Monday, March 28, 2022

Oligarch

Oligarch (pronounced ol-i-gahrk)

(1) In political science, one of the rulers in an oligarchy (a system of government characterized by the institutional or constructive rule of a few and the literal or effective exclusion of the many); a member of an oligarchy.

(2) A very rich person involved in business in a manner which interacts intimately with the organs of government, the nature of the relationship varying between systems but usually with the implication of mutually beneficial corrupt or improper (if sometimes technically lawful) conduct.

(3) In cosmogony, a proto-planet formed during oligarchic accretion.

1600-1610: From the French oligarque & olygarche, from the Late Latin oligarcha, from the Ancient Greek λιγάρχης (oligárkhēs) and related to oligarkhia (government by the few), the construct being olig- (few) (from stem of oligos (few, small, little) (a word of uncertain origin)) + -arch (ruler, leader) (from arkhein (to rule)).  The noun plural was oligarchs.  In English, an earlier form of oligarchy was the circa 1500 oligracie, a borrowing from the Old French.  Oligarch & oligarchy are nouns, oligarchal, oligarchical & oligarchic are adjectives, and oligarchically is an adverb; the noun plural is oligarchs.  The playful minigarch (the offspring of an oligarch) and oligarchette (a female oligarch or an aspiring oligarch not yet rich enough to be so described are both non-standard while oligarchie & oligarchisch are sometimes used to convey a deliberate sense of the foreign.  Oligarch is now almost never used in its classical sense to refer to rulers of a political entity but instead to describe the small numbers of those who have become exceedingly rich, usually in some improper (even if technically lawful) way with the corrupt and surreptitious cooperation of those in government, the implication being they too have benefited.  Words like plutocrat, potentate and tycoonocrat are sometimes used as synonyms but don’t covey the sense of gains improperly and corruptly achieved.

Oligarchs are sometimes described in the press as "colorful characters", something a bit misleading because many seek a low profile, something often advisable in Mr Putin's Russia.  In a movie about oligarchs Netflix presumably would focus on some of the more colorful.

In modern use, an oligarch is one of the select few people who have become very rich by virtue of their close connections to rule or influence leaders in an oligarchy (a government in which power is held by a select few individuals or a small class of powerful people).  Unlike the relationship between “monarch” & “monarchy”, “oligarch” & “oligarchy” are not used in the literature of political science in quite the same way.  A monarch’s relationship to their monarchy is a thing defined by the constitutional system under which they reign and that may be absolute, despotic or theocratic but is inherently directly linked.  However, even in a political system which is blatantly and obviously an oligarchy, the members of the ruling clique are not referred to as oligarchs by virtue of their place in the administration, the more common descriptors being autocrat, despot, fascist, tyrant, dictator, totalitarian, authoritarian, kleptocrat or other terms that to varying degrees hint at unsavoriness.  Instead, the word oligarch has come to be used as a kind of encapsulated critique of corruption and economic distortion and the individual oligarch a personification of that.  The modern oligarch is one who has massively profited, usually by gaining in some corrupt way either the resources which once belonged to the state or trading rights within the state which tend towards monopolistic or oligopolistic arrangements.  Inherent in the critique is the assumption that the corrupt relationship is a symbiotic one between oligarch and those in government, the details of which can vary: oligarchs may be involved in the political process or entirely excluded but a common feature to all such arrangements is that there is a mutual enrichment at the expense of the sate (ie the citizens).  The word oligarch has thus become divorced from oligarchy and attached only to oligopoly.

The word oligopoly dates from 1887, from the Medieval Latin oligopolium, the construct being the Ancient Greek λίγος (olígos) (few) + πωλεν (poleîn) (to sell) from the primitive Indo-European root pel (to sell) and describes a market in which an industry is dominated by a small number of large-scale sellers called oligopolists (the adjectival form oligopolistic from a surprisingly recent 1939).  Oligopolies, which inherently reduce competition and impose higher prices on consumers do not of necessity form as a result of improper or corrupt collusion and may be entirely organic, the classic example of which is two competitors in a once broad market becoming increasingly efficient, both achieving such critical mass that others are unable to compete.  At that point, there is often a tendency for the two to collude to divide the market between them, agreeing not to compete in certain fields or geographical regions, effectively creating sectoral or regional monopolies.  If competitors do emerge, the oligopolists have sufficient economic advantage to be able temporarily to reduce their selling prices to below the cost of production & distribution, forcing the completion from the market, after which the profitable price levels are re-imposed.

A classic game theory model of oligopolistic behavior.

Although not thought desirable by economists, they’ve long attracted interest interest because they create interesting market structures, especially when they interact with instruments of government designed to prevent their emergence or at least ameliorate the consequences of their operation.  The most obvious restriction governments attempt to impose is to prevent collusion between oligopolists in an attempt to deny them the opportunity to set prices of particular goods.  Even if successful, this can only ever partially be done because most prices quickly become public knowledge and with so few sellers in a market, most of which tend to operate with similar input, production & distribution costs, each oligopolist can in most cases predict the actions of the others. This has been of interest in game theory because the decisions of one player are not only in reaction to that of the others but also influences their behavior.

Dartz Prombron: The Prombron is now typical of the preferred transport for an oligarch, the traditional limousine not able to be configured to offer the same level of protection against attacks with military-grade weapons.  Prombrons were originally trimmed with leather from the foreskins of whale penises but the feature was dropped after protests from the environmental lobby.

Oligarchs in the modern sense operate differently and the Russian model under Mr Putin has become the exemplar although some on a smaller scale (notably Lebanon since 1990) are probably even more extreme.  The Russian oligarchs emerged in the 1990s in the chaos which prevailed after the dissolution of the old Soviet Union.  They were men, sometime outside government but often apparatchiks within, well-skilled in the corruption and the operations of the black market which constituted an increasingly large chunk of the economy in the last decade of the USSR and these skills they parlayed into their suddenly capitalistic world.  Capitalism however depends on there being private property and because the USSR was constructed on the basis of Marxist theory which demanded it was the state which owned and controlled the means of production and distribution, there was little of that.  So there was privatization, some of it officially and much of it anything but, the classic examples being a back-channel deal between the oligarch and someone in government purporting to be vested with the authority to sell the assets of the state.  Few in government did this without a cut (often under the guise of a equity mechanism called “loans for shares”) and indeed, some apparatchiks sold the assets to themselves and those assets could be nice little earners like oil & gas concessions or producers, electricity generators, transport networks or financial institutions.  One of the reasons the assets were able to be sold at unbelievably bargain prices was a product of Soviet accounting: because the book value of assets had so little meaning in communist accounting, in many cases recorded asset values hadn’t be updated in decades and were in any case sometimes only nominal.  There were therefore sales which, prima facie, might have appeared to verge on the legitimate.

2021 Aurus Senat, now the official presidential car of the Russian state.

Few were and in any event, even if the aspiring oligarch didn’t have the cash, somewhere in government there would be found an official able to arrange the state to loan the necessary fund from the resources of the state, if need be creating (effectively printing) the money.  From that point, newly acquitted assets could be leveraged, sold to foreign investors at huge profit or even operated in the novelty of the free market, an attractive proposition for many given the asset obtained from the state might be a natural monopoly, competition therefore of no immediate concern.  Thus was modern Russian capitalism born of what were economic crimes on a scale unimaginable to the legions condemned to death or years in the Gulag under comrade Stalin.  Even before becoming prime-minister in 1999, Mr Putin was well aware of what had happened, being acquainted with some of the players in the process but shortly after assuming office, he had small a team of lawyers, accountants and economists undertake a forensic analysis to try more accurately to quantify who did what and who got how much.  Although the paperwork his investigative project produced has never been made public, it was reputed to have been reduced to a modestly-sized file but the contents were dynamic and put to good use.

In either 2003 or 2004, Mr Putin, assisted by officers of the FSB (successor to the alphabet-soup of similar agencies (Cheka, GPU, OGPU, NKGB, NKVD, SMERSH, MGB & (most famously) KGB)) experts in such things, “arranged” a series of interviews with the oligarchs whose conduct in the privatizations of 1990s had been most impressive (or egregious depending on one’s view).  Well aware of the relationship between wealth and political influence, Mr Putin’s explained that the oligarchs had to decide whether they wished to be involved in business or politics; they couldn’t do both.  Mr Putin then explained the extent of their theft from the state, how much was involved, who else facilitated and profited from the transactions and what would be the consequences for all concerned were the matters to come to trial.  Then to sweeten the deal, Mr Putin pointed out that although the oligarchs had stolen their wealth on the grandest scale, “they had stolen it fair and square” and could keep it if they agreed to refrain from involvement in politics.  The Russian oligarchy understood his language, the lucidity of his explanation perhaps enhanced by oligarch Mikhail Khodorkovsky (b 1963; then listed as the richest man in Russia and in the top-twenty worldwide) being arrested on charges of fraud and tax evasion, shortly before the meetings were convened (he was convicted in 2005 and sentenced to nine years in prison and while serving his sentence was charged with and found guilty of embezzlement and money laundering.  Mr Putin later pardoned Khodorkovsky and he was released to self-imposed exile in late 2013).  Few failed to note the significance of Mr Khodorkovsky having been "meddling in politics". 

Mr Putin being taken for a drive by George W Bush (b 1946; George XLIII, US president 2001-2009) in the Russian president's GAZ M21 Volga and admiring his 2009 Lada Niva.

In a sign the oligarchs were wise to comply, it was estimated by Bill Browder (b 1964; CEO and co-founder of the once Moscow-linked Hermitage Capital Management) during his testimony to the US Senate Judiciary Committee in 2017 that the biggest single increase in Mr Putin’s personal wealth happened immediately after Mr Khodorkovsky was jailed.  Given the history, Mr Browder is perhaps not an entirely impartial viewer but the pact between the autocrat and the oligarchy has been well-understood for years but what has always attracted speculation is the possibility that attached to it was a secret protocol whereby Mr Putin received transactional fees, imposing essentially a license to operate in Russia, alleged by some to be a cut of as much as 50%, based apparently on assessed profits rather than turnover.  Even if a half-share is too high and his cut is a more traditional 10%, the amount payable over the years would have been a very big number so there’s been much speculation about Mr Putin’s money, some estimates suggesting he may have a net wealth in the US$ billions.  That would seem truly impressive, given the Kremlin each year publishes a disclosure of their head of state’s income and assets and the last return disclosed Mr Putin enjoys an annual salary of US$140,000 and owns an 800-square-foot (74 m2) apartment, his other notable assets being three cars: a 1960 (first series) GAZ M21 Volga, a 1965 (second series) GAZ M21P Volga and a 2009 Lada Niva 4x4.  Keen on the outdoors, he also owns a camping trailer.

A country cottage on the Black Sea coast alleged to be owned by Mr Putin.  The large grounds surrounding the cottage are an indication why Mr Putin needs his 2009 Lada 4x4 & camping trailer.

On the basis of that, income and net wealth seem not at all out of alignment but intriguingly, he’s been photographed with some high-end watches on his wrist, including an A. Lange & Söhne 1815 Tourbograph which sells for around US$500,000.  He is rumored to be the owner of a 190,000 square-foot (17,650 m2) mansion which sits atop a cliff overlooking the Black Sea (reputedly Russia’s largest private residence and known, in a nod to the understated manner of the rich, as “Putin’s country cottage”) which has an ice hockey rink, a casino, a nightclub with stripper poles, an extravagantly stocked wine cellar and the finest furniture in Louis XIV style, the toilet-roll holders apparently at US$1,250 apiece (although, given the scale of the place, he may have received a bulk-purchase discount).  It demands a full-time staff of forty to maintain the estate, the annual running costs estimated at US$2-3 million.  Designed by Italian architect Lanfranco Cirillo (b 1959), and officially owned (though alleged to be held under a secret trust of which Mr Putin is the sole beneficiary) by oligarch Alexander Ponomarenko (b 1964), the construction cost was estimated to be somewhere around a US$ billion which seems expensive but a yacht currently moored in Italy and alleged also to belong to Mr Putin is said to have cost not much less to launch so either or both may actually represent good value and to assure privacy, the Russian military enforces a no-fly zone around the property.  Like many well-connected chaps around the world, a few of Mr Putin’s billions figured in the release of the Panama Papers in 2016.

1962 GAZ-M21 (rebuilt to KGB (V8) specifications).

Apart from the Black Sea palace, there are unverified reports Mr Putin is the owner of 19 other houses, 58 aircraft & helicopters and 700 cars (although it’s not clear if that number includes his two Volgas and the Lada).  No verified breakdown of the 700 cars has ever been published but given Mr Putin’s apparent fondness for Volgas, it may be his collection includes the special-variant of the GAZ-M21 Volga, 603 (as the GAZ-M23) of which were produced between 1962-1970 for the exclusive use of the KGB and other Soviet “special services”.  Equipped with the 5.53 litre (337 cubic inch) V8 engine from the big GAZ-13 Chaika (Gull) (1959-1981 and in the Soviet hierarchy, second only to the even bigger ZIL limousines (1936-2012)), the car was said to be a not entirely successful piece of engineering but it was certainly faster than the four-cylinder model on which it was based.  It’s never been clear just what was the top speed because the speedometer was calibrated only to 180 km/h (112 mph) but one intrepid KGB apparatchik claimed to have achieved that and reported the Volga was “still accelerating”.  Known to be nostalgic for the old ways of the KGB, it’s hoped Mr Putin has preserved at least one.

Mr Putin agitprop.

Mr Putin has admitted: "I am the wealthiest man, not just in Europe but in the whole world: I collect emotions. I am wealthy in that the people of Russia have twice entrusted me with the leadership of a great nation such as Russia. I believe that is my greatest wealth."  Quite how rich Mr Putin might be is such a swirl of estimates, rumors, supposition and doubtlessly invention (lies) that it's unlikely anyone except those disinclined to discuss the matter really know and after all, if he's rich as his detractors claim, he probably isn't exactly sure himself.  Given that, his statement seemed intended to clear up any misunderstandings.

No comments:

Post a Comment