From ... in Economics Managed Decline Political — Mar 2, 2023

Western Oligarchy

One of the obstacles to understanding the managed and apparently deliberate destruction of the small and medium-sized businesses that in the UK have decreased in number by half a million since 2020

One of the obstacles to understanding the managed and apparently deliberate destruction of the small and medium-sized businesses that in the UK have decreased in number by half a million since 2020 and the removal of our national sovereignty on the justification of saving us from, by turns, a health crisis, an environmental crisis, an energy crisis or a cost-of-living crisis, is the question of how anyone can benefit from doing so. It’s always difficult to look into the future and predict what is going to happen, but we can look back on and try to learn from the recent past.

If we want to know where this impoverishment and disenfranchisement of the British people is leading and who will benefit, we could do worse than look at what happened to Russia in the 1990s.

When Mikhail Gorbachev became General Secretary of the Communist Party of the Soviet Union in March 1985, he immediately began his programme of perestroika (‘restructuring’) the economic and political policy of the USSR. Five years later, in September 1990, under the policy reform called glasnost (‘openness’), the Soviet Parliament granted Gorbachev, now the newly elected President of the USSR, emergency powers of privatisation. This included the authority to transform state-owned enterprises into joint-stock companies with shares offered on stock exchanges. After Gorbachev’s resignation and the formal dissolution of the USSR in December 1991, the first Russian President, Boris Yeltsin, initiated a programme of privatisation that sought to compress twenty years of Western neoliberalism into a few years in a country whose population had no experience of how finance capitalism works.

Two years later, more than 85 per cent of Russian small businesses and more than 82,000 Russian state-owned companies, about one-third of the total in existence, had been privatised.

One of the first initiatives was Voucher Privatisation, which between 1992 and 1994 distributed 144 million vouchers that could be converted into stock shares in more than 100,000 state-owned companies among 98 per cent of the Russian population, in principle giving each citizen a share of the national wealth. However, the Russian worker, impoverished and increasingly unemployed by the rapid dismantling of the Soviet economy, had little understanding of shareholder capitalism, and these vouchers were almost entirely bought up for a few rubles by Russian bureaucrats, who had a clearer idea of the state of the Russian economy, state-owned company directors, who had a better grasp of the value of Russian resources, and the mafia, who after years of trading Western commodities on the Soviet black market had a better idea of the future value of these shares.

By the end of June 1994, ownership of 70 per cent of Russia’s large and medium-sized companies and about 90 per cent of its small businesses had been transferred into private hands.

In 1995, with the Government facing a fiscal deficit and in return for funding his re-election campaign, Yeltsin initiated the Loans for Shares scheme, through which state industrial assets in petroleum, gas, coal, iron and steel were auctioned for loans by commercial banks. Since these loans were never returned, largely because they were used to pay off the interest on existing Government debt, and because the auctions were rigged by political insiders, the state assets were effectively sold for a fraction of their value. Yukos Oil, for example, worth around $5 billion, was sold for $310 million; Sibneft, the third-largest producer of oil in Russia and worth $3 billion, was sold for $100 million; and Norilsk Nickel, which produced a quarter of the world’s nickel, sold for $170 million, half as much as a competing bid.

This scheme created a new class of oligarchs (from the Ancient Greek oligarkhía, ‘rule by the few’), industrialists and bankers who now controlled not just the Russian economy but also its Government. Conscious, however, that future governments might reverse Yeltsin’s carpet-sale of the nation’s wealth, the oligarchs, instead of investing in these industries, immediately set about stripping their assets to increase their equity. The vast wealth they accumulated from doing so was invested abroad, largely in Swiss banks, but also into UK property through the largest money-laundering service in the world, the City of London, through which more than £100 billion of ‘dirty money’ continues to pass every year, the bulk of it from Russia and the Ukraine.

This flight of capital out of the country left the Government unable to collect taxes, leading to it defaulting on debt repayments and ultimately to the Russian financial crisis of 1998. When foreign investors began to pull out of the market, selling Russian currency and assets, the Central Bank of Russia, which had only been founded in July 1990, had to spend its foreign reserves to defend Russia’s currency, expending approximately $27 billion of its US dollar reserves. This led to the most cataclysmic peacetime economic collapse of an industrial country in history. By 1999, the gross domestic product of Russia had fallen by more than 40 per cent, and the increase in retail prices by 2,520 per cent in 1992 had wiped out what personal savings the Russian people had accumulated. A decline in meat consumption was mirrored by a huge increase in crime, corruption and mortality, the latter of which reached the highest in history of an industrial country not at war. Unemployment in a country where it had previously been unknown reached 13 per cent. Inflation peaked at 85.7 per cent. Government debt reached 135 per cent of GDP, and Russia, consequently, became the largest borrower from the International Monetary Fund, with loans totalling $20 billion in the 1990s. Little of this served its ostensible purpose, however. A quarter of this sum, some $4.8 billion, was stolen upon its arrival in Russia on the eve of the financial crisis, and disappeared into an anonymous account registered in the offshore tax jurisdiction of Jersey.

If all this sounds familiar, Yeltsin’s reforms were based on the Washington Consensus, ten principles of economic neoliberalisation first implemented in Augusto Pinochet’s Chile and by the Argentinian Junta in the 1970s, and imposed by the International Monetary Fund, the World Bank and the US Treasury as a condition of receiving loans. These include redirecting public spending from funding state services to investment in pro-growth services like education and healthcare; eliminating restrictions on import trade and foreign investment; abolishing regulations on safety, health and polluting the environment that impede the market; and above all privatising state industries.

As a result of these reforms, on October 1998, the Government of Russia, despite being the largest exporter of natural gas and oil reserves in the world, had to appeal for international humanitarian aid. It was a long way but only a short time since the Soviet Union had been one of two world superpowers, and a lesson in how quickly the wealth and national assets of a country can be stripped when its population is exposed naked to the predations of finance capitalism.

Although it has ‘recovered’ to the extent that today — particularly following the rise in energy prices consequent upon the sanctions — Russia is in the top ten largest economies in the world by nominal GDP, per capita it drops to 53rd. A decade ago, the gap between rich and poor in Russia was the largest of any country in the world, with 35 per cent of the wealth of a country of 144 million people owned by just 110 billionaires, with much of that wealth stored in offshore financial jurisdictions. In 2021, the 500 richest Russians, each with a net worth of more than £100 million and making up just 0.001 per cent of the total population, still controlled 40 per cent of the country’s entire household wealth — more than the poorest 99.8 per cent, 114.6 million people, combined. This is what finance capitalism does to a nation and a people without the political and institutional means to protect themselves.

Today, across the neoliberal democracies of the West, national governments in thrall to the new forms of global governance formed on the justification of addressing multiple manufactured ‘crises’ are implementing equivalent programmes of managed economic collapse devised by the same international institutions of global macro-economic management.

Instead of Perestroika, Glasnost, Voucher Privatisation and Loans for Shares, these programmes of economic and political ‘reform’ are called Agenda 2030, Sustainable Development Goals, Universal Basic Income and Central Bank Digital Currency. And although these are being implemented not on the collapse of a centralised command economy like that of the Soviet Union but in neoliberal economies facing the second Global Financial Crisis in twelve years, the aim of these programmes is the same: impoverishment of national populations, bankruptcy of independent businesses, expropriation of national land and resources, instalment of puppet governments to present a facade of democracy to technocratic rule, and an economic and political power-grab by a financial ruling class.

The removal of our rights, driving down of our standard of living, reduction in our food and energy consumption, spiralling inflation and the economic sanctions and programmes enforcing these, are all designed to transfer our national and personal assets into the hands of this global elite. Just as happened in Russia in the 1990s, the Bank of England has increased its quantitative easing programme to bail out the UK economy, recently spending £19.3 billion buying up Government bonds to prop up the failing pound, with the commitment to spend £65 billion if necessary. With the number of company insolvencies in 2022 the highest in 13 years, small businesses driven into bankruptcy by two years of government-enforced lockdown and rocketing energy prices have had their market share bought up by corporate monopolies. Inflation was predicted by the Bank of England to reach 13 per cent in early 2023, with some estimates predicting a high of 18 per cent. And the duties and authority of the UK state continue to be outsourced by our Government to international companies, who are being empowered by new legislation to set the limits of our previously inalienable rights and freedoms. Finally, our new globalist Prime Minister has been elected not by UK voters or even by his own parliamentary party, but by the international financiers and technocrats who, just as they do in Russia and the Ukraine, now dictate not only our economic policies but also our politics.

Let me clarify what I mean and don’t mean by this comparison, in an effort to head off some of the more foolish rebuttals from the union-jack waving champions of NATO.

I am not saying that post-Soviet Russia is a mirror of the UK in 2023.

The differences between the historical circumstances and the economies of the two countries are too great. What I’m arguing is that the managed destruction of the Russian economy after the dissolution of the Soviet Union is an image of where we are heading and why we are being driven to such an end. The Russian and Ukrainian oligarchs weren’t only motivated by the wealth they could take out of their countries and into offshore tax jurisdictions managed by financial advisers in the City of London; they were, and are, interested in the political power that wealth gave them. And just as they chose Vladimir Putin to be the successor to the shambling Boris Yeltsin, so too our oligarchs have chosen Rishi Sunak as the successor to the shambling Boris Johnson.

Yet, while Putin has managed to curb some of the power of the Russian and Ukrainian oligarchs over the economy and politics of his country, increased GDP, cut inflation, reduced the national debt, increased foreign exchange reserves, incomes, pensions and the value of the ruble, we can expect no such miracles from Sunak, who is so deep in the pockets of their Western equivalents that the top of his head can barely be seen as he hops up and down on his latest soap box.

The UK hasn’t been a democratic state since at least March 2020, when the country was placed in a de facto State of Emergency and thousands of regulations stripping us of our rights and freedoms were made by ministerial decree without oversight or approval by our elected representatives in Parliament. But in the wake of those restrictions having largely been lifted in March 2022 — while still being imposed by private and public companies, including airlines and the National Health Service, as a condition of access, service or employment — Sunak’s unilateral decision to impose the programmes and technologies of UK biosecurity and Agenda 2030 outside of any democratic process is the brazen admission that we are now ruled by international technocracies of global governance run by corporate CEOs, international bankers and government-appointed technocrats. And although today we call them ‘philanthropists’, ‘entrepreneurs’ and ‘global investors’, the actions of these unelected globalists are every bit as criminal as those of the Russian and Ukrainian oligarchy in the 1990s, except that they’re acting on a far greater stage and with far more damaging consequences for their, by turns, outraged or applauding but always deceived audience.

The economic and cultural sanctions placed on Russia and the immense financial and military investment in the Ukraine by this global government since March 2022 are instrumental to the financial war these Western globalists are waging against Russia’s oligarchs; but contrary to the rhetoric of our politicians and actors, they are doing so not to defend the human rights of Ukrainians and a puppet government installed by a US-engineered coup in 2014 for precisely this reason, but rather to emulate, replace and surpass that oligarchy in wealth, political influence and above all control over the immense natural resources of Russia and, more immediately, those of the Ukraine.

The recent announcement by President Volodymyr Zelensky that, following the €100 billion in military, financial and humanitarian aid the West handed over to his Government in 2022, the US asset-managers BlackRock, JP Morgan and Goldman Sachs will ‘coordinate’ its investment in the Ukraine and its vast natural resources — not only in grain, oil and gas but also in minerals and the lithium that is the primary component in electric batteries — should demonstrate to all but the most fervent blue-and-yellow-flag-waving zealots what interest the West has in this manufactured geopolitical, military and energy crisis. In preparation for the neoliberalisation of the Ukraine, Zelenskyy has already banned opposition political parties, worker’s unions and independent media platforms, passed laws to privatise state-owned businesses, banks and assets, promised to deregulate and cut corporate taxes for businesses, issued hit lists on journalists critical of his Government’s policies, and called on NATO to launch preemptive nuclear strikes on Russia.

If we want an image of where we are being led by this globalist coup — which is being implemented on the spurious justifications of protecting our health from a deadly new virus, defending Europe from ‘Mad Vlad’ Putin, and saving the planet from man-made global warming — the economic inequality, financial corruption and political disenfranchisement of the Russian people and, closer in time, the puppet Government of the Ukraine and its dance-contestant President, is a good place to look. This is an image of our future.

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