The Rise of Oligarchs

There is a lot of discussion on Oligarchy of late. In India, the exponential rise of Adani group is attracting debate currently. The fast handover of public resources to few individuals has led to the rise of oligarchs across the world. This is a pattern which is universal. From Russia to Sweden, the rise of Oligarchs has been consistent. The power of the party they support has also been rising. With huge funds at their disposal, the parties have expanded their base, bought out smaller parties and invested in media businesses to curtail voices. 

From Germany down to the PRC, a few control vast parts of the economy. While in most economies, the oligarchs are focused on only one industry, few venture into several fields and consolidate industry  creating monopoly.  Across the world, privatisation of public resources has been the primary cause of the rise of oligarchs. The term Oligarch was earlier used to refer to Russia’s big Oligarchs but that has become a global trend and also led to concentration of power in the hands of a few to continue their control over the economy. Hence, their men consistently rule the country, sometimes for a long period. These oligarchs exponentially increase their incomes meanwhile. USA’s billionaires own more than Asia or Europe’s Oligarchs. 

In Germany, the top wealthy people are the owners of the retail market chains and next come the branded manufacturers like the BMW owner Quandt family. When we compare Europe, North America and Asia’s billionaires, it is clear that in North America and Asia, the Oligarchs are first generation oligarchs who either have exceptional businesses like in the USA or are close to the politicians like in Asia. Many of the first generation Oligarchs grew due to purposeful weakening of public sector companies and handing them over to these oligarchs for a pittance. Same pattern repeats across all countries. 

The countries which promoted the welfare state had the largest share of these oligarchs. Welfare states require huge funds and the easiest way out for them is to privatise public sector companies. It is a race down to the bottom as Hayek warned decades back.The bigger the welfare state, greater the inequalities and greater the silence from beneficiaries. U bind beneficaries into silence, muffling their voice. Noone dares to raise their voice lest they lose their benefits. 

In Contrast, Germany’s Oligarchs have built from inherited wealth, families that have long held control over major pieces of the economy in those countries. In Europe, inherited wealth and few families control a maze of companies and funds that ultimately own the majority of companies across the world. Funds like Blackrock are big owners. Even in Asia, companies with legacies over a 100 years still control a major part of the economy. The first generation companies wealth across the globe comes from privately owning technology, pharma, infrastructure, service sectors, software companies that would run forever like Google. 

All these Oligarchs fund both ruling and opposition parties for business continuity. In India, Tatas, Birlas, Ambanis were close to the ruling political parties. Adani has been a recent first generation addition to this club. Most of the top 1% are obviously close to political parties and bureaucracy and even plan for their retirement with plump positions or abroad funds. 

Huge imports from China destroyed many traditional industries in India resulting in massive unemployment.The increased number of people in the food delivery industry is being touted as massive employment but it is freelancing. America has become a freelancing nation with more than 50% of its workers doing freelancing but 40 mn Americans are on foodstamps. Welfare state makes the rich richer and the weak weaker. If just two score firms are contributing to three fourths of total corporate profit, it is indicative of a country with greater concentration of power in the hands of a few. Such great source of funding behind them, the government becomes authoritarian even if the constitution is democracy. 

When few corporations control the economy, they also increase the power of the middleman increasing prices of essential goods making traders happy but the producers unhappy since the farmer still continues to get what he earlier got but the middle man rakes in all the profit. Corporations determining the price of goods per their margin of profits is what causes rise in grocery costs. The more concentrated or organised the market is, the industry becomes commoditized with just price being the differentiator.

Even among the states, southern states are ruling in services,pharma and technology while the western states dominate in manufacturing, trading, energy and infrastructure. The eastern states have a lesser share of the economy. In time, these growing corporations started nurturing their own political parties and hence we see powerful regional parties in some states, family owned, who seemingly continue for decades primarily because there are corporates that want them to win because of assured business continuity. All states have vast natural resources and competition is for grabbing those resources for their profit. A few corporations dominated under UPA and the same is happening under NDA. Most of the industries today are commoditized and monopolised raising entry barriers for newcomers. The interconnectedness of politicians and corporations have stoked protectionism. 

Oligarchs grow since credit is easily available to them ignoring basic banking principles, regulations are amended/ignored for them. Most of the HNIs and Oligarchs debts are written off by the government banks in many countries. Corporate NPAs have just a 7% recovery rate. Most of these funds flow to the political parties at the time of elections. For this, political parties ensure that vast public resources are handed over to their Oligarchs so that they do not need to hesitate buying out opposition parties/leaders with unlimited  & unaccounted funds coming in from untraceable sources. That makes parties bigger. Inorganic growth of parties has been funded entirely by these Oligarchs and hence they are able to penetrate new geographies too across the globe. There is muted opposition against Oligarchs but it does not gather storm since the Oligarchs control media and are part of Globalists who ensure muted oppositon.  Ultimately, the Oligarchs are controlled by Globalists who buy huge stakes in these Oligarchs making them the ultimate owners of these companies.  The commoditization of industries obviously divides the middle class into upper middle class who are close to the HNIs while the lower middle class are close to the poor. The freebies given by the government disincentivize innovation.