Hello, and welcome to Oligarchy. We are tracking how Covid-19 and the world’s response to it is affecting the super-rich — and what that means for power and politics.
FIJI IS OPEN FOR BUSINESS (BUT NOT YOURS)
I’ve been awaiting signs that the world’s oligarchs are gaining special pandemic-era privileges denied to us ordinary folk, and now — from Fiji — here they are. Fiji is an archipelago of several hundred islands about a quarter of the way from Australia to California and, although it’s been barely touched by Covid-19, its tourism industry has been devastated by global travel restrictions. So, last week, Prime Minister Frank Bainimarama sent out an appeal to the world’s superyachters and private jetters: Fiji wants them, and their money.
“Say you’re a billionaire looking to fly your own jet, rent your own island, and invest millions of dollars in Fiji in the process,” he tweeted. “If you’ve taken all the necessary health precautions and borne all associated costs, you may have a new home to escape the pandemic in paradise.”
Just to emphasize that this wasn’t an offer open to the ordinary kind of people who might normally vacation in Fiji, he tagged in Forbes magazine, the FT’s glossy How To Spend It supplement, Jetset magazine, and various other house publications of the ludicrously rich.
Why does this matter?
- Economic downturns, and the associated squeeze on tax revenues, provide governments with two options. They can either work with other countries to make sure everyone pays the bills to fix the world, or they can undercut other countries and try to attract as many of the world’s rich as they can, fix their own problems, and let everyone else go hang.
- The more countries get engaged in the undercutting process, the more likely everyone else is to join in. Fiji’s decision to roll out the red carpet is a worrying sign that other places might do so too.
- If the super-rich manage to dodge paying the bills, the rest of us will have to pay them instead. I don’t know about you, but I don’t feel that paying any bills is very easy right now, or likely to become so any time soon.
Has this happened before?
Yes, indeed. In fact, all the major innovations designed to let oligarchs dodge scrutiny, taxes and responsibility grew out of temporary expedients introduced by governments trying to raise revenue in time of recession — whether that’s St Kitts and Nevis inventing the passport-for-sale business in the early 2000s; South Dakota upending the trust business in the 1980s; or Britain inventing the entire offshore industry back in the 1950s.
I have long been looking out for a sign that super-rich people have created a new kind of citizenship – I called their notional country “Moneyland,” in a book of the same name – and Fiji’s innovation takes that prospect one step closer.
COVID IS MAKING OLIGARCHS RICHER
Every day comes a new sign that the world’s crooks and thieves have learned of a new way of profiting from the coronavirus. In Ecuador, they cornered the body bag market, and inflated prices thirteen-fold. In Bolivia, the health minister has been arrested for allegedly overcharging his own ministry for ventilators that didn’t even work. In Zimbabwe, the health minister has been charged with corruption over a contract for Covid-19 testing kits.
In Ukraine, the health ministry has overpaid for PPE, and the interior ministry has bought firearms from a shell company, which hiked prices beyond what was available on the open market.
- “Special procurement procedures during the quarantine period, unfortunately, did not work out,” noted the Anti-Corruption Action Centre. “Experience demonstrated that accelerated procurement without competition is quickly abused.”
BUT HOW HAVE OLIGARCHS BEEN DOING AS A CLASS?
WealthX has just published its annual census of the world’s billionaires, in which the consultancy group analyzed the habits and well-being of the very wealthy as if they were an endangered troupe of giant pandas.
The good news is that last year went well for them: the 2,825 people in this exclusive club (that’s about a thousand more individuals than there are giant pandas left in the world) increased their wealth by more than a tenth to a cumulative total of $9.4 trillion, which is not quite as much as the entire GDP of China (where giant pandas live) but getting close.
Sadly, however, 2020 has not been so kind. “The number of billionaires in technology, insurance, business services and healthcare grew by between six percent and nine percent during the first five months of 2020,” WealthX noted. “Billionaires in shipping, apparel (including luxury) and aerospace experienced the worst performances.”
Still, they are likely to weather the storm rather better than the rest of us, so we don’t need to worry too much. One aspect of increasing inequality is that it’s as much of a phenomenon among Ultra-High-Net-Worth (UNHW) people, as it is among the rest of us: extraordinarily rich people are drawing further ahead of the ordinarily rich, just as they are both outpacing the merely ordinary.
“Since the publication of our first Billionaire Census in 2013, billionaire wealth as a share of UHNW wealth has risen steadily, from around 22 percent to 26 percent in 2019, while the size of the billionaire population as a share of the UHNW population has remained largely stable — an indication of the growing influence of this exclusive club,” WealthX notes.
Why does this matter?
- It is this class of the mega-rich that will be lobbying for favors to rebuild the post-Covid economy. The richer they are, the more favors they can demand.
WHAT I’M READING
Luke Harding’s new book, “Shadow State: Murder, Mayhem and Russia’s Remaking of the West” revisits many of most the sordid episodes of the Trump presidency, including the attempts to enlist Ukraine in a campaign against Joe Biden. You may think this is all too raw to engage with all over again, but it gives priceless context to the current struggle over the alleged Russian bounties for Taliban fighters killing U.S. troops in Afghanistan. It also reminds us how important it is to fix corruption as a system that invisibly infects entire sections of the global economy, rather than just tackle its sporadic visible outbreaks.
See you next Wednesday,
Oliver