Oligarchy

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. You can sign up for the newsletter here.

None of us are doing much moving around at the moment — the most exciting thing I’ve done in weeks is visit the supermarket — but the consequences of this enforced stability mean more than just entrenched ennui for those lucky enough not to have fallen sick: it could have prolonged and perhaps irreversible consequences for how democracy and wealth relate to each other, which we need to understand. 

MOBILITY IS FROZEN

I live beneath the flightpath between Heathrow and JFK, and flights are now so rare that we stop to look at them when they pass over, twinkling dots trailing feathery clouds of contrail.

• Private jet flights are down two-thirds from last year, and showing few signs of picking up. 
• With countries locked down, there’s nowhere for a private jet to fly to, and few commercial flights to take either. 

Why should we care: this sudden freeze has changed the calculation that underpins kleptocracy: what’s the point of stealing a fortune if you can’t spend it in a major global city? Some enterprising businesses are sending round butlers to serve food to oligarchs at home. But really, this forced immobility is more of a concern for oligarchs than an opportunity.

Some countries have promised being quarantined won’t make someone liable for taxes, but Bloomberg has spoken to a tax adviser whose clients are panicking about the financial implications of not being able to dodge between jurisdictions as they like. 

• If they’re not careful, they may end up having to pay taxes to support the services — honest police officers, smooth roads, efficient courts, biddable politicians — that they’re accustomed to receiving for free. 
• “Taxes are only going to go one way — up,” said Menna Bowen, a partner at law firm Gunnercooke. “Someone has to pay for all of this.”

But there are opportunities too: estate agents are struggling to find buyers, so it’s a great time to be cash rich. The Guardian reports that a Russian oligarch bought a seven-story London townhouse for more than a million pounds off the asking price.

• How do they show off a house if potential clients can’t even be in the same country as it? Like the rest of us, they use Zoom, though I suspect that – in the circumstances — they would consider Microsoft Teams as well.

But there are some thing you can’t do by video: 

• send your children to school in Europe 
• vacation on the Mediterranean
• get treated for your ailments in London, Berlin, Singapore or Saudi Arabia

With that all unavailable, will they realize the importance of investing more of their stolen money at home?

Yes? 

• “It feels like a once-in-a-lifetime chance to change corrupt systems for good at each level,” wrote Professor Heather Marquette, an expert in corruption and development, in her blog.

Or no?

• “The nature of an emergency response itself can open new avenues for corruption,” said Ed Olowo-Okere, Director of the Governance Global Practice at the World Bank.

Will the rich and powerful further entrench their positions? That is what they did  after the 2007-8 financial meltdown: ever-more countries sold golden visas, and slashed taxes to lure the super-rich, like an abandoned spouse promising anything, anything to get their partner back. 

Or will the rest of us resist? If this crisis shows anything, it is that there is a significant advantage to living in a country with a well-run health service. Last month, I spoke to a concierge for the mega-wealthy: “What matters to my clients at the moment is not tax rates, but what country offers a healthcare system they can trust. It used to be all about Britain and America, but Germany and Austria are popular now.”

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See you next Wednesday,
Oliver