Age of Russian Hyper-Oligarchy Getting Stale? Advice for Putin from US robber baron history

Theodore Roosevelt, President of the United States in the early part of the twentieth century of the era of robber and railway barons, said there were good trusts and bad trusts. He believed that there could be owners with a large segment in a market as long as it was not excessive in percentage terms and these kings of money behaved with relative decent social responsibility.

Two of the richest at the time who would probably dwarf even most Russian oligarchs, in terms of how much of the economy they controlled, were Andrew Carnegie, an immigrant from Scotland who came with little money to America. Then there was Jupiter Pierspont Morgan whose initials and name dominate the sign even of today’s mega Wall Street bank, which is in Russia today in a significant way.

It is clear that both businessmen who rivaled each other in areas like steel, were not only smart but pretty ruthless to gain massive growth in their businesses. The oligarchs were so rich that one of them, a Vanderbilt, could afford building and maintaining a house called Biltmore with the size, decor and immense estate grounds that even dwarfed that of many castles and grounds owned by the King of France.

The difference in wealth between them and their workers were astronomical, making even Goldman Sachs hundred million dollar remuneration received by its president in one year look relatively low as measured in today’s dollar equivalency taking massive cumulative inflation into account. This was the era of the American oligarchs. Forget Trump or even Buffet and even Abramovitch of Russia.

If I were Vladimir Putin, I would read everything about how Theodore Roosevelt dealt with the so-called less responsible oligarchs. In respect to JP Morgan who controlled 98 percent of the brokerage business on Wall Street, he beat Morgan in the courts. The decision was 3 to 2 against Morgan.

This was quite a victory given the absolute terror and fear Morgan invoked even in judicial quarters. Morgan’s trust was broken up. The same happened for Rockefeller eventually spawning Exxon, which actually became more profitable as a separated competing entity.

It is clear that the Yeltsin government gave away a lot of the Russian government owned commercial assets at deep discount, even as monopolies or semi-monopolies. Putin knows that and so does the whole world it feels by now, at least in major business circles. Not all oligarchs generated most of their wealth through that strange process that followed in the wake of the collapse of the Soviet Union, of course.

My guess is Putin will use the situation of Russia under sanctions to deal with what Roosevelt described as the bad trusts. This process will likely involve an accelerated de-privatization -at least partially- that started before Yukos Oil was taken over. It is interesting to see that the former oligarch of that company does not seem to have a critical mass of political influence even after being released from prison. I am not sure why, but possibly it is partly because we are no longer in the era of celebrating oligarchs in Russia. A transition is in process?

This time in Russia may represent  the considerable reduction of influence of what are equivalent to the dominating trusts of Roosevelt’s time. This includes the process with big companies of strategic importance and big tax providers going back to the state in whole or part as the Russian variation of Roisevelt’s trust busting, at least to a degree.

It is difficult to see that the so-called bad oligarchs -let us us say, the overly greedy and overly manipulative/ interfering in undermining (democratic) electoral political processes- will have such a good future in Russia. This may reflect in part some of the large capital flows over and above nervousness because of sanctions. Is in part the bad (not just the good nervous European sourced money worried about sanctions) running tail before the hammer comes down from the Kremlin. We shall see but there have been some well publicized signs.

It is my guess that those multinationals which wish to act as good corporate citizens and whose countries have not overly jumped on the American led sanction bandwagon could have an opportunity to get useful assets or commercial agreements with attractive rates as certain oligarch money leaves. Just look at BP, Exxon etc as examples of companies with sufficiently positive relations with the Kremlin wanting to maintain or increase their presence. And BP has been very profitable with its assets in Russia.

Those who wish to play proper ball in the market place and be socially and politically responsible could have a great long term economic future in Russia. Others had best stay primarily in London and New York would be an educated guess. They may stir up in some cases a lot of misunderstanding of Russia, but my guess is their proxy representatives of various politicians and sometimes leaders in the G7 will be long gone while those at the top in the Kremlin will be likely largely in place. Is there a message here?

I think a better strategy would be for all oligarchs to work harder to eliminate sanctions, improve step by step rule of law at home and generally support the motherland without unnecessarily upsetting their foreign hosts where they live abroad. That does not seem to be a difficult strategy or an unreasonable one? But as I have not lived here so long, what would I know about what is the best dynamic for oligarchs to have with the government?

However, if I may be permitted, it might be interesting to learn a wise thing from Andrew Carnegie realizing that having money just to grow more was not everything for him. He gave almost all of his massive fortune to a charitable foundation he set up. I do not know how the foundation laws work in Russia, but I think from the Kremlin to the average people they would appreciate that kind of generosity that the oligarch Carnegie demonstrated. And it is very much needed in near recession Russia. Oligarchs working in partnership to distribute this money to the true needy especially those eventually hurt by western sanctions might be a positive way.

The day or stage of oligarchy lasted only so long in America in its hyper form. Those who went with the times during the progressive period benefitted. Those who did not suffered the wrath of the Roosevelt government. I expect the same will happen here in Russia albeit faster if not slowly. And with a legal process possibly too swift and “efficient” for western media and juridical types there to understand fully.

One thing is clear, these are interesting and I think exciting times. There are opportunities for positive changes here and even smart investments by the savvy international investors. One can look at Russia as a glass half empty about to be filled or one that will be continued to be drained. I prefer to see the next glass that will be near full.

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