issue 259 - September 1994
The new robber barons
Behind every fortune lies a crime. David Ransom argues that we’ve forgotten the lessons
of history and opened the door to a new breed of voracious profiteers.
No rain ever falls on the starkly beautiful Atacama Desert of northern Chile. Here you will find the huge and fabulously rich Chuquicamata copper mine, one of the artificial wonders of the world, its terraces carved from the rock like a Greek amphitheatre for giants.
At the turn of the century only a few lonely prospectors wandering in the wilderness knew about its hidden wealth. But the Guggenheim family, who were making a relatively modest fortune from silver mining in Mexico at the time, were also sniffing around Chile and came across Chuquicamata more or less by accident. They snapped it up for a couple of hundred thousand dollars, figured out that it was the largest single deposit of copper in the world, and waited.
They did not have to wait for long. The richest of all the big US copper companies, Anaconda, had exhausted its old mines and wanted Chuquicamata badly. So badly that in 1902 they paid the Guggenheims $100 million – that’s a billion (yes, one thousand million) or so dollars at today’s prices – for control of it. A nice little earner from a couple of years’ work by the Guggenheims.
The Guggenheims eventually became great philanthropists and endowed one of the world’s prettiest art museums in New York. Anaconda, on the other hand, had to set about the more mundane task of recovering its money. Chuquicamata would have to earn the most fabulous profits for the deal to pay off. It did, many times over, decade after decade.
The only people who made absolutely nothing from the deal were the Chilean miners who did the work. Their function was to toil away, forever digging what soon became the biggest artificial hole in the world, to pay Anaconda for a deal they had played no part whatever in making. They were, you might say, paying for the Guggenheim Museum in New York, when everyone thought it was the Guggenheims.1
Every fortune is made in this way, for personal wealth is no more than a badge of competence at getting someone else to pay your bills.
What we are talking about here, however, is not just any old personal fortune or the nicer distinctions of wealth between most of us, whatever we may own or howsoever we may have earned it. There are individuals whose personal wealth is now measured not just in hundreds or thousands but in thousands of millions of dollars.
Their appetite for riches, for possessions and power knows no bounds. They are driven by obsessions akin to madness, by an evangelical belief in their own genius that, left to its own devices, would make monsters of us all. We only have to retrieve the evidence from our own history to see that this is so.
The turn of the century was a particularly good time for philanthropists. Not just the Guggenheims but the Rockefellers, the Carnegies and a brace of others in the US were founding the super-rich dynasties whose names are better remembered today, if at all, for the philanthropic institutions they named after themselves.
At the time, however, not everyone called these people philanthropic. In fact the preferred popular term for them was ‘robber barons’. For this was the great age of private-monopoly industrial empires in the US. Extraordinary personal fiefdoms were built from oil, mining, railways, steel, newspapers, all the large-scale modern industries of the day. They were ruled as absolute dictatorships by a savage breed of ruthless megalomaniacs.
It was one of those moments in history when, as if by alchemy, fresh ways of making a personal fortune beyond anyone’s wildest imaginings suddenly materialized. At first, other people just looked on in stunned amazement. But eventually, after long and often violent conflicts with the people they employed, the robber barons were tamed. The dangers of unrestrained, monopolistic power wielded by individuals who frequently turned out to have been almost completely insane were recognized. ‘Anti-trust’ – anti-monopoly in the UK – and labour-rights legislation by governments with at least some democratic credentials moderated the excesses, or saved capitalism from self-destruction, depending on your point of view.
We are now, I think, living through a similar historical moment. At no time since then have the super-rich got richer and more powerful with quite such effortless ease.
The fiefdoms of the new robber barons may look a bit different. Code names like ‘deregulation’ and ‘structural adjustment’ conceal their true identity. They are being built on new territory: retailing, information technology, mass communications, entertainment, financial speculation and ‘kleptocracy’ – government by thieves.
In the relatively fresh pastures of Japan and Southeast Asia the biggest bucks have so far been made from real estate, like the chunk of central Tokyo inherited by the Mori brothers that helps them to weigh in with a personal fortune of $13 billion. The shift from ‘corporate’ to personal wealth has only just begun in this part of the world. As elsewhere, it is happening because the restraints have been removed, the lessons apparently forgotten.
But in many essential respects the new fiefdoms of the robber barons are the same. They are, as ever, exclusively male. Apart from the odd monarch, widow or daughter of wealth, there are still very few women to be found among the world’s richest people. This suggests that the quest for unlimited money and power is one of the nastier products of male fantasy. Unchanged too is the urge to found dynasties, the craving for monopoly power and the Napoleon-complexes of the individuals concerned.
Some of us were, I think, distracted by what we took for a brand-new world. We gazed with grudging respect at the glittering citadels of the global village, the flickering images, the limitless possibilities of new technology, the financial big bang. We talked in grand, abstract terms about everything that had gone: ‘post-modernism’, ‘the post-industrial age’, ‘the post-Cold War era’. We were looking for something new in the New World Order.
Maybe when we’d read Bonfire of the Vanities, seen Wall Street or watched Serious Money we imagined that after the stock-market crash of 1987, economic recession and the property slump, surely the nasty little ‘Yuppies’, the self-styled ‘Lords of the Universe’, must have gone bust. In fact, the number of dollar billionaires more than doubled between 1987 and 1992.2 All that really happened was that the big fish ate the smaller fish and the concentration of wealth and power in the hands of super-rich individuals accelerated.
Multinational corporations had been made to look bloated and lumbering in a world of fast-buck footwork. They lost their aura of invulnerability to predatory raiders. ‘Leveraged buyouts’ by individuals wielding enormous quantities of borrowed cash enriched those who organized them and, more importantly, changed corporate culture. Short-term profits and share prices became the absolute arbiters of corporate policy.
To make themselves leaner and hungrier the corporations invited the predators into the boardroom. Quite extraordinary ‘remuneration’ packages, share options, performance bonuses, pension rights and other ‘incentives’ made corporate Chief Executive Officers and their boardroom buddies among the wealthiest people in the world. In terms of disposable income some of them became richer than the billionaires listed in Fortune magazine, the in-house journal of the super-rich.
Most striking is the case of Rupert Murdoch, who at one point owed his bankers $8 billion – yes that’s eight thousand million dollars. Financial institutions and banks put an almost religious faith in the genius of individual ‘entrepreneurs’.3
This attitude is now spreading to a wider public. The feeling seems to be that if you’re a genius at making money, then you’ll be a genius at running a country. The most celebrated example of this is the billionaire property speculator, football impresario, media monopolist and now Premier of Italy Silvio Berlusconi. Large sections of the Italian people, apparently exasperated by venal politicians and unabashed by the prospect of a return to fascism, decided that in the chaotic circumstances of Italian politics they might as well have the real thing and vote for Berlusconi himself.
He had a precursor in Ross Perot, the gadfly billionaire who financed his own campaign in the last US presidential elections. And he will undoubtedly have his successors. There is just too neat a symbiosis, too tempting an investment here for the chance to be missed. Political ambition sits very comfortably with the megalomania of the robber baron. The coffers of the state offer rich pickings – ‘privatization’ has been a favourite in recent years – while there’s no better way of taking out an insurance policy against your personal tax bills than running the government.
In the South we’ve become accustomed to seeing this sort of thing for some time. Kleptocratic rulers, hugely wealthy men sponsored by their Northern chums, steal taxes, land, loans, export earnings, anything that moves. At one time the ‘fight against communism’ was sufficient justification. Now we know this for the excuse it always was – at least in Zaire, Côte d’Ivoire, Indonesia, Haiti, Brunei, Saudi Arabia, Kuwait and a depressingly large number of other countries with openly kleptocratic rulers.
It is true that in Latin America military kleptocracy has become redundant. Very similar results can now be achieved by ‘structural adjustment’, which has enormously enriched élites through programmes of privatization, deregulation and cuts in social services. The 35 families in Mexico who ‘earn’ more than the 15 million poorest Mexicans; the five-billion-dollar swindles of former President Collor and his ‘adviser’ PC Farias in Brazil are just the most celebrated examples.
In the North, what JK Galbraith calls a ‘culture of contentment’ may have helped the super-rich to get away with the loot.4 He reckons the relatively prosperous majority of the population in Europe and North America has not minded too much about the poor minority getting poorer or about a very rich minority getting very much richer, so long as it can stay contented in the middle.
We have also, I think, become bewitched by the rich and famous. We peer at their tedious, self-indulgent ‘lifestyles’ through banal ‘keyhole’ TV programmes and magazines with silly names like Hello! and Voilà! We read about revolting hereditary barons who stuff their heads into bags filled with cocaine; about the ‘old’ rich and the royals who seem to have been there always and therefore to represent some kind of inherent human condition. We muse about becoming rich ourselves, thinking it harmless. And, while we muse, tax and social wefare cuts in the UK, for example, transfer anything between $30 and $75 billion over our heads from the very poor to the very rich.
In Brazil you’d need to be quite mad not to see such things for what they really are. Here there has arisen in recent years a dystopian vision of strutting media barons feeding exotic soap operas to a society whose abandoned children prowl city streets in a state of glowering fury and tears.
A couple of years ago, outside the city of Goiânia, I saw a few beef cattle owned by a very rich landowner strolling through lush fields behind high fences on both sides of a road. Packed onto a grimy, narrow strip along the verges, spilling into the road and clinging to the most tenuous form of life imaginable, were thousands of people. I could not help reflecting that it was they, more than the cattle, who were being farmed. This in a country, and among a people, that have waited in vain for an ‘economic miracle’ their resources and genius would otherwise quite easily permit. There is only one word for this: plunder.
It is one thing to diagnose the illness, quite another to cure it. Try thinking of the new robber barons as sufferers from a serious mental disorder of addiction. Therapists will tell you that the first step to recovery is for the patient to recognize that he is indeed disordered. The second – which also aids the first – is for everyone else to say so and refuse to collude in the patient’s self-deception.
In more urgent and extreme circumstances we could do worse, I suppose, than follow the example of our friends in Chiapas, southern Mexico. They know all too well what their local barons look like and what they stand for. During the uprising there in January they decided to kidnap one of them (he was released unharmed).
The great advantage of keeping the new robber barons in our sights is that there are very few of them indeed and many more of us. It is not envy but contempt we should feel for them. Or are we to believe that profit is the only measure of value; that conspicuous consumption is virtuous; that ‘the environment’ is a golf course; that it is better to pay tax consultants than taxes; that everything done in the name of democracy and equity is wrong?
If so we should follow the new robber barons into the lunatic asylum and hope someone will be left on the outside to foot the bill. Midas, after all, turned everything he touched into gold, including his own daughter. Better, I say, to rename the Guggenheim Museum ‘Chuquicamata’.
1 This story is based on my research in Chile while working at the London School of Economics between 1970 and 1974.
2 Fortune International, 28 June 1993.
3 William Shawcross, Murdoch, Pan Books, London, 1993.
4 JK Galbraith, The Culture of Contentment, Penguin, London, 1992.
You can put money on practically anything in Latin America – horses, card games, football, the toss of an animal bone plated with gold and silver, the fall of a heavy piece of metal thrown towards a line marked out on the ground.
My own experience with gambling nearly cost me my life.
In Argentina in the 1970s ten-pin bowling was very popular. When I was a teenager I used to go to one of the biggest bowling alleys in Buenos Aires with my friends. About six months after we started we were approached by some smartly-dressed men we’d never seen before.
They invited us to play, just for a few drinks. We won most of the games. One of them asked if we would like to play at another bowling alley. He promised to pay for everything. It was very exciting to think that someone was interested in the way we played.
For about two years we lived like kings. We stayed in a hotel paid for by our benefactors. Eventually we felt we’d made enough money and could stop playing.
When we told our patrons that we wanted to quit they offered to double our money. They even offered to provide us with women. The women were told they had to look after us and give us whatever we wanted. But we were getting concerned about what could happen to us. One day I confronted my girlfriend. Why did we have all this money? Why all this protection? Why was even the choice of drinks decided for us?
She couldn’t answer straight away, and after a few minutes she started to cry. She tried to explain that I, my friends and the women were pawns for this group of people, the local mafia, and that it no longer mattered what we wanted to do.
It was too late now to get away from them. If we did try we were likely to end up in a side street with a knife in our backs. We were no longer playing just for fun but to stay alive. We belonged to the Mafia and could be bought and sold without any say in our own futures.
One weekend a group of us got together to plan our escape. It was risky and we knew that we wouldn’t get a second chance. We weren’t even sure we could trust one another not to inform our bosses. One Wednesday we walked out of the hotel just in the clothes we wore and headed for Brazil. I left my friends there and carried on to Colombia, a free man. I’d learnt my lesson.
This special report appeared in the filthy rich!: the new robber barons issue of New Internationalist. You can buy this magazine or, to get stories like this one through your door every month, subscribe.