About twenty years ago, I found myself in the Moscow office of one of Russia’s leading business oligarchs. One of his companies owed my bank some money, and I was there to find a way to get that money back. After we finished our business, the oligarch reached across his desk and with a simian Mona Lisa smile handed me his copy of Jon Krakauer’s Into Thin Air. At that moment, I wanted to understand how that man and people like him thought, and what we could learn from them. (Yeah, despite the threat I felt from the book title, we got the money back.)
He wasn’t my first oligarch, and he wouldn’t be my last. But he got me started down a very interesting wormhole. As we all live more and more in the worlds of Trump and Putin, here’s what I’ve found so far on the other side:
What are business oligarchs?
Business oligarchs generate significant wealth from business activity, then gain national political office or influence. They are very different from political oligarchs, who use their political office to gain wealth. Business oligarchs move from wealth to power. Political oligarchs move in the opposite direction. The direction makes all the difference. Trump is a business oligarch. Putin is a political oligarch.
Business oligarchs are hugely significant and have been for some time. For example, these actors have developed business organizations that employed at least 5.7 million in 2016, governed countries with 2016 populations totaling 796 million, and generated cumulative wealth totaling over $1 trillion in 2016 dollars. Business oligarchs have gained their wealth through business activities in virtually every sector of the global economy.
Who are they?
Business oligarchs are of two types. One type gains national political office. They exercise formal power. Current and recent examples include heads of state Petro Poroshenko (Ukraine), Mauricio Macri (Argentina) and, as noted earlier, Donald Trump (United States); heads of government Malcolm Turnbull (Australia) and Saad Hariri (Lebanon); cabinet members Robert Rubin and Wilbur Ross in the US; and legislators Guanqui Lu and Qinghou Zong in China. Some business oligarchs, such as Roman Abramovich (Russia) and Michael Bloomberg (US), have held nationally significant sub-national offices such as governor or mayor.
Since 1945, 17 business oligarchs have been heads of state or government. The average net worth of these oligarchs is $2.9 billion, with a range from $17 million to $16 billion. In this population, Trump's estimated net worth (currently $4.5 billion, according to Forbes) is above average. The average term of office for those who have completed it is 4.3 years, ranging from 1 to 9 years.
The frequency of business oligarchs as heads of state or government has been increasing over the past few decades, from three in the 1990s to five in the 2000s and seven to date in the 2010s. The peak period was from 2011 to 2014, when five business oligarchs were in these offices. We’ve returned to that peak level in 2017.
Business oligarchs have governed countries at all stages of development, ranging from factor-driven (Andry Rajoelina in Madagascar) to efficiency-driven (the Shinawatra siblings in Thailand) and innovation-driven (Silvio Berlusconi in Italy). While we don't have good data on scholarly assessments of these actors' reputations while in government, it seems fair to say that these reputations vary widely. I have not been able to find instances since 1945 of business oligarchs being regarded as great political leaders. Many of their administrations were marked by scandal and accusations of corruption. At this stage, it is difficult to sort out if this is due to the institutional environments in which they worked, if it is due to being "bad apples," or if it is due to some other reason or reasons.
A second type of business oligarch—and one much harder to understand—exercises informal national political influence, rather than holding a formal office. They use their influence through three major pathways: financial contributions (the Koch brothers and George Soros, both in the US), informal advice (Warren Buffett in the US), and behind the scenes manipulation of laws, regulations, and their enforcement (the late Boris Berezovsky in Russia).
Where are they?
Business oligarchs have been active on every continent except (perhaps) Antarctica. However, when we look at countries that have two or more business oligarchs as either head of state or government, the geographical triangle anchored by Kiev, Beirut, and Rome contains a concentration of these actors. So too the United States, where at least five presidents (Washington, Hoover, Bush I and II, and Trump) can be categorized as business oligarchs.
When have business oligarchs been active?
Business oligarchs have been with us since ancient Greece, when Thucydides acquired wealth from his gold mines and used the resulting influence to become a general in the Athenian army during the Peloponnesian wars. During the 15th century, Cosimo de Medici employed his bank’s wealth to become the ruler of Florence, commencing a family dynasty that ruled during much of the Italian Renaissance. George Washington’s business activities made him one of the wealthiest of America’s founding fathers and contributed to his reputation for leadership, leading to his election as that country’s first head of state.
Why do business oligarchs exist?
Since Plato and Aristotle, a lot of thought has been given to this question. Despite their undeniable influence, business oligarchs are not well understood and are hard to study systematically. They are like Napoleon, who my former LSE professor Philip Windsor once characterized thusly: "The most intelligent comment made about Napoleon came from a Belgian peasant, who saw him reviewing his troops just before Waterloo....'If that man's face was a clock,' he declared, 'no one would dare look at it to tell the time.'"
There’s a lot that we don’t know about business oligarchs. How do they move from wealth to power? Which business oligarchs are more likely to make this move successfully? Are they more likely to be effective once in office compared to others coming from different backgrounds?
Business oligarchs are likely to be here for a while. I’m still trying to understand that Mona Lisa smile.