Thursday, January 3, 2013

From Central Planning To Oligarchy

I’ve often asked the question, 'how did we go from a species of relative egalitarianism to one of kings, emperors, serfs and slaves?' This article from Bloomberg about China's "princelings" provides a fascinating real-world insight to how a society of relative egalitarianism and equality, with rulers who lived among the people and did not display ostentatious wealth (remember the last emperor Pi Yi's small house and garden in Beijing?), can transform in a relatively short time to one with a ruling oligarchy of fabulous wealth, exploiting their social connections to the utmost. BoingBoing summarizes: "This long-read from Bloomberg about China's "Princelings" -- the generation of hyper-rich oligarchs' children, descended from Mao's generals -- is endlessly fascinating. Wealth in China is even more concentrated than Russia, Brazil or the USA, and the Chinese looter-class use complex screens that take advantage of different ways of representing their names in English, Cantonese and Mandarin to obscure the ownership of former state assets, flogged at pennies on the dollar in sweetheart deals for the hyper-privileged. The Princelings are western-educated, mostly in the USA, and flaunt expensive luxury-brand accessories on their social media profiles."

Heirs of Mao’s Comrades Rise as New Capitalist Nobility (Bloomberg)
In three decades, they and their successors lifted more than 600 million people out of poverty and created a home-owning middle class as China rose to become the world’s second-biggest economy. Chinese on average now eat six times more meat than they did in 1976, and 100 million people have traded in their bicycles for automobiles.

The Immortals also sowed the seeds of one of the biggest challenges to the Party’s authority. They entrusted some of the key assets of the state to their children, many of whom became wealthy. It was the beginning of a new elite class, now known as princelings. This is fueling public anger over unequal accumulation of wealth, unfair access to opportunity and exploitation of privilege -- all at odds with the original aims of the communist revolution.

To reveal the scale and origins of this red aristocracy, Bloomberg News traced the fortunes of 103 people, the Immortals’ direct descendants and their spouses. The result is a detailed look at one part of China’s elite and how its members reaped benefits from the country’s boom.

In the 1980s, they were chosen to run the new state conglomerates. In the 1990s, they tapped into real estate and the nation’s growing hunger for coal and steel. Today the Immortals’ grandchildren are players in private equity amid China’s integration into the global economy.

Twenty-six of the heirs ran or held top positions in state- owned companies that dominate the economy, data compiled by Bloomberg News show. Three children alone -- General Wang’s son, Wang Jun; Deng’s son-in-law, He Ping; and Chen Yuan, the son of Mao’s economic tsar -- headed or still run state-owned companies with combined assets of about $1.6 trillion in 2011. That is equivalent to more than a fifth of China’s annual economic output.

The families benefited from their control of state companies, amassing private wealth as they embraced the market economy. Forty-three of the 103 ran their own business or became executives in private firms, according to Bloomberg data.
I wonder if a similar thing happened in ancient Rome. Michael Hudson:
"That’s when civilization began to go down hill. It’s usually considered the start of Western civilization, but what people think is the start of Western Civilization was the falling apart of Near Eastern origins of civilization, of this economy that had been put together in a very well-organized economy, and all of a sudden instead of the public institutions, you had local chieftains occurring, and in Rome, very soon you had the aristocratic families overthrow the kings, and the functions that were in the public sector in the Near East all of a sudden were taken over by private families — let’s call them the Mafia, because that’s basically what the Roman oligarchy was."
Those aristocratic families became the patrician class, from pater, meaning father (as in fathers of their country). So they went from a centrally-planned economy ruled by kings to a "democracy" ruled by powerful families. It was those wealthy families that were expected to provide for the people from their own purse - they built the monuments and the public works, funded the armies, etc. Wealthy families often paid for bread and olive oil for the poor (Rome's "national debt" was actually the emperor's personal debt). The members of these hyper-ambitious families jostled among one another for power and glory, driving Rome's conquest of the Mediterranean. Eventually, Rome declined into class war between the rich and the poor (which is probably where Marx got his ideas). The oligarchy declined to just three, and then one - the emperor.

Are we seeing a similar case in modern China? You go from a society with strict societal sanctions and institutional constrains on extreme wealth accumulation to one in which “to get rich is glorious.”  Boosters of capitalism are quick to point out how much richer China is as a society, while of course ignoring any downside, such as the alienation, violence, police state repression, environmental damage, destruction of social bonds, exploitation of deracinated rural workers, the yawning gap between rich and poor, the rise in mental illness, precariousness of existence, overconsumption, obesity, rise in stress levels, destruction of priceless cultural heritage and so on. But I'm sure the exact same thing happened in the ancient world - the elites got richer, but as long as society was expanding and wealth was flowing in, the people did not mind. The elites brought home the bacon for the wider society, justifying their huge share. They were the rainmakers, so there was no use hating them. As long as Rome was expanding its territory and living standards were increasing with all the luxury goods, food, wine, slaves, and so on, no one complained about the elites at the center of it all, even if you were a citizen at or near the bottom.

The "Immortals" are probably a reasonably good stand-in for oligarchies from Ur to Babylon to Greece to Rome to the Middle Ages to the present-day United States. Kinship ties and privileged positions lead to ever more wealth accruing into ever fewer hands, until eventually societies can no longer expand and they disintegrate. It's fascinating having actual documentation of how this happens, complete with family trees. Of course, the analogy with hunter-gatherers is very limited, the Chinese are hardly going from hunter-gathering to civilization, but rather are one of the oldest agricultural civilizations on the planet (arguably the oldest still in existence). But it reveals the nature of wealth concentration through kinship and institutional control even in the absence of emperors or kings since the very beginnings of societies of surplus.

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