The Disposable Oligarchs

CHRISTOPHER A. HARTWELL is Professor of International Business Policy and Head of the International Management Institute at the Zurich University of Applied Sciences School of Management and Law and a Professor at Kozminski University. TRICIA D. OLSEN is Professor of Global Public Policy and Political Science and Harold E. Stassen Chair at the University of Minnesota’s Humphrey School of Public Affairs. Why Wealthy Elites Come to Regret Their Bargains With Authoritarians Christopher Hartwell and Tricia D. Olsen The attendees at U.S. President Donald Trump’s second inauguration included a typical cast of government officials, legislators, and cabinet nominees. What was not so typical was the crew of billionaires who also attended—and took center stage. The Meta CEO Mark Zuckerberg, the Amazon founder Jeff Bezos, the Google CEO Sundar Pichai, and the Tesla/SpaceX CEO Elon Musk were all seated one row behind Trump’s children and in front of many of his cabinet nominees, including Pete Hegseth, Robert Kennedy, Jr., and Kristi Noem. To many, the billionaires’ prominent placement—and the overtures they seemed to be making in anticipation of Trump’s swearing in—signified a new bargain between U.S. business elites and the president. Such a bargain is not just dangerous for a country’s democracy but also for the business elites who make it. And it brings the United States much closer to other countries in which alliances between government leaders and business tycoons are more typical. With good reason, many observers in the United States saw in Trump’s inauguration the enshrining of a new oligarchy. The term “oligarch” is more commonly associated with post-Soviet Russia. In the late 1980s, Soviet leader Mikhail Gorbachev’s major economic reforms, known as perestroika, allowed once nationalized and state-run industrial assets to increasingly make their way into the hands of politically connected managers and a nascent entrepreneurial class of business executives. The fall of the Soviet Union accelerated this transition, as economic mismanagement by Kremlin officials led to chronic cash shortages and forced the government to borrow money from private banks. As collateral, private bankers demanded stakes in major state-owned enterprises. When the government invariably defaulted, the banks gained control of the commanding heights of the Russian economy. The owners of these banks—favored insiders such as Roman Abramovich, Boris Berezovsky, and Mikhail Khodorkovsky—used these bargain-basement takeovers to consolidate vast fortunes in oil, banking, media, and other sectors, which allowed them to exert powerful influence over Russia’s new president, Boris Yeltsin, and the Russian economy. Although many of these firms performed well and even helped Russia emerge from a financial crisis in 1998, the scheme produced a concentration of wealth and political power that hampered any true free-market reforms in the country. But almost as quickly as they arrived on the scene, Russia’s oligarchs soon became political targets themselves. In the first decade of this century, with the tumult of the prior decade receding, Russia developed what scholars call an “authoritarian state capitalist” system: a nominally private economic system rife with state intervention designed to benefit an elite but still with institutions not yet entirely captured by that elite. Under authoritarian state capitalism, political leaders exist in an uneasy equilibrium, attempting to secure the levers of power in society that remain outside their control. These figures have to overcome the most important counterbalance to political power: economic power. Powerful and independent economic actors then become targets because their power prevents complete authoritarian consolidation. Russia’s oligarchs are the world’s most notorious, but other countries with authoritarian state capitalist systems, from Saudi Arabia to Turkey, have their own. Elites around the globe imagine that they are immune to the convulsions that come with tremendous political change, believing that their fortunes and their networks will sustain them. But just as cozying up to autocrats can help enrich and empower elites, so, too, can it lead to their downfall. Throughout the 1990s, Yeltsin increasingly relied on his oligarchs to govern effectively and as a result, they gained greater influence over the Russian economy, economic policy, and the halls of political power. When Vladimir Putin became Russia’s president in 2000, he embarked on a mission to constrain them. The “mob” of the 1990s, in the words of the political scientist Jordan Gans-Morse, gave way to “the man.” Over the course of Putin’s first presidential term, Berezovsky, Vladimir Gusinsky, and Vladimir Potanin all faced investigations and, in many instances, had their assets seized by a resurgent state apparatus. In 2003, Putin jailed Khodorkovsky—who had acquired an oil and gas company from the Russian government and was

The Disposable Oligarchs

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