Tamsin Shaw explains how anti-market Russian oligarchy has spread to the US, and that Big Tech may be the prime beneficiary.

It has become evident over the past few years that the wealthiest individuals in Europe and America, who we’re used to thinking of as anti-state libertarians, have –in fact – abandoned free markets in favour of state-supported monopolies: they wish to be oligarchs.

In the Russian model of what is known as “state capitalism”, businesses that are strategically essential to the state receive various forms of state protection, including the absorption of economic risk. The billionaire owners of these businesses move their enormous profits off-shore and very little financial benefit accrues to the Russian people, so deep inequalities are endemic.

When assessed in purely economic terms, this model looks extremely unappealing. Russia has had very low economic growth, particularly since the 2014 devaluation of the Ruble, and has been derided for its outsized geopolitical ambitions compared to the size of its economy. It has been referred to dismissively by Americans as “Mexico with nukes”.

But, the far-right in Europe and America have perceived quite clearly the advantages of this system – both to the state and its favoured oligarchs.

Strategic Investment – Hybrid Warfare

Russia’s influence in the world has been vastly increased through its use of strategic investment as a form of hybrid warfare. It has long been Vladimir Putin’s modus operandi to make loyal oligarchs serve strategic interests.

Petr Aven of Alfa Bank told the Office of the Special Counsel during Robert Mueller’s investigation in the US that he is one of approximately 50 oligarchs regularly invited to meet with Putin, and that Putin’s directives at those meetings are taken very seriously.

These oligarchs have bought companies that own sensitive data or emerging technologies, they own telecommunications and energy businesses that are vital to states’ interests and national security, they have established industries in economically vulnerable areas of Europe and America that will suffer disproportionately if sanctions are imposed.

The tremendous leverage Russia can wield through the use of relatively meagre economic means has only recently become evident. The West has been slow to catch on.

Putin brought the Russian oligarchs, enriched under Boris Yeltsin, swiftly to heel when he became President in 2000. The post-Soviet expansion of the Russian economy had created enormous fortunes for the billionaires but, in 2003, Putin made clear his intentions towards those who were his political opponents with the arrest of the wealthiest man in Russia, the owner of Yukos, Mikhail Khodorkovsky (who was imprisoned and now lives in exile in the US). Many other arrests followed.

Those who remain in charge of their companies receive state support in exchange for investing strategically on behalf of the Kremlin.

Bannon and Putin’s Economic Nationalism

The financial crash of 2008 hit the Russian oligarchs extremely hard. But many of America’s billionaires suffered immense losses too.

To influential figures on the right, it started to seem that, not only were free markets a potential source of social instability (they were seen to have contributed to erasing traditional hierarchies of race and gender), but a global economy at the mercy of increasingly complex financial instruments could not be guaranteed to concentrate wealth in what they saw as the right hands – those with conservative Christian values.

Steve Bannon and his allies (including the Mercers and others on the elite, far-right Council for National Policy) became the ideologues of what they misleadingly termed “economic nationalism”. They claimed to be angry about the 2008 financial crisis because ordinary people were made to suffer by the reckless behaviour of the banks. That position, of course, makes sense and is appealing to the liberals who Bannon is addressing whenever he talks to the mainstream media. But he also has an unrelated set of objections.

In a speech to the Vatican in 2014, Bannon described the erosion of the form of capitalism that is built on a “Judaeo-Christian foundation” (“Judaeo-Christian is a knowingly anti-Semitic term implying the supersession of Judaism by Christianity). It has been replaced, he says, by Wall Street’s “securitisation of everything”, whereby everything is viewed “as a securitisation opportunity” rather than it investing in businesses that deliver something of real value. Wall Street has eroded the distinction between commercial banks and investment banks, one that Bannon wants to reinstate.

His ideas are strikingly similar to those expressed by Putin after the financial crisis in a 2009 speech to the World Economic Forum.

From Free Markets to Backroom Deals

Like Bannon, Putin claims to be concerned primarily about ordinary working people, though – like Bannon – none of his actions have borne this out.

Like Bannon, Putin views the crisis as having been caused by the “disproportions between the scale of financial operations and the fundamental value of assets”, as well as those between “the increased burden on international loans and the sources of their collateral”.

Putin wants to see a “reversion to fundamental asset value” and believes that “the economy of the future must become an economy of real values”. This means not allowing international finance to destabilise an economy in which entrepreneurs develop socially and strategically valuable goods.

The 2008 crisis, Putin says, has shown that globalisation and securitisation together have dragged down economies across the world, regardless of their political or economic system, so that everyone is at the mercy of the weakest links in the chain.

What both Putin and Bannon understand is that, if you want to pursue strategic, political or social ends through private enterprise, you can’t rely on free markets – especially heavily securitised markets – to deliver the necessary stability.

In his Vatican speech, Bannon praised Putin as a comrade in arms in a war for “Judaeo-Christian values” against the forces of “Islamo-fascism”.

As an advisor to the Trump campaign and its transition team, Bannon evidently tried to put together, with the help of Putin, state-supported energy deals that would advance shared geopolitical goals.

During the transition period following the 2016 US Presidential Election, their representatives – including Bannon’s friend Erik Prince and Putin’s emissary Kirill Dmitriev (CEO of the Russia Direct Investment Fund, a sovereign wealth fund set up to create partnerships with the sovereign wealth funds of other countries) – held meetings that also involved the UAE, Saudi Arabia, Qatar and Israel, with the intention of striking deals that would alter the balance of power in the Middle East, isolating Iran and ultimately delivering nuclear technologies to their allies in Saudi Arabia.

Trump’s Oligarch’s Fail – but Silicon Valley Steps In

Robert Mueller’s report tells us that, on 16 January 2017, Dmitriev outlined for his “boss” – Vladimir Putin – the ways in which the US and Russia might develop greater cooperation. He then arranged a phone conversation between Donald Trump and Putin on 28 January to discuss the plan.

Apart from keeping open lines of communication between “key people” and maintaining an open dialogue, Dmitriev recommended that the two countries work on “jointly fighting terrorism”, on “jointly engaging in anti-weapons of mass destruction efforts” and “developing ‘win-win’ economic and investment initiatives”. But, the subsequent arrest of a key player – General Michael Flynn – put on hold the nuclear power deal that was central to this project.

The efforts were unsuccessful. America doesn’t yet have loyal oligarchs in the Russian mould, reliably advancing its geopolitical aims.

Peter Thiel (CEO of Palantir) has warned in a New York Times op-ed that Google’s relationship with China is “seemingly treasonous”.

The attempts being made by US billionaires to shape the world are often laughable.

A Vanity Fair article recently revealed that WeWork founder Adam Neumann thought – before the collapse of his company – that he, Jared Kushner and Mohammed bin Salman could together solve the problems of the Middle East, in part by employing his business model in the West Bank and Gaza. He was a consultant on Kushner’s Middle East peace plan.

But what America, like Russia, does have is a handful of billionaires who have benefited enormously from government funding and support, who reap immense profits and hoard their wealth in off-shore companies.

They are the heads of the large Silicon Valley companies – Apple, Google, Amazon, Facebook and Microsoft – whose fortunes were made with the help of taxpayer dollars, through mechanisms such as the Small Business Innovation Research Programme and the non-profit venture capital funds established by US defence and intelligence agencies, the most successful being the CIA’s pioneering fund, In-Q-Tel.

They have developed technologies considered necessary for national security purposes, whilst maintaining the patents, commercialising the products and reaping unparalleled financial rewards. But they are not bound to serve only the national security interests of the US. Their bottom line is commercial.

When it profits Google to develop AI technologies in China, it does. There are standing tensions between Google and the Pentagon over the fact that Google’s AI lab in Beijing, which has been creating products (such as Tensorflow – software used to analyse big data and predict outcomes) that can be converted by the Chinese back into tools for the military.

Existential Threat

Donald Trump, the “America First” President who was quick to engage in a trade war with China, seems unlikely to tolerate such behaviour for long.

His friend, the tech entrepreneur Peter Thiel (CEO of Palantir, a tech company that has won important national security contracts with the DHS, FBI, NSA, CDC, the Marine Corps, the Air Force and Special Operations Command, among other agencies) has warned in a New York Times op-ed that Google’s relationship with China is “seemingly treasonous”.

Steve Bannon expressed the view, in a 2018 conversation with CNN’s Oliver Darcy, that the big tech companies should be broken up and Big Data put into a public trust. Given the role that Bannon’s company, Cambridge Analytica (with help from Palantir) played in the 2016 US Presidential Election, we can assume this view is rooted in a strong sense of the political power such companies hold.

So, one of the greatest questions we now face is: what will the big tech companies do to hold onto their power?

We’re beginning to see answers.

In October, an audio recording of a conversation Mark Zuckerberg held with some of his employees the previous July was leaked. In it, he described Democratic presidential candidate Elizabeth Warren’s plans to break up big tech companies as an “existential threat” to his company.

In September, Zuckerberg met privately with Trump, ahead of hearings in Congress about Facebook’s policies on political advertisements and on its planned cryptocurrency. A few days after the meeting, Zuckerberg announced that Facebook would not ban lying in political ads. It has now been revealed that he had a second secretive meeting with the President around the same time – at a small private dinner at the White House. Peter Thiel was also a guest.

We need to start giving thought now to what a second-term Trump, gloves off, with loyal oligarchs in charge of enormously powerful companies, an ally in the Kremlin, and the judiciary already in hand, could do – and whether our democracy is better equipped than Russia’s to survive it.