Oligarchy

Hello Oligarchy readers,

We tracking the ways the Covid-19 is affecting the super-rich— and what it means for the rest of us.

NAVALNY

If you haven’t watched it already – and, to be honest, even if you have – stop what you’re doing and watch the video of Alexei Navalny interviewing a member of the FSB hit squad that tried to kill him. Even by the standards of Russia, which has long been a country where all-but-impossible news stories happen on a seemingly daily basis, this is incredible. 

In case you haven’t been following the Navalny news. He’s an anti-corruption blogger turned opposition politician, who regularly exposes the financial crimes of the powerful on his website. In August, he was poisoned with Novichok, evacuated for treatment in Germany, and survived. Then Bellingcat, exploiting Russia’s everything-is-for-sale approach to information security, in an investigation that was astounding even by their standards, identified his would-be killers and exposed their identities.

In his annual multi-hour press conference last week, Putin did his traditional tough guy act, and brushed off a question about the poisoning. Sadly for the president, however, Navalny was well ahead of him, and already had an interview with one of the poisoners in the can. He waited until this week to release it, and did so on Monday. Seriously, watch it, it’s bonkers.

I think my favorite bit is the detailed discussion of where exactly on Navalny’s underpants the Novichok was painted, though I also appreciated the final section where the FSB man has a sudden wave of anxiety that perhaps – just, perhaps – he shouldn’t have been having this discussion on a non-secure phone line. Navalny assures him it’s fine, with a sangfroid which is really something.

Kremlin officials have been treating Navalny as a sort of blonde Voldemort for years, and avoiding saying his name as if that will give him additional power. This strange echo of Soviet practice, where officials would make comments that only made sense if you’d read the dissidents’ illegal samizdat publications, hit a new high after the underpants revelation.

• “We can say that the patient has a pronounced persecution mania,” Kremlin spokesman Dmitry Peskov told reporters (still refusing to mention Navalny by name). “You can also clearly establish a certain manifestation of megalomania, because, as they say, he even compares himself to Jesus. As for the rest, of course, there’s a Freudian symptom that is marked by a fixation with your own crotch area.”

Western countries have been forthright in condemning the attempted murder, and European countries imposed sanctions on the Russians involved. It’s always hard to assess public opinion in Russia, but it is pretty incredible that Navalny’s video should have been watched almost 14 million times in just 24 hours. (Update: I wrote that two hours ago, and the figure is now closing on 14.5 million, with 1.5 million likes.)

It appears, however, that the endlessly adaptable Russian criminal code is keeping up. Russian film director Vitaly Mansky has been detained for holding a pair of blue Tommy Hilfiger boxer shorts outside the FSB headquarters. Two days ago, that wouldn’t have meant anything at all; now, it’s already a subversive act.

Is this peak 2020? Surely, it can’t be far off.

INEQUALITY

It’s been a topsy-topsy 2020 for Elon Musk, the outspoken boss of Tesla. At the start of the year, he was worth a mere $26.6 billion; as of right now, he’s the second richest man in the world, with $142.2 billion in wealth, which really puts into perspective whether or not it was a good idea for me to try to save the equivalent of $12 on my brother’s Christmas present by ordering it from America.

The reason it wasn’t a good idea for me to do my Christmas shopping transatlantically was the same one that’s persuaded Mr. Musk to upend his life and move to Texas: over-mighty government regulation. In my case, I had to pay $25 in import duties before DHL would deliver my parcel, which more than canceled out the cost saving. In his case, he had to abide by pesky regulations and shut his factory in California as officials desperately fought to slow the spread of Covid-19. 

There’s also the small matter of Texas not collecting income or capital gains tax from individuals, which could prove quite useful when it’s time for Musk to cash in his stock options in what is now an S&P 500 company. And that has revived a discussion over what is the best way to guarantee prosperity. Should taxes be low, so entrepreneurs invest, as in Texas? Or should they be high, so the benefits of growth are spread more widely, as in California?

Funnily enough, two academics have addressed this very question in a new paper: The Economic Consequences of Major Tax Cuts for the Rich, which examines the performance of 18 western countries over the last five decades. It’s pretty categorical.

• “Major tax cuts for the rich push up income inequality, as measured by the top 1 percent share of pre-tax national income.”
• “Turning our attention to economic performance, we find no significant effects of major tax cuts for the rich. More specifically, the trajectories of real GDP per capita and the unemployment rate are unaffected by significant reductions in taxes on the rich in both the short and medium term.”

Translation: tax cuts for the rich make the rich richer and do the rest of us no good at all. Translated into politician: tax cuts give the rich a bigger piece of the pie, without making the actual pie any bigger. Perhaps next year, academics could look into the best way for restaurants to feed their customers: should they serve pie to everyone, or just give the whole thing to that bloke in the corner? I think he’s called Elon.

ANTI-CORRUPTION 

We still don’t know if Congress will overrule President Donald Trump’s petulant veto of the National Defense Authorization Act, with its crucial anti-corruption measures, and things look worryingly more complicated than I’d like them to. We can still hope it’ll pass, but that’s reliant on congressional Republicans growing some spines between now and New Year’s Eve, so I’d say it’s still unwise to bet the farm on it.

Anyway, there’s enough to worry about without trying to second guess whatever’s happening in the bunker, so let’s look ahead to what a Joe Biden presidency might do. The Alliance for Securing Democracy, a non-partisan group in Washington set up in 2017 with an impressively credentialed advisory council, has come up with some ideas in a new report, which I hope the incoming administration will give some thoughts to.

• “With Russia and China’s increasing usage of strategic corruption and malign finance as geopolitical weapons, and with publics around the world – including in the United States – angry about economic inequality and perceived corruption at home, anti-corruption offers a unique opportunity to unify U.S. foreign and domestic policy.” 
• “Diplomats and lawmakers agree that cracking down on corruption may be the most viable way to restore American leadership by meeting demands for accountability from citizens all over the world.”

I think I might print out the page of recommendations and leave them as my letter to Santa. I’ve been good this year, so fingers crossed.

WHAT I’M WRITING

I’m sorry to say that I’m going to take a couple of months off from writing this newsletter, to focus on writing the final chapters of my latest book. I’ll be back in March, by which I point I fully expect the world to be pretty much sorted.

Happy Holidays, Happy New Year, and here’s to 2021 being a whole lot better than 2020, for everyone but the oligarchs.

See you back in your inbox in two months.

Oliver