From the Ashes, a New World Can Be Born
On March 3, 2012, 22-year-old Russian conceptual artist and political activist Nadezhda Tolokonnikova, also known as Nadya Tolokno, was arrested by Russian authorities and charged with “hooliganism motivated by religious hatred.” By August 17, 2012, she was sentenced to two years imprisonment with hard labor.
Her case garnered international attention, as Nadya was a member of Pussy Riot, a Russian feminist protest punk rock and performance art group based in Moscow.
Her crime? On February 21, 2012, Pussy Riot staged a performance inside Moscow’s Cathedral of Christ the Savior, a performance that was condemned as sacrilegious by the Orthodox clergy and eventually stopped by church security officials. The women said their protest was directed at the Orthodox Church leaders’ support for Vladimir Putin during his election campaign of 2012.
After getting out of jail, Nadya continued on with Pussy Riot, which now has a variable membership of 11 women. In Pussy Riot’s first North American tour, in the spring of 2018, Nadya Tolokonnikova stated that economic inequality “is a big issue for Pussy Riot,” saying that inequality was a notable feature of both Russian and American society.
Which brings me to the war going on right now between Ukraine and Russia, a war that is truly a clash of titans, with the world’s three superpowers—Russia, China and the U.S.—all involved. Obviously, it’s only Russia that is doing the warring, but China and the U.S. both loom closely.
And it’s a war in which economic inequality also looms closely. So closely in fact that this clash of titans could lead to any number of outcomes, some of which would cause even more economic inequality, and some that could lead to a breaking apart of the chains of inequality.
Russia is clearly the aggressor in this war, while the Ukraine is a pawn in Russia’s game. Meanwhile, the U.S. is fighting by proxy.
In the run-up to the war, Putin accused the U.S. of being an “empire of lies.” He is not wrong in his criticism, as the U.S. has a long history of being an aggressor around the world—most recently, with the war they provoked in Iraq.
But that doesn’t excuse Putin’s actions. He may have made this preemptive strike on Ukraine to show NATO he means business, to bring Ukraine back into the Russian motherland, to restore the glory of the Russian Czarist Empire and expand its borders, to gain the natural resources of Ukraine, or to create a new world order devoid of what he sees as Western influence and decadence.
Many writers and journalists have been attempting to understand Putin’s thinking; I won’t even attempt to purport what’s going through his mind.
But what I can tell you is that this clash of titans is about the rot of capitalism, on all sides—this is a war between corrupt oligarchic capitalists and corrupt oligarchic kleptocrats.
Much is made of the Russian billionaires, but America has more. According to Forbes magazine, while Russia has 117 known billionaires, the U.S. has 724—Russia has 0.677 billionaires per million people, while the U.S. has 1.853 billionaires per million people. Of course, that’s known billionaires, as there are many others that Forbes can’t possibly know about.
The Russian billionaires owe their allegiance and fortune to Vladimir Putin, who allowed his close associates to own the natural resources of Russia, which is where the fortunes have been made. In exchange, the Russian billionaires’ give a certain percentage of their earnings to Putin—that is why many sources state that Putin is the richest person in the world.
His money, like for all the Russian billionaires, is funneled through a byzantine maze of banks in order to be channeled through tax havens all over the world.
The American billionaires owe their allegiance and fortune to no one; their fortunes have been made by bending laws, or subsidizing politicians to bend the laws, in order to aid the American oligarchs. Their money, like the Russian billionaires’ money, is also funneled through the maze of back channels in order to land in tax havens around the world.
In all cases, the money can’t be traced to its original owner.
Even with the economic sanctions that are crippling the Russian economy right now—both oligarchs and common citizens alike are feeling the brunt, although the common citizens are taking a much bigger hit—the money that is hidden from view can’t be touched by the sanctions.
The assets of the billionaires that can be seen—the yachts, the mansions, the art work, the money that sits in bank accounts—can be seized, but not their money that lurks in the shadow economy, the world of money laundering.
The biggest tax haven in the world is the Cayman Islands; the second biggest is the U.S., with many U.S. states making themselves attractive for those who want to shield their currency assets. The U.S. is also the country most complicit in helping individuals hide their money.
The money that sits in the U.S. tax havens has to do something; it can’t just sit there and earn nothing. So it goes looking for places that pay good yields. And since those whose money it is pay no taxes on income earned, they want to make as much as possible with their money.
The oligarchs pay cash for homes, yachts, jets, luxury cars, art work and the like—that’s the showy stuff, the things that allows them to brag to the world about how much money they have.
But then there’s the money no one knows about. This is the dirty money. And one place it goes is into the world of private equity, that most ugly manifestation of predatory capitalism.
That’s the irony: Russian billionaire money helps fuel private equity firms and predatory capitalism.
Here’s how private equity works: a private equity firm buys an undervalued company, using the company as collateral for the loans the private equity firm gets to buy the company. The debt is then put onto the balance sheet of the company that was bought, allowing the private equity firm to take on no or very limited financial risk.
Then the company that was bought begins to pay back the debt—making only interest payments—from their revenue. The private equity firm, in order to enhance profits, will look to cut expenses from the company they bought by firing employees, or moving the factories to China, Mexico, or somewhere else where they can pay employees dollars a day, or selling off subsidiaries of the company.
Meanwhile, the partners in the private equity firm are siphoning globs of money from the company and lining their pockets with the proceeds.
At the same time, the clock is ticking, as the company owned by the private equity firm continues to pay the interest payments on their debt from the revenue they take in; the clock is ticking because after a year, or a couple of years—whatever the loan terms are—the company has to make a balloon payment and repay the debt in its entirety.
But what the private equity firm does as it gets close to the time the company it owns has to pay their debt in entirety is what is called “rolling” the loan. The private equity firm gets another loan to allow its company to continue making only interest payments, in the process saddling the company with even more debt.
And of course, this allows the partners of the private equity firm to continue siphoning off more cash.
That’s what you call a Ponzi scheme, continually bringing in new money to pay off the original money.
And where does this money come from to roll the loan? That’s where dirty money shows up. The U.S. Federal Bureau of Investigation believes firms in the nearly $10 trillion private equity industry are being used as vehicles for laundering money at scale, and a lot of that dirty money comes from Russia.
Not that the private equity firms care where the money comes from—don’t ask, don’t tell, as they say.
The money funding the private equity firms could be from the Russian oligarchs, or it could be Putin. Again, don’t ask, don’t tell.
Putin knows this money sits in private equity’s funding pools. And this might be the nuclear option he has been belligerent about—it might be pulling the plug on the private equity funding sources.
Pull the plug and it could all fall down: all the king’s horses and all the king’s men won’t be able to put this Humpty Dumpty together again.
The reason for why Humpty Dumpty could fall apart is that over 8,000 companies are owned by private equity firms. Huge swaths of the retail sector, storied media companies, grocery chains, important elements of health care, the music industry, housing—one private equity firm is the largest landlord in the world—and a whole lot more, are all under the control of private equity.
If they lose their funding, there will be a massive fail of private equity firms and the over 8.000 companies they own. We’d be saying goodbye to 7-Eleven, Brookstone, Bumble Bee Foods, Century 21 Real Estate, Barnes & Noble, Albertsons, Extended Stay America, Hertz Car Rentals, Hilton Hotels, Macy’s, PetSmart, Legoland, Infinity Broadcasting, Metro-Goldwyn-Mayer, Warner Music Group, Staples, Michaels, Neiman Marcus, Beech-Nut, Boston Market, Chrysler, Four Seasons Hotels and Resorts, Friendly’s, Getty Images, Johnny Rockets, Readers Digest, Revlon, Safeway, Snapple, Tandem Computers, Westinghouse, YES Network, Dun & Bradstreet, and a whole heck of a lot more.
Meanwhile, China, the last of the superpower troika, has to determine where they stand amidst the fog of war. Russia is a major supplier of oil to China, and China uses Russia’s oil to power their factories, where they make the cheap goods that Americans love so much.
China enjoys the trade surplus they have with the U.S., and the amount of dollars it brings them. Would they consider shutting off the pipeline of cheap goods they send to the U.S.?
If Russia were to pull the dirty money private equity firms receive, it would be a major hit to the predatory nature of American capitalism. It would be devastating to the U.S. economy at first; but it could lead to better days ahead.
And if China were to pull the plug on the cheap goods they sell to the U.S., it would also be a devastating hit to the U.S. economy, but it could also lead to better days ahead. The U.S. could enter into a post-growth type economy, one in which people aren’t caught up in getting the latest bauble, all for the sake of accruing more and more stuff.
All three of the world’s superpowers are dysfunctional states: part predatory capitalist, part corrupt oligarchies, and part kleptocracies—all rolled into one.
While citizens of the U.S. have freedoms that aren’t found in Russia or China—witness what happened to Nadya Tolokonnikova of Pussy Riot fame when she dared criticize Putin and the Orthodox Church—the U.S. is suffering under the crushing burden of economic inequality (as are Russia and China).
All three of these countries need a transformation to become social democracies, as is seen in European countries. European countries transformed into social democracies after the devastation of World War II, and it’s because they are social democracies that Europe has been peaceful for close to 80 years—they have learned how to live together.
Until now, thanks to the aggression of Russia, a country that has claimed to be a democracy since Putin took over in 1999. But Russia is no democracy—they imprison the dissidents of the country, and power rests in the hands of a small cadre of people. It’s only Putin and his small circle that holds the power in Russia—the oligarchs have no say in what Putin does.
So if Putin does go after the nuclear option of pulling the plug on the dirty money that funds private equity firms, it could collapse both the American economic system and the Russian economic system—it would collapse the Russian economic system because the authorities would seize the money of the Russian billionaires that’s funding private equity.
But from the ashes a new world can be born. Just as European countries rebuilt their economies after the ashes of World War II and became social democracies—and with it, offering a strong social safety net to its citizens—the same could hold true for America.
It is past time for the U.S. to join the league of developed nations and become a fully functioning social democracy. The economic system of the U.S., as presently constituted, is tearing both the U.S. and world apart.
Nadya Tolokonnikova of Pussy Riot is correct: economic inequality is the world’s burning issue. And each of the world’s superpowers is plagued by it. If the dominoes fell and the U.S. economy was transformed, it would start to end economic inequality in the U.S., and maybe that would then spread to the other world’s superpowers—and true peace could then break out.
One can hope the transformation into a social democracy for the U.S. occurs without economic calamity, but instead by conscious choice.