James Petras: China and India – the Billionaires

By James Petras

China’s Billionaires

China’s billionaires, twenty in number, unlike India’s, are on average younger, have less advanced educational degrees, were almost all educated in China and only 10% (2) inherited wealth.  Sixty-five percent are fifty years or younger.  Their total wealth is $29.8 billion dollars.

While most Indian billionaires inherited wealth and then built their fortune by using economic power to secure neo-liberal policies, in China almost all billionaires inherited and secured political influence through kinship ties as the basis for building their economic empire.  The Chinese billionaires early on converted political ties to secure lucrative public enterprises, land, export subsidies, loans, import and export licenses, which facilitated the rapid accumulation of wealth.  Almost all of China’s billionaires secured millions in assets during the late 1980’s to the 1990’s first wave of neo-liberal policies, under President Ziang Zemin (1993-2003) and Prime Minister Zhu Rongji;  and expanded to billionaire status in the run-up to China’s entrance into the WTO in 2001.  The proliferation of billionaires accelerated under President Hu Jintao (2003 to the present) and Prime Minister Wen Jiabao (2003-present) despite the rhetoric about ‘social safety nets’, greater welfare spending and lessening inequalities.

The key ‘historic’ political figure responsible for the structures, which led to inequalities and the growth of the super-rich billionaires, was Deng Tsiao Ping who gave powerful state backing to step-by-step liberalization, de-regulation and privatization.  It was Deng whose crude slogans ‘To get rich is no crime’, encouraged rampant conversion of state resources into private fortunes.  Deng’s ideology of growth of productive forces at all costs which legitimized the conversion of the Chinese Communist Party into a large-scale bribe-taking machine displacing urban housing of workers and rural villages to make way for real estate speculators and construction companies.  Among China ’s billionaires fifty percent secured their wealth in whole or part from real estate investments – largely through links to the Jiang Zemin-Zhu Rongji regime.  The Chinese capitalist elite is a mixture of kleptocrats and entrepreneurs: ‘Klepto-preneurs.’

Chinese millionaires became billionaires by diversifying and combining their investments – from agro-business to real estates, from manufacturing to commerce and real estate.  The graduation from millionaires to billionaire status involves grabbing or creating assets wherever a ‘deal’ can be made with regional, provincial or municipal party officials.

All billionaire tycoons are now owners of conglomerates, all have close relations to high officials, all started with state support and then branched out to other economic sectors.

Political pull rather than higher education helped the new Chinese oligarch climb to the top of the class structure.  Only 25% have a university education and most of the higher educated are found in the younger set of billionaires.  Fifty percent of the group 40 years and younger are college educated, while none of the billionaires over 50 have a university degree.  While data on the number of multi-millionaires are not readily available, foreign and Chinese experts estimate that they run into at least the hundreds of thousands.  Even so the fact is that 20 Chinese super-rich have a net worth of $28.9 billion – greater then at least 400 million Chinese peasants, unemployed workers, displaced householders and migrant rootless laborers. 

What is striking in China, as in Russia, is the speed of wealth concentration ( in less than a decade ), the degree to which macro-economic policies coincided with the accumulation of private wealth and the spread of ownership across economic sectors in.

Almost all billionaires began by exploiting the domestic market; the export sector became  important from the nineties onward.  Most of China ’s exports are through foreign contractors who control the most lucrative commercial side of China ’s trade boom.  The initial reticence of the Chinese government to rapidly open up all its economy to foreign exports reflects the strength of the newly emerging super-rich capitalists.  As this bourgeoisie has consolidated, it has moved to overseas investments in mineral resources (15%) and joint ventures (real estate, manufacturing and high tech). 

With the rapid growth of billionaires and millionaires in strategic growth sectors of the economy, their political weight in the Chinese political system has expanded.They successfully forced open new economic sectors, the relocation of the poor, and escalated the  pillage of natural resources,the  pollution of the environment and the exploitation of labor.  They no longer pressure the Party from the outside – they have their ideologues, promoters and policy-makers inside the regime.

As a result of pillage, abusive taxes, forced relocation and party-regime corruption directed at benefiting the rich and super-rich, the Chinese masses particularly in the medium sized provincial towns and villages have been in constant open revolt, relying on their own local leaders and organizations and direct action.  For example, in mid-May 2007, over 10,000 people rioted setting buildings on fire and overturning cars owned by the elite in Guanxi over local government tax abuses.  The escalation of extra-parliamentary action by Chinese workers and peasants has been escalating since 2001.  Very conservative official figures record 87,000 protests in 2005 – up 50% from 2003.  More recent estimates for 2006 and 2007 run much higher despite the national government’s formation of special forces to put down growing popular unrest.

China and India the ‘emerging world powers’ have in fact created a powerful political machine for manufacturing newly minted billionaires, blending new elites with old money and family networks.  The ‘new class’ is the engine of  monstrous class inequalities and high growth enclaves in the midst of a sea of misery.  The prosperity and opulent wealth of the new metropolises , full of high-rise offices, luxurious apartments, and palatial mansions belies the vast poverty and yawning gap between the super-rich and the hundreds of millions,abused,scorned and feared ..  Today in China , discontent is widespread and fragmented: If and when the alienated masses come together, it might make the first ‘Cultural Revolution’ seem like a polite garden party.

China is an unstoppable billionaire and multi-millionaire-directed export economy in which foreign reserves keep piling up.  The trade imbalances are integral to the billionaire-centered strategy, which is based on the export market and investments because of the low income of the mass of Chinese in the domestic market. 

While political corruption is a key factor greasing the wheels for the rise of the super-rich, the key factors are  systemic economic factors:  the entrenched economic ruling class makes it difficult to reform the model based on 30 years of economic policy.

The key to the growth of the billionaires and multi-millionaires is the deep supply of cheap capital and land, and vast armies of low paid labor, all subjected to extraordinary rates of exploitation leading to 7% annual increases in productivity.  China ’s high  rates of exploitation overcomes cost increases due to the rise in prices of raw materials, energy and currency revaluation.  For example a 30% increase in the price of iron  ore imports between april 2006-april2007  was accompanied by a 159% increase  of exports of steel outputs …  The growth of billionaires is highly dependent on low interest rates, product of the state policy of paying low interest to household savings.  According to the Financial Times; “Households are in effect subsidizing the low cost of capital because of the low ceiling on deposit rates…There has been a huge increase in profits but they are not getting their share of it.” (FT May 22, 2007 p7).

Cheap credit subsidized by working class and peasant households, cheap land seized by the regime evicting the urban and rural poor and transferred to the super-rich, high rates of exploitation extracting huge profits from low paid labor and a growing pool of unemployed new entrants and older workers  in the labor market, caused by the low job creation of China’s new capital-intensive industries.. The systemic incentives  create the abysmal gap between super rich billionaires and the hundreds of millions of impoverished workers, peasants and unemployed.

No amount of regime rhetoric calling for a reduction of the rich-poor divide has any possibility of advancing, given the reality of systemic incentives pushing in the opposite direction.

Indian Billionaires
 The concentration and wealth of the Indian billionaires ($191 billion dollars) far exceeds the  wealth of their Chinese counterparts ($28.9 billion dollars).  In fact the total wealth of the top two Indian billionaires is $52.1 billion dollars, almost double that of all 20 Chinese billionaires together.  The world’s greatest inequalities are found in India where the wealth of 35 billionaire families exceeds that of 800 million poor peasants, landless rural workers and urban slum dwellers. 

Contrary to conventional wisdom, the majority of Indian billionaires are not young, high tech, innovative, competitive billionaires.  Over seventy percent are over fifty years old, one third do not have a university degree,  less than one fifth have Masters degrees and fifty-seven percent inherited a substantial part of their fortune.  The great majority of Indian billionaires started as millionaires – as part of the privileged upper class – and parlayed their long-standing family and political connections toward maximizing their profits.  Over half (54%) of India’s billionaires accumulated their initial tens of millions through their monopoly positions in manufacturing, mining and construction and then took advantage of the liberalization, de-regulation and privatization policies of the Congress and BJP ruling parties to construct their billion-dollar empires.

The much-publicized software-high tech Indian billionaires are a distinct minority of approximately 20% of the super-rich, out-numbered even within the service sectors by media moguls and financial and real estate speculators.

While all of the billionaires are Indian citizens and claim primary residency in India , almost 90% of them have primary or secondary residency abroad in Australia , other Asian countries or the United Kingdom .  While their initial wealth was derived from inheritance, manufacturing and services, almost one-third have reaped windfall profits from real estate speculation (shopping malls, special economic zones and residential housing) which has been fueled by high level and extensive corruption of top officials and the forcible removal of villagers and the urban slum dwellers.

The growth of this powerful super-rich elite has nothing in common with the formation of a national bourgeoisie. Over one-third are in the process of extending their business enterprises abroad and many more have formed joint ventures with foreign multi-nationals.

The growth of this powerful economic elite extends beyond their initial lucrative sectoral growth.  In fact to graduate from multi-millionaire to billionaire status requires the diversification of investments and the formation of conglomerates of unrelated economic sectors, whose only function is to accumulate wealth.

Many of the mineral and manufacturing companies, which accumulated their first hundreds of millions exploiting Indian labor, have re-invested their profits in overseas million-dollar residences and real estrate, in new mining firms and overseas stocks and bonds.

A careful perusal of the career trajectory of the Indian billionaires reveals the crucial importance of state policy.  Up until the late 1980’s, the Indian mixed economy facilitated the growth of numerous Indian millionaires.  The advent of the neo-liberal Janata (BJP) and Congress regimes during the 1990’s( and especially with  the new millennium) were the midwives of the birth of the great billion-dollar empires. While many Indian publicists and economists hail the ‘Indian miracle’ and classify India as an ‘emerging world power” because of the high growth rates of the past 5 years, what really has transpired is the conversion of India into a  billionaire’s paradise. The in the price of land and real estate speculation  has led to forced relocations of villagers to make way for new economic zones, where industrialists re-locate to avoid taxes , labor and social legislation while real estate speculators reap windfall profits.  The growth of relative and absolute poverty, and declining living standards are masked by academics relying  on absurdly low bench-marks of poverty– $2 dollars a day (World Bank Year Book, Washington 2006).  In fact given the decline of public services and the de-facto privatization of health and education, the rise in rents, regressive taxation, the re-conversion of land use, the lowering of trade and investment barriers – the very factors that have converted the privileged Indian millionaires in billionaires – 800 million Indian workers ,peasants and the underemployed have seen a deline of their relative and absolute living standards .

The heightening class polarization epitomized on the one hand by the hundreds of thousands of millionaires and the 35 billionaires and on the other hand by the hundreds of millions of uprooted, exploited and destitute urban and rural poor is finding expression in the growth of mass direct action, armed struggles and mass voter rejection of incumbent politicians associated with the Congress Party, the BJP and Communist Party of India, the governing parties.

Local and overseas celebrants of the ‘festival of the billionaires’ flatter Indian politicians with puff-pieces about Indian as a ‘newly emerging world power’. In contrast the great mass of  the  rural poor and lower caste denounce the strategic political links between the state and the billionaires, between economic liberalization and social immiseration.  The long decade between 1994-2007 will be seen as the age of infamy, a period of the conversion of multi-millionaires to billionaires. The following decades may become  the age of the rebellion for the three-quarters billion children of the poor, struggling to expropriate the wealth of the privileged progeny of today’s Indian billionaires.

(The Palestine Chronicle is a registered 501(c)3 organization, thus, all donations are tax deductible.)
Our Vision For Liberation: Engaged Palestinian Leaders & Intellectuals Speak Out