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- Dynastic Power in the Modern World - 7 May 2014
Think of any period in human history when empires and imperialism were common features of society, whether from ancient Egypt, Rome, China, to the Ottomans and the rise of the European and Japanese empires.
There is an institution that - with few exceptions - was
prevalent across most imperial societies: the family dynasty.
This has been the case for much of human history, at least so long as empires and states have been consistent features.
And yet, in the modern era, we imagine our societies to
be free of dynastic rule - an archaic feature of a world long past, not
consistent with the ideals and functions of democracy, capitalism or
modernity. We might imagine this to be true, but we would, in fact, be
wrong.
...in a world largely
dominated by a single state,
the United States, acting as the international
imperial arbiter on behalf of powerful corporate and financial interests,
dynastic power remains a central institution in the global system.
Today, most - but certainly not all - dynasties do not hold formal or direct political authority. The world's most economically and politically powerful countries are no longer governed by kings and queens or emperors.
Instead, modern dynastic power is largely a development that emerged with
the decline in the authority of monarchs, and with the rise in parliamentary
democracy and capitalism.
Out of these monumental social transformations came new dynasties, embedded within the financial, industrial and corporate oligarchies.
Their power was not in
direct control of the political apparatus, but in their concentration of
control over the financial, economic and industrial spheres. With that
power, inevitably, came both the desire and the ability to influence and
pressure the political sphere.
We see power - typically - in terms of those who hold political office: prime ministers and presidents who we elect, as is consistent with our belief that we live in democracies. We see competing factions of political parties vying for office, with us - the people - as the ultimate arbiters of who gets to hold power.
The influence of
globalization's dynasties remains unseen, or, misunderstood.
And yet, the
concept of dynastic rule - of families competing, cooperating, and indeed,
conspiring with and against each other for control and domination - are
prevalent and popular within our culture.
Set in a mythical world, yet largely based upon the historical rivalries of the 'War of the Roses', we witness the characters evolve and events unfold as several families and dynasties battle each other, conspire, compete and cooperate for control of the known world.
They are frequently ruthless, cunning and deceitful, often surrounded by 'yes men' or the poison-tongued advisers who rose to their positions not by virtue of birth and name, but by their individual capacities for manipulation and cunning.
It is a world in perpetual war, engrossing poverty, with the privileged few sending the poor to fight their battles for them, to die and suffer while the rich few propagate and prosper.
With no lack of conspiracies, the greatest threat to individual
members of dynasties typically comes from their own or comparatively
powerful families. Issues of patriarchy, incest, blood-lust, and secession -
to the head of the family or the head of the throne - are consistent
throughout.
We are
distracted with sports, entertainment, 'royal weddings', a fear of
foreigners and terrorism, and are blinded and manipulated by a deeply
embedded propaganda system. Our celebrity culture celebrates banality and
irrelevance: we tune in to the latest Kim Kar-crash-ian disaster of a human
being that plasters the tabloids, while we tune out to the rivalries and
repercussions of 'Globalization's Game of Thrones'.
Past dynasties typically held absolute authority over their local regions, states or kingdoms.
That type of authority does not exist at the major state, regional or global levels today, with few exceptions, such as the ruling monarchs of the Gulf Arab dictatorships. Yet, while the mechanism of authority is less centralized or formalized in the modern world, the scope and reach of authority - or influence - has expanded exponentially.
In short, while in
past eras, a single family may have exerted absolute authority over a
comparably small region or empire, today, the indirect influence of a
dynastic family may reach across the globe, though it remains far from
absolute.
With the emergence and prevalence of globalization, multinational corporations, banks, financial markets, philanthropic foundations, think tanks, media conglomerates, educational institutions, public relations and the advertising industries, financial and industrial oligarchs and dynasties have come to be integrated with the nation-state structure.
Families that
have established modern dynasties typically rose to prominence through their
concentration of power and wealth in financial, industrial and corporate
spheres. From these positions, political power and influence became a
necessity, or else the loss of economic power would be an inevitability.
Dynastic families establish 'philanthropic foundations' to serve a dual purpose of justifying their wealth and influence (by being perceived as 'giving back'), but which, in actuality, provide concentrations of wealth managed for the purpose of 'strategic giving':
While appearing to be 'charitable' institutions, the major foundations are predominantly interested in the process of long-term social engineering.
Notably among such foundations are the,
...among many others.
In think tanks, top officials from these sectors are gathered in a single institution where they work together to plan strategies for economic and foreign policies, for establishing consensus between elites, and to serve as training and recruitment grounds for officials to enter the political and foreign policy establishment, where they are capable of enacting the very policies developed within the think tanks.
Notable think tanks with immense influence - specifically in the United States - include,
Larger, international think tanks have been increasingly common during the era of globalization, uniting respective elites from across the powerful western industrial states, instead of simply the elites within each respective state.
Notable among these institutions are,
The prevalence of financial, industrial and corporate dynasties within these institutions has ensured that such families have significant political influence, and have - moreover - played pivotal roles in the construction and evolution of our modern state-capitalist society.
Not coincidentally, with the preservation and propagation of modern dynastic power has come the preservation and propagation of modern imperialism, no longer established as a formal colonial system of control.
Instead, it is represented as a complex
inter-dependency and interaction of institutions and ideologies that
manifest as a system of globalized 'informal imperialism', with the United
States at the center.
Each family dynasty has their own unique history, with power concentrated in particular companies or family offices.
Many, if not most, of these families also have significant connections with each other, acting as joint shareholders in various companies, sitting on the same boards and mingling in the same social circles.
They cooperate and they compete with each other for influence in Globalization's 'Game of Thrones'. This series aims to bring to light some of the stories, players and structures of the world's dominant dynasties.
The research included in this series has been undertaken through The People's Book Project, a crowd-funded initiative to produce a series of books examining the ideas, institutions and individuals of power, as well as the methods and movements of resistance in the modern world.
- Managing the Wealth of the World's
Dynasties -
A Family Affair
In 2010, Forbes - a major financial publication which publishes an annual list of the world's richest people - noted that the richest of the richest 400 Americans were members of prominent corporate and financial dynasties, with six of the top ten wealthiest Americans being heirs to prominent fortunes, as opposed to being 'self-made' billionaires.
What's more, since the financial crisis began in 2007 and 2008, the fortunes of these dynasties - and the other super-rich who made the Forbes list - had only increased in value.
Corporate America can frequently be seen as the emblem of the 'self-made' rich, a representation of a supposedly democratic, capitalist society, where firms are run by "professional managers" who received the right education and developed the appropriate talents to make successful companies.
The reality, however, is that roughly a third of the Fortune 500 companies (that is, many of the world's largest multinational corporations) are in fact "family businesses," frequently run by family members, and often outperforming the "professionally managed" firms "by a surprisingly large margin," noted the New York Times.
In other words, in the United States - the beacon of the 'self-made' millionaire - a huge percentage of the most successful companies are owned by family dynasties, and most of the richest individuals are heirs to these family dynasties.
The picture that begins to emerge better reflects that of an aristocracy, rather than a democracy.
As the New York Times noted in 2010, "the increasing use of so-called dynasty trusts" was undermining the notion that America was a meritocracy (where people 'rise through the ranks' of society based upon merit instead of money, access or family lineage.
Dynastic trusts allow super-rich families,
In laws that predate the formation of the United States as an independent nation, such family trusts were only able to limit the term of the existing trust to roughly 90 years, after which the property and wealth which was consolidated into the trust would be owned directly by the family members.
However, in changes that were implemented through Congress in the mid-1980s and in state legislatures across the U.S. in the 1990s, the rules were amended - with the pressure of the banking lobby - to allow family trusts to exist "forever," a quiet coup for the existing and emerging aristocratic American class.
Thus, the modern dynasty trust was officially sanctioned as a legal entity - a type of private family company - that would be responsible for handling the collective wealth - in money, property, land, art, equities (stocks), bonds (debt), etc. - of the entire family, for generation after generation.
The focus is on long-term planning to maintain, protect and increase the wealth of the dynasty, and to hold it 'in trust' against the inevitable in-fighting that accompanies dynastic succession and generational differences.
This would prevent - in theory - one generation or patriarch from mishandling and squandering the entire family fortune.
The legal structure of a family trust differs greatly from public corporations, in that their focus is not on maximizing short-term quarterly profits for shareholders, but in maintaining multi-generational wealth and prestige. Family trusts are increasingly used to manage the wealth of the world's super-rich dynasties, alongside private banking institutions and other wealth management and consulting firms.
There is an entire industry dedicated to the management of money, wealth and investments for the super-rich, and it is focused largely - and increasingly - on family dynasties.
Of Rockefellers and Rothschilds
One of the world's most famous family trusts - the "family office" - is that of Rockefeller & Co., now known as Rockefeller Financial.
It was founded in 1882 by the oil baron industrialist John D. Rockefeller as the 'family office' to manage the Rockefeller family's investments and wealth. Roughly a century after it was founded, in the 1980s, Rockefeller & Co. began selling its 'expertise' to other rich families, and by the year 2008, the trust had roughly $28 billion under management for multiple clients.
When the CEO of Rockefeller & Co., James S. McDonald, shot himself in an alley behind a car dealership in 2009, the family looked for and found a successor in the former Undersecretary of State for Economic, Energy, and Agricultural Affairs for the Bush administration, Rueben Jeffery III, a former partner at Goldman Sachs.
Jeffery was responsible for handling the family's wealth throughout the global financial crisis, and by 2012, the assets under management by Rockefeller Financial had grown to $35 billion.
As of late 2012, Rockefeller & Co. had approximately 298 separate clients, providing them with "financial, trust, and tax advice." The typical clients for Rockefeller & Co. are families with more than $30 million in investments, and the group charges new clients a minimum annual fee of $100,000.
However, the family office has increasingly been attracting clients beyond other family dynasties, including major multinational corporations awash with cash in a world where nation states are flooded in debt.
David Harris, the chief investment officer of Rockefeller Financial, explained in a 2012 interview with Barron's (a magazine for the super-rich), that as the world's nations were stuck in a debt crisis, triple-A rated multinational conglomerates represented "the new sovereigns" with "unprecedented" amounts of cash to be invested.
And while prominent family trusts have become increasingly attractive for other rich families and institutions to handle their wealth, they have also become attractive investments in and of themselves.
One of Europe's largest banks, the French conglomerate Société Générale (SocGen) purchased a 37% stake in Rockefeller & Co. in June of 2008.
However, with the European debt crisis, the bank had to cut a great deal of its assets, and so in 2012 Rueben Jeffery III managed the sale of the 37% stake in the Rockefeller enterprise from SocGen to RIT Capital Partners, the investment arm of the London Rothschild family, one of the world's most famous financial dynasties.
Barron's magazine noted that the official union of these two major financial dynasties "should provide some valuable marketing opportunities" in such an uncertain economic and financial landscape, where "new wealth" from around the world would seek,
Early in 2012, the Rothschild family, with various banks and investment entities spread out across multiple European nations and family branches, was making a concerted effort to begin the process of,
The main goal of the merger was "to cement once and for all the family's grip on the business," giving the family a 57 percent share in the voting rights, thus protecting the merged entity from hostile takeovers.
Thus, as the Rothschild banking dynasty was seeking to consolidate its own family interests across Europe, they were simultaneously looking to expand into the U.S. through the Rockefellers.
Thus, when Lord Jacob Rothschild - who managed the British Rothschild's family trust, RIT Capital Partners - announced that RIT would be purchasing a 37% stake in Rockefeller Financial Services in May of 2012 for an,
At the time of the announcement, David Rockefeller, who was then 96-years-old, commented that,
Rockefeller & Co.'s CEO, Rueben Jeffery III, declared that,
In a world where families hold immense wealth and power, the official institutional union of two of the world's most famous and recognizable dynastic names makes for an attractive investment for newer dynasties seeking propagation and preservation.
The Family Office
As the Financial Times noted in 2013, the "family office" for the world's wealthy dynasties, which had,
Still, many so-called "single family offices" continue to operate in secrecy, managing the wealth of a single dynasty, but the emergence of "multi-family offices" (MFOs) has become an increasing trend in the world of wealth management, handling the wealth and investments of multiple families.
The world's largest private banks have specific "family office arms" which are dedicated to managing dynastic wealth, and these banks continue to dominate the overall market.
Bloomberg Markets published a list of the top 50 MFOs in 2013, with HSBC Private Wealth Solutions topping the list, advising assets totaling $137.3 billion, with other banks appearing on the top ten list such as BNY Mellon Wealth Management, Pictet and UBS Global Family Office.
Despite the fact that the family office arms of the world's top private banks dominate the list, many of the oldest family offices made the list, such as Bessemer Trust and Rockefeller & Co.
A top official at HSBC Private Bank was quoted by the Financial Times as saying:
In effect, we are witnessing the era of the globalization of family dynasties.
Such a view is shared by Carol Pepper, a former financial adviser and portfolio manager at Rockefeller & Co. who established her own consulting firm - Pepper International - in 2001, specializing in advising families with more than $100 million in net worth.
In a 2013 interview with Barron's, Pepper explained that with the globalization of higher education - where the super-rich from around the world send their children to the same prominent academic institutions - as well as with the emergence of associations designed to bring wealthy families together, "the 19th century [is] coming back," referring to the era of Robber Baron industrialists and co-operation between the major industrial and financial fortunes of the era.
Pepper explained that in the present global environment, she was witnessing,
The globalization of family dynasties and the 'return' to the 19th century is an institutional phenomenon, facilitated by elite universities, business and family associations, international organizations, conferences and other organizations.
Thus, regardless of geographic location, the world's wealthiest families tend to send their children to one of a list of relatively few elite universities, such as Wharton, Harvard or the London School of Economics.
At these and similar schools, noted Carol Pepper, the future heirs of family fortunes attain,
So-called 'non-profit' associations like the International Family Office Association, the Family Business Network, and ESAFON, among others, are institutional representations of "intentional efforts by rich clans to rub shoulders with one another."
Instead of a rich family in one region hiring an outside firm to introduce them to a new market, they simply are able to reach out directly to the wealthy families within that market, and, as Pepper explained, their interests will be increasingly aligned and "hopefully you'll all make money together."
Instead of relying on banks as intermediaries between markets, rich families with more than $47 million to invest are pooling their wealth into the multi-family offices (MFOs).
The Financial Times explained that such wealthy families were,
Further, as banks have been coming under increased scrutiny since the financial crisis,
Explaining this, the Financial Times appropriately quoted advice by the character Don Corleone from The Godfather, when he told his son:
As the Wall Street Journal noted, family offices,
As such, regardless of where many family fortunes are made, the family office has come to represent the central institution of modern dynasties.
And the growth of multi-family offices has been astounding, with the number increasing by 33% between 2008 and 2013, with more than 4,000 in the United States alone, the country with the highest number of wealthy families and individuals, including 5,000 households that have more than $100 million in assets.
The Wall Street Journal noted:
However, it does help to have hundreds of millions of dollars.
In 2012, the list of the largest multi-family offices were largely associated with major banks, including HSBC, BNY Mellon, UBS, Wells Fargo and Bank of America, but Rockefeller Financial maintained a prominent position as the 11th largest multi-family office (according to assets under advisement and number of families being served).
And beyond the specific arm of the 'multi-family office' to the list of the top wealth management groups as a whole, private bank branches of some of the world's most recognizable bank names dominated the list:
...among others.
However, after the top 19 wealth management companies in the world - all of which were arms of major global banking and financial services conglomerates - came number twenty on the list: Rockefeller Financial.
Indeed, things have never been better for the super-rich. A 2012 poll of 1,000 wealthy Americans by the Merrill Lynch Affluent Insights Survey revealed that 58% of respondents felt more financially secure in 2012 than they did the previous year.
In 2013, U.S. Trust, the private banking arm of Bank of America, released a survey of 711 individuals with more than $3 million in investable assets, of whom 88% reported that they were more financially secure today than they were before the financial crisis in 2007. Further, the main goal for the super-rich in 2013 was reported to be "asset appreciation" as opposed to "extreme caution", as the survey reported for 2012.
In 2013, Bloomberg Markets Magazine reported that the number of wealthy people in the world with more than $1 million in investable assets had increased by 9.2% over 2012, reaching a new record of 12 million individuals, and the assets by the rich increased by roughly 10%, reaching a combined total of roughly $46.2 trillion.
With this growth in extreme wealth, the wealth management business is itself becoming a major growth industry, with independent firms competing against the big banks in a race to manage the spoils of the world's super-rich.
And the world's big banks want to get more of this investable wealth.
For example, Goldman Sachs has boosted its private wealth management services. The number of partners at the bank working in asset management in 2010 represented 4.5% of the bank's total partners, a number which grew to 12% by 2012.
Tucker York, the head of private wealth management in the U.S. for Goldman Sachs, noted:
The managing director and chief investment officer of Goldman Sachs' private wealth management arm, Mossavar-Rahmani, told Barron's in 2012:
In addition, he noted,
In a world of immense inequality, with the super-rich controlling more wealth than the rest of humanity combined, the wealth management industry - and within it, the 'family office' - have become growth industries and increasingly important institutions.
The whole process of globalization has facilitated not only the internationalization of financial markets, multinational corporations and the economies they dominate, but it has in turn facilitated the globalization of family dynasties themselves, whose wealth is largely based on control over corporate and financial assets and institutions.
In globalization's 'Game of Thrones', the world's super-rich families compete and cooperate for control not simply over nations, but entire regions and the world as a whole.
As dynasties seek perpetuation, most people on this planet are concerned with survival.
Whoever wins this 'Game of Thrones,' the people lose.
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