What's up guys and welcome back to wall street millennial on this channel, we cover everything related to stocks in investing. If you look at a list of the richest people in america, it is mainly populated with founders and ceos of big tech companies like elon musk, jeff, bezos and mark zuckerberg. The richest three people in europe either created or inherited massive fashion brands, including lvmh, zara and l'oreal, while the exact sources of wealth are different. The broad idea is the same.

If you want to become a billionaire, you should either develop a new and innovative technology or create a brand that millions of people aspire to around the world, but in russia it's different, despite only being the 11th country in terms of gdp, russia has 101 billionaires, which Is the fifth highest in the world? Almost all of russia's billionaires are so-called oligarchs, who made their vast fortunes through their close relationships to the government. Even to this day, most russian billionaires can trace their fortunes back to the disorderly process in which state-owned enterprises were privatized. Following the collapse of the soviet union through various means politically connected, businessmen were able to buy stakes in the country's massive state-owned enterprises for absurdly low prices, making them billionaires almost overnight. Today, most of russia's billionaires have the majority of their net worth in industrial and financial companies that were formerly state-owned enterprises in this video, we'll look at the rise of russia's oligarchs, how they made their wealth and where they stand today throughout most of the 20th century.

The soviet union was a communist state with the government exerting complete control over the command economy. There was no room for rich businessmen to wield undue influence over the government. They strive to create a completely egalitarian world where people contributed what they could and took only what they needed from the economy and for the most part they succeeded. They created one of the most egalitarian societies in the world, but over the years inefficiencies started to build up within the communist system, while it was egalitarian.

To some extent. This wasn't because everyone was equally rich, but instead because everyone was equally poor by the 1980s, it became clear that the soviet system was unsustainable in its current form. They were quickly losing ground, both economically and militarily, to the united states, who was their main political rival shortly after an attempted coup in 1991, the soviet union formally dissolved mikhail gorbachev, who is the last general secretary of the communist party, was forced to hand over power To boris yeltsin, the newly elected president of the russian federation, yeltsin now found himself shouldering the herculean task of rebuilding the russian state and economy almost from scratch. He decided the best course of action was to finally end the country's century-long experiment with communism and transition to a market-based economy.

Under the old soviet system, private property was almost completely outlawed substantially. All of the country's industrial capacity was controlled by massive state-owned enterprises or soes. These enterprises had a combined value of hundreds of billions or possibly even trillions of dollars. If these assets were to be privatized, how should their ownership be divided up? These enterprises were created over decades through the blood, sweat and tears of millions of soviet workers, since they were created by the people.

It only made sense that their ownership should be returned to the people. They did this by distributing so-called privatization vouchers equally among the population. Each voucher was convertible into shares of state-owned enterprises. The idea was that this would equally distribute the country's wealth across the general population.

The program was initially well received by the public and yeltsin's popularity soared. However, there is a problem. The russian population had lived their whole lives under a communist regime. The idea of private property and ownership stakes in companies was completely foreign to them.

The vast majority of people had no idea what a stock market was, and thus they had no way of knowing what their privatization vouchers were worth, but the government officials and bureaucrats who ran the soes were far more sophisticated. They knew how valuable these companies would become. As private enterprises, they went around russia and offered to buy people's vouchers for well below their fair value, unaware of just what they were handing over most ordinary russians agreed and gave up their shares for pennies on the dollar compared to their fair values. The general confusion of the time also allowed for some insane ponzi schemes which exploited the financially uneducated population.

We've covered this extensively in a previous video linked in the description below the privatization under yeltsin was the birthplace of the russian oligarchy, formerly nameless bureaucrats and other well-connected businessmen became billionaires almost overnight, as they now controlled. Russia's vast industrial and financial resources. Yeltsin was widely considered to be weak and ineffectual building a new government from scratch is difficult. The economy was having a difficult time adjusting to a free market economy and by the late 90s the country had fallen into a deep recession.

Yeltsin relied heavily on the oligarchs to help with the economic reforms and continue to give many of them government subsidies, despite the fact that they are now technically private companies. Yeltsin's popularity plummeted as most of the rest of the country continued to live in poverty, while a few well-connected businessmen were able to take control of the former soes and become billionaires. The people finally started to realize they got screwed over by the privatization voucher system, and yeltsin was viewed as a puppet of the oligarchs during the 1990s. The oligarchs consolidated their power and increased their wealth, but this state of affairs would not last forever.

In 2000, the deeply unpopular yeltsin stepped down and was replaced with the newly elected president, vladimir putin, the former kgb agent gained popularity in russia by vowing to crack down on the oligarchs who effectively controlled the country over the past decade. He met with the oligarchs to make his position clear. While he would allow him to keep control of their companies. He wasn't going to be their puppet like yeltsin was he was going to have complete control over the government and he wasn't going to tolerate unelected oligarchs exerting undue influence.

While most of the oligarchs accepted this bargain and fell in line. There were a few who were reluctant to give up their power and they ended up paying a very high price for this. At the beginning of putin's reign, the richest of the oligarchs was a man by the name of mikhail kodakowski. He owned a massive oil company called yuko's and, like many other oligarchs, initially made his wealth through the privatization vouchers.

He was the richest man in russia at the time and previously had significant influence over the yeltsin administration. He badly underestimated the newly elected putin publicly criticizing him in funding opposition parties, but this was the last mistake you would ever make in russia in 2003. He was arrested on charges of fraud and tax evasion. He ended up serving 10 years in prison before finally being released and leaving the country.

With this arrest, putin was sending a clear message: mikhail was perhaps the most powerful of the oligarchs. If even he could be arrested, nobody was safe under putin. The power dynamic changed substantially. The oligarchs could no longer rely on government subsidies like they could under yeltsin.

They now had to operate for the most part like real businessmen in a free market economy. This increased productivity tremendously and allowed russia to close much of the gap between their own economy and those of their western rivals in the first decade of putin's reign, the gdp per capita increased 12 volt as the economy modernized, but it has since stagnated due to economic Sanctions from nato countries as well as unfavorable commodity prices and corruption, still exists in the russian economy. Today, the oligarchs can still access lucrative government contracts and receive other privileges as long as they remain on good terms with the putin administration and the oligarchs have been doing quite well. Currently, there are over 100 russian billionaires, the vast majority of which can be considered oligarchs.

Putin's government is far from perfect, but he probably deserves at least some credit for taking back control of the country from the oligarchs who pulled the strings under the yeltsin administration. You could probably argue that having one chief executive controlling all the oligarchs is better than having the oligarchs control one puppet leader that is as long as the executive is benevolent. Alright, guys that wraps it up for this video. What do you think about russia's oligarchs? Do you think the current system under putin is better than the old system under yeltsin? Let us know in the comments section below, if you enjoyed this content, make sure to hit the like button and subscribe, so you don't miss future uploads as always.

Thank you. So much for watching and we'll see you the next one wall street millennial, signing out.