Richard Helms Explains Skimming
In 1973 I was a young man living in Iran, on leave from my first faculty position at Harvard Business School, helping to start a new business school in Tehran—the Iran Center for Management Studies (ICMS). While there I spent an afternoon with Richard Helms. He had been one of the founders of the CIA and had been its chief since 1966.
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When I met Helms, he had just been pushed out by President Nixon because he refused to help cover up the Watergate affair. He was in Iran for a week, mulling what would soon be his new position in the hinterlands—ambassador to Iran. Helms was concerned with how the U.S. embassy staff tended to live apart from ordinary Iranians and wanted to talk about how we avoided that kind of insularity at my school.
We talked about my work at the school and I tried to explain the students’ reactions to our curriculum. They wanted very much to become professional managers. They wanted to believe that our way of looking at business—as a profession—made sense. But it was an uphill battle because everything in their culture and social life told them a different story—that success was not earned. Rather, it was granted by those with position and power.
Helms told me that I was really trying to be a missionary, trying to preach the gospel of capitalism in a country that had been, one generation ago, stuck in the Middle Ages. He said:
Your students listen to you because you are an emissary of a rich and powerful society. We have created wealth and power in a new way—a way that seems almost magical to people caught in traditional culture. Very few societies protect private initiative and private enterprise and very very few build great companies like IBM or Sears. In much of the world, the only way to get wealth is by inheritance, war, or skimming.
“Skimming?” I asked. He explained:
Where there are large flows of money, you will find skimmers. It is hard to make a living as a farmer here in Iran, but those who can get close to the billions in oil money flows can become remarkably wealthy by skimming off just a bit.
As he spoke, Helms moved his hand in a shallow horizontal sweeping motion, as if diverting a little water from a fast-moving stream.
The bigger the flow, the more they can skim without anyone making a fuss. In traditional societies, it was the king’s taxes. Here in the Middle East, it’s oil.
Helms’ dictum that “the bigger the flow, the more they can skim” helps explain the dynamics of Washington D.C. and Wall Street.
In Washington, the U.S. income tax has produced the largest concentrated flow of money in human history—a skimmer’s paradise. Most of what a congressperson does today is not lawmaking but institutionalized skimming. That is, diverting some of the vast torrents of federal spending towards their district or to their campaign supporters.
Wall Street has to be the center of the next largest money flow, a place where skimming has been regularized in the form of proprietary trading and computerized front-running (high-frequency trading).
Skimming on a large scale can impoverish whole societies. Based on its resources and the talents of its people Russia should be a very rich country. Yes, its living standards have improved since the end of the USSR. But, despite the privatization of huge amounts of resources and companies, household wealth in Russia has not increased. According to a recent study, this has been because of a vast unrecorded transfer of wealth out of Russia, mainly to Europe, by a small number of people. The researchers found that unrecorded wealth in offshore centers amounted to about 85% of national income by 2015, i.e., roughly as much as the total recorded financial assets of [all] Russian households.”Skimming on a vast scale.
Novokmet, F., Piketty, T., & Zucman, “From Soviets to Oligarchs: Inequality and Property in Russia 1905-2016,” World Inequality Lab, 2018. https://wid.world/document/soviets-oligarchs-inequality-property-russia-1905-2016/.