The Wall Street banks are the new American oligarchy – a group that gains political power because of its economic power, and then uses that political power for its own benefit.
Paul Krugman uses a form of the term:
The fact is that what we’re experiencing right now is a top-down disaster. The policies that got us into this mess weren’t responses to public demand. They were, with few exceptions, policies championed by small groups of influential people — in many cases, the same people now lecturing the rest of us on the need to get serious.
Joseph Stiglitz uses the same kind of language:
Economists are not sure how to fully explain the growing inequality in America….
But one big part of the reason we have so much inequality is that the top 1 percent want it that way…. Wealth begets power, which begets more wealth.
The New York Times editorial page says that extreme inequality of wealth:
… skews political power, because policy almost invariably reflects the views of upper-income Americans versus those of lower-income Americans.
The words are different, but all of them express a common thought, that the rich play a huge role in determining policy, and get policies that benefit themselves. A recent paper, Oligarchy in the United States?, 7 Perspectives on Politics 731 (2009) by Jeffrey A. Winters and Benjamin I. Page, provides a unifying language for these separate descriptions. (abstract here, entire paper available from your library, and worth the time it takes.) It answers three crucial questions: What exactly do we mean by oligarchy, how can you have an oligarchy in what is ostensibly a democracy, and how can an oligarchy function when there is such a large number of hyper-wealthy people.
The first is fairly simple. Winters and Page follow Aristotle in defining an oligarchy as rule by the richest citizens, who in every society are a comparatively few people. As to the second, they also follow Aristotle in saying that constitutional governments are a mixture of two forms. This is from Politics, IV, viii:
For polity or constitutional government may be described generally as a fusion of oligarchy and democracy; but the term is usually applied to those forms of government which incline towards democracy, and the term aristocracy to those which incline towards oligarchy, because birth and education are commonly the accompaniments of wealth.
Winters and Page say that the richest people have certain interests in common, the desire to protect their wealth both from taxation and inflation, to increase it, and to deploy it at will. With respect to government policies that affect these interests, the oligarchy is in complete control. On all other issues, the views of the wealthy are just as varied as they are in the general population. LGBT rights are a good example. Some rich people are haters, and some aren’t. The political power deployed by one group can be counteracted by power from another, and democracy is likely to operate.
Thus, we have a fusion, as Aristotle says, between oligarchy and democracy. There is an implicit bargain between oligarchs and the 99%: you let us run the money, and you can pretty much do whatever you want to with social issues and anything else.
On the third question, how can oligarchy work in a society with thousands of hideously wealthy people, Winters and Page start with the fact that wealth translates to political power. It isn’t the only source of power, but it is an important one. They say rich people do not exercise of this power themselves. They own and operate huge corporations, and they fund think tanks and foundations. With these tools, they hire armies of salaried professionals from the middle and upper middle classes to advance their interests by persuading people with power from other sources to do what the rich want. Those functionaries do not even necessarily require specific instructions. They know what is needed to preserve and increase the wealth of their masters.
The rich don’t have to conspire among themselves to get results. Their material interests in protecting their wealth and increasing it, means that their interests are aligned. They favor the same policies, even without overt coordination. Only a few of them have to act to control the outcomes that matter to them.
Winters and Page try to apply these ideas to the US. They look at wealth and income inequality in detail, but they are unwilling to draw from existing data the conclusion that the US is an oligarchy. They argue that the best approach is case studies, work done by journalists and scholars who
… see things they are not supposed to see and pick up relevant boasts, accusations and downright gossip that (even if disdained by some social scientists) can help clarify mysterious political events. Such material, together with process-tracing investigations (finding, for example, that large monetary contributions are followed by strong policy advocacy in private meetings and by policy success) can lead to reasonable inferences of influence that are convincing to all but the most die-hard skeptics.
We’ve seen many of these case studies. Here’s one from Thirteen Bankers. Brooksley Born was head of the CFTC in the late 90s. She decided to commission a paper on the potential problems of unregulated derivatives, like credit default swaps. Wall Street was making a fortune out of derivatives. Larry Summers, then Chair of the President’s Council of Economic Advisers, Alan Greenspan, then Chair of the Fed and Treasury Secretary Robert Rubin were united in furious opposition even to a study. Summers called Born.
As recalled by Michael Greenberger, one of Born’s lieutenants, Summers said, “I have thirteen bankers in my office, and they say if you go forward with this you will cause the worst financial crisis since World War II.”
Having high-placed tools like Larry Summers doing your bidding, that’s power. That’s oligarchy in action.