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Oligarchy Is the Problem

John Pierpont Morgan, American Oligarch (photo: Images of American Political History, public domain)

We have a society in which money is increasingly concentrated in the hands of a few people, and in which that concentration of income and wealth threatens to make us a democracy in name only.

Paul Krugman, 11/5/11

The data supports this claim: income and wealth are concentrated in the top .1% of Americans. Spokespeople for the rich, including the Republican legislators, call these people “job creators”. This paper says no:

The data demonstrate that executives, managers, supervisors, and financial professionals account for about 60 percent of the top 0.1 percent of income earners in recent years….

Another big chunk are professionals who serve their corporate masters, including accountants, lawyers, business consultants and salespeople (10.3), and real estate people (4.7%). Another 6.3% are as retired or dead. In fact, if you look at the list of potential job creators, you have maybe 10% of the top .1%.

The authors offer two possible explanations for the wealth of this class of leeches. One is poor corporate governance, which permits corporate executives to extract money from the shareholders. Rising stock markets are another, allowing executives cash out their options profitably. The point of stock options is to “align the incentives of the executive with those of the shareholders.” I’d say stock options are another sign of poor corporate governance: hiring sociopaths who screw shareholders if they don’t get enough money to feed their bloated egos.

When the top brains in the business start talking openly about Oligarchy, the rest of us need to learn all we can about the real nature of politics in the US. Another paper, Oligarchy in the US?, (abstract here, you can get the paper from your local library on-line; it’s written in English, not academic) by Jeffrey Winters and Benjamin Page, explains:

Oligarchy refers broadly to extreme political inequalities that necessarily accompany extreme material inequalities. Oligarchs are actors who personally command or control massive concentration of wealth—a material form of power that is distinct from all other power resources, and which can be readily deployed for political purposes.

This definition distinguishes the Oligarchy from the more general concept of power elites. President Obama, John Boehner and Ben Bernanke are members of the power elite, but they are not themselves of the Oligarchy, far from it. They have debts to the Oligarchy, which supported their election or appointment, but they also owe duties to the rest of us, and can, in theory, be replaced if they do not meet those obligations with someone who will meet those duties. There are others in the power elite as well, and any of them could obstruct the greed of the Oligarchy. But they don’t very often, do they?

Winters and Page identify three goals that connect members of the Oligarchy:

1. Protecting and preserving wealth
2. Insuring the unrestricted use of wealth
3. Acquiring more wealth.

These limited goals do not require Oligarchs to exercise control over other political matters. People’s social arrangements, for example, are irrelevant to the goals of the wealthy, and they can safely be left to politics. It is only when their material interests are at stake that the Oligarchy operates, inside the putative democracy.

The paper explains that it isn’t necessary for the Oligarchy to work very hard to carry out its goals, let alone conspire to do so. Their minions know what to do. Members of the Oligarchy and their tools don’t work against each other. If a small group wants something, it will most likely happen unless the rest of the members object.

The authors offer several indicators of the existence of the Oligarchy, but as good academics typically do, they want more study, and they point to case studies as especially relevant.

So, here’s a case study. Derivatives are dangerous. AIG should be all the proof anyone needs. For small businesses, there is the example of BKB Properties. Swaps are legalized grifts, relying on the implicit government guarantee that issuing banks are too big to fail, and the willingness of their government tools to force austerity on the Greeks and anyone else who might try to default. If Dodd-Frank had actually imposed controls on derivatives, it would have cut deeply into the profits of banksters.

When the big banks pushed back against real legislation, and then against rules written under the weakling Dodd-Frank, there was not a single voice from the Oligarchy arguing for strict regulation, let alone outlawing them. There were very few voices from the power elite, either. That wasn’t an accident.

The rich don’t thwart the rich. Almost all of the 1% and a good part of the top 10% push fiercely for the interests of the rich. Their personal wealth depends on it.

That is why Oligarchy is the problem.

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