The basis for joint action

(For previous posts about the oligarchy, see here.)

There is much in common between what the tea partiers and progressives seek, as can be seen in this informative joint interview on Fox News with Ralph Nader, a lifelong progressive, and Ron Paul, a tea party favorite.

Look at the list of things they agree on: Opposing corporate control of government, bloated military budgets, undeclared wars, corporate bailouts, invasion of civil liberties and civil rights, opposition to the USA PATRIOT Act, trade deals like NAFTA and WTO, stronger whistleblower protections, support for WikiLeaks, opposition to runaway deficits, and bringing transparency to the actions of the Federal Reserve and putting it under democratic control.

When it comes to health care, they both support the repeal of the legislation passed last year because it adds to corporate control of the system but each would like to replace it with different things. Nader wants a single payer system while Paul wants what he calls a free market system. I think Nader’s comment right at the end addresses a misunderstanding that people like Paul have in that a single-payer system (like in France) does not mean that government ‘takes over’ and delivers health care. Doctors and hospitals will still be private but what would be eliminated is the multiplicity of for-profit health insurance firms that do not add anything of value but simply introduce a vast and expensive bureaucratic layer between doctor and patient.

To form alliances with elements of the Tea Party and other groups that progressives have opposed will require a much better understanding of coalition politics than currently exists in the US. Coalition political strategy is nothing like the ‘bipartisanship’ that is so much beloved by the Villagers. Coalition politics means two things: identifying those items that we can agree upon and can garner mass support; and being willing to work with others on the basis of whether they agree with you on those specific issues, irrespective of whether we like those groups in general. The label affixed to people or their views on other issues should be immaterial. In coalition politics, there are always shifting alliances, and the people who work with you on one issue may oppose you on the next. But that is part of the deal.

The reason that political movements splinter and cease to be effective is because we get so angry with people and groups because they disagree with us on things we care strongly about that we refuse to work with them on other things that we also care strongly about, and so nothing gets done. But this does not make sense. After all, when we work on (say) getting single payer health care, some of the people who join us may well have views on other issues that we would find uncongenial or even hateful but we don’t know it because the topic may never come up. So why does knowing about it make any difference?

Is it distasteful to work on (say) opposing government suppression of First Amendment rights alongside people who may be racists and homophobes? Of course it is. But politics is not about feeling good or pure. It is about getting the results we think are important. We should be willing to work with the devil if the devil agrees with us on what to do about a specific agenda item. For example, readers of this blog know that I think that we would much better off without religion. But when it comes to fighting oppressive governments in Central and South America, some religious groups are doing wonderful work and I support them.

To make this happen we have to realize that the focus has to be on the things that we agree on. Note that the list of things that Paul and Nader agree on are all related to important economic and civil liberties issues. It should not matter that progressives and tea partiers and paleo-conservatives and libertarians differ on many social issues. Coming together on the above common agenda alone will bring about a vastly different and better country.

We also have to realize that the tea partiers are themselves victims of the oligarchy. Their politics and analyses of the situation are what they are because the oligarchic alliance of business, government, and media have misled them about the causes of their discontent. The Palin-Beck-Limbaugh axis of misinformation is, whether consciously or not, a tool of the oligarchy because they are the means by which popular anger is being deliberately directed towards those issues that oligarchy does not care two cents about (guns, abortion, gays, race, Muslims, immigration, terrorism, welfare, etc.) but which serve to divide us and prevent us from joining forces to fight the oligarchy on the things that do affect them.

I have referred in this series to the transglobal oligarchy as if it were a monolith. And they are when it comes to protecting oligarchic interests, even though they may well differ strongly on issues relating to national interests. The point is that they can put aside those differences and unite on the things that benefit the oligarchy and this is what gives them their strength. Those who oppose the oligarchy have to learn to do the same.

Our best hope is to engage with those disaffected elements in the tea party and try and shift their focus from their current obsessions so that they see who their true enemies are. If we make a concerted effort do so, there is a possibility that at some point these people will see the root causes of their problem. In order to achieve that, progressives, rather than issuing blanket condemnations of the movement and spending a lot of effort decrying the undoubtedly xenophobic, racist, homophobic, and outright nutty elements in their ranks, will have to instead appeal to those in the tea party movement for whom economic and civil liberties issues are their main concern and are willing to overlook differences on social issues. Rather than falling into the trap of dwelling on these divisive issues, progressives and tea partiers should agree to disagree on them and pool their energies on the things they agree upon. The efforts of Ron Paul, Ralph Nader, and Vermont Senator Bernie Sanders to build a coalition platform for joint action is a good start.

Building this coalition will not be easy because there is a steady and concerted effort by the oligarchy and its media allies to focus attention on those things that divide this coalition because the last thing they want to see is people getting together to take aim squarely at oligarchic interests.

Another path for the future

(For previous posts about the oligarchy, see here.)

If an economic calamity is to be averted in the US, it will require a popular revolt against the power of the oligarchy because the political leadership is not going to do take action against it.

The Democratic Party is unlikely to be the leader of a mass movement for change because its base is far too quick to capitulate to its party leadership. The party’s base seems to be always bewildered as to why their party does not follow through on its promises but as Glenn Greenwald points out, it is absurd for progressives to be puzzled by Obama’s willingness, even eagerness, to capitulate to his seeming political opponents, because it they who are enabling this very behavior. It is worth quoting him at length.

Why, angry progressives seem to be asking, would Obama ignore the views of his so-called “progressive base” while seeking to please those who are his political adversaries?

But it’s perfectly rational for Obama to do exactly that. There’s a fundamental distinction between progressives and groups that wield actual power in Washington: namely, the latter are willing (by definition) to use their resources and energies to punish politicians who do not accommodate their views, while the former unconditionally support the Democratic Party and their leaders no matter what they do. The groups which Obama cares about pleasing — Wall Street, corporate interests, conservative Democrats, the establishment media, independent voters — all have one thing in common: they will support only those politicians who advance their agenda, but will vigorously oppose those who do not. Similarly, the GOP began caring about the Tea Party only once that movement proved it will bring down GOP incumbents even if it means losing a few elections to Democrats.

That is exactly what progressives will never do. They do the opposite; they proudly announce: we’ll probably be angry a lot, and we’ll be over here doing a lot complaining, but don’t worry: no matter what, when you need us to stay in power (or to acquire it), we’re going to be there to give you our full and cheering support. That is the message conveyed over and over again by progressives, no more so than when much of the House Progressive Caucus vowed that they would never, ever support a health care bill that had no robust public option, only to turn around at the end and abandon that vow by dutifully voting for Obama’s public-option-free health care bill. That’s just a microcosm of what happens in the more general sense: progressives constantly object when their values and priorities are trampled upon, only to make clear that they will not only vote for, but work hard on behalf of and give their money to, the Democratic Party when election time comes around.

I’m not arguing here with that decision. Progressives who do this will tell you that this unconditional Party support is necessary and justifiable because no matter how bad Democrats are, the GOP is worse. That’s a different debate. The point here is that — whether justified or not — telling politicians that you will do everything possible to work for their re-election no matter how much they scorn you, ignore your political priorities, and trample on your political values is a guaranteed ticket to irrelevance and impotence. Any self-interested, rational politician — meaning one motivated by a desire to maintain power rather than by ideology or principle — will ignore those who behave this way every time and instead care only about those whose support is conditional. And they’re well-advised to do exactly that.

It is probably the case that a lack of enthusiasm on the part of the Democratic base contributed to the Democrats’ defeat in the 2010 midterm election. But what Obama cares about is getting re-elected in 2012, and he knows full well that come March or April of that year — if not earlier — most of the progressives who are now continuously complaining about him will be at the front of the line waving their Obama banners, pulling out their checkbooks and whipping into line anyone who is not similarly supportive. By contrast, corporate institutions and Wall Street tycoons will pour their money into Obama’s defeat if he does not show them the proper level of deference and accommodate their policy demands, but will support him (as they did in 2008) if he pleases them. Resource disparities between those factions are significant, but it’s also due in part to their own choices that Wall Street is empowered, and progressives are irrelevant.

This is why the oligarchy is most successful in its attempts at squeezing the poor and the working and middle classes when Democrats are in power.

It is for this reason that I see the Republican Party’s base in the tea party, for all its manifest faults, as more likely to create the conditions for change than the Democratic Party’s base. The latter is still stuck in a passive mode that puts their faith in a leader. Some of them still see Obama as that savior while others are getting disillusioned and are seeking a new hero. Their desperate need for a noble standard bearer who will fight their battles for them is something that saps their energies. In the words of Galileo (put into his mouth by playwright Bertolt Brecht in his Life of Galileo), “Unhappy is the land that needs a hero.”

At least the Republican base is wary and suspicious of their leadership. At least they realize that political leaders should fear them and that it is up to them to be vocal and active in putting pressure on them. Their growing suspicion that they are being manipulated by their political leadership at least provides some hope for a re-awakening and organizing.

What progressives need to do is develop a common agenda with those who are also disaffected with the power of the oligarchy. This will require a different attitude towards the Tea Party, paleo-conservatives, and libertarians. Rather than wholesale rejection of those groups, we should seek to form alliances on those issues that we can agree upon, and there are surprisingly many.

Next: A possible common agenda

The US as a destabilizing threat to the transglobal oligarchy

(For previous posts about the oligarchy, see here.)

The main threat to the transglobal oligarchy does not come from those countries that we normally think of as being unstable but from the US, because of the rapacity of the financial sector of the US economy that, like a swarm of locusts, is consuming everything in sight in satiating its greed, leaving the rest of the economy and the country bare. And their enablers are both the Republican and Democratic parties.

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Simon Johnson, the former chief economist with the IMF, in an article (that I referred to before in my 2009 series of posts on the American oligarchy) says that the financial sector has captured the US government and that the US shows a disturbing similarity to those countries that used to be derisively called banana republics. He says the recent financial crisis made visible to everyone the oligarchic control of government.

But there’s a deeper and more disturbing similarity: elite business interests—financiers, in the case of the U.S.—played a central role in creating the crisis, making ever-larger gambles, with the implicit backing of the government, until the inevitable collapse. More alarming, they are now using their influence to prevent precisely the sorts of reforms that are needed, and fast, to pull the economy out of its nosedive. The government seems helpless, or unwilling, to act against them.

Top investment bankers and government officials like to lay the blame for the current crisis on the lowering of U.S. interest rates after the dotcom bust or, even better—in a “buck stops somewhere else” sort of way—on the flow of savings out of China. Some on the right like to complain about Fannie Mae or Freddie Mac, or even about longer-standing efforts to promote broader homeownership. And, of course, it is axiomatic to everyone that the regulators responsible for “safety and soundness” were fast asleep at the wheel.

But these various policies—lightweight regulation, cheap money, the unwritten Chinese-American economic alliance, the promotion of homeownership—had something in common. Even though some are traditionally associated with Democrats and some with Republicans, they all benefited the financial sector. Policy changes that might have forestalled the crisis but would have limited the financial sector’s profits—such as Brooksley Born’s now-famous attempts to regulate credit-default swaps at the Commodity Futures Trading Commission, in 1998—were ignored or swept aside.

The financial industry has not always enjoyed such favored treatment. But for the past 25 years or so, finance has boomed, becoming ever more powerful. The boom began with the Reagan years, and it only gained strength with the deregulatory policies of the Clinton and George W. Bush administrations. Several other factors helped fuel the financial industry’s ascent. Paul Volcker’s monetary policy in the 1980s, and the increased volatility in interest rates that accompanied it, made bond trading much more lucrative. The invention of securitization, interest-rate swaps, and credit-default swaps greatly increased the volume of transactions that bankers could make money on. And an aging and increasingly wealthy population invested more and more money in securities, helped by the invention of the IRA and the 401(k) plan. Together, these developments vastly increased the profit opportunities in financial services.

Johnson argues that given this diagnosis of the problem, the prescription is straightforward: we need to get rid of the oligarchy, starting with breaking up all the ‘too big to fail’ banks and financial institutions that now dominate the US economy. But who will bell this particular cat? The government has, at least in theory, the power to do so. But the two major political parties are so beholden to the oligarchy and embedded with them that they are not going to take the initiative. Johnson seems to think that the necessary pressures to change will have to come from outside the system.

The second scenario begins more bleakly, and might end that way too. But it does provide at least some hope that we’ll be shaken out of our torpor. It goes like this: the global economy continues to deteriorate, the banking system in east-central Europe collapses, and—because eastern Europe’s banks are mostly owned by western European banks—justifiable fears of government insolvency spread throughout the Continent. Creditors take further hits and confidence falls further. The Asian economies that export manufactured goods are devastated, and the commodity producers in Latin America and Africa are not much better off. A dramatic worsening of the global environment forces the U.S. economy, already staggering, down onto both knees. The baseline growth rates used in the administration’s current budget are increasingly seen as unrealistic, and the rosy “stress scenario” that the U.S. Treasury is currently using to evaluate banks’ balance sheets becomes a source of great embarrassment.

Under this kind of pressure, and faced with the prospect of a national and global collapse, minds may become more concentrated… If our leadership wakes up to the potential consequences, we may yet see dramatic action on the banking system and a breaking of the old elite. Let us hope it is not then too late.

Columnist and cartoonist Ted Rall says that the situation is already too far gone for any hope of orderly change within the current system and sees a collapse coming unless there is a political revolution.

The prospect of a global economic meltdown or an actual revolution is obviously not a cheery one. If the US economy nosedives, not only will it cause a lot of misery here, it will undoubtedly drag a lot of other nations down with it, at least in the short run, because of the deep interconnections in the world’s economies.

Next: An alternative way forward?

How Monica Lewinsky saved Social Security

(For previous posts about the oligarchy, see here.)

I have repeatedly said that progressives have to be most on the alert when Democrats are in power. It is under Democratic administrations that the oligarchy tries to achieve major goals because the party’s base, ever-vigilant to guard against encroachments when Republicans hold power, falls asleep when their own party is at the helm. We see Obama doing things in the name of national security that would have evoked howls of protest if Bush had done them. We see Obama treating Wall Street with a generosity that would be loudly protested if a Republican did it.

The big prize for the oligarchy is, of course, Social Security. The privatization of Social Security has been a long-cherished dream of Wall Street anxious to get their hands on that trillion-dollar account. In general, Republicans have been thwarted when they tried to do it. George W. Bush tried to privatize it in his second term but was beaten back and gave up on it. The Democratic Party has long been seen as the defenders of Social Security, which is why the oligarchy sees it as a better agent for achieving its goals.

It is not well known that Bill Clinton also secretly set in motion attempts to privatize (they use the euphemism ‘reform’ or ‘save’) Social Security, following his successful move to gut welfare programs for the poor. These secret plans were well advanced and getting down to the level of fine-tuning details in preparation for a public announcement. But as Robin Blackburn explains in this 2004 article, he was thwarted, not by the party’s base, but by the Monica Lewinsky scandal which forced him to appease his base in order to save his political skin.

We have this on the authority of high-ranking members of the Clinton Treasury who gathered in Harvard in the summer of 2001 to mull over the lessons of the 1990s. At that conclave it was revealed that on Clinton’s orders a top secret White House working party had been established to study in detail the basis for a bipartisan policy on Social Security that would splice individual accounts into the program. Such was the delicacy of this exercise that meetings of the group were flagged under the innocent rubric “Special Issues” on the White House agenda.

In the mid-1990s pessimism about the future of Social Security was rife in seminars, conferences, op-eds and learned papers by which elite consensus is fashioned. The media lent an eager ear to charlatanry from outfits like the Third Millennium, which ventriloquized a supposed consensus amongst youth that the program would not be there for them when they came to retire – and that consequently their best bet was to take their FICA payments and put them in a private share account in soar-away Wall Street.

Third Millennium was, of course, a front for the privatization lobby. But it did tap into a vein of public anxiety and skepticism concerning Social Security finances and, with the stock market soaring upward, its Wall Street connections were an asset not a liability.

But in 1998 the Lewinsky scandal burst upon the President, and as the months sped by and impeachment swelled from a remote specter to a looming reality, Clinton’s polls told him that his only hope was to nourish the widespread popular dislike for the hoity-toity elites intoning Clinton’s death warrant.

In an instant Clinton spun on the dime and became Social Security’s mighty champion, coining the slogan “Save Social Security First”.

In his 1999 State of the Union address Clinton seized the initiative from the privatizers with a bold new plan that gave substance to the “Save Social Security First” slogan. He proposed that 62 per cent of the budget surplus should be used to build up the Social Security trust fund. He promised to veto any attempt to divert Social Security funds to other uses, and he urged that 15 per cent of the trust fund should be invested in the stock market, not by individuals but by the Social Security Administration.

The first part of the plan to privatize Social Security, which has long been in evidence, is to soften up the public by persuading all people that the system is in dire crisis, and especially the young, that they are being ripped off because Social Security will not be there for them when they retire. This is a lie. There is no long-term problem with Social Security that cannot be fixed with minor tinkering within the system. This graph of the Social Security trustees projections of future financial status (as a percentage of GDP) shows that there are no runaway costs in Social Security in the foreseeable future and the gap between revenue and outlays can be easily closed. Furthermore, the current surplus in the trust fund (well over three trillion dollars) that has been built up over the years can be used to fund the deficit in the current account at least over the next two or three decades without any changes at all in the system.

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The economic minds behind Clinton’s moves were Larry Summers and Gene Sperling, both of whom are now close Obama advisors. There is no doubt in my mind that Barack Obama also wants to raid Social Security in some way to benefit the oligarchy, to do what Clinton and Bush could not. His reduction of the payroll tax contribution and his adoption of the alarmist rhetoric about the need to ‘fix’ Social Security has laid the groundwork for meddling with it. You can be sure that his economic team is already working on it. The real question is when he will reveal the details of what he has in mind, whether he will keep his plans secret for longer or whether he will reveal at least part of it in this year’s State of the Union speech to be given this evening.

The cautious thing to do would be for Obama to wait until his second term, like Clinton and Bush, so that he does not have to worry about any negative impact on his re-election chances. But Obama seems to have an arrogant confidence about his ability to get his followers to rally behind him whatever he does, and he may well think that he can tackle Social Security now and escape unscathed.

And he will unless people protest loud and long. Monica Lewinsky played her part. Now it is up to the rest of us to save Social Security.

Recent cracks in the oligarchy

(For previous posts about the oligarchy, see here.)

I wrote earlier about how cracks appeared in the oligarchy during the late stages of the Vietnam war. In that case, the oligarchy split between those businesses for whom the war remained a good thing because their businesses directly benefited from the war effort, and those for whom it was a bad thing because the people and resources that might have benefited them were being drained away to service a war that seemed to have no end. In the current situation, while the pressures due to an over-extended military are still there, the split in the oligarchy is more likely to occur between the financial sector and the manufacturing/agricultural sector because the financial sector is increasingly being seen as a parasite that produces little of value but instead becomes bloated by sucking the blood out of the productive sectors of the economy, all with the active collusion of the government. These cracks in the oligarchy are being widened by its out-of-control rapacity, as sectors within it seek to advance at the expense of others. This intraoligarchic competition to see who can enrich themselves the most will likely less to its own downfall.

Even some establishment journalists like Frank Rich of the New York Times have noticed how things have gone way too far in favoring the financial sector:

The obscene income inequality bequeathed by the three-decade rise of the financial industry has societal consequences graver than even the fundamental economic unfairness. When we reward financial engineers infinitely more than actual engineers, we “lure our most talented graduates to the largely unproductive chase” for Wall Street riches, as the economist Robert H. Frank wrote in The Times last weekend. Worse, Frank added, the continued squeeze on the middle class leads to a wholesale decline in the quality of American life — from more bankruptcy filings and divorces to a collapse in public services, whether road repair or education, that taxpayers will no longer support.

The Obama administration seems not to have a prosecutorial gene. It’s shy about calling a fraud a fraud when it occurs in high finance… Since Obama has neither aggressively pursued the crash’s con men nor compellingly explained how they gamed the system, he sometimes looks as if he’s fronting for the industry even if he’s not.

We can expect to see this ‘wholesale decline in the quality of American life’ continue because the oligarchy is demanding it. As Chrystia Freeland writes in an article in the January/February 2011 issue of The Atlantic titled The Rise of the New Global Elite:

The U.S.-based CEO of one of the world’s largest hedge funds told me that his firm’s investment committee often discusses the question of who wins and who loses in today’s economy. In a recent internal debate, he said, one of his senior colleagues had argued that the hollowing-out of the American middle class didn’t really matter. “His point was that if the transformation of the world economy lifts four people in China and India out of poverty and into the middle class, and meanwhile means one American drops out of the middle class, that’s not such a bad trade,” the CEO recalled.

I heard a similar sentiment from the Taiwanese-born, 30-something CFO of a U.S. Internet company. A gentle, unpretentious man who went from public school to Harvard, he’s nonetheless not terribly sympathetic to the complaints of the American middle class. “We demand a higher paycheck than the rest of the world,” he told me. “So if you’re going to demand 10 times the paycheck, you need to deliver 10 times the value. It sounds harsh, but maybe people in the middle class need to decide to take a pay cut.”

Whether one agrees with the sentiments expressed or not (the case that there should not be such a great disparity between the average person in America and the rest of the world is perfectly defensible), what is interesting to notice is how these private individuals are casually planning the future of the world and how to distribute its resources, with the expectation that governments will go along with their decisions. Governments are followers of the oligarchy, not leaders.

But how much can the oligarchy push their agenda on the world without pushback? Freeland suggests that they may be overplaying their hand.

But if the plutocrats’ opposition to increases in their taxes and tighter regulation of their economic activities is understandable, it is also a mistake. The real threat facing the super-elite, at home and abroad, isn’t modestly higher taxes, but rather the possibility that inchoate public rage could cohere into a more concrete populist agenda—that, for instance, middle-class Americans could conclude that the world economy isn’t working for them and decide that protectionism or truly punitive taxation is preferable to incremental measures such as the eventual repeal of the upper-bracket Bush tax cuts.

The lesson of history is that, in the long run, super-elites have two ways to survive: by suppressing dissent or by sharing their wealth. It is obvious which of these would be the better outcome for America, and the world. Let us hope the plutocrats aren’t already too isolated to recognize this.

The transglobal divide between the very rich and the rest of us will lead to popular unrest. This is more likely to happen in the US because while inequalities in other major emerging economies like China, India, Russia, and Brazil are also increasing, there is still an improvement in the average standard of living of the people in those countries. China, as just one example, is investing heavily in new infrastructure, creating a vast network of roads and high-speed rail to name one big item. Similar movement is visible in the other emerging markets. It is in the US where inequalities are increasing while average standards of living are either stagnating or declining and infrastructure is decaying as the anti-tax zealots demand cuts in government spending at federal, state, and local levels.

The popular perception (right or wrong) is that these other emerging countries are modernizing while the US is decaying, which is why the US is so unstable.

Next: The US as a destabilizing threat to the transglobal oligarchy.

The nature of oligarchic power

One of the famous sayings of Chairman Mao in his Little Red Book was that “Political power grows out of the barrel of a gun.”

That saying still holds true. The US oligarchy has disproportionate influence within the transglobal oligarchy because it has the military strength of the US behind it. This is why we can expect to see China develop its military strength over time, as it must if it is to have ambitions of becoming either the world’s premier power or at least on a par with the US, as all indications suggest that they want to be, despite their denials. But military power can only be sustained over an extended period if there is a sound economic base. Otherwise, one can have a collapse from within, as was the case with the former Soviet Union.

The recent announcement by the US Defense Secretary that he would recommend extremely modest cuts in Pentagon spending suggested to me that there was a growing realization that the over-extended US military was sapping the economic strength of the US. But the subsequent revelation by the Chinese government of test flights of their own new stealth fighters will undoubtedly give ammunition to the US military-industrial lobby with which to pressure its Congressional supporters to not only reverse the cutbacks but to even increase military spending, even though weapons analysts say that the Chinese fighters are quite inferior to current US counterparts and the Chinese are nowhere near matching the US militarily.

Although I am by no means a military strategist, the timing of the Chinese announcement made me wonder if they are playing a deep game, trying to nudge the US into wasting more money on unproductive weapons systems and military adventures at the expense of broader economic development, all as a means of weakening the US economy. In other words, their military strategy is really an economic one. This is, after all, not an original idea. The US used the arms race and lured the Soviet Union into Afghanistan in order to force them into military expenditures that they could not sustain. That too was economic warfare, disguised as a military strategy. Mikhail Gorbachev extricated them from that morass and although some Russian nationalists blame him for the break up of the Soviet Union and its fall from superpower status, future generations may well hail him as the person who saved Russia from the total economic disaster that might have ensued from trying to hold on to an over-extended empire.

So while the visible source of power is military and is overt, the real source of power is economic and the way that the oligarchy wields that power is subtle. And because the modern oligarchy is transglobal in nature and not particularly beholden to the welfare of any particular nation state, their interests need not be in synchrony with the needs of the people in any given country. All of us are cogs in a machine, replaceable and expendable.

Membership in the oligarchy is not formal but arrived at after one gives the appropriate cues that one is suitable, similar to the way it is decided to whom to extend an invitation to join the membership of exclusive country clubs. How they work is also similar to the way that a lot of business decisions are made privately on golf courses, in country clubs, and at cocktail parties.

In a must read article published last year, Simon Johnson, the former chief economist with the IMF and thus someone with impeccable establishment credentials, refers to what has happened in the US as a ‘quiet coup’ in which the oligarchy, especially the financial sector, has captured the government. He details how an advanced oligarchy operates and how it wields power.

Of course, the U.S. is unique. And just as we have the world’s most advanced economy, military, and technology, we also have its most advanced oligarchy.

In a primitive political system, power is transmitted through violence, or the threat of violence: military coups, private militias, and so on. In a less primitive system more typical of emerging markets, power is transmitted via money: bribes, kickbacks, and offshore bank accounts. Although lobbying and campaign contributions certainly play major roles in the American political system, old-fashioned corruption—envelopes stuffed with $100 bills—is probably a sideshow today, Jack Abramoff notwithstanding.

Instead, the American financial industry gained political power by amassing a kind of cultural capital—a belief system. Once, perhaps, what was good for General Motors was good for the country. Over the past decade, the attitude took hold that what was good for Wall Street was good for the country. The banking-and-securities industry has become one of the top contributors to political campaigns, but at the peak of its influence, it did not have to buy favors the way, for example, the tobacco companies or military contractors might have to. Instead, it benefited from the fact that Washington insiders already believed that large financial institutions and free-flowing capital markets were crucial to America’s position in the world. (My italics)

One channel of influence was, of course, the flow of individuals between Wall Street and Washington. Robert Rubin, once the co-chairman of Goldman Sachs, served in Washington as Treasury secretary under Clinton, and later became chairman of Citigroup’s executive committee. Henry Paulson, CEO of Goldman Sachs during the long boom, became Treasury secretary under George W. Bush. John Snow, Paulson’s predecessor, left to become chairman of Cerberus Capital Management, a large private-equity firm that also counts Dan Quayle among its executives. Alan Greenspan, after leaving the Federal Reserve, became a consultant to Pimco, perhaps the biggest player in international bond markets.

These personal connections were multiplied many times over at the lower levels of the past three presidential administrations, strengthening the ties between Washington and Wall Street. It has become something of a tradition for Goldman Sachs employees to go into public service after they leave the firm. The flow of Goldman alumni—including Jon Corzine, now the governor of New Jersey, along with Rubin and Paulson—not only placed people with Wall Street’s worldview in the halls of power; it also helped create an image of Goldman (inside the Beltway, at least) as an institution that was itself almost a form of public service.

Is it any wonder that when it comes to advancing the interests of Goldman Sachs and the related financial sector, the government and media do so reflexively? When you have such a system in place, you don’t need a formal hierarchy or structure or agenda to achieve your ends. It happens ‘naturally’.

Next: Recent cracks in the oligarchic structure.

Who makes up the oligarchy?

Commenter Jeff, in response to an earlier post, posed the question: Who or what constitutes the oligarchy and when did they come into being? Another commenter to that same post, named simply G, asked: What needs to be done to change things? I’ll address the first question here and keep the next for a subsequent post.

There are occasional attempts to portray the oligarchy as some secretive group of unidentified individuals such as the Masons or the Illuminati (or the Inebriati), meeting in secret with passwords and the like. They are not because that is not how things work. The modern transglobal oligarchy consists of figures in the government and private sector working largely in the open. They meet regularly at big public functions where a substantial time is spent in open meetings. But these gatherings also allow for private meetings such as dinners and parties and other social events where the spotlight is off and where a lot of the consensus is built up.

If you look closely, you will see such non-secret informal decision making systems all around you. Whether in your school or religious institutions or community or professional organizations or social circles, there will usually be some smaller grouping of like-minded influential individuals that talk privately to one another often and come to an informal consensus on what to do, and the open meetings are where those informal decisions are formalized, codified, and implemented. The influential people in those groups would be offended to be told that they are acting as a cabal, usurping the rights of the larger group to freely deliberate and make decisions. They see themselves as a positive force, making the organization run more smoothly.

The oligarchy works just like that. Some of the names of these influential groups which meet regularly are familiar: the Trilateral Commission, the Carlyle Group, the Bilderberg Group, the Bohemian Grove, etc. But there are many more. Chrystia Freeland in an article in the January/February 2011 issue of The Atlantic titled The Rise of the New Global Elite describes the process by which people become part of it.

To grasp the difference between today’s plutocrats and the hereditary elite, who (to use John Stuart Mill’s memorable phrase) “grow rich in their sleep,” one need merely glance at the events that now fill high-end social calendars. The debutante balls and hunts and regattas of yesteryear may not be quite obsolete, but they are headed in that direction. The real community life of the 21st-century plutocracy occurs on the international conference circuit.

The best known of these events is the World Economic Forum’s annual meeting in Davos, Switzerland, invitation to which marks an aspiring plutocrat’s arrival on the international scene. The Bilderberg Group, which meets annually at locations in Europe and North America, is more exclusive still—and more secretive—though it is more focused on geopolitics and less on global business and philanthropy. The Boao Forum for Asia, convened on China’s Hainan Island each spring, offers evidence of that nation’s growing economic importance and its understanding of the plutocratic culture. Bill Clinton is pushing hard to win his Clinton Global Initiative a regular place on the circuit. The TED conferences (the acronym stands for “Technology, Entertainment, Design”) are an important stop for the digerati; Paul Allen’s Sun Valley gathering, for the media moguls; and the Aspen Institute’s Ideas Festival (co-sponsored by this magazine), for the more policy-minded.

The people who attend these gatherings are well connected to key figures in the business world and have the ear of key policy makers in governments and in fact move freely between the two worlds. In the US, Goldman Sachs, the US Treasury Department, and the Federal Reserve Bank can almost be considered to be a single entity because of all the people who smoothly move between them. As Glenn Greenwald wrote in 2009:

[Michael] Paese went from Chairman [Barney] Frank’s office to be the top lobbyist at Goldman, and shortly before that, Goldman dispatched Paese’s predecessor, close Tom Daschle associate Mark Patterson, to be Chief of Staff to Treasury Secretary Tim Geithner, himself a protege of former Goldman CEO Robert Rubin and a virtually wholly owned subsidiary of the banking industry. That’s all part of what Desmond Lachman — American Enterprise Institute fellow, former chief emerging market strategist at Salomon Smith Barney and top IMF official (no socialist he) — recently described as “Goldman Sachs’s seeming lock on high-level U.S. Treasury jobs.”

Meanwhile, the above-linked Huffington Post article which reported on [Senator Dick] Durbin’s comments [that "The banks -- hard to believe in a time when we're facing a banking crisis that many of the banks created -- are still the most powerful lobby on Capitol Hill. And they frankly own the place."] also notes Sen. Evan Bayh’s previously-reported central role on behalf of the bankers in blocking legislation, hated by the banking industry, to allow bankruptcy judges to alter the terms of mortgages so that families can stay in their homes.

Matt Taibbi piles on the evidence on how this fairly close-knit but informal network of especially well-connected insiders share and use information that is not even available to the general business community, let alone us members of the hoi polloi.

Another extremely interesting detail, which I and others have reported on, involves the fact that all the big banks on Wall Street (including Goldman) and many of hedge funds (including Citadel) had a meeting at the Fed with Ben Bernanke just three days before the Fed announced its plan to subsidize the sale of Bear to JP Morgan Chase. This was on March 11, 2008; the only big bank that was not invited to this meeting was Bear, Stearns. It strains all credulity to imagine that the rescue of Bear was not discussed at that meeting and that none of the players at that meeting made moves based on those conversations.

However there is a mounting pile of evidence suggesting a sort of widespread culture of insider trading in which a few players (specifically the major banks and a few of the biggest and best-connected hedge funds) have milked a seemingly endless stream of exclusive information, not occasionally or opportunistically but as an ongoing commercial strategy. I get about two or three letters a week from people in the finance business complaining that this or that company is openly advance-trading on a) information from the Federal Reserve about things like interest rate changes, or b) info about big client orders in things like commodities, or c) mergers and the like. Certainly there is a great deal to be suspicious of with regard to the behavior of certain companies in advance of major events like the rescue of Bear Stearns, the collapse of Lehman Brothers, the AIG bailout, the acquisition of Merrill Lynch by Bank of America, the emergency conversions to bank holding company status of Goldman and Morgan Stanley, and the announcement of major bailout programs like the TALF and the P-PIP.

Anyone who knew in advance how or when these deals were going down could make billions almost without trying, and we know that the heads of many of the major banks were in contact with key federal officials during this entire period.

That’s how the oligarchy works.

Next: The nature of oligarchic power

When cracks appear in the oligarchic system

Knowledge seeks to be free.

While oligarchic suppression of unauthorized messages can be very thorough, it can never be complete. There will always be people who have a strong urge to know the truth and disseminate it and they will find ways to do so. We have seen in the past that even under tightly-controlled state media systems, an underground press and radio and other low-cost news systems such as pamphlets and wall posters emerge to provide an outlet for those who challenge the system.

In relatively open societies in the US, the challenge for non-oligarchic alternative voices is both harder and easier. It is easier because there is (usually) no overt suppression of other voices by direct censorship. Instead the focus is on marginalizing them, by making them seem extreme so that these voices do not reach a mass audience.

It is harder because the seeming openness of the system makes it harder for ordinary people to see the control of the oligarchy and thus less likely to see the need for alternative views. I am sure that many people in the US think that we are exposed to the full range of news and opinions on TV, in newspapers, and in magazines because we have Fox News and MSNBC, the Wall Street Journal and the New York Times, the National Review and The Nation.

People tend to be not aware of what they are missing. It takes a great deal of media and political sophistication to be aware of what you are not hearing. A good example is Noam Chomsky. He is well known worldwide as an important political analyst and public intellectual and yet you will never see him anymore in the US mainstream media. To read his work or hear him, you will have to actively seek him out or read alternative media on a regular basis. The same is true for a whole host of people. If you do not appear in the major media venues, you and your views may as well not exist. The non-stop cacophony of voices that surround us in the media serves the purpose of creating that non-awareness. In fact, a good way to become better informed is to not watch TV or read the mainstream press but read only the headlines and the bare bones facts of a story and start just thinking for yourself about what it means.

This is why the internet has been so unsettling for the oligarchy. It lowered the cost of admission to the media club to almost zero and so one has had an explosion of voices, most of whom are free to say what they want. The government does not have to worry about the New York Times or CNN ‘going rogue’ because their dependence on advertisers and stockholders is sufficient to keep them in check and to even support government efforts to suppress dissenting voices.

The internet’s openness was tolerable as long as those new voices were scattered and diffuse and uncoordinated, each commanding just a small audience. But the emergence of outfits like WikiLeaks that are able to command widespread attention has really thrown a wrench into the media propaganda model which is why we should expect to see attempts to ‘regulate’ the internet to prevent ‘irresponsible’ (translation: anti-oligarchic) voices form gaining a foothold or by making the cost of business higher by governments using their vast resources to take legal action against smaller entities, thus driving up their costs and putting them out of business.

The WikiLeaks episode has opened a window on the oligarchic structure in the US. The US media likes to portray itself as independent of, and even adversarial to, the government. But when a true challenge to the government emerged, they quickly reverted to their true role of government ally. For example, see how the US media has disowned WikiLeaks and refused to fight or even speak out on their free speech rights, leaving it up to international media to call upon them to protect the First Amendment. It is the US media that fights the idea that WikiLeaks is a journalistic enterprise just like them and thus deserving of all First Amendment protections.

It is important to understand that this abandonment of WikiLeaks is not due to normal business competition. They are not doing this because of business reasons, because they fear that their subscribers and advertisers will shift away from them to WIkiLeaks because the latter is not that kind of operation and does not present that kind of danger. After all, they are giving away their information free to the mainstream media. Those mainstream media organizations that are distancing themselves from WikiLeaks are clearly doing this for ideological reasons, because they are opposed to what WikiLeaks represents which is a source of information that is outside oligarchic control. They act this way because the US media is part of the oligarchy and thus unconsciously picks up the cues that tell it what to do. The US government does not need to do anything. What better propaganda system is there?

WikiLeaks poses a challenge to the oligarchy because even those journalists that have passed through the filters and risen within the system realize that at some basic level, attempts to shut down WikiLeaks is wrong and this is creating cracks in the system. We need to widen those cracks by driving home the message that this is an important First Amendment issue and that what WikiLeaks does is no different from what Bob Woodward does except that he serves the interests of the oligarchy and WikiLeaks does not.

Next: Who makes up the oligarchy and what can we do about it?

The media as a model of how a modern oligarchy operates

A well-functioning oligarchic system usually operates smoothly and largely openly and without a hierarchical structure. It achieves its goals by setting up filters that weed out those who do not support its agenda and rarely requires overt intervention to achieve its goals.

I discussed earlier how the major filter was the high cost of entry in the modern media world that meant only rich people or organizations could create a big megaphone for their views. Only someone like Rupert Murdoch, for example, could create a new major network like Fox News. The high cost of entry came into being over a century ago and was a result of market forces and technological advances and the adoption of a business plan that depended largely on advertising for revenues.

Governments were happy to let that process proceed though in the early days some had concerns. It is not well known now until the mid-19th century the US government subsidized the printing and mailing of newspapers in order to enable a wide diversity of voices to be heard. While there are obvious dangers to be faced with government funding, it is possible to construct buffers to insulate the government from having too much influence over editorial content. The BBC and CBC are models that, while flawed, show what can be done. The abandonment of government subsidies to newspapers set in motion a propaganda system that works without any further outside intervention.

A case study of how the media filters work to weed out undesirable elements is the process of embedding mainstream journalists with US troops that was introduced by the US government. Once the news executives agreed to this practice, it further consolidated the links between government and the media. Those journalists who felt that embedding was wrong and undermined their impartiality left the mainstream media and went elsewhere. Only those who did not find it objectionable stayed and they are the ones who report the news and will rise up and become heads of news divisions.

When people like John Burns of the New York Times and Lara Logan of CBS News criticized Michael Hastings of Rolling Stone magazine for publishing the piece that got General Stanley McChrystal fired as head of the Afghanistan war effort, they perfectly symbolized the process at work. What they did by criticizing Hastings was a good career move for them. Whether they were speaking what they really thought or were more cynical and calculating does not matter. If the latter, they will rationalize their actions, create justifications, and internalize the reasons that caused them to act this way and thus become even more dutiful servants of the oligarchy. Meanwhile Hastings, who used to work for Newsweek, left and became an independent journalist because he couldn’t stand the role that establishment reporters played within that system.

This example shows how the oligarchy operates in the media. It is not that reporters write stories that are then censored by their bosses who are acting on the orders of politicians, as a crude propaganda model would suggest. It is that the system weeds out the reporters who would write such stories in the first place and only keeps those who would not even consider filing such a story, making overt censorship unnecessary.

It is only under extreme conditions that the commonality of interests between the government and the media breaks down and this is usually due to a split in oligarchic interests. One example in the US was during the later stages in the Vietnam war when the costs of the war became seen as a serious threat to some sections of the US economy and the draft was resulting in the conscription of even people from the ruling classes. This division in the oligarchy allowed much more vocal criticism of the war even in the mainstream media and resulted in the government trying to directly influence them in the form of trying to suppress publication of the Pentagon Papers and exerting direct pressure on major newspapers and network news division executives to limit negative coverage of the war. When the hand of the oligarchy becomes visible this way, you know the system has developed cracks.

But the near unanimous support by the US media for the wars in Iraq and Afghanistan showed that those earlier cracks have been now sealed because the government did not even need to tell the news organizations to act as cheerleaders. The news executives and reporters by and large agreed with the government’s goals because those who might have disagreed had long ago left and gone elsewhere because they just did not ‘fit’.

A model for how the oligarchy works

To understand who constitutes the new national and transglobal oligarchies and how they work, it is helpful to examine a subsystem of the oligarchy that has been studied extensively and provides a good model or template for understanding it. One fact that quickly emerges is that the best propaganda systems are those that operate seemingly transparently.

Those countries that have tightly controlled state media have a much less effective propaganda system than countries like the US. Not only are people in those countries aware that the media is a propaganda organ, which makes them skeptical of what it says, there is always the danger that somebody in the media is going to blurt out things that contradict the party line.

It is much more effective to have a structure in which the people in the media share common values with the ruling classes so that they sincerely spout the desired message. This is far more effective than forcing them to toe the party line against their will because the people in the media are truly saying what they think and thus the public thinks that they are being told the truth. And they would be correct in a narrow sense. You will almost never find outright lying by mainstream US journalists. What the media does is three things: they will not cover certain kinds of stories, the stories they do cover will be viewed through a particular prism that is advantageous to establishment interests, and the range of analyses will be restricted to a narrow spectrum. Everything that falls within these limits will be called ‘moderate’, ‘centrist’, ‘reasonable’, ‘mainstream’, and other favorable labels and gain easy access to media outlets to repeatedly propound their message while anything outside will be labeled ‘radical’, ‘extreme’ and be rarely heard.

How is this remarkable consensus achieved? By creating a media structure that has filters built into it that, as you rise in the ranks, steadily weed out those whose values and ideology do not conform. In the US this is achieved by raising the cost of admission to the media world. In the beginning days of newspapers and radio, there was a wide diversity of voices because it did not cost that much to start up a new operation. Reporters were often from working class backgrounds with no college degree who started at the very bottom and worked their way up as they learned the their craft.

Nowadays no one who is not a wealthy person can start a newspaper or radio or TV station. Furthermore, they depend on advertising for a large chunk of their revenues. As a result of the ownership and revenue filters, they need to target businesses and the maximum number of individuals who will buy those goods, which means skewing coverage that is favorable to business and towards the more affluent. Furthermore, journalism has become a profession that requires a college degree (though there are exceptions), which means that a narrower spectrum of people (mostly from the middle and professional classes) with more establishment views enter the profession.

As a result of these structural constraints, a whole set of unseen filters get put into place and only certain types of reporters will pass through them. Those who are the best at internalizing those values are the ones who ‘fit’ the media and will pass through the filters and rise up the ranks to become editors and opinion makers. And the views they express will almost always be sincere ones. They would be shocked to be told that they are part of a propaganda system. They will insist, quite rightly, that no one orders them to say or write anything.

The system at Rupert Murdoch’s Fox News where top executives send daily memos to their news reporters telling them what to cover and how to cover it (as revealed in Robert Greenwald’s documentary Outfoxed) is quite unusual in its crudeness. This series of Doonesbury cartoon strips about the documentary is amusing. But holding up Fox News as an example of shoddy journalism (which is absolutely true) implies that the non-Murdoch media are not part of the propaganda system when in fact they are but do not need to be so crude.

The members of the mainstream media do not meet in secret and plot. They have no need to. They meet in public, at professional and social gatherings and conferences and the like, to share ideas and strategies. And since they all pretty much share the same values and goals, they arrive at conclusions that advance the interests of the US oligarchy without having to be explicitly told to do so by their oligarchic bosses.

What I have described is just a sketch of the US media system. For a much more comprehensive treatment of how the media in the US works as an effective propaganda system because of the various filters incorporated within it, read Manufacturing Consent, the classic analysis of the US media by Noam Chomsky and Edward R. Herman, and The Problem of the Media by Robert W. McChesney.

The oligarchy is created and functions pretty much the same way, as will be discussed later.