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 latest idiocy

Apparently the willingness of people to be duped by hucksters into believing that inanimate objects wield magical powers that can improve their lives has resulted in the popularity of something called ‘Power Balance’ bands, a silicone band containing a hologram. It seems like all it takes is for some celebrity to endorse some nonsense for others to rush out and buy them, even if there is zero evidence in its favor. Articles about these things never seem to include people who buy these things and then have their lives take a turn for the worse.

I blame religion for this kind of idiocy. It encourages people to believe in magic, and once you go down that anti-science road, you become a sucker just waiting to be taken in by hucksters.

The no-fly list as a means of coercion

Gulet Mohamed, whose story I have written about before, is back in the US.

His case illustrates how the US government, headed by that noted constitutional scholar Barack Obama, subverts the constitutional protections of its citizens by using the no-fly list to coercively detain and interrogate citizens in other countries which have far fewer protections, at least on paper.

Civil liberties groups charge that his case is the latest episode in which the U.S. government has temporarily exiled U.S. citizens or legal residents so they can be questioned about possible terrorist links without legal counsel.

The American Civil Liberties Union is suing the U.S. government on behalf of 17 citizens or legal residents who were not allowed to board flights to, from or within the United States, presumably because, like Mohamed, they were on the government’s no-fly list. Of those stranded overseas, all were eventually told they could return, often after they agreed to speak to the FBI. None was arrested upon their return.

The ACLU suit, filed in Portland, Ore., alleges that Americans placed on the no-fly list are denied due process because there is no effective way to challenge their inclusion.

There is a weird Orwellian quality to the no-fly lists.

The government does not acknowledge that any particular individual is on the no-fly list or its other watch lists. Nor will it reveal the exact criteria it uses to place people on its list… But U.S. officials insist that the process used to place individuals on the no-fly list is legal and well founded, and relies on credible intelligence.

Right. After all, the government has such a good reputation for telling the truth and behaving according to the law so why shouldn’t we trust it implicitly?

As Nat Hentoff writes, we are allowing the creation of a system of secret rules and prisons to be used at the will and discretion of the president, outside the range of the constitution.

Media filters at work

Apparently that portion of the press conference where Chinese president Hu Jintao was asked about human rights issues was blacked out in the state-run China media. Damian Grammaticas, the Beijing correspondent of BBC News, says smugly, “Just hearing a Chinese president deal with direct questions on human rights is incredibly rare. In China the heavily state-controlled media doesn’t pose them”

But when have you heard anyone in the major US media ask Barack Obama or Hillary Clinton at a press conference how the US can lecture other countries on human rights when it is itself a serious serial violator?

The point is that the filters in the media that weed out independent thinkers works so well that it would never occur to almost all those who rise to the level of being allowed into these press conferences to pose such a question. Any journalist who had the temerity to do so would be frozen out by the government (and even his or her colleagues) and never be called upon again and would have to be replaced by his organization. This would be a bad career move and journalists likely realize this, at least at a gut level.

This is why the US does not have to be so crude as China and censor broadcasts. The media does it itself perfectly well.

Single payer health insurance system in India

There is a common misunderstanding that the single payer system of health insurance means that the government provides all the health services. That is not true. There are many systems of single payer in which doctors and hospitals are private. It is just that 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 would be eliminated.

This story from the public radio program Marketplace shows how even in the rural farming sector in India, introducing a single payer system called Yeshavini has resulted in a vast improvement in health care at very low cost.

[W]hile Congress, and the rest of the country, continue to argue over who’s helped and who’s hurt by health care reform, the world’s cheapest health insurance program can be found in India. It covers at least 4 million of that country’s poorest farmers with a fairly simple philosophy: More patients means lower costs.

About a third of all of the patients at [Dr. Devi] Shetty’s hospital are farmers from rural villages. They’re here because they have something called Yeshaswini insurance. It doesn’t cover routine doctors visits for, say, a cough or a cold, but the insurance does cover all surgical procedures. The farmer pays approximately three cents a month; the government puts in one and a half cents and farmers cooperatives operate the program.

That volume actually allows them to negotiate really good deals, lower costs of medical equipment and drugs. And the success rate for surgery at Shetty’s hospital is as good as hospitals in the U.S. at a fraction of the cost.

Typically, farmers have to sell their land, take out crippling loans or just not have surgery. That’s why Yeshaswini insurance is immensely popular. Farmers can choose from any one of 350 hospitals in the region.

Dr. Julius Punnen is a cardiac surgeon who helped set up the program. He says every day the hospital battles with private insurance companies to get reimbursed. But Yeshaswini is different. It was designed to provide treatment.

The private for-profit health insurance companies are a cancer on the health care system that must be eliminated.

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.

Constitution-free zone

You are most vulnerable to having your civil liberties (supposedly guaranteed by the Bill of Rights in the US constitution) ignored when you are entering the country, because the US Customs and Border Patrol (a division of the Department of Homeland Security) seems to have been given extraordinary powers in order to ‘protect’ the country.

The story of Craig Johnson provides a disturbing picture of what they can do to anyone just for exercising their constitutional rights in a way that the government does not like.

But such things can happen even if you never leave the country, because the DHS takes a very expansive view of what constitutes the ‘border’.

The ACLU says a “Constitution-free zone” exists within 100 miles of the US border, where DHS claims the authority to stop, search and detain anyone for any reason. Nearly two-thirds of the US population lives within 100 miles of the border, according to the ACLU, and the border zone encompasses scores of major metropolitan areas and even entire states.

Along the northern border with Canada, international students and scholars have sometimes been detained for weeks because they were not carrying all their documents with them when traveling within the country. Cary M. Jensen, director of the International Services Office at the University of Rochester, says that “For international visitors who see people boarding trains, pulling people off, asking for documents, it feels a lot like East Germany did when I visited in 1980.”

There will be those who criticize Jensen for hyperbole and say that even now the US is nowhere close to East Germany. They will be right. They will also be right when they point out that other countries routinely require people to carry identification papers with them. In Sri Lanka, for example, people can be randomly stopped at checkpoints and asked to show their identity cards and I always carry my passport with me when traveling in that country.

But the real issue is what kind of nation do we want the US to be? Is being better than Sri Lanka now or East Germany during the cold war the new standard for civil liberties?