The rise and potential fall of the global plutocracy

Chrystia Freeland is an excellent reporter who has been chronicling the rise of the global oligarchy and whose articles I have linked to several times in my posts on the workings of the oligarchy. (See here, here, here, and here.)

In a recent op-ed titled The Self-Destruction of the 1 Percent, she points out that such concentration of power by plutocrats have occurred in the past and inevitably lead to the destruction of the very system that benefited that class, pointing to 14th century Venice as an example.

The story of Venice’s rise and fall is told by the scholars Daron Acemoglu and James A. Robinson, in their book “Why Nations Fail: The Origins of Power, Prosperity, and Poverty,” as an illustration of their thesis that what separates successful states from failed ones is whether their governing institutions are inclusive or extractive. Extractive states are controlled by ruling elites whose objective is to extract as much wealth as they can from the rest of society. Inclusive states give everyone access to economic opportunity; often, greater inclusiveness creates more prosperity, which creates an incentive for ever greater inclusiveness.

The history of the United States can be read as one such virtuous circle. But as the story of Venice shows, virtuous circles can be broken. Elites that have prospered from inclusive systems can be tempted to pull up the ladder they climbed to the top. Eventually, their societies become extractive and their economies languish.

That was the future predicted by Karl Marx, who wrote that capitalism contained the seeds of its own destruction. And it is the danger America faces today, as the 1 percent pulls away from everyone else and pursues an economic, political and social agenda that will increase that gap even further — ultimately destroying the open system that made America rich and allowed its 1 percent to thrive in the first place.

She then proceeds to look at recent trends in America that show parallels to the failed systems of the past and concludes:

It is no accident that in America today the gap between the very rich and everyone else is wider than at any time since the Gilded Age. Now, as then, the titans are seeking an even greater political voice to match their economic power. Now, as then, the inevitable danger is that they will confuse their own self-interest with the common good. The irony of the political rise of the plutocrats is that, like Venice’s oligarchs, they threaten the system that created them.

Can there be any doubt that what we currently have in the US is an extractive class? As Annie Lowrey writes in the New York Times, in the first year of the recovery since the recession, the top 1% took a whopping 93% of the income gains. The 1% now earns about one sixth of all income. And they still think it is not enough and demand even more.

Even traditional economists are increasingly worried and coming round to the view that inequality is not an incidental side effect of growth but something that negatively affects it and needs to be addressed head-on.

“Growth becomes more fragile” in countries with high levels of inequality like the United States, said Jonathan D. Ostry of the International Monetary Fund, whose research suggests that the widening disparity since the 1980s might shorten the nation’s economic expansions by as much as a third.

Reducing inequality and bolstering growth, in the long run, might be “two sides of the same coin,” research published last year by the I.M.F. concluded.

The concentration of income in the hands of the rich might not just mean a more unequal society, economists believe. It might mean less stable economic expansions and sluggish growth.

That is the conclusion drawn by two economists at the [IMF], Mr. Ostry and Andrew G. Berg. They found that in rich countries and poor, inequality strongly correlated with shorter spells of economic expansion and thus less growth over time.

The Republicans represent the vanguard of the plutocratic movement and the Democrats provide the political cover for them by being its ‘kinder, gentler’ face. Both parties are going to continue to collude to put the economic squeeze on anyone outside their limited circle because they really do think that anyone of us who is not directly contributing to the growth of their wealth are parasites who deserve to be crushed. Mitt Romney was accurately channeling those vies with his 47% remarks.

This does not mean that there is no difference between the two parties because there are some important ones. But we must be realistic that what we can hope to achieve from Democrats are advances in certain worthwhile social goals, such as improvements in the rights of women and gays and racial/ethnic minorities, as long as those advances do not seriously threaten the economic interests of the extractive class, at least in the short term. We can hope that as these formerly marginalized groups achieve at least some semblance of equality, it becomes harder to divide us along social lines and we can unite to overturn the stranglehold that the oligarchy has on political power.

Freeland has a new book on this topic called Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else and she was interviewed about it on The Colbert Report.

(This clip appeared on October 11, 2012. To get suggestions on how to view clips of The Daily Show and The Colbert Report outside the US, please see this earlier post.)


  1. kraut says
    As Nietzsche said: “What does not kill me, makes me stronger”.

    “Until now capitalism adopted this slogan, but this attitude will have in the end a limited span. Even though capitalism’s crises should keep it in life for long time, what matters will be the last crisis. The current financial and monetary crisis sprung precisely from the progressive destruction, since the days of Ronald Reagan and Margaret Thatcher, of any form of economy regulation. Left to themselves, the financial markets are obeying their very logic.

    Today we are witnessing the result of this: rising inequality, implementation of unbearable austerity programs, the colossal debts of states, delocalization, rising unemployment, destruction of ecosystems, etc … At the same time, what we may call the economic illusion is unveiled: goods are not considered if not in terms of market value and immediate utility. The capitalist world is a world voided of all qualities that characterize human nature. But they inevitably return.”

  2. baal says

    My conservative friends are disproportionally interested in history and how that informs their patriotism. Saddly, they overlook that the founding fathers saw aristocrats as the entire problem. Our current oligarchs are the aristocrats and for very much the same reasons, are the problem.

  3. F says

    The history of the United States can be read as one such virtuous circle.

    I suppose, if you look at it really hard from the right angle, and you’re really determined to see it that way. Any inclusiveness in the earlier US is entirely an accident of their being a very large vacuum to fill.

  4. says

    they overlook that the founding fathers saw aristocrats as the entire problem

    Ironic, since they were aristocrats in all but name, who established a fake democracy for the elite by the elite and ratified themselves as those elites.

  5. Francisco Bacopa says

    We have our pitchforks and torches. The best analysis I ever read about Occupy was that it was a peasant rebellion. And it was suppressed like a peasant rebellion. The police are like us, yet somehow they usually end up serving the interests of the .01%

    But there are still real choices. Remington Alessi, a pretty big player in Occupy Houston and a #D12 arrestee, is running for Harris County Sheriff on the Green ticket.

    In other news, it looks like everyone facing federal charges over #D12 is going to get their charges dropped as it seems that an Austin PD detective infiltrated Occupy Austin and then tried to stir things up there. When Occupy Houston was planning an Occupy the Ports on D12 in support of Oakland, we invited other Occupy movements from Texas. Guess who came? The detective from Austin and a few hardcore dudes from Austin. Guess who bought the materials to make our Dragon Chain that would get us prosecuted under the Patriot act? The Austin cop.

    Still, It was all worth it. I loved participating in the most effective D12 event outside of Oakland. We shut down the Old Gates at exit one on 610 for five hours. I personally led a group up the embankment to shut down a northbound lane of the One Mile 610 Bridge. I saw crazier shit than you can imagine, though except for a few cases of horse trampling there was no police brutality. DHS was there too. They showed their rifles and then mostly just stood on the levee goofed off. I never felt so alive.

    We need to do this again. We need to make them fear us. It’s time for an American Spring.

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