January 20, 2011
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