Plutocracy literally means rule by the rich. “Rule” can have various shades of meaning: those who exercise the authority of public office are wealthy; their wealth explains why they hold that office; they exercise that authority in the interests of the rich; they have the primary influence over who holds those offices and the actions they take.
These aspects of “plutocracy” are not exclusive. Moreover, government of the rich and for the rich need not be run directly by the rich. Also, in some exceptional circumstances rich individuals who hold powerful positions may govern in the interests of the many, for example Franklin Roosevelt.
The United States today qualifies as a plutocracy – on a number of grounds. Let’s look at some striking bits of evidence. Gross income redistribution upwards in the hierarchy has been a feature of American society for the past decades. The familiar statistics tell us that nearly 80 percent of the national wealth generated since 1973 has gone to the upper 2 percent and 65 percent to the upper 1 per cent. Estimates for the rise in real income for salaried workers over the past 40 years range from 20 percent to 28 percent. In that period, real GDP has risen by 110 percent – it has more than doubled.
To put it somewhat differently, according to the Congressional Budget Office, the top earning 1 percent of households gained about 8 times more than those in the 60 percentile after federal taxes and income transfers between 1979 and 2007 and 10 times those in lower percentiles.
In short, the overwhelming fraction of all the wealth created over two generations has gone to those at the very top of the income pyramid.
That pattern has been markedly accelerated since the financial crisis hit in 2008. Between 2000 and 2012, the real net worth of 90 percent of Americans has declined by 25 percent. Meanwhile, Warren Buffet, Jeff Bezos and Bill Gates et al, i.e. the wealthiest 1 percent of the world’s population, now own more than half of the world’s wealth (according to a Credit Suisse report in Nov. 2017). Croesus is green with envy.
Not By Accident
Theoretically, there is the possibility that this change is due to structural economic features operating nationally and internationally. That argument won’t wash, though, for three reasons.
First, there is every reason to think that such a process has accelerated over the past nine years during which disparities have widened at a faster rate. Second, other countries (many even more enmeshed in the world economy) have seen nothing like the drastic phenomenon occurring in the United States. Third, the readiness of the country’s political class to ignore what has been happening, and the absence of remedial action that could have been taken, in themselves are clear indicators of who shapes thinking and determines public policy.
In addition, several significant governmental actions have been taken that directly favor the moneyed interests. This includes the dismantling of the apparatus to regulate financial activities specifically and big business generally.
Runaway exploitation of the system by predatory banks was made possible by the Clinton “reforms” of the 1990s and the lax application of those rules that still prevailed. Former Attorney General Eric Holder, let’s recall, went so far as to admit that the Department of Justice’s decisions on when to bring criminal charges against the biggest financial institutions will depend not on the question of legal violations alone but would include the hypothetical effects on economic stability of their prosecution. (Those adverse effects are greatly exaggerated).
Earlier, Holder had extended blanket immunity to Bank of America and other mortgage lenders for their apparent criminality in forging through robo-signing of foreclosure documents on millions of home owners. In brief, equal protection and application of the law has been suspended. That is plutocracy.
Moreover, the extremes of a regulatory culture that, in effect, turns public officials into tame accessories to financial abuse emerged in stark relief at the 2013 Levin Committee hearings on J P Morgan Chase’s ‘London Whale” scandal. Morgan officials stated baldly that they chose not to inform the Controller of the Currency about discrepancies in trading accounts, without the slightest regard that they might be breaking the law, in the conviction that it was Morgan’s privilege not to do so.
Senior regulators explained that they did not see it as their job to monitor compliance or to check whether claims made by their Morgan counterparts were correct. They also accepted abusive treatment, e.g. being called “stupid” to their face by senior Morgan executives. That’s plutocracy at work. The Senate Finance Committee hearing drew only 3 senators – yet another sign of plutocracy at work. When mega-banks make illicit profits by money laundering for drug cartels and get off with a slap on the wrist, as has HSBC and others, that too is plutocracy. FDR, it rightly is said, saved American capitalism. Barack OBAMA saved predatory financial capitalism.
When the system of law that is meant to order the workings of society without reference to ascriptive persons is made malleable in the hands of officials to serve the preferred interests of some, it ceases to be a neutral instrument for the common good. In today’s society, it is becoming the instrument of a plutocracy.
The financial behemoths and big business in general can count on sympathetic justices to bail them out when cornered by prosecutors. The United States Attorney for the Southern District of New York, Preet Bharara, was making an earnest attempt to call to account several predators when the New York Supreme Court pulled the rug out from under him. Their generous interpretation of the dubious Supreme Court decision on wrongful trading cases upheld the overturning of the conviction of Michael S. Steinberg, the highest-ranking officer of notorious hedge fund SAC Capital Advisors. Bharara was obliged to drop seven outstanding cases against the Wall Street biggies.
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From Lewrockwell.com, here.
