Adam Smith, Etching created by Cadell and Davies (1811)


Oligarchy rests on grotesque inequality of material resources. The vast resources available to the rich are used to build social structures that protect their wealth. The US oligarchy is a shining example. Our oligarchs use their stunning wealth both to insure that civil government protects its interests and to infect the public with views supportive of its power and wealth.

One easy example of use of governing power is the effort to shove taxes off on the next lower group of taxpayers, which has been wildly successful. But oligarchic power to influence society extends far beyond legislation, and into the way we understand the economy. Remember the fracas about strategic defaults? The banking segment of the Oligarchy went nuts when they realized that smart people would just walk away from underwater houses if they lived in states that don’t permit deficiency judgments after foreclosures. The screaming about the moral obligation of human persons to repay debts was hilarious. I’d love to see a corporate person with those sensibilities.

Simon Johnson’s article, The Quiet Coup, shows how this works on an even larger scale. Johnson explains how it is that within months after the Great Crash, it became obvious that political institutions would not impose significant financial reform, or insist on accountability for the crimes that led to the Great Crash.

… [T]he American financial industry gained political power by amassing a kind of cultural capital—a belief system. … 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.

It is, of course, perfectly obvious that Oligarchs want monopolies, not competitive markets. In a real free market system, competition beats the price of goods down to the lowest possible level. How’s that working on your cell phone bill? AT&T trying to buy T-Mobile is your free market in action. It’s just like Adam Smith said:

The member of parliament who supports every proposal for strengthening this monopoly, is sure to acquire not only the reputation of understanding trade, but great popularity and influence with an order of men whose numbers and wealth render them of great importance.

Getting people to believe the fairy tales doesn’t come cheap. You have to be willing to spend enormous quantities of money, by the standards of average people, to buy that kind of influence. You have to have multiple forums and many influential and authoritative people repeating your myths. You need economists unanchored by reality and sitting in endowed chairs at famous universities. You need your own media. You need your own think tanks. You need photogenic authority figures. But a fortune to the average person is just pocket change to the 100 people whose personal wealth is 100,000 times the average wealth of the bottom 90% of the population.

And it works. A homely example: in September 2004, my wife was talking to the Saturday letter carrier about the coming election. He planned to vote Republican, because he was a big fan of tax cuts for the rich. He figured they’d use the money to create jobs. This was not an ignorant person. He explained trickle-down theory in some detail, and quite accurately. He obviously believed what he was saying.

Just think of the number of people who idolize rich people. Think of the people who say that the biggest problem facing the nation is the national debt, and that everyone has to sacrifice to solve this problem, including the old and sick. These people believe what their authority figures tell them, and there are a lot of them.

One more example. When the Oligarchy has so much money, and such an enormous ability to control our lives, why do so many people reject the idea of redistribution of wealth? One explanation is that there are too many people who deeply believe that if you have vast amounts of money, you deserve it and imposing taxes on your just desserts is just wrong. And they can’t articulate anything more compelling than that.

Many people believe that if we got real limits on political campaign financing, we could move the debate. I don’t think so. Oligarchs and their trained seals in academic economics and business schools, and their public relations people, and what Jeffrey Winters calls the Income Defense Industry, all work together to control public discourse on terms favorable to the interests of the rich. I think politicians will act favorably to the interests of the Oligarchy, even if they can’t make significant campaign contributions, because they genuinely believe that Oligarchs deserve their wealth, privileges and status.

Most people believe things about the economy that are demonstrably untrue, and obviously not in their best financial interests, and until that changes, politics won’t change.
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Other posts in this series on Oligarchy:
Oligarchy Inside Democracy
The Roots of US Oligarchy Are Deep
Evidence of Economic Oligarchy
Oligarchy Is The Problem
Oligarchy Is the Politics of Wealth Defense by the Richest