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Saturday, March 02, 2013

The Road to Oligarchy

Regardless of how many wars on poverty are declared and how often calls are issued to make the rich pay their fair share, neither the rich nor the poor will be going anywhere anytime soon. The question is what forces will keep the poor impoverished and where the rich will derive their wealth from.

The founder of Subway recently said that he could not have started up his company today. Similar messages have come from the founders and heads of other major companies. That isn't to say that companies will cease to exist. What we think of as business has been changing for some time.

In most countries, starting a business does not begin with a great idea. It begins with connections. Knowing the right people is still important, but in most places it's the most important thing.

Under the current American model, a company becomes successful and then begins to lobby Washington to gain a competitive advantage or to avert hostile lobbying directed at negating its existing competitive advantage. That is a perversion of free enterprise, but in much of the world companies begin lobbying first and then become successful. This is the model that has evolved under Obama. And it's a familiar model to anyone doing business in Russia or China. Political connections come first and then the business becomes feasible.

Oligarchy is the inevitable outcome of an economic climate where the governments acts as a gatekeeper to the country's customers. Measures that began as limited safety and fraud regulations have become a comprehensive political economic system that controls every aspect of every economic transaction.

The government creates markets. It creates companies and customers. It sets prices and taxes industries that it does not favor out of business.

Corporate lobbying isn't just about the proverbial 200 dollar screwdriver. It's about making it more expensive for some companies to make screwdrivers than others. It's also about forcing independent screwdriver manufacturers out of business. It's about government grants to make environmentally friendly screwdrivers and heavy taxes on companies that don't make environmentally friendly screwdrivers.

Tactics like these aren't new. The Esch Act eliminated white phosphorus matches through a punitive tax back in 1910. But a century later, the government wiped out the incandescent bulb industry, not for health reasons, but to comply with a trendy ideology. Microsoft, which had hardly bothered to lobby before, was dragged to Washington on monopoly charges that Google, the ultimate dot com insider, today laughs off. And Microsoft learned its lesson, investing in sizable amounts of lobbying capital.

The government is a bigger factor in business models for both large and small businesses than any other. Whether it's struggling against the mountains of paperwork or looking for ways to profit from the latest regulations, business has come to be defined by government. The tier of governments at every level have accumulated huge amounts of wealth and power. Government power is used to control how business is done while government spending makes political officials into the country's biggest consumers.

The fusion of business with government leads to oligarchy. The rich are not going anywhere, but wealth becomes a factor of their government connections, rather than skill or even inheritance. Government control over business began under the banner of combating monopolies only to end by creating government monopolies. The war against income inequality will end the same way and with the same results as the oligarchies in Russia, China, Mexico and everywhere else.

The future of Obamerica is a country full of corrupt government officials and tycoons. The future is an aristocracy of union bosses running their own guilds, corporate monopolies that change with each election and government officials with mansions and armed bodyguards.

Income inequality will be huge with oceans of poverty and small islands of wealth locked away behind gated communities. Populists will promise power for the people, only to make the system even more corrupt. One company or one boss will be brought down, only to be replaced with the favorites of another party.

Everyone will despise the tycoons and the government. The government will promise to protect the people from the tycoons, even as it works closely with them, and the tycoons will lavish money on certain areas in exchange for loyalty. Both the government and the tycoons will be closely tied up with organized crime which will launder its drug profits through the tycoons and use its political connections to gain protection and sanctions against rival organizations.

This three-sided war between government, tycoons and organized crime will involve members of all three groups using each other against their own rivals. The distinction between all three will be vague at best. Government officials will profit from their business connections and use their power to aid organized crime. Organized crime will have its own businesses and politicians. And the tycoons will run for office and have clean 'white' businesses, dirty 'black' businesses and 'gray' businesses.

Most of the money in the country is in the hands of one of these three groups. The tycoons control the white market. Organized crime controls the black market. Government controls the monetary supply and collects tribute from both markets, officially and unofficially. This is a closed system with very little room for dynamism except through outside intervention.

In an oligarchy, walking in and starting your own business is not really an option. The first bar that any new business has to meet is that of connections. The second bar is the interests of the oligarchy. You don't start a car company if the oligarchy's titans have a lot of money invested in a buggy monopoly. The car company will be either burned out or legislated out of business. Conversely, if you pick your moment, you can get a monopoly on that new foreign automotive technology if you know the right people and spread the right amount of bribes around.

The oligarchy safeguards established interests. It is a mafia whose goal is to control and profit from all wealth. Even when it comes to power as the result of a revolution, it very quickly discovers its own established interests. Its members will knock each other off, but they all agree that the basic nature of the system should not change. What they fear most of all is the collapse of that system.

There is plenty of money to be made in an oligarchy, but there is very little forward motion. New things do not emerge out of an oligarchy of union guilds, politically connected tycoons and politicians who derive their power and influence from their connections to both. Once a new thing exists, then the oligarchy will find ways to profit from it and even improve it, but there is no progress from within the oligarchy.

There is also very little social mobility. Human ingenuity can allow people to become wealthy under nearly any set of circumstances, but it's a good deal harder to do it under an oligarchy. Oligarchies have enough instability that it is possible, but those individual stories of making it up from the slums are usually isolated incidents. The majority of slum-dwellers stay in the slums and become involved with a political faction if they want to improve their lives.

In the oligarchy the wealthy form a natural aristocracy, but it isn't an aristocracy of talent, it's the accretion of closeness to power. This aristocracy changes in composition with revolutions, but its nature remains the same.  It is a collection of the people with the best lobbyists, the best bribes and the closest cultural ties to whoever is in power. Any member of the oligarchy can have his wealth and influence stripped away in minutes at the behest of the regime.

Even as American Exceptionalism declined, the remaining free enterprise aspects of the country kept the American Dream alive. For a while that American Dream, the ability to enter the country and move up the economic ladder became the sum of the nation. Generations of politicians reduced the meaning of the United States to a nation of immigrants where any new arrival could launch his own business and make money.

The rise of the oligarchy is foreclosing that dream leaving only the nation of immigrants struggling within a complicated political hierarchy for government handouts from a political movement that denounces some tycoons at the behest of other tycoons. It's the oligarchy at war for control of the dead present, even as it kills the past and the future to accommodate its plans.

It is the end of America and the rise of an Obamerica. Obamerica will still have great reserves of wealth, but on average it be far poorer and far less productive.

Obamerica will be known as a party country, a good place to buy the good things if you are one of the sons of the rich or are a tourist from a rich country. Obamericans will be described as sensuous and spontaneous pleasure-loving people. Obamerican cities will be violent, dangerous and exciting places full of decadence. Its slums will be full of drug dealers and child prostitutes. Most Obamericans will not believe in the future, but will cheerfully accept the misery of the present. They will hate the rich, but long to be in their place so that they can stomp on the poor. The old prosperous nation will be gone and in its place will be the oligarchy.

15 comments:

Ex-Dissident said...

Lets hope there are enough parents out there who will fight on behalf of their children. That is what the TEA party was and remains about. We beat these fascists back 60 years ago, and we can still beat them into the ground.

Anonymous said...

We are lucky to be spectators in the final act of America. The play has been long, over two hundred years, but we lucky residents of this moment will get to see the finale, the crescendo. There have been plot twists and surprises throughout the play, but about 2/3rds of the way through, the sharper observers in the audience realized exactly how it would end. Much like Hollywood constantly redoing the same movies from the past, this play has been put on before. Any resident of ancient Athens, latter era Rome, or any of the empires of history in decline would recognize this play, for they lived it in their time. And now so shall we.

Edward Cline said...

Daniel's description of Obamerica is precisely what is depicted in Netflix's "House of Cards," a 13-part series which I urge readers here to watch. Modeled on the British "House of Cards," which ran between 1990 and 1995, and which attacked "Thatcherism," it is a cynical dramatization of one politician's vengeance on a wimpy, malleable president. It indicts the very kind of corporate lobbyists and tycoons described in Greenfield's column, and reveals the sleazy underside of power politics and corruption, which includes the manipulation of the press, logrolling wheeling-and-dealing, malfeasance, character assassination, and murder.

There are no heroes in the story, merely villains and their clueless victims. All the villains are Democrats, but the series was made by Democrats (e.g., co-produced and starring Kevin Spacey, who is "close" to Bill Clinton and other oligarchs), so that is a puzzle. It's as though Spacey, David Fincher, and other producers wished to say to America: this is how it is, and this is how it's going to be. We're in the catbird seat, and rich, and powerful, and want to remain rich and powerful, so, get used to it. You're all a bunch of slaving flunkies. The series is a superbly done educational device. It boils down the essence of Democrats and Republicans. The series underscores Greenfield's statement that "the oligarchy the wealthy form a natural aristocracy, but it isn't an aristocracy of talent, it's the accretion of closeness to power."

Dennis Latham said...

Great article. It does make my hair rise when you say Obamerica. I just feel collectively that he and Joe Biden together have no idea of how to do anything other than destroy the country. To give Obama any laudatory standing other than being a criminal is something I can't stomach. I have yet to see a president in my lifetime who actually cares for people and the country. And you can't get that far into the system without being a criminal. I just think he is totally protected by media and the big money or everyone would instantly be able to see through his insanity.

careyrowland said...

It is the worship of power, which is a component of to the Will to Power, which was documented by an earlier Daniel who had landed, by circumstantial providence, in the heady center of Nebuchadnezzar's babylon and thereby spoke presciently of a quintessentially corrupt leader who would rise to power by his worship of the god of "forces."

Doug Mayfield said...

A clear and accurate description of what I have seen in my lifetime, government in America, federal, state, amd local, slowly surely strangling the individual entrepreneur
with taxes and regulations, administered by dull 'no nothing' bureaucrats. In particular, while involved in medical care, I watched Medicare/Medicaid and State regulators make sure that no one could innovate without their permission.

Remember that when M/M came into existence 'to help those who can't afford care' and not 'to control medical care'. As Lenin said, and the Socialist Left heartily agrees, tell any lie to gain power.

I've talked with people who work outside of medical care. They always ask 'Why is medical care so expensive?' I explain in detail that any attempt at reducing costs is always met by the dimwit 'attack dog' bureaucrats unleashed by the government on behalf of 'safety'. And they're joined by hospitals desperate to recover money they lose on Medicaid/Medicare by jacking the prices for other patients through the roof.

I went to the ER for high blood pressure and dizziness. The bill for an evaluation by a physician plus lab tests and an EKG was $4000. I went to see the CFO of the hospital and told him that since I worked in medical care and knew what goes on, he would reduce the bill or get stiffed. He reduced the bill to $650 (still too much in my view) which I paid.

I burden DG's web site with the details of this episode, because it shows what happens when government controls a sector of our economy. Multiply this episode by millions of simlar occurences every day and you see what's wrong with medical care in particular and the economy in general.

When the government takes over, as it has taken over medical care and education, the inevitable result is destructive price increases without bound. Everyone, except those with political pull (witness Congress exempting themselves from Obamacare), is crippled financially by prices in that sector(witness the student loan crisis and the recurrent news story of people losing their homes to pay off medical bills).

Government uses force, so, in any legitimate society, in amy moral society, government is restrained. In America we have steadily lost all restraints on government with the exception, relative to other countries, of freedom of speech. If the Obamacrats have their way, that will disappear too, eradicated by laws on 'hate speech', 'protecting against internet piracy', etc., ad nauseam. 'Wanna be' tyrants always have a good excuse.

If we lose freedom of speech, it will mean dictatorship in this country and the rule of the mob, who will trail along, dumb, glassy eyed, behind 'revolving door' interchangeable leaders, gratefully accepting tidbits those leaders care to dispense, tidbits grabbed at gun point from the few left who still work for a living, as in Cuba, Greece, Venezuela, Russia, and other Socialist/Fascist paradises around the globe.

Writers, Sinclair Lewis 'It Can't Happen Here', Ayn Rand 'Atlas Shrugged', appear prescient, as they are keen obervers of ongoing intellectual trends that become steadily more clear as time passes. In this country, that trend is statism, the obliteration of the individual in favor of the state. I remain hopeful that the Tea Parties can do something for us. We'll see.

Anonymous said...

The big-government, big-corporate criminal complex doesn't tolerate competition.

IgorR said...

Every civilization in history was ended by a combination of one of the following four factors: being overwhelmed by an outside force, being drastically changed by a revolution, succumbing to the forces of nature and inability to extract sufficient resources, or internal corruption. What has kept the United States from a similar fate was the spirit and beliefs of its people. The Progressives have systematically destroyed those through their influence of education and the media, and have overwhelmed the country with immigrants who have no real idea about what had made the country great. Unless control is wrestled away from the Progressives and the current oligarchs of those three areas the fate is sealed.

Pisang said...

I think you mean "incandescent bulb," not "fluorescent lamp."

Daniel Greenfield @ the Sultan Knish blog said...

yes thanks

IgorR said...

Trying to profit from oligarchy

http://www.futureofcapitalism.com/2011/02/introducing-the-crony-capitalist-index

Anonymous said...

"Corporate lobbying isn't just about the proverbial 200 dollar screwdriver. It's about making it more expensive for some companies to make screwdrivers than others. It's also about forcing independent screwdriver manufacturers out of business. It's about government grants to make environmentally friendly screwdrivers and heavy taxes on companies that don't make environmentally friendly screwdrivers."


Daniel: I think you've just described the Italian Mafia on steroids. The tactic minus the physical violence seems similar.


Keliata

Gene said...

I have been a Cassandra for years attempting to explain what Mr Greenfield wonderfully expressed. Most of us are still in denial and, now, a few are realizing there has been a subversion. It may or may not be too late for us. I am resigned myself, which does offer the ability to reflect. That said, let me propose that an oligarchy depends upon customers, ultimately. Briefly put, we must engage in and foster a massive general boycott. Don't use any major media, cancel cable TV, do not use large banks, withdraw from the fiefdom, put your money into metals or outside the country. Oligarchs want YOUR money, so disappear. We need the more than the currently intended fiscal collapse.. Two major suggestions: get your children out of public schools and VOTE IN PRIMARIES. The latter being important as the general election is Bloods v. Krips. VOting for the likes of Messers Romney, Bush, McCain are wasted votes even if your guy wins. e.g. McCain, Jindal, Rubio, and Cruz are not natural born and no GOP person will support the Constitution. Why Mr. Obama is Indonesian. It is all a game for the ruling class
OK, brevity has escaped me, sorry.

Fat Man said...

Fucking Brilliant, Dude.

goyisherebbe said...

Cooperatives might be the answer. Check out the Basque example of Mondragon: http://www.mondragon-corporation.com/ENG.aspx

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