Saturday, April 7, 2012

The Oligarchy that Governs the World

Last Sunday, B. Obama pledged to introduce the so-called, Buffet Tax to ensure that the rich pay a fair share.  But during the week, his closest advisers were seeking support and  funding from Wall Street's financiers for his electoral campaign and reassuring them that if the US president were reelected he would not take any punitive measures against them.This is odd, isn't it ? The president of the most powerful nation has surrendered to the power of finance.

In 2011, the 'Occupy Wall Street' movement was against the 1% rich and the rising inequality of resources and opportunities. The government response to that massive protest is a weak proposal which will not alter fundamentally  the unequal distribution of wealth in the US society. In return, the rich  do not want only  to influence government decisions but actually to make political choices (see the article by Frank Thomas in Harper's Magazine)

We know a lot about the poor from many academic studies on poverty. We know much less about the rich and in depth studies are relatively rare. They would, however, be helpful to understand the concentration of capital in the hands of  very few people. In the US, the real power is held by an oligarchy of very rich people.  Data on inequality show the massive transfer of wealth in favour of the rich. Since 1978, the top 1% have increased their income by 256% while the average income of American households has remained stagnant or even declined. Over the last two years of the recession, 93% of the national income increase has been captured by the top 1%. 

Levels of income concentration are comparable to the age of empires or feudal regimes. Walton, the owner of the Wal-Mart supermarkets, own more than 150 million people together and its turnover is bigger than the aggregate GDP of 25 nations. About 50% of national income is concentrated in around 300 thousand people. Just 1% of the richest American hold an investment fund, Black Rock, which administers a total portfolio of 3.500 billion dollars, more than the reserves of any central bank in the World. Goldman Sachs has assets whose value is higher than the European Central bank which manages the single currency of 17 States. Private foundations such as the Bill Gates foundation give more aid to poor countries than the World Health Organization (WHO) and can therefore control decisions in healthcare policy for entire nations. 

The masters of the universe are capitalists, shareholders or top managers of big financial corporations, which exceed the economic dimension of many European States. The dangers of a plutocracy (a government of the rich) were explained by Adam Smith who warned of "great inequality" where  "civil government" is "instituted for the defence of the rich against the poor". From Tocqueville until Roosevelt, the US history is characterized by the warning of an excessive concentration of capital to the detriment of good government in the interest of all. 

This is a reality in today's US society: a small oligarchy -  300 thousand rich men, i.e. 0,1% of the population, has more than half of the US national income relative to 180 million people. But the current issue is that they are actively involved in the government of the US nation to maintain the current state of power. In ther book, 'Winner take all politics "(2012), Jacob Hacker and Paul Pierson show that income inequality are not a natural consequence of globalization and technological progress which impoverish the less educated, but that it has been politically engineered through fiscal policies. Capitalists have learnt to get organized politically  with influential organizations such as the Chamber of Commerce, think tanks like the Club for Growth and Americans for Tax reform. A further boost to the 'government of the rich' came from a Supreme Court's ruling, 'Citizens United', which has extended without any restrictions to the big American Corporations the same 'freedom of expression' that the US Constitution has acknowledged to citizens. This has enabled the rich to use the so-called Pacs (Political Action Committees), with unlimited resources and freedom to purchase commercial TV spots to support their candidates. 

A war has begun, the war of the rich against a weak president, with the face of the most unpopular and immoral capitalism ever in American history. 

P.S: A recent study published by the Bank of Italy found that inequality is very large in terms of wealth, less on income. Only ten individuals own as much as the poorest 3 million. 

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