Showing posts with label institutions. Show all posts
Showing posts with label institutions. Show all posts
Sunday, 22 May 2022
Saturday, 19 February 2022
Sunday, 15 October 2017
How the oligarchy wins
Ganesh Sitaraman in The Guardian
A few years ago, as I was doing research for a book on how economic inequality threatens democracy, a colleague of mine asked if America was really at risk of becoming an oligarchy. Our political system, he said, is a democracy. If the people don’t want to be run by wealthy elites, we can just vote them out.
The system, in other words, can’t really be “rigged” to work for the rich and powerful unless the people are at least willing to accept a government of the rich and powerful. If the general public opposes rule-by-economic-elites, how is it, then, that the wealthy control so much of government?
The question was a good one, and while I had my own explanations, I didn’t have a systematic answer. Luckily, two recent books do. Oligarchy works, in a word, because of institutions.
In his fascinating and insightful book Classical Greek Oligarchy, Matthew Simonton takes us back to the ancient world, where the term oligarchy was coined. One of the primary threats to oligarchy was that the oligarchs would become divided, and that one from their number would defect, take leadership of the people, and overthrow the oligarchy.
To prevent this occurrence, ancient Greek elites developed institutions and practices to keep themselves united. Among other things, they passed sumptuary laws, preventing extravagant displays of their wealth that might spark jealously, and they used the secret ballot and consensus building practices to ensure that decisions didn’t lead to greater conflict within their cadre.
Appropriately for a scholar of the classics, Simonton focuses on these specific ancient practices in detail. But his key insight is that elites in power need solidarity if they are to stay in power. Unity might come from personal relationships, trust, voting practices, or – as is more likely in today’s meritocratic era – homogeneity in culture and values from running in the same limited circles.
While the ruling class must remain united for an oligarchy to remain in power, the people must also be divided so they cannot overthrow their oppressors. Oligarchs in ancient Greece thus used a combination of coercion and co-optation to keep democracy at bay. They gave rewards to informants and found pliable citizens to take positions in the government.
These collaborators legitimized the regime and gave oligarchs beachheads into the people. In addition, oligarchs controlled public spaces and livelihoods to prevent the people from organizing. They would expel people from town squares: a diffuse population in the countryside would be unable to protest and overthrow government as effectively as a concentrated group in the city.
They also tried to keep ordinary people dependent on individual oligarchs for their economic survival, similar to how mob bosses in the movies have paternalistic relationships in their neighborhoods. Reading Simonton’s account, it is hard not to think about how the fragmentation of our media platforms is a modern instantiation of dividing the public sphere, or how employees and workers are sometimes chilled from speaking out.
The most interesting discussion is how ancient oligarchs used information to preserve their regime. They combined secrecy in governance with selective messaging to targeted audiences, not unlike our modern spinmasters and communications consultants. They projected power through rituals and processions.
At the same time, they sought to destroy monuments that were symbols of democratic success. Instead of public works projects, dedicated in the name of the people, they relied on what we can think of as philanthropy to sustain their power. Oligarchs would fund the creation of a new building or the beautification of a public space. The result: the people would appreciate elite spending on those projects and the upper class would get their names memorialized for all time. After all, who could be against oligarchs who show such generosity?
An assistant professor of history at Arizona State University, Simonton draws heavily on insights from social science and applies them well to dissect ancient practices. But while he recognizes that ancient oligarchies were always drawn from the wealthy, a limitation of his work is that he focuses primarily on how oligarchs perpetuated their political power, not their economic power.
To understand that, we can turn to an instant classic from a few years ago, Jeffrey Winters’ Oligarchy. Winters argues that the key to oligarchy is that a set of elites have enough material resources to spend on securing their status and interests. He calls this “wealth defense,” and divides it into two categories. “Property defense” involves protecting existing property – in the old days, this meant building castles and walls, today it involves the rule of law. “Income defense” is about protecting earnings; these days, that means advocating for low taxes.
The challenge in seeing how oligarchy works, Winters says, is that we don’t normally think about the realms of politics and economics as fused together. At its core, oligarchy involves concentrating economic power and using it for political purposes. Democracy is vulnerable to oligarchy because democrats focus so much on guaranteeing political equality that they overlook the indirect threat that emerges from economic inequality.
Winters argues that there are four kinds of oligarchies, each of which pursues wealth defense through different institutions. These oligarchies are categorized based on whether the oligarchs rule is personal or collective, and whether the oligarchs use coercion.
Warring oligarchies, like warlords, are personal and armed. Ruling oligarchies like the mafia are collective and armed. In the category of unarmed oligarchies, sultanistic oligarchies (like Suharto’s Indonesia) are governed through personal connections. In civil oligarchies, governance is collective and enforced through laws, rather than by arms.
Democracy defeated oligarchy in ancient Greece because of 'oligarchic breakdown.'
With this typology behind him, Winters declares that America is already a civil oligarchy. To use the language of recent political campaigns, our oligarchs try to rig the system to defend their wealth. They focus on lowering taxes and on reducing regulations that protect workers and citizens from corporate wrongdoing.
They build a legal system that is skewed to work in their favor, so that their illegal behavior rarely gets punished. And they sustain all of this through a campaign finance and lobbying system that gives them undue influence over policy. In a civil oligarchy, these actions are sustained not at the barrel of the gun or by the word of one man, but through the rule of law.
If oligarchy works because its leaders institutionalize their power through law, media, and political rituals, what is to be done? How can democracy ever gain the upper hand? Winters notes that political power depends on economic power. This suggests that one solution is creating a more economically equal society.
The problem, of course, is that if the oligarchs are in charge, it isn’t clear why they would pass policies that would reduce their wealth and make society more equal. As long as they can keep the people divided, they have little to fear from the occasional pitchfork or protest.
Indeed, some commentators have suggested that the economic equality of the late 20th century was exceptional because two World Wars and a Great Depression largely wiped out the holdings of the extremely wealthy. On this story, there isn’t much we can do without a major global catastrophe.
Simonton offers another solution. He argues that democracy defeated oligarchy in ancient Greece because of “oligarchic breakdown.” Oligarchic institutions are subject to rot and collapse, as are any other kind of institution. As the oligarchs’ solidarity and practices start to break down, there is an opportunity for democracy to bring government back to the people.
In that moment, the people might unite for long enough that their protests lead to power. With all the upheaval in today’s politics, it’s hard not to think that this moment is one in which the future of the political system might be more up for grabs than it has been in generations.
The question is whether democracy will emerge from oligarchic breakdown – or whether the oligarchs will just strengthen their grasp on the levers of government.
A few years ago, as I was doing research for a book on how economic inequality threatens democracy, a colleague of mine asked if America was really at risk of becoming an oligarchy. Our political system, he said, is a democracy. If the people don’t want to be run by wealthy elites, we can just vote them out.
The system, in other words, can’t really be “rigged” to work for the rich and powerful unless the people are at least willing to accept a government of the rich and powerful. If the general public opposes rule-by-economic-elites, how is it, then, that the wealthy control so much of government?
The question was a good one, and while I had my own explanations, I didn’t have a systematic answer. Luckily, two recent books do. Oligarchy works, in a word, because of institutions.
In his fascinating and insightful book Classical Greek Oligarchy, Matthew Simonton takes us back to the ancient world, where the term oligarchy was coined. One of the primary threats to oligarchy was that the oligarchs would become divided, and that one from their number would defect, take leadership of the people, and overthrow the oligarchy.
To prevent this occurrence, ancient Greek elites developed institutions and practices to keep themselves united. Among other things, they passed sumptuary laws, preventing extravagant displays of their wealth that might spark jealously, and they used the secret ballot and consensus building practices to ensure that decisions didn’t lead to greater conflict within their cadre.
Appropriately for a scholar of the classics, Simonton focuses on these specific ancient practices in detail. But his key insight is that elites in power need solidarity if they are to stay in power. Unity might come from personal relationships, trust, voting practices, or – as is more likely in today’s meritocratic era – homogeneity in culture and values from running in the same limited circles.
While the ruling class must remain united for an oligarchy to remain in power, the people must also be divided so they cannot overthrow their oppressors. Oligarchs in ancient Greece thus used a combination of coercion and co-optation to keep democracy at bay. They gave rewards to informants and found pliable citizens to take positions in the government.
These collaborators legitimized the regime and gave oligarchs beachheads into the people. In addition, oligarchs controlled public spaces and livelihoods to prevent the people from organizing. They would expel people from town squares: a diffuse population in the countryside would be unable to protest and overthrow government as effectively as a concentrated group in the city.
They also tried to keep ordinary people dependent on individual oligarchs for their economic survival, similar to how mob bosses in the movies have paternalistic relationships in their neighborhoods. Reading Simonton’s account, it is hard not to think about how the fragmentation of our media platforms is a modern instantiation of dividing the public sphere, or how employees and workers are sometimes chilled from speaking out.
The most interesting discussion is how ancient oligarchs used information to preserve their regime. They combined secrecy in governance with selective messaging to targeted audiences, not unlike our modern spinmasters and communications consultants. They projected power through rituals and processions.
At the same time, they sought to destroy monuments that were symbols of democratic success. Instead of public works projects, dedicated in the name of the people, they relied on what we can think of as philanthropy to sustain their power. Oligarchs would fund the creation of a new building or the beautification of a public space. The result: the people would appreciate elite spending on those projects and the upper class would get their names memorialized for all time. After all, who could be against oligarchs who show such generosity?
An assistant professor of history at Arizona State University, Simonton draws heavily on insights from social science and applies them well to dissect ancient practices. But while he recognizes that ancient oligarchies were always drawn from the wealthy, a limitation of his work is that he focuses primarily on how oligarchs perpetuated their political power, not their economic power.
To understand that, we can turn to an instant classic from a few years ago, Jeffrey Winters’ Oligarchy. Winters argues that the key to oligarchy is that a set of elites have enough material resources to spend on securing their status and interests. He calls this “wealth defense,” and divides it into two categories. “Property defense” involves protecting existing property – in the old days, this meant building castles and walls, today it involves the rule of law. “Income defense” is about protecting earnings; these days, that means advocating for low taxes.
The challenge in seeing how oligarchy works, Winters says, is that we don’t normally think about the realms of politics and economics as fused together. At its core, oligarchy involves concentrating economic power and using it for political purposes. Democracy is vulnerable to oligarchy because democrats focus so much on guaranteeing political equality that they overlook the indirect threat that emerges from economic inequality.
Winters argues that there are four kinds of oligarchies, each of which pursues wealth defense through different institutions. These oligarchies are categorized based on whether the oligarchs rule is personal or collective, and whether the oligarchs use coercion.
Warring oligarchies, like warlords, are personal and armed. Ruling oligarchies like the mafia are collective and armed. In the category of unarmed oligarchies, sultanistic oligarchies (like Suharto’s Indonesia) are governed through personal connections. In civil oligarchies, governance is collective and enforced through laws, rather than by arms.
Democracy defeated oligarchy in ancient Greece because of 'oligarchic breakdown.'
With this typology behind him, Winters declares that America is already a civil oligarchy. To use the language of recent political campaigns, our oligarchs try to rig the system to defend their wealth. They focus on lowering taxes and on reducing regulations that protect workers and citizens from corporate wrongdoing.
They build a legal system that is skewed to work in their favor, so that their illegal behavior rarely gets punished. And they sustain all of this through a campaign finance and lobbying system that gives them undue influence over policy. In a civil oligarchy, these actions are sustained not at the barrel of the gun or by the word of one man, but through the rule of law.
If oligarchy works because its leaders institutionalize their power through law, media, and political rituals, what is to be done? How can democracy ever gain the upper hand? Winters notes that political power depends on economic power. This suggests that one solution is creating a more economically equal society.
The problem, of course, is that if the oligarchs are in charge, it isn’t clear why they would pass policies that would reduce their wealth and make society more equal. As long as they can keep the people divided, they have little to fear from the occasional pitchfork or protest.
Indeed, some commentators have suggested that the economic equality of the late 20th century was exceptional because two World Wars and a Great Depression largely wiped out the holdings of the extremely wealthy. On this story, there isn’t much we can do without a major global catastrophe.
Simonton offers another solution. He argues that democracy defeated oligarchy in ancient Greece because of “oligarchic breakdown.” Oligarchic institutions are subject to rot and collapse, as are any other kind of institution. As the oligarchs’ solidarity and practices start to break down, there is an opportunity for democracy to bring government back to the people.
In that moment, the people might unite for long enough that their protests lead to power. With all the upheaval in today’s politics, it’s hard not to think that this moment is one in which the future of the political system might be more up for grabs than it has been in generations.
The question is whether democracy will emerge from oligarchic breakdown – or whether the oligarchs will just strengthen their grasp on the levers of government.
Friday, 25 May 2012
Adam Smith's Market never stood alone
Published: March 10 2009 20:15 | Last updated: March 10 2009 20:15
Exactly 90 years ago, in March 1919, faced with another economic crisis, Vladimir Lenin discussed the dire straits of contemporary capitalism. He was, however, unwilling to write an epitaph: "To believe that there is no way out of the present crisis for capitalism is an error." That particular expectation of Lenin's, unlike some he held, proved to be correct enough. Even though American and European markets got into further problems in the 1920s, followed by the Great Depression of the 1930s, in the long haul after the end of the second world war, the market economy has been exceptionally dynamic, generating unprecedented expansion of the global economy over the past 60 years. Not any more, at least not right now. The global economic crisis began suddenly in the American autumn and is gathering speed at a frightening rate, and government attempts to stop it have had very little success despite unprecedented commitments of public funds.
The question that arises most forcefully now is not so much about the end of capitalism as about the nature of capitalism and the need for change. The invoking of old and new capitalism played an energising part in the animated discussions that took place in the symposium on "New World, New Capitalism" led by Nicolas Sarkozy, the French president, Tony Blair, the former British prime minister, and Angela Merkel, the German chancellor, in January in Paris.
The crisis, no matter how unbeatable it looks today, will eventually pass, but questions about future economic systems will remain. Do we really need a "new capitalism", carrying, in some significant way, the capitalist banner, rather than a non-monolithic economic system that draws on a variety of institutions chosen pragmatically and values that we can defend with reason? Should we search for a new capitalism or for a "new world" – to use the other term on offer at the Paris meeting – that need not take a specialised capitalist form? This is not only the question we face today, but I would argue it is also the question that the founder of modern economics, Adam Smith, in effect asked in the 18th century, even as he presented his pioneering analysis of the working of the market economy.
Smith never used the term capitalism (at least, so far as I have been able to trace), and it would also be hard to carve out from his works any theory of the sufficiency of the market economy, or of the need to accept the dominance of capital. He talked about the important role of broader values for the choice of behaviour, as well as the importance of institutions, in The Wealth of Nations ; but it was in his first book, The Theory of Moral Sentiments, published exactly 250 years ago, that he extensively investigated the powerful role of non-profit values. While stating that "prudence" was "of all virtues that which is most helpful to the individual", Smith went on to argue that "humanity, justice, generosity, and public spirit, are the qualities most useful to others".*
What exactly is capitalism? The standard definition seems to take reliance on markets for economic transactions as a necessary qualification for an economy to be seen as capitalist. In a similar way, dependence on the profit motive, and on individual entitlements based on private ownership, are seen as archetypal features of capitalism. However, if these are necessary requirements, are the economic systems we currently have, for example, in Europe and America, genuinely capitalist? All the affluent countries in the world – those in Europe, as well as the US, Canada, Japan, Singapore, South Korea, Taiwan, Australia and others – have depended for some time on transactions that occur largely outside the markets, such as unemployment benefits, public pensions and other features of social security, and the public provision of school education and healthcare. The creditable performance of the allegedly capitalist systems in the days when there were real achievements drew on a combination of institutions that went much beyond relying only on a profit-maximising market economy.
It is often overlooked that Smith did not take the pure market mechanism to be a free-standing performer of excellence, nor did he take the profit motive to be all that is needed. Perhaps the biggest mistake lies in interpreting Smith's limited discussion of why people seek trade as an exhaustive analysis of all the behavioural norms and institutions that he thought necessary for a market economy to work well. People seek trade because of self-interest – nothing more is needed, as Smith discussed in a statement that has been quoted again and again explaining why bakers, brewers, butchers and consumers seek trade. However an economy needs other values and commitments such as mutual trust and confidence to work efficiently. For example, Smith argued: "When the people of any particular country has such confidence in the fortune, probity, and prudence of a particular banker, as to believe he is always ready to pay upon demand such of his promissory notes as are likely to be at any time presented to him; those notes come to have the same currency as gold and silver money, from the confidence that such money can at any time be had for them."
Smith explained why this kind of trust does not always exist. Even though the champions of the baker-brewer-butcher reading of Smith enshrined in many economics books may be at a loss to understand the present crisis (people still have very good reason to seek more trade, only less opportunity), the far-reaching consequences of mistrust and lack of confidence in others, which have contributed to generating this crisis and are making a recovery so very difficult, would not have puzzled him.
There were, in fact, very good reasons for mistrust and the breakdown of assurance that contributed to the crisis today. The obligations and responsibilities associated with transactions have in recent years become much harder to trace thanks to the rapid development of secondary markets involving derivatives and other financial instruments. This occurred at a time when the plentiful availability of credit, partly driven by the huge trading surpluses of some economies, most prominently China, magnified the scale of brash operations. A subprime lender who misled a borrower into taking unwise risks could pass off the financial instruments to other parties remote from the original transaction. The need for supervision and regulation has become much stronger over recent years. And yet the supervisory role of the government in the US in particular has been, over the same period, sharply curtailed, fed by an increasing belief in the self-regulatory nature of the market economy. Precisely as the need for state surveillance has grown, the provision of the needed supervision has shrunk.
This institutional vulnerability has implications not only for sharp practices, but also for a tendency towards over-speculation that, as Smith argued, tends to grip many human beings in their breathless search for profits. Smith called these promoters of excessive risk in search of profits "prodigals and projectors" – which, by the way, is quite a good description of the entrepreneurs of subprime mortgages over the recent past. The implicit faith in the wisdom of the stand-alone market economy, which is largely responsible for the removal of the established regulations in the US, tended to assume away the activities of prodigals and projectors in a way that would have shocked the pioneering exponent of the rationale of the market economy.
Despite all Smith did to explain and defend the constructive role of the market, he was deeply concerned about the incidence of poverty, illiteracy and relative deprivation that might remain despite a well-functioning market economy. He wanted institutional diversity and motivational variety, not monolithic markets and singular dominance of the profit motive. Smith was not only a defender of the role of the state in doing things that the market might fail to do, such as universal education and poverty relief (he also wanted greater freedom for the state-supported indigent than the Poor Laws of his day provided); he argued, in general, for institutional choices to fit the problems that arise rather than anchoring institutions to some fixed formula, such as leaving things to the market.
The economic difficulties of today do not, I would argue, call for some "new capitalism", but they do demand an open-minded understanding of older ideas about the reach and limits of the market economy. What is needed above all is a clear-headed appreciation of how different institutions work, along with an understanding of how a variety of organisations – from the market to the institutions of state – can together contribute to producing a more decent economic world.
Wednesday, 18 April 2012
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