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Plutocracy

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Headlined to H2 1/7/13

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In bygone eras control was gained by the sword and was maintained by a feudal system where the peasants were completely powerless and military force was the exclusive preserve of the land owning aristocracy.   The serfs were also property of the lords of the feudal estates, who in turn owed service to the King who claimed ownership rights over the entire nation and at whose pleasure the lords held their estates.   The Church, in service to these relatively stable social structures, preached peasant submission to their heavenly and earthly kings.

After the Magna Carta in 1215 the lords gained more autonomy, but autonomy among plutocrats should not be mistaken for autonomy "of the people".   In the industrial era feudal serfs became wage serfs, and just as some feudal serfs at some times and in some places enjoyed quite beneficent treatment by their rulers, so wage serfs at times (such as the three decades after WWII in America) shared in a general prosperity.

In recent centuries the sword's role in taking land and extracting wealth has been supplemented by finance: the creation and allocation of credit money first by bond merchants and later by the more formal institution of "banking."   Money can peacefully "buy" most anything in this world, including human beings and all their skills and talents and energies and attributes, so by possessing the power to create financial credit out of thin air and thereby issue a nation's and the world's "money", the big international bankers are able to achieve with finance what had previously required military force.  

"Economic hitmen" entrap nations in unpayable debt that is owed in a foreign currency, a currency that the indebted nation is not allowed to create but must "earn" by selling real things and receiving payment in that foreign currency.   The hitmens' sales rhetoric is that export earnings from the newly financed investments will provide the foreign currency funds to repay the loans.   The "loans' {which are actually loans of "credit money" that banks do not "have" but actually "create" on their balance sheets as a new bank deposit in the borrower's bank account offset by a new debt balance in the borrower's loan account: banks "create" the money that they lend}, are secured by "collateral".   Collateral is real things of real value, which the borrower pledges to forfeit to the banker if he fails to repay his loan.   Collateral is real mines and national utilities and buildings and infrastructure, built up by the nation's collective efforts over decades or centuries.  

So when the borrowers default on the loan payments, the bankers and their collaborators come in and assume ownership of the real resources of the nation.   Or as we see today in places like Greece, the government is pressured to sell the nation's islands and ports and national infrastructure to get money to pay its debts, but the only people who have money are the plutocrats, who buy the national treasures for nickels on the dollar.   In this way finance is able to convert its power to create money into its power to gain ownership of real resources, real wealth.

Mills believed that 20th century corporatization consolidated America's rich into a true "class", self-aware of their own elite position and of their common interests in extracting the productive wealth of the nation (and now the "globalized" world) as their private profits.   There is no need for an explicit "conspiracy", because all members of the elite class self-consciously share the same interests, and their corporate lawyers and managers vigorously prosecute those interests in the financial, economic and political spheres, the spheres of power.   Mills' analysis is in the "sociological" tradition of Thorstein Veblen ("The Theory of the Leisure Class", 1899), whose work Mills acknowledges as seminal but limited in its scope and applicability.  

In 1922 Richard Franklin Pettigrew, long term US businessman and Senator, published, "Triumphant Plutocracy: The Story of American Public Life from 1870 -- 1920", which is the period during which Pettigrew was intimately involved in the business and government of America.   He describes how the "robber barons" flat out appropriated vast tracts of the American land mass and its resources, and had their paid Congressman (especially Mark Hanna, whom Mills also names) weasel the government to actually pay for construction of the railroads and the steel mills, etc. that the 'industrialists' owned as their private property.  

Their great wealth of land and natural resources was simply "taken" from the public domain and legalistically transferred into their private domain.   And their great wealth of industrial infrastructure, such as railroads and steel mills, was paid for out of public funds by the complicit government.   Perhaps not all great fortunes were stolen in these ways, but this form of wealth acquisition defined the era.

This was "The Gilded Age" that Twain and Dudley lampooned in their 1873 book of that title.   Though Balzac is attributed authorship of, "behind every great fortune, there is a crime", nobody on the internet can actually find a written record of his saying it.   But it is nevertheless true.   America's great fortunes were weaseled and finagled and stolen by financial and political manipulation and collusion, not "earned" by "rugged individual" economic production and not "accumulated" by personal thrift.   Pettigrew insists repeatedly, from 50 years of first hand experience with these men, that "capital is stolen labor, and its only function is to steal more labor".   Mills concurs, observing that,

""if the taxpayers of the United States had not paid, out of their own labor, for a paved road system, Henry Ford's astuteness and thrift would not have enabled him to become a billionaire out of the automobile industry."

In the 1920s and 30s British engineer CH Douglas, author of the "social credit" alternative financial system, observed that the incredible productivity of any individual in a modern industrialized economy has very little to do with the individual's own talents and efforts but is rather a consequence of our "cultural inheritance" of all the productive infrastructure and technologies that our civilization has collectively built up over centuries.   Henry Ford's success depended on just this kind of cultural inheritance of advanced technologies like mining and metallurgy and machining and electricity and rubber and engines and gasoline and factory organization of resources and labor and, of course, the national road system.

Already by the mid-1800s such diverse writers as John Stuart Mill ("Principles of Political Economy", 1848) and Marx/Engels (The Communist Manifesto", 1848) were recognizing that in an industrialized economy where machinery replaces human labor, it is no longer necessary or even desirable to attempt "full employment" because all of the people's economic needs and wants can be produced with much less human work.   Even that great advocate of free trade David Ricardo, in his 1817 book, "Principles of Political Economy and Taxation", in his chapter, "On Machinery", acknowledged that the Luddites were right, that the adoption by capitalists of machinery really is damaging to the interests of the laboring classes.   Machinery, Ricardo wrote, "renders the population redundant".

Douglas saw this too, that the labor of the entire population was no longer necessary to the productive process.   Nevertheless the producers still need a "market" to sell their outputs, so they still need a population of "consumers" of those outputs.   As a solution Douglas advocated (in a context where the government reclaims its money issuing power from the bankers) that the government issue to every citizen a "national dividend", which they receive by virtue of their owning a share of the nation's cultural inheritance of natural resources and an industrial economy.   Every American owns an equal share of USA Inc, and every American receives a money dividend that enables him or her to purchase a share of the industrial output.  

This is more complicated in today's globalized production system where Chinese and global goods have significantly replaced American goods in America's consumer economy, but the principle of a national dividend is still applicable.   Milton Friedman, intellectual father of today's dominant neoliberal worldview, advocated a negative income tax, which Nixon supported when he was told that by paying a "guaranteed annual income" he could eliminate welfare bureaucrats.   JS Mill observed that in a post-employment industrial economy, the issue of distribution of the fruits of production would have to be decided by a political process.  

The market system only pays incomes to contributors to the productive process, so if industrialization creates large scale structural unemployment then some other means of income distribution is needed to get purchasing power into the hands of the "redundant" population.   But Romantic conservatives to this day continue to appeal to "the invisible hand of the free market" to "automatically" manage income and wealth distributions, even though income and wealth distributions within a corporatized economy are determined by power, exercised by self-serving "men", not by disinterestedly objective and non-human "market forces".    

Pettigrew's only folly is found at the very end of his book where he admires the new soviet government of Russia, before the authoritarian realities of soviet communism (meet the new boss, same as the old boss) became apparent.   I spent my life in small business and I believe in individual free enterprise, and I don't agree that socialism is the answer to "grand theft nation".   I share OpEd News commenter Old Codger's doubt that there is a realistic solution.  

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I spent my working life as an independent small business owner/operator. My academic background is in philosophy and political economy. I began studying monetary systems and monetary history after the 1982 banking crash that was precipitated by (more...)
 

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We are told that we live in a democratic free mark... by Derryl Hermanutz on Monday, Jan 7, 2013 at 3:46:45 AM
I too have come to many of the same conclusions as... by Don Caldarazzo on Monday, Jan 7, 2013 at 5:42:04 AM
I agree, Don, it's not hopeless. The internet has... by Derryl Hermanutz on Monday, Jan 7, 2013 at 6:52:50 AM
  Now I can quote an oped writer when I ... by Theresa Paulfranz on Monday, Jan 7, 2013 at 2:57:16 PM
In patriarchy the basic thing is hoarding and in m... by Theresa Paulfranz on Monday, Jan 7, 2013 at 3:09:29 PM
I like the idea of the potlatch economy, Theresa. ... by Derryl Hermanutz on Tuesday, Jan 8, 2013 at 6:58:42 AM
I can not help but say more ... Eve falls first. ... by Theresa Paulfranz on Tuesday, Jan 8, 2013 at 11:21:40 AM
I agree with your assessment of the consequences o... by Derryl Hermanutz on Tuesday, Jan 8, 2013 at 3:46:58 PM
...under the Sun." (Ecclesiastes 3:1)What the plut... by Richard Girard on Monday, Jan 7, 2013 at 4:16:13 PM
I agree Richard. The problem is that "our" govern... by Derryl Hermanutz on Tuesday, Jan 8, 2013 at 7:28:28 AM
Thanks. There are transition towns popping up in m... by intotheabyss on Monday, Jan 7, 2013 at 4:36:04 PM
Thanks for the support. Good to hear of a local s... by Derryl Hermanutz on Tuesday, Jan 8, 2013 at 7:29:27 AM
should not  agree with Codger because the lat... by Mark Sashine on Monday, Jan 7, 2013 at 7:49:47 PM
I always learn something from reading your comment... by Derryl Hermanutz on Tuesday, Jan 8, 2013 at 7:35:42 AM
is  a Kentuckian farmer- writer who  doe... by Mark Sashine on Tuesday, Jan 8, 2013 at 8:06:42 AM
...is this article. It not only contains intellige... by Daniel Penisten on Friday, Jan 11, 2013 at 2:44:53 PM