Necessity of the Plutocracy?
By Staff News & Analysis - January 06, 2011

The Rise of the New Global Elite … F. Scott Fitzgerald was right when he declared the rich different from you and me. But today's super-rich are also different from yesterday's: more hardworking and meritocratic, but less connected to the nations that granted them opportunity — and the countrymen they are leaving ever further behind … Perhaps most noteworthy, they are becoming a transglobal community of peers who have more in common with one another than with their countrymen back home. Whether they maintain primary residences in New York or Hong Kong, Moscow or Mumbai, today's super-rich are increasingly a nation unto themselves. – Atlantic

Dominant Social Theme: The new transnational rich must be generous or assuredly society will have more troubles.

Free-Market Analysis: Chrystia Freeland has written a polite globalist polemic in our view, making the point that fabulously wealthy financial types are setting up a global, transnational society. This is probably true; but it is not, as the article (excerpted above) tries to make out, an inevitability.

This perspective entirely conforms to the goals of the Anglo-American elite that wants to impress on Western middle classes internationalist inevitabilities. Freeland tries to treat the resurgence of banking wealth as an inevitability as well, but she is being disingenuous. She must know the truth: The money being made by those in the investment banking industry, and to a lesser degree in commercial banks, is a direct result of central bank monetary stimulation.

The money in the pockets of Western securities bankers was printed on central banking printing presses and virtually handed to them. She analyzes some of these issues – glancingly in our view – but avoids the essential facts of monetary stimulation entirely. It is not convenient to her argument.

Nonetheless, we shall make it for her: In fact, the Western securities industry was ruined two years ago, its banks devastated and saddled with literally trillions in debt that it could never repay. The central banking machinery came to the rescue with those trillions and more. The wealth that accrued throughout the early 2000s to investment bankers and then re-accrued via bailouts is phony money.

The author tries to make the case that modern bankers deserve their millions annually because they are "hard working." But plenty of people are hard-working. Bankers get what they do because the elites have created a perverse system of monetary stimulation that prints money-from-nothing and bankers occupy the pitiless heart of it.

The kind of article she is writing might have been more believable 20 or even 10 years ago. But people are well aware of the mechanism now – generally if not specifically. They know something is wrong and that they are not getting a fair shake. The century-old fiction that the elite created – that the banking industry was a profitable one and thus people got paid more – has been erased by the elite's own actions taking place under the glare of the Internet.

Europe is ablaze not just because of austerity programs but because people understand they and their governments are submitting to an austerity from which banks are exempt. Not only were banks stuffed with money-from-nothing in the past two years, the powers-that-be are insisting that indebted European governments pay banks back loans taken out during palmier times without a haircut.

Yet the Atlantic runs a major article on the subject of banking and bankers without mentioning these things. It is the reason why the Atlantic, despite an obvious resurgence still has a long way to go to be a major player in the "thought magazine" niche. These magazines helped shape the viewpoint of the American intelligentsia throughout the 20th century. Magazines like the New Yorker, Atlantic and the New York Review of Books – invariably leftist but elegantly so – provided a roadmap for how people thought about the world they lived in and how government related to it.

But such magazines are still struggling and this article is a good example why. The author is not alone of course in avoiding some of the fundamental issues. We have written about the Atlantic in the past; luminaries such as Simon Johnson, formerly a high official with the IMF, penned a lengthy article more than a year ago blaming Wall Street for the 2008 meltdown. He too neglected to mention central banking, or at least to give its incompetence equal weight. Then there is gonzo journalist Matt Taibbi who wrote a well-received article for Rolling Stone magazine blaming Goldman Sachs for most of the woes of the US monetary system. You can read about Taibbi and Johnson here:

The idea is to blame the securities industry and the "plutocrats" for the West's economic woes. This is what happened in the 1930s when central banks last blew up the system. Wall Street was regulated and "populism" was encouraged as a political system. The power elite is happy to point fingers at rich securities bankers; it is central banking that is to be off limits. And even now, we observe, despite a general sense (especially in America) that central banking is a main player in the disaster of the Greater Recession, central banks remain above the regulatory conversation. The Federal Reserve in fact has received vast new powers. Here's how Freeland frames her argument:

America really does need many of its plutocrats. We benefit from the goods they produce and the jobs they create. And even if a growing portion of those jobs are overseas, it is better to be the home of these innovators — native and immigrant alike — than not. In today's hypercompetitive global environment, we need a creative, dynamic super-elite more than ever … [But] the lesson of history is that, in the long run, super-elites have two ways to survive: by suppressing dissent or by sharing their wealth. It is obvious which of these would be the better outcome for America, and the world. Let us hope the plutocrats aren't already too isolated to recognize this.

We would argue this conclusion is wrong on almost every count. The banking community no matter how wealthy does not constitute the "super rich." The banking community SERVES the power elite – which really is phenomenally wealthy. Additionally, America does NOT need its plutocrats. It needs to get rid of the central banking system that creates and endlessly distorts and centralizes the larger economy.

After Thoughts

The Anglosphere is having tremendous trouble coming up with a believable narrative these days and recycling the memes of the early 20th century is probably not an effective strategy. Ms. Freeland's article is notable, therefore, but not for the reasons she might hope.

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