Globalization, Oligarchs, and Confused Politicians

David Runciman has produced an interesting discussion of globalization and the concentration of wealth and power in an article in the London Review of Books: Confusion is Power. The occasion for Runciman’s discussion is a new book by Ferdinand Mount: The New Few, or a Very British Oligarchy: Power and Inequality in Britain Now. Mount’s concerns are driven, as the title suggests, by the ever increasing concentration of wealth in the hands of a few and its potential consequences. The discussion is focused on Britain, but the same issues are at play in the United States; only the names are changed.

Runciman begins by reminding us what an actual oligarchy looks like by describing Russia.

"In Russia the basics are easy to understand: people use money to get power and power to get money. The country is ruled by a narrow, self-serving elite who go through the motions of holding elections and transferring power. No one is fooled."

He contrasts the simple politics of Russia with that of countries like the US, the UK, and the EU, and concludes they are still true democracies because their politics are sufficiently complicated as to leave the observer baffled as to how anything gets accomplished. He seems to agree with this assessment by Mount:

"....we are not really ‘a full-blown oligarchy’ but ‘a flabby, corroded type of liberal democracy in which the oligarchs have been enjoying a free run’."

Runciman provides an interesting perspective on the changes that have come with growing inequality.

"This has not been a power grab by a bunch of ruthless operators. It’s more like an embarrassing accident. The people who are running the show seem as confused as anyone about how we got here. They didn’t mean it to turn out like this and they would quite like to do something about it. They just don’t know how."

He describes politicians as having become not so much corrupt as incompetent and weak.

"The politicians are just following the line of least resistance. Standing up to people with vast reserves of wealth and the power to make your life more difficult than it might otherwise be takes a certain amount of effort; certainly more effort than playing along with them does. And playing along with them is more fun. So if no one is going to insist on your doing the difficult thing, why bother?"

The discussion then turns to examining factors that have made the current circumstances different than previous periods. The most obvious occurrence is the rise and dominance of globalization. Runciman provides two ways to view the effects of globalization.

"One says that globalisation has simply exposed societies like ours to the hard winds of global competition. This has driven wages down at the bottom but driven rewards up at the top, because in the hyper-competitive global market for executive talent, success is at a premium."

He views this as a bit of a myth because the phrase "executive talent" often seems to be an oxymoron.

"The problem with that argument is that executive rewards are insufficiently correlated to success or even to obvious signs of talent: too many of the new rich seem to have had the money given to them regardless of what they do. Their reward is for being in the right place at the right time."

He then provides a less conventional—and more interesting—way to view the effects of globalization.

"The more convincing story is that globalisation is a cover story for indecision and fear. It does not drive the concentration of power and wealth according to rational measures of market forces but it sows enough confusion and uncertainty to make decisive action look like too much trouble. Politicians who suspect that they don’t know what they are doing are reluctant to do anything that might confirm it."

A state of "confusion and uncertainty" has been deliberately fostered by the aggressive greed of the financial sector.

"....knowledge is not always power. Sometimes, confusion is power as well. The finance executives don’t really know what they are doing, as we have discovered in the last few years. But they have created a world that no one else understands either, which gives them all the freedom they need."

Globalization also provides the wealthy with a club they can brandish to strike fear in the timid and the confused: the threat to leave and to take their wealth with them.

"In Britain the politicians are terrified that footloose international finance will relocate if they assert themselves. They see globalisation as squeezing their room for manoeuvre, not enhancing it. But they also see it as excusing their relative passivity in the face of rising inequality, since it creates the impression that there are forces out there beyond anyone’s power to control."

Runciman’s conclusion:

"Ours is, as Mount says, not a true oligarchy, but a frightened, complacent liberal democracy in which the....[wealthy and powerful].... have been given too much room to breathe."

Particularly striking is Runciman’s view of globalization as not a stage where the exceptional can see their talents richly rewarded, but as a complex environment that leaves politicians confused and unable to understand or to try to respond. He suggests that this complexity has been enshrined as "forces beyond our control" and is used to justify inaction.

Runciman’s discussion reminds us that we should not be viewing globalization as a force of nature that will go where it wishes as if operating under some form of natural law. Globalization is what those playing in that field can make of it; there are no natural laws at work. It was created by enterprising individuals and it can be tamed, if necessary, by enterprising individuals.

We just need to replace "frightened, complacent" politicians with smarter, stronger ones.

How hard could that be?