The Iron Law of Oligarchy Returns

America likes to think of itself as a land of the Great Middle Class with a government “of, by and for the people.” But that reality has changed drastically over the past several decades, as money and power have created a dominant American Oligarchy, writes Danny Schechter.

By Danny Schechter

The word “Oligarchyhas finally come home. For years, it was a term only used in connection with those big bad and sleazy Mafioso-type businessmen in Russia. Russia had Oligarchs; we didn’t. That became a big difference between the official narrative of what separated our “land of the free and the home of the brave” from “them” in the post-Soviet period.

Actually, I first heard the term “oligarchy” when I was studying labor history at Cornell half a lifetime ago. We were taught about something called the “Iron Law of Oligarchy.” It was a concept coined by Robert Michels, a friend of sociology guru, Max Weber, way back in 1911. Here’s how it was defined in that relic of another age: The Encyclopedia Brittannica:

Thomas Piketty's "Capital in the Twenty-first Century."

Thomas Piketty’s “Capital in the Twenty-first Century.”

“Michels came to the conclusion that the formal organization of bureaucracies inevitably leads to oligarchy, under which organizations originally idealistic and democratic eventually come to be dominated by a small, self-serving group of people who achieved positions of power and responsibility. This can occur in large organizations because it becomes physically impossible for everyone to get together every time a decision has to be made.”

So, oligarchies have been with us seemingly forever. It’s an “iron law,” says Michels, but in current usage the term references the small elite – the 1 percent of the 1 percent – that dominates economic and political decision-making.

Everybody on the liberal left is now discovering information spelled out in a number of studies that caught the attention of Bill Moyers and his writing colleague Michael Winship. They discuss the way governments become partial to oligarchs and insure that the rich rule:

“Inequality is what has turned Washington into a protection racket for the one percent. It buys all those goodies from government: Tax breaks. Tax havens (which allow corporations and the rich to park their money in a no-tax zone). Loopholes. Favors like carried interest. And so on. As Paul Krugman writes in his New York Review of Books essay on Thomas Piketty’s Capital in the Twenty-First Century, ‘We now know both that the United States has a much more unequal distribution of income than other advanced countries and that much of this difference in outcomes can be attributed directly to government action.’”

According to the AFL-CIO, “CEOs of major companies earn an average of 331 times more than their employees!” The New York Times reports America’s middle class is “no longer the world’s richest.”

Asking if democracy can “tame” plutocracy, Bob Borosage of the Campaign for America’s Future, cites another study: “A recent exhaustive study by Martin Gilens and Benjamin I. Page found that elites got their way not often, but virtually all of the time.”  [emphasis mine] I guess the answer to his question regarding the possibility of “taming” plutocrats is, in the current moment, a thundering “NO.”

Even the barons of business news admit that wealth is concentrated as almost never before, Here’s Bloomberg News: “Just today, the world’s 200 richest people made $13.9 billion.” In one single day, according to Bloomberg’s Billionaires Index.

This is the Fed’s “wealth effect.” It’s a construct that Alan Greenspan’s Federal Reserve conjured up out of thin air and presented to the incredulous American people as a valid economic theory. Greenspan’s successor, Ben Bernanke, then promoted it to the Fed’s stated raison d’être. His theory: if we immensely enrich the richest few thousand people in the world during years of bailouts, money-printing and interest-rate repression, everyone would be happy somehow.

Adding critical firepower to this perspective, Eric Zuesse, cites the study to appear in the Fall 2014 issue of the academic journal Perspectives on Politics, that finds that “the U.S. is no democracy, but instead an oligarchy, meaning profoundly corrupt, so that the answer to the study’s opening question, ‘Who governs? Who really rules?’ in this country, is:

“‘Despite the seemingly strong empirical support in previous studies for theories of majoritarian democracy, our analyses suggest that majorities of the American public actually have little influence over the policies our government adopts. … When the preferences of economic elites and the stands of organized interest groups are controlled for, the preferences of the average American appear to have only a minuscule, near-zero, statistically non-significant impact upon public policy.’

“To put it short: The United States is no democracy, but actually an oligarchy.”

The underlying research for this study, authored by Martin Gilens and Benjamin I. Page, drew on “a unique data set that includes measures of the key variables for 1,779 policy issues,” Zuesse noted.

Much of this involves what economist Simon Johnston calls the “capture” of the state by corporate interests. He explains in a recent post: “Before 1939, wages and profits in the financial sector in the United States amounted to less than 1% of GDP; now they stand at 7-8% of GDP. In recent decades, financial assets have expanded dramatically relative to any measure of economic activity, as life expectancy increased and the post-WWII baby boomers began to think about saving for retirement. Compared to the size of the US economy, individual banks are now much bigger than they were in the early 1990’s.”

Sounds pretty frightening – and depressing, but none of us should be shocked by these findings. Last year, I did a TV documentary series, Who Rules America, based, in part, on the writings of C. Wright Mills on The Power Elite years ago and the detailed research by sociologist William Domhoff who forecast these trends.

As the economy changes, so does internal politics, as Tom Lodge observes in the case of South Africa: “the degenerative changes that are observed within the ANC … appear to reflect a global trend in which mass parties are being replaced by electoral machines that depend less and less upon militant activism” and more on transactional exchanges between the electorate and the political elite.

In this restrictive political frame, how can ordinary people effectively address their government for change? It behooves us to lobby our media to start reporting on the world as it is, not what it was, when today’s senior editors grew up, believing in the myths of American pluralism. And, now, disregarding who really has, and wields, power.

News Dissector Danny Schechter blogs at Newsdissector.net, and edits Mediachannel.org. His latest book is When South Africa Called, We Answered, How Solidarity Helped Topple Apartheid. (2014). Comments to dissector@mediachannel.org

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8 comments on “The Iron Law of Oligarchy Returns

  1. F. G. Sanford on said:

    plu·toc·ra·cy noun \plü-ˈtä-krə-sē\: government by the richest people: a country that is ruled by the richest people: a group of very rich people who have a lot of power

    OK, I’ll go along with oligarchy for the sake of discussion, but it’s actually a plutocracy. The oligarchs have succeeded in promoting a nearly apoplectic fear approaching religious zealotry of those scary words: Marxism, Socialism and Communism. This visceral fear stems from the fact that philosophically, they actually ARE Marxists. Not, mind you, in the sense that they favor it, but because they recognize that his model provides reliable predictions. In a capitalist oligarchy, wealth irreversibly accumulates upwards until social unrest results in rebellion. Western capitalism, with its constant reference to “economic growth” as the answer to social progress, can only sustain itself as long as Imperial expansion can continue exploiting undeveloped countries with natural resources and captive, cheap labor. Those are running out. “Growth economics” can no longer mask the pathological symptoms that Marx insisted would eventually define unfettered capitalism. The state serves as a vehicle to protect accumulated wealth; its defining characteristic is a monopoly on the legitimate use of violence. As empires, fail, that use of violence is ALWAYS turned inward against its own populace.

    Marx is difficult to understand because his writings are steeped in 19th century vocabulary and syntax. Try some of his actual words with modern grammar and vocabulary substituted:

    “With the development of “free market” capitalism, individuals grow richer and richer while the government falls ever more deeply into debt. It is therefore obvious that as soon as the oligarchy has accumulated money, the government must beg from them, and in the end it is actually bought up by the oligarchy. This takes place in a period in which the oligarchy is still confronted by the middle class, and consequently the government can retain some appearance of independence in relation to both of them. Even after the government has been bought up, it still needs money and, therefore, continues to be dependent on the oligarchs. The politicians who perform government activities, use the general powers of politics to pursue their own particular interests within the government hierarchy. “The class distinctions of civil society thus become established as political distinctions.” Better to make the middle class fight a “two front war” against the politicians in government and the oligarchs in the economy. A two party duopoly, among other things, makes it difficult for the populace to form a clear conception of who is their principal enemy.”

    Scary, isn’t it? Now, you may be able to appreciate why they go BATSHIT when they hear “Socialism” or “Communism”. Communism has NEVER actually existed. What actually exists today in the United States is the mirror image of Soviet Oligarchy, or more properly, BOLSHEVISM. The premier advocates of this political system are the oligarch bankers and financiers along with Neocon military industrialists. Philosophically, they derive from Trotskyite Communists and the disciples of Leo Strauss, the Godfather of the Kagans and other prominent Neocons. The rational alternative is called “Social Democracy” or “Regulated Capitalism”. That’s what countries like Switzerland, Sweden, Norway and Denmark have. They never talk about “growth”, because they have achieved stable, sustainable economies. “Austerity” is the Neocon word for “Collectivism”, just like the Bolsheviks used to enjoy. By changing the words, America has been sold a new paradigm: The “United Soviet States of America”. It appears to be poised to fail, just like its namesake.

    “The function of the law is not to provide justice or to preserve freedom. The function of the law is to keep those who hold power, in power.” – Gerry Spence

    • Jay Laudermilk on said:

      @Sanford,

      May the gods be forever damned, I fucking love your posts. I seriously wish I knew you outside of the net, in real life, the realm of physicality and materialism. I completely believe you and I would be friends and we would have very long, illuminating intellectual conversations transcending hours. We definitely do not agree on everything, but that is really insignificant, because where we have arrived at the same conclusions, that is to say, what we do agree on, is infinitely more important than our disagreements.

      Imagine everything that could be accomplished if intellectuals like yourself forged an alliance. I love deconstructions of this ill-fated World, like the deconstructions you preform. I live in a world where endless people need help, I want to be able to help all of them who need, all of the weak, impoverished and suffering. The vast, vast, overwhelming majority of the world’s populace subsists in poverty, which for most is a short, miserable life before entropy vanquishes them. The majority of the 190 (or is it 206?) countries in the World are absurdly impoverished and exist only to be abused and taken advantage of by greater, stronger (imperial acting) countries like the United States & co.

      The ‘Third World’ (a term that ought to be re-defined or discarded since all so-called third-world states have adopted Capitalism by now and in fact are more purely Capitalistic than the US of A) is of intrinsic and special interest to me. Marx & Lenin were primarily interested in an industrial, working class vanguard to foment revolution. Mao was much closer to my interests, breaking from Marxism-Leninism by being primarily focused on the peasant/agrarian/rural/pastoral class to revolt, with Third Worldism.

      - Jay

    • lumpentroll on said:

      @F. G. Sanford

      Echoing Jay: I’ve taken to searching for your comments before reading the articles.

    • Higgs Boson on said:

      @Sanford:

      In our modern fiat monetary system, it should not be possible for the government to fall into debt. As the sovereign issuer of currency, the federal government cannot “run out of money”. All money originates in the first instance from federal government spending. The federal government creates (spends) money, which fuels economic activity. The federal government then collects taxes to regulate that activity. Taxes do not fund the fund the federal budget. All of the political posturing about cutting deficits is just that – political. The federal government is not revenue constrained, and can create all the money it needs to pay any and all obligations, at all times. Inflation could become a problem when there is an excess of money in the private sector competing for finite resources. As long as there is not full employment, the probability for inflation is extremely low. In Marx’s time currencies were valued against metal reserves such as gold, a situation that has not existed since 1971. Yet, we continue to carry on with the theater of pretending federal spending is going to bankrupt us. Really, this is what is at the heart of the struggle between the 1% and the rest. It is the fact that the federal government’s power to tax is what gives the currency its value, and not a finite reserve of metal that someone can own and hoard. The federal government cannot be involuntarily “drowned in a bathtub”. It CAN be done voluntarily, and to accomplish that it is necessary to maintain the deficits-are-scary bugaboo.

      • F. G. Sanford on said:

        What gives currency its “value” is what you can buy with it. ROFLMAO. Why is it that people continue to confuse verbal diarrhea with intellectual prowess?

        • Higgs Boson on said:

          And why can you buy stuff with it? You can’t stroll into a Walmart with pigs, or chickens, or any foreign currency and trade it for goods and services. You can use ONLY U.S. dollars. Why? What gives the dollar its value? Because you and every else must pay taxes to the federal government using U.S. dollars. You must pay your taxes to the federal government with the currency produced by it. If you don’t you will suffer penalties which can include prison. Explain how that is “verbal diarrhea”. Or do you have some great insight you can share?

    • Boiled Frog on said:

      Thus quoting, even interpreting Marx, outright this way is brave. You just came right out as a “Marxist”.

      Thanks, I never could call anyone a Marxist before :)

      I won’t ask if you carry a “card” of whatever pinko organization that presumptuously will negate any point you made. I never saw a take on Marx’ writing like yours since my old pal(RIP) who always declared that Marx would be the first to admit his vision would not occur until there is a worldwide proletariat.

      It could be you are on to something, an idea that Marx spelled out, that has been despised and marginalized to the point that nobody knows what he was saying because it was toxic and anti-freedom. This sounds like a vast propaganda success.

      But then rightie pundits already condemn Picketty as a Commie anyway. I’m beginning to view that as a compliment these days.

  2. Recently, George Will provided a useful quote from the British Ambassador to the US Cecil Spring-Rice on Teddy Roosevelt “You must always remember that the President is about 6.” t was Teddy who stumped for the US to enter that most deadly of World Wars.
    However, his cousin Franklin Delano had a different perspective vis-a-vis British colonial methods. His son Elliott reported in his biography “As He Saw It” that FDR told Churchill in no uncertain terms that the US after the war would no longer tolerate the British Empire keeping the world in a deliberate state of backwardness paying tribute in raw materials.
    The problem though is that no one told up the mantle of FDR in the US, in fact just the opposite with the “dumb American giant” reeling from one colonial war to another in thrall to Churchill’s manipulative geopolitical dictum of the “Iron Curtain” of combating communism. Thus we had a string of “post colonial” wars starting with Viet Nam. Today is no different. In fact, we are now even more entangled in foreign adventures in stark opposition to George Washington’s warning in his Farewell Address.
    So who really heads the oligarchy? It is a collection of interlocking boards of directors of Anglo-Dutch “royalty” still to this day. The fortunes made on these shores by financial chicanery which goes unpunished are always beholden to this supposed elite found in the “hallowed halls” of her royal majesty’s Chatham House.
    http://thingumbobesquire.blogspot.com/2014/04/who-heads-oligarchy.html