David Rothkopf about the global power elites (02-06-2014)
In his book “Superclass. The global power elite and the world they are making” (2008) Rothkopf offers an insider’s view on the various power elites, which have a significant effect on the evolution of global society. An important finding is that elites do hardly conspire. Their influence is the result of the development of a common view on the world. By regular meeting each other members of the ‘club’ learn how they must interpret particular developments, and who is to be trusted.
Several interconnected networks can be distinguished. It goes without saying that persons who function as nodal points between the different networks are the most important figures. Rothkopf discusses the business, the financial, the political, the military and the religious/cultural elites. In this short essay about the book, we will focus on the financial elite. In a second section we will discuss the role of subcultures, which emerge out of regular networking. In a third section we will go into more detail with respect to the political influence of the financial and monetary elites. In a fourth section we evaluate the results and the last section concludes.
- Elites develop subcultures
Rothkopf is an insider; he knows many members of the elite very well, and time and again he participates in their gatherings. He observes that many members meet each other regularly; quite often even more than having meetings with people from the own organization. They are strongly focussed on self-interest, and are hardly aware of what it means for people to be a subordinate, to be poor and disrespected. But they work hard, are rich, and think that they are doing very important work, also important for the mass of the people. Quite often sons and daughters of rich and prestigious families, grown up in a particular culture, are following their education in prestigious universities – all in the same way; all learning to speak the same language. Many members of the elites outside the USA have received their education in the USA. Even highly ranked Chinese persons, who possess influential positions in the economy, received their education in America. So, the minds of those who have the ambition to play a role in the top of business and politics are programmed in one particular way. Only in this way persons have a chance of being selected and having access to the highest circles. Rothkopf describes the members of the global elite as brilliant people with closed minds – their common understanding of the world is fixed, and never challenged by people who interpret the world differently.
- The global financial elite
The financial world is ruled by economists, lawyers and financial specialists. Most of them are educated by a few universities. They studied the same textbooks, which offered them (implicitly) a particular view on the financial world. They all have learned to speak the neoclassical language. Also specialists in (monetary) macroeconomics were taught in just one way of interpretation, which is monetarist economics. After WWII there was a consensus growing between the vested experts about the running of economies. It was called the Washington consensus. Governments should abstain from intervention, except the protection of private property rights. Business cycles should not be countered by changes in the effective demand for goods. After a while the poor part of society will profit from the resulting economic growth (trickle-down effect).
During the 80s of the previous century there was growing consensus among the financial elite that government budgets were too large and governments were too interventionist in their attempts to minimise the business cyclical fluctuations. The ruling credo became: deregulation and lower taxes, especially the taxes on higher incomes and wealth. The approach was called supply-side economics, and its philosophical roots are typical libertarian. Although a typical capitalist society results in very unequal distributions in income and wealth, the absolute level of material prosperity for the poor is higher than in non-capitalist societies. Large and growing inequality is the result of market processes, as described by the neoclassical and Austrian theory. Talents are unequally distributed among people. If talented people are not paid exceptionally high wages, they are motivated to increase their leisure time. For society as a whole this would be a disastrous development: the best and the brightest prefer part-time work! In other words, exceptional salaries for the very top is an profitable investment for society as a whole.
Rothkopf’s book shows the reader a global power elite, which consists of brilliant people, who have developed a closed mind, and operate on the basis of a common understanding. Their frames of interpretation are not perceived as such. They are taught to be the experts, and that their opinions are based on sophisticated science. It makes it possible for them to serve their own interests. They assume that a world in which everyone is free and only responsible for himself, is in the interest of all other people. It might take a while before the poor can reap the fruits of the work by the elite. They must be patient! The book is published just before the start of the great financial crisis 2008, a crisis, which was not foreseen by the best experts. Other schools of thought, such as the radical economists, and the post-Keynesians, – less talented, of course – offered realistic analyses of the situation, and warned for an eventual great crisis. Unfortunately the elite did not notice the critique.
At the moment (May, June 2014) there is a Piketty-hype going on. Piketty (2014) has published a huge amount of statistics about rising inequality in the distribution of income and wealth. According to him capitalism will not survive if we do not increase the wealth tax, preferably on the global level. Unfortunately Piketty does not offer an analysis of the economic system. It means that we cannot understand the phenomenon of inequality well. Moreover, we cannot develop policies that are supposed to be effective. Increasing wealth tax, ceteris paribus, will lead to a significant increase in tax evasion, and an increase in the cultural class conflict between labour and capital.
The analysis by Rothkopf suggests a different policy. His interpretation focusses on social-cultural and psychological variables. The best and the brightest come from the best and the brightest families, sending their kids to the best and the brightest education institutions. The lives of these students is essentially an ongoing process of upbringing and schooling . It means that the adjective ‘best and brightest’ only holds for the skills that are necessary for the conservation of the vested order.
When we want to reduce economic and social inequality Piketty’s proposal to increase wealth taxes is just one measure among other policy instruments. Higher taxes will not lead to a change in the formation of future elites, of which members have closed minds. There are two reasons why we need to change the situation.
- Even in the rich countries such as the USA there are still many poor people, who live under the poverty line.
- The global elite has the power to influence the course of history significantly. Their common understanding is based on common closed minds. Their frames of interpretation are systematically wrong. The world financial crisis 2008 and the policies that were implemented to tackle the crisis, is a good illustration of the biased views of the elite.
Some economic inequality is not bad in itself. But the power of the elite to maintain the status quo, including al the misery for so many people is the big problem. One important strategy to break through the closed shop of the rich is to make the educational programmes at universities more pluralistic. The almost monopoly of the neoclassical approach in economics should be dismantled. More competition with respect to frames of interpretation is a first and necessary step to open the minds of future elites. A second step is to open the networks of the elites. The institutions of education, health care and the media should increasingly invite members of the elite to play an active and visible role in society. The institutions of the rich should become involved in the ongoing societal debates and actions, meant to improve the quality of it, also for the other classes. In this way a psychological-sociological climate might emerge in which the elites become less hostile to proposals to increase income and wealth tax tariffs.
Social and economic inequality is institutionalised in the networks of the global elite. Their networks are only accessible for just a few. The young members learn from the more experienced the way the world turns. Their closed minds are a threat to the functioning of our open economies and societies. So the big question is how to open these networks and learn to use these networks for the benefit of all classes in society. There are good examples in this respect already. Through sponsoring and charity rich people get connected to the problems of other classes. This strategy can be further developed and refined. It leads to less conflict and aggression, compared with the use of taxes as an instrument in the hands of the capitalists OR in the hands of labour.
Dr. Piet Keizer
Associate Professor Economic Methodology
Utrecht University School of Economics
02 -06 -2014
 In English there is no sharp distinction between the Dutch word ‘onderwijs’ and the Dutch word ‘opvoeding’. Upbringing refers to the first years of a child most of the time. What I mean to say is that education is not view- and value-free. Elite students learn how to interpret the world and how to be effective, so as to maintain the status quo. However, they do not learn it as an interpretation, but as something natural. In economics the natural rate of unemployment, the natural rate of interest and the natural rate of wages are examples of this phenomenon.
 This is not only the case in capitalist countries; this is a characteristic of all societal orders.