Revolt Against the Elites

Today George Friedman of Stratfor offers a big-picture analysis of our current financial and political crises.

As always, his views are worthy of serious thought.

While our crisis may have started in the financial markets, it has now, Friedman suggests, also become a political crisis.

When the markets nearly unraveled in 2008 people lost faith and trust in the elites who were managing the financial system.

We then expected that our its political elites would manage the situation, hold people accountable, and set the nation on a better course.

By now, more and more citizens have recognized that the political elites had no such intention. Or, if they had the intention, they did not have the ability.

Friedman declares that the true crisis lies in mismanagement by the elites. The result, he says is that no one trusts the elites any more.

The rich and powerful in our country have lost legitimacy. Thus, we have a problem.

The people no longer trust those who were managing the system.

Discussing the fallout from the 2008 crisis, Friedman explains: “From the standpoint of economics, this was essentially a financial crisis: who made or lost money and how much. From the standpoint of political economy it raised a different question: the legitimacy of the financial elite. Think of a national system as a series of subsystems — political, economic, military and so on. Then think of the economic system as being divisible into subsystems — various corporate verticals with their own elites, with one of the verticals being the financial system. Obviously, this oversimplifies the situation, but I’m doing that to make a point. One of the systems, the financial system, failed, and this failure was due to decisions made by the financial elite. This created a massive political problem centered not so much on confidence in any particular financial instrument but on the competence and honesty of the financial elite itself. A sense emerged that the financial elite was either stupid or dishonest or both. The idea was that the financial elite had violated all principles of fiduciary, social and moral responsibility in seeking its own personal gain at the expense of society as a whole.”

Once America lost confidence in the financial elites, it turned to the political elites to resolve the problems.

In Friedman’s words: “Fair or not, this perception created a massive political crisis. This was the true systemic crisis, compared to which the crisis of the financial institutions was trivial. The question was whether the political system was capable not merely of fixing the crisis but also of holding the perpetrators responsible. Alternatively, if the financial crisis did not involve criminality, how could the political system not have created laws to render such actions criminal? Was the political elite in collusion with the financial elite?”

As we know, no one was held responsible for the financial crisis of 2008.

Instead, people across the nation became suspicious that the bankers, lawyers, bureaucrats, agency heads, and politicians were in it together.

The leading American politician in the post-crisis period, Barack Obama, did rail against Wall Street, but his campaign had received massive support from the bankers he was railing against.

Friedman does not say it, but the political elites who were called upon to right the wrongs of financial mismanagement were Democrats.

In 2009 and 2010, political power in Washington lay entirely in the hands of Democrats.

In the end, no one was held responsible for the near-crash of 2008.

Enter the Tea Party.

Friedman summarizes Tea Party philosophy cogently: “Its argument was that the political elite used the financial crisis to dramatically increase the power of the state (health care reform was the poster child for this) while mismanaging the financial system through excessive sovereign debt.”

In the post 2008 period the Democratic political elites used the crisis to increase their own power, while at the same time loading down the financial system with an obscene amount of debt.

They had no intention of taking responsibility for that either. When asked why we face a debt crisis Democratic politicians go on about the Bush tax cuts and the wars… without saying a word about the trillions of dollars of debt added by the Obama administration.

Friedman is looking to offer a balanced analysis. So he sees the Tea Party attacking the elites from the right and the anti-globalization crowd attacking it from the left.

To me this does not seem entirely accurate. While it is true that the Tea Party challenges the elites from the right, I question whether we can consider the anti-globalization crowd a left-wing populist rebellion against the elites

A few months ago we saw a leftist rebellion against Gov. Scott Walker’s labor reforms in Wisconsin. But the demonstrators were not agitating against the financial elites, or even the political elites. They were protesting to maintain the old regime, under which they could bleed state and local governments in order to enjoy the fruits of their own political power.

The laws that Walker was trying to reform had been constructed by the political elites, in conjunction with the labor unions.

The anti-globalization and anti-austerity left is not opposed to the political elites. It comprises the political muscle that sustains those elites. Who else but the unions profited from the Obama stimulus?

If the government takes on more power and spends more money, a goodly part of it ends up in the pockets of the union members who work for the government.

In the same way, the riots that broke out in Greece a few months ago were a rebellion against the political elites, but they were instigated and organized by government employees who were offended that they would lose the benefits that a previous generation of elites had conferred on them.