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The New Power Elite: Inequality, Politics and Greed [1 ed.]
 9781783087891, 9781783087884, 9781783087877

Table of contents :
Cover
Front Matter
Half-title
Half-title
Title page
Copyright information
Table of contents
List of illustrations
Preface
Chapter 1-8
Chapter One Elites Under Siege
A Plague on All Your Palaces
Incompetence
Corruption
Unfulfilled Expectation
Unrepresentativeness and Illegitimacy
Rescuers Gone Rogue: Establishments and Bureaucracies
Sniping at Science
Chapter Two Power, Networks and Higher Circles
Softening, Diffusing and Dissolving Power
Structurally Ingraining Power
Power without the Powerful
Power in Networks: Positions over People
‘Deep State’ Distress: The Presidential Pushback
Power in Networks: Strong, Weak and Old-School Ties
Don’t Look Down
Translating the Social Network
Institutional Networks, Interlocks and the ‘Great Vampire Squid’
The New ‘Higher Circles’
Global Business
Government
‘Civil Society’ Organizations
The Indispensable Military
The Performative Elite: Celebrities
A Cognitive Elite? Technocrats, Intellectuals and Experts
Chapter Three Sources of Stability: Elite Circulations and Class Coalitions
Renounce and Renew
Top-Down Transformation
Class Coalitions, and Elites’ Role in Building Them
Elites as Creators and Destroyers of Coalition
Progressive Distributional Coalitions
Conservatives Learn to Trust the Crowd
The Left Keeps Its Class
Contemporary Discontent: The Storms below the Summit
Chapter Four Rousing Rebellion: Elite Fractions and Class Divisions
Reclassifying Classes
Class Divisions in Practice: Characters and Capitals
The Dynamics of Division
An Elusive Elite
Cooperation, Co-optation and Confrontation
The Fragility of Class Coalitions
Militant Middle Classes and Mobilized Mobs
Obsolescent Coalitions? Personalizing Protest Politics
Restoring Order
Chapter Five Politics and Money
Money Buying Power, Power Grabbing Money
The Quest to Separate Policy from Profit
Institutional Power/Money Separation, 1950–70
‘Symbiotic’ Separation, 1970–2000
The Twenty-First-Century Breakdown of Money/Power Separation
Evidence for Plutocracy
Slippage into Oligarchy
Who Buys Influence, and How?
Raw Deals
Chapter Six Inequality: Causes and Consequences
Stretching the Top of the Pyramid
Squeezing the Lower Middle and the Base
The Globalization Grievance
Betrayed by Free Trade
Nation States versus Global Corporations
The Technological Imperative
Financialization and Borderless Money
Retreating from Redistribution
Double-Edged Education
Toleration for Rising Inequality
Worlds Apart
Chapter Seven Elites and Democracy
Why Do Elites Concede Democratization?
Democracy as Elite Protection Strategy
Democracy via Distributional Struggle: The Middle Clash
Less Revolution, More Redistribution
Why Doesn’t a Universal Franchise Cause Elite Expropriation?
National Politics and International Business
Democracy as Consequence of Elite Ascendancy
Political Institutions, Property and Elites
Democracy and the Circulation of Elites
Inequality and Democracy: An Unresolved Tension
Chapter Eight Giveaways and Greed
The Working Rich: Adding Capital and Labour Income
Joining an All-Star Cast
Cult of the Giver
Righteous in Donation
Commercial Philanthropy: When Public Influence Fails
Charities of Fire?
Public Handouts’ Hidden Role: Restoring Elite Cohesion
A Generous Conclusion
End Matter
Afterword: The Best and the Rest
Pluralist Counter- Case
Past Claim
Present Reality
Democratic Dilution
Past Claim
Present Reality
Plutocratic Implosion
Past Claim
Present Reality
‘Elite- Distance’ Calibration
Past Claim
Present Reality
Middle- Ground Moderation
Past Claim
Present Reality
Results Defuse Revolts
Past Claim
Present Reality
Gilt by Association
Past Claim
Present Reality
Media- Manufactured Consent
Past Claim
Present Reality
Restorative Circulation
Past Claim
Present Reality
Elision with Establishment
Past Claim
Present Reality
Plutocracy- Philanthropy Tradeoff
Past Claim
Present Reality
Redistributive Coalitions
Past Claim
Present Reality
References
Index

Citation preview

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lites have always ruled – wielding inordinate power and wealth, taking decisions that shape life for the rest. In good times the ‘1%’ can hide their privilege, or use growing social mobility and economic prosperity as a justification. When times get tougher there’s a backlash. So the first years of the twenty-first century – a time of financial crashes, oligarchy and corruption in the West; persistent poverty in the south; and rising inequality everywhere – have brought elites and ‘establishments’ under unprecedented fire. Yet those swept to power by this discontent are themselves a part of the elite, attacking from within and extending rather than ending its agenda. The New Power Elite shows how major political and social change is typically driven by renegade elite fractions, who co-opt or sideline elites’ traditional enemies. It is the first book to combine the politics, economics, sociology and history of elite rule to present a compact, comprehensive account of who’s at the top, and why we let them get there.

The New Power Elite

‘C. Wright Mills rides again, over 60 years later, in this vigorously argued analysis which is based on a powerful alliance of class and elite theory.’ —William Outhwaite, Emeritus Professor of Sociology, Newcastle University, UK

Alan Shipman, June Edmunds and Bryan S. Turner

‘This book is a useful contribution to the current debates on the growing influence of the plutocracy. With its comparative and international focus, it adds an important dimension to the ongoing debates in the US and Europe.’ —Michèle Lamont, Professor of Sociology and African and African American Studies, and Director, Weatherhead Center for International Affairs, Harvard University, USA

The New Power Elite Inequality, Politics and Greed

Alan Shipman is an economist, currently with the Open University, UK, who has also worked as an emerging markets analyst, and industrial and social researcher. June Edmunds lectures in sociology at the University of Sussex, UK, and is an affiliated senior research fellow at the Centre of Development Studies, University of Cambridge, UK. Bryan S. Turner is professor of the sociology of religion at the Australian Catholic University, an honorary professor at the University of Potsdam, Germany, and an emeritus professor at the Graduate Center, City University of New York, USA. Anthem’s Key Issues in Modern Sociology series publishes quality, innovative research that advances contemporary scholarship on the major structural changes in modern societies and connecting sociological thought to public issues. Cover image: © Natasha Bell

www.anthempress.com

Alan Shipman, June Edmunds and Bryan S. Turner

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ANTHEM’S KEY ISSUES IN MODERN SOCIOLOGY Anthem’s Key Issues in Modern Sociology series publishes scholarly texts by leading social theorists that give an accessible exposition of the major structural changes in modern societies. These volumes address an academic audience through their relevance and scholarly quality, and connect sociological thought to public issues. The series covers both substantive and theoretical topics, as well as addressing the works of major modern sociologists. The series emphasis is on modern developments in sociology with relevance to contemporary issues such as globalization, warfare, citizenship, human rights, environmental crises, demographic change, religion, postsecularism and civil conflict. Series Editor Peter Kivisto – Augustana College, USA Editorial Board Harry F. Dahms – University of Tennessee at Knoxville, USA Thomas Faist – Bielefeld University, Germany Anne Rawls – Bentley University, USA Giuseppe Sciortino – University of Trento, Italy Sirpa Wrende – University of Helsinki, Finland Richard York – University of Oregon, USA

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The New Power Elite Inequality, Politics and Greed

Alan Shipman, June Edmunds and Bryan S. Turner

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Anthem Press An imprint of Wimbledon Publishing Company www.anthempress.com This edition first published in UK and USA 2018 by ANTHEM PRESS 75–​76 Blackfriars Road, London SE1 8HA, UK or PO Box 9779, London SW19 7ZG, UK and 244 Madison Ave #116, New York, NY 10016, USA © Alan Shipman, June Edmunds and Bryan S. Turner 2018 The authors assert the moral right to be identified as the authors of this work. All rights reserved. Without limiting the rights under copyright reserved above, no part of this publication may be reproduced, stored or introduced into a retrieval system, or transmitted, in any form or by any means (electronic, mechanical, photocopying, recording or otherwise), without the prior written permission of both the copyright owner and the above publisher of this book. British Library Cataloguing-​in-​Publication Data A catalogue record for this book is available from the British Library. ISBN-​13: 978-​1-​78308-​787-​7 (Hbk) ISBN-​10: 1-​78308-​787-​0 (Hbk) This title is also available as an e-​book.

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CONTENTS List of Illustrations

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Preface

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Chapter One

Elites under Siege

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Chapter Two

Power, Networks and Higher Circles

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Chapter Three

Sources of Stability: Elite Circulations and Class Coalitions

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Chapter Four

Rousing Rebellion: Elite Fractions and Class Divisions

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Chapter Five

Politics and Money

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Chapter Six

Inequality: Causes and Consequences

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Chapter Seven

Elites and Democracy

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Chapter Eight

Giveaways and Greed

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Afterword: The Best and the Rest

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References

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Index

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ILLUSTRATIONS Figures 6.1 Distribution of average income growth during expansions, US, 1949–​2012

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6.2 Average household real income, US, 1979–​2011

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Tables 2.1 Degree of closure and extent of ties

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4.1 UK latent class structure

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4.2 Yesterday’s harmonious trajectory

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4.3 Today’s discordant trajectory

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5.1 Phases of political and commercial elite orientation

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7.1 Redistributive options among three classes and the state

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PREFACE The key questions about today’s elites are easy to ask. How did a few spectacularly wealthy bankers and fund managers, whose magic money tree crumbled to sawdust in 2008, get themselves bailed out with public funds that no health service or infrastructure commission could dream of ? Why did democratically elected governments allow the ‘1 per cent’, and those at even more exquisite decimal places, to flee further enriched from a market meltdown that would traditionally have culled their ‘capital’? Why, when voters in America, Europe and Asia turned against governments that had made them pay twice for corporate excess, did they rally behind dissenting members of the elite rather than traditional anti-​elitist parties? What enables the domination of politics and business by an unchosen few –​skewing the distributions of power, wealth and status even further skywards –​when such pyramids were meant to be flattened long ago by democratization, meritocratic selection and social mobility? The New Power Elite derives answers from the latest empirical evidence on rising concentrations of economic and political power, allied to new theories of how elites maintain, apply and justify their ascent over the rest of society. It traces contemporary turbulence to the membership and internal dynamics of elites –​economic, political and social –​and the way they manage their connections to the rest of society. The composition and conduct of decision-​making ‘higher circles’ remains central to explaining how national and multilateral political arrangements remain stable for long periods, interspersed with phases of abrupt change. It also sheds light on why the patterns of change are often common across countries that differ in strength of democracy and civil society, and why they typically raise fractions of the previous elite to greater prominence, despite mass protest aimed at bringing the whole elite down to earth. Sixty years after C. Wright Mills’s pioneering probe of the Power Elite in the United States, we offer new and internationally applicable ideas on the importance of friction within the elite in sparking and steering wider social change; the shifting relationship between power and money within elites; the alternative ways in which elite fractions enrol ‘middle’-​and ‘working’-​class elements in their power struggles; and the typical developmental consequences of elites alternately forming and breaking up distributional class coalitions.

Elites and Classes We make the case that elite analysis, while complementing rather than substituting class analysis, was too long subordinated to it. Social classes and the (distributional) coalitions formed between them are important for political stability, economic progress and the

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phases of instability that punctuate that progress. But elites, possessing an agency and cohesion that classes inevitably lack, are instrumental in creating and maintaining these coalitions. Intra-​elite tensions and rivalries play an equally essential part in breaking up and realigning them. In every country, when a sizeable ‘middle class’ emerges as a third force between landowners and peasants, it plays a key role in creating the stable political arrangements that push economic development into industrialization. Renegade elite fractions, whose only reinforcements once came from the ‘mass’, now have a safer intermediate group to turn to for support in seeking political change (achieved by replacing the incumbent fraction or forcing it in a new direction). Successful coalition-​building invites its own destruction because an expanding middle class becomes divided, with upper and lower elements losing shared interest while finding affinity with classes above and below. While middle-​class expansion usually means a shrinking working class, this too can become divided. Those who gain a measure of protection from the employers and professionals above them lose antagonism towards them, and may aspire to join them; those who lack such protection lose any loyalty to the boss, but may be open to alliance with an elite that can battle that boss from above. Elite-​ driven policy responses, especially the promotion of globalization and technological innovation often treated as ‘exogenous’, can lead to a re-​expansion of the working class whose legally protected ‘insider’ and unprotected ‘outsider’ elements make it even more easily divided. The simultaneous sharpening of competing class interests and fraying of intra-​class cohesion enables increasingly powerful elites to divide, rule and prolong their own ascendancy. The shift (with advancing industrialization) from a simple owner/​worker division to as many as seven discernible classes widens the available options for elites to build coalitions, and for renegade fractions to split them by reviving class antagonism. We give past and contemporary examples to illustrate the theoretical possibilities in action, linking strands of economic history and historical sociology which ‘political economy’ has only just started to connect. Social sciences’ continued focus on class, while helping to understand the increasingly complex stratification below the elite level, has led to neglect of the agency that mobilizes class interests and converts them into policy –​which can only be exercised by smaller numbers that have floated above the class system.

The Argument in Brief Chapter 1 gives an overview of the global reaction against elites since the start of the century, observing that holders of concentrated power and wealth sought to ground this in expertise and accountability precisely when publics were ceasing to view these as justifications. Rising expectations of what elite rule should deliver, alongside political and economic limits on what they could do, led to increased questioning of elites’ competence and sensitivity towards their corruption, turning their unrepresentativeness from a source of prestige into a further incitement to revolt. A charge sheet emerges, summarized in the table below, which at first suggests an existential challenge to elites’ long rule.

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PREFACE Why rising elite power/​wealth did not previously cause instability

Why rising elite power/​wealth causes instability now

Elites appeared to merit their widening income and wealth differential over classes below, e.g. through personal achievement or public service

Elites no longer merit the widening differential, which appears to arise through luck, disproportionate reward or theft from others

Elite power and wealth did not rise at the expense of lower classes but was gained from sources (like foreign conquest) not open to the classes below them

Elite power and wealth is now gained at the expense of the classes below them, through capture of economic and political rewards that rightly belong to those lower classes

Elites’ rising power and wealth appeared to benefit the classes below them, e.g. by providing a trickle down that raised other classes’ incomes, or incentivizing the elite to provide better government

Elites’ rising wealth and power delivers no benefits for the classes below, and may even be associated with a more corrupt, less efficient elite that is less willing or able to promote the wider society it used to serve

Power, wealth and status followed separate distributions: money did not guarantee status and power, which could be attained without high income and wealth and whose attainment did not automatically bring these

Power, money and status are now inextricably entwined, so an elite that captures a growing share of one commands comparably growing shares of the others

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Chapter 2 refines the key concepts of power and elites, showing how social sciences’ overly successful quest to dissociate it from agency and dissolve it into structure left them unprepared for the new centuries’ glaring visibility of elites, and shows of public anger against them. It explores the way that popular and academic analysts of elites have seized on ‘networks’ as their primary instrument of power, but without respecting important distinctions between personal and position-​based sources of power and between strength and length of connections as determinants of its strength. This leads on to an identification of the ‘higher circles’ comprising today’s elites with an expanding non-​profit sector added to the traditional triad of political, business and military chiefs. Chapter 3 reviews the long-​running debate on the ‘circulation’ of elites as a source of their renewal and continued relevance, and the more recent identification of elite-​ brokered ‘class coalitions’ as essential to keeping dynamic societies stable. It explains why elites must be viewed as active and classes as passive in the construction and reconfiguration of such coalitions, examining various historical and contemporary illustrations. A political ‘right’ which once looked to an elite to override and contain the battle between classes has recognized their co-​optability by that elite, while a political Left once inspired by class struggle now acknowledges the need for elite coordination  –​a crossover that signals the essential role of class in provoking and resolving divisions within elites. Chapter  4 refines analysis of the class ‘coalitions’ supporting elite rule by using empirical studies of class to characterize its shifting divisions in contemporary society. It shows how coalitions can be undermined by the economic progress they enable, and reconfigured by elite fractions –​empowered or displaced by that progress –​which

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recruit disaffected classes to augment their attack on other fractions. Particular attention is paid to the past and present roles of the ‘middle class’ and its sometimes cooperative, occasionally combative, relations with groups above and below it. The distinct roles of ‘middle’ and ‘working’ classes in intra-​elite battles are examined with historical and contemporary examples, which end with a discussion of how elites try to restore order when such class enrolment sparks demands for wider change than they are willing to concede. Chapter 5 examines the tangled history of links between ‘power elites’ and ‘wealth elites’, from the convergence assumed by elite theorists of the nineteenth century to efforts at their institutional separation in the twentieth, and their politically conceded reconvergence in the twenty-​first. It notes that despite growing evidence that decisions by increasingly powerful national political elites have become more closely aligned with the interests of increasingly powerful internationalized business elites, the details of any unified ‘capitalist’ agenda remain elusive. Instances of commercial interests buying specific favours eclipse any purchases of general ‘pro-​business’ policies, with the preservation of existing personal fortunes still a clearer motive for political intervention than the capture of new profit-​making opportunities. Chapter 6 links the preceding social and political arguments to recent evidence of rising economic inequality, highlighting the way that elites’ power concentrations have been enhanced by the capture of recent gains from economic growth by the already well-​off (and their insulation from economic downturns). It shows how ‘globalization’ and ‘technical change’ have often been used to explain (as irremediable) increases in inequality that actually result from changes of policy, especially away from income redistribution. Linking empirical findings from the United States and Europe to the class divisions assessed in Chapter  4, it explores the changing role of the newly enriched ‘upper’ middle class, the squeezed ‘lower’ middle class and the ‘precariat’ dropping out of the traditional working class in changing the pattern of class coalitions and the tactics of elite fractions seeking to realign them. Chapter 7 asks why democracy, apparently extending across the old industrial and many of the newly industrializing countries throughout the past centuries, has apparently done so little to challenge elite rule or the income and wealth concentrations that underlie it. Attention is paid to new ‘political economy’ theories in which the elite concedes democracy to avert its wholesale expropriation, and longer established theories in which franchises are extended only after decisions affecting economic policy and resource allocation have been depoliticized so that popular choice cannot deflect them. Historical evidence is provided that democratization promotes the making and breaking of class coalitions that traditionally served to keep elites in power, and is thus more realistically viewed as a consequence of elites’ rule than a likely route to their overthrow. Chapter  8 concludes the analysis by reconciling two apparently contradictory features of today’s elites:  a ‘philanthrocapitalism’ under which wealth and power are meritocratically attained and altruistically deployed, and a rampant greed that a desire to give back to society and solve its most urgent problems is genuine and widespread in contemporary ‘higher circles’, but insufficient to defuse the public’s anti-​elite anger due

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to suspicion of ulterior motives. In particular, corporate philanthropy tackles problems that can usually be traced to past corporate excess, and that governments are left unable to solve by constraints placed by private interests on the public realm. Additionally, philanthropy functions as a source of elite cohesion that ensures the ongoing ascendancy of the powerful few over the less cohesive classes –​middle and professional as well as ‘working’  –​that still ultimately pay for billionaires’ largesse. Celebrities, whose power to glamourize and humanize elites by dwelling among them has risen with the reach of broadcast and social media, now merge with its commercial and political elements to ensure their resilience against contemporary attack.

Motivation and Background Long-​ignored denunciations of elite greed, by perturbed patricians on the right and enemies of privilege on the left, seemed to gain sudden traction as the new millennium opened. Bonus-​soaked bankers suddenly tottered into ‘credit crunch’, appealing for rescue to the governments whose purse strings they had previously pulled. A wave of terrorist attacks on symbols or flaunters of commercial wealth exposed the failure of a globalized market system to include and enrich all social groups, and its peculiar vulnerability when the disaffected took up arms or malicious computer code. Scientists and public intellectuals, whose pronouncements once made them opinion formers and gave them the ear of policymakers, found their prognoses and prescriptions suddenly challenged as they collided with contrary data or ‘common sense’. Political and business bosses, where unable to scapegoat discredited experts, found their tenures inexorably shortened as a misled public lost its deference for all leaders. Screen and stage stars stood (alongside bishops, gurus and televangelists of diverse faiths) accused of power abuse transmuted into sex abuse, while sporting heroes were forced to defend their records against charges of chemical enhancement. These rejections of past political, commercial, cultural and cognitive elites appeared to culminate in political earthquakes across several continents. A fall in fossil energy prices linked to global recession and carbon emission curbs prompted street protests against governments that had relied on oil and gas revenues to fund generous public services alongside low taxes –​toppling long-​time dictatorships in Libya and Egypt in 2011, and forcing repressive action by governments in Iran (2009), Russia (2011–​12), Sudan (2011–​ 13), Bahrain (2011–​14), Syria (2011–​18) and Venezuela (2014–​18) in order to cling to power. Democratic arrangements that might earlier have defused such discontent began instead to channel it in unexpected directions that proved equally disruptive. In mid-​ 2016, voters from England’s affluent south and deprived north combined with the disaffected Welsh to vote for the United Kingdom’s withdrawal from the European Union (EU), despite majorities of its Scots and Northern Irish constituents (and Londoners) wishing to remain. Later that year, Donald Trump took time out from his real-​estate empire and reality television appearances to enter the White House, the least prepared of presidential candidates defeating the ultimate professional, after rousing a Republican vote in former Democratic heartlands. Other electoral upsets followed in 2017 with

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a once-​ mocked opposition leader (Jeremy Corbyn) demolishing the Conservatives’ majority in the United Kingdom, the independent Emmanuel Macron snatching the French presidency from traditional left and right parties, and Germany’s long alternation of Christian Democrat and Social Democratic rule interrupted by the rise of populist parties. Often unpredicted, these twists were commonly presented as a popular revolt against elites. Mainstream parties and previously tolerated autocrats were seen to have become –​ or been captured by –​members of a small ultra-​privileged circle, who no longer understood or promoted the interests of ordinary people. Protests were directed at ‘adjustment’ and ‘austerity’ policies that deflected economic pain from concentrated financial and business interests onto households and small traders with much shallower pockets, and ‘security’ strategies that turned potentially liberating new technologies into harbingers of low pay and perpetual surveillance. Anti-​globalization movements –​which had drawn together various strands of socialism, environmentalism, nationalism, communitarianism and global justice campaigning to contest the notion that all alternatives to Western economic liberalism had ended after the Cold War  –​saw a common theme beneath these grievances. The seething masses were calling time on a project of international and interregional integration that had promised benefits for all, but that actually gave unprecedented riches and globetrotting opportunities to an already lucky few while bringing insecurity and misery for the rest. Yet it soon became clear that Trump, initially the most bruising of bedfellows for the US Republicans, had been expertly co-​opted by them. His first year in the White House saw fellow finance and real-​estate billionaires appointed (alongside five-​star generals) to key posts, regulations stripped away as enforcement agencies were passed to directors who denied the need for them, and deep cuts in top income and corporate tax rates financed (if at all) by stripping healthcare subsidies and tax breaks from the lower-​paid. Voters lured by promises of protection against unfair foreign competition and corporate domination were threatened instead with the biggest drive against labour protection and income redistribution since Ronald Reagan. The EU’s traditional ruling parties, often exploiting the discord across the Atlantic, rebuilt their accustomed coalitions –​promptly reaffirming their commitment to monetary and trade integration that placed severe limits on fiscal redistribution and price inflation, the traditional routes by which elite wealth and power are cut down to size. The ‘Arab Spring’ meanwhile turned quickly to winter, with conditions no less cold for those who had protested against reborn autocracy in countries of the former Soviet Union and the theocracy in Iran. China strengthened its one-​party system under communist general secretary Xi Jinping, its opposition-​quelling tactics closely studied in Vietnam, Cambodia, Turkey and many other high-​growth ‘emerging’ and ‘frontier’ economies. In Latin America, a political pendulum that had swung leftwards at the turn of the century election of left-​leaning governments in (among others) Brazil, Argentina, Venezuela, Bolivia and Chile began to swing back towards conservatism, as old problems of corruption and wealth inequality re-​emerged. While South Africa and Zimbabwe showed tarnished leaders the exit early in 2018, there was familiar frustration for similar

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spring-​cleaning efforts in Sudan, Ethiopia, Eritrea, Angola and the Democratic Republic of Congo. The New Power Elite confronts current social-​science thinking on elites with these recent bursts of action for and against them. It offers a multidisciplinary explanation of why elites periodically lose control, why important structural changes often happen when they do and why in most cases they quickly regain it despite the changed political and economic landscape. Rejecting the historical inevitability of some past accounts, it also identifies the conditions in which elites can be genuinely toppled, and replaced by anti-​elitists who inevitably acclimatize to palaces that are only partly demolished. As the book went to press, elites were still in unusual disarray in the United Kingdom –​sliding towards a ‘Brexit’ which all mainstream parties and most business representatives had initially condemned as economically damaging and socially divisive. Signs of comparable top-​level conflict were showing on both sides of the high-​stakes duels between Saudi Arabia and Iran, North and South Korea, and Russia and Ukraine.

Extensions More could doubtless have been said about the typical origin of conflicts within elites (ideological, generational, personal) that eventually split them into fractions; about the ways in which those fractions recruit other sections of society to fight their intra-​elite battles; and about the role of the near-​elite (aspiring political leaders, not-​quite-​big-​ enough businesspeople) in shielding or exposing elite fractions when other groups rise against them. Space constraints have also limited our selection of national examples, although we hope to have provided enough from outside the United States and Europe to show that our analysis extends beyond the ‘West’. A focus on the process of elite circulation has meant more abbreviated discussion of the reasons that require it –​internal decay (via incompetence and corruption), divided reactions to adverse external change, the equally powerful divisions that arise through elites presiding over favourable change, and the limited extent to which political adaptation can be accomplished through changes of mind rather than substitution of one for another. We anticipate criticism from existing scholars of elites –​especially those who declared them socially sidelined or intellectually irrelevant at the turn of the century, and those who have always downplayed their role in favour of class-​based, evolutionary, economic-​ optimizing or technology-​driven views of what drives social change. Constructive attacks from established scholars on an earlier draft of this book led to an amicable parting from our original publisher and a substantial restatement of our argument to deal with incumbent objections. We remain grateful to those who parted ways with our argument earlier, and sincerely thank our new imprint –​long a constructive challenger in the academic publishing hierarchy –​for providing an alternative channel with a speed that preserved topicality. We avoid speculating on the outcome, in America and Europe, of ongoing fallout from the ‘populism’ –​often enlisted by warring elite fractions –​which took root in the unique early twenty-​first-​century hotbed of fiscal austerity and monetary largesse. Early

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evidence on the most successful populists suggests that their performance in office was quickly unravelling, as they were forced to abandon the expedient class alliances that had sealed their electoral majorities. We hope they will defy this pessimistic inference from historical precedent. A lawsuit from Trump and associates would doubtless boost our sales, but the commander-​in-​chief was embroiled in bigger battles as this book went to press. Alan Shipman June Edmunds Bryan S. Turner January 2018

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Chapter One ELITES UNDER SIEGE We know whom to blame for our bad situation –​and they are few enough to name, if not quite close enough to land our custard pies on. Country and provincial-​town dwellers complain of a metropolitan elite, so ensconced in the big city’s artificial prosperity they ignore the plight of other regions. Reformers blame stagnant or falling social mobility on the influence of ‘elite schools’, passing on cultural advantage generationally under a false impression of merit. Even once-​revered elite sports stars are under suspicion for the substances they took on the way to the top. Donald Trump’s election as US president and UK voters’ decision to leave the EU reflect the failure of ‘elites in both parties to speak to the sense of disempowerment that we see in much of the middle class’ according to public philosopher Michael Sandel (Cowley 2016). In Middle Eastern and former Soviet countries, citizens have risen to challenge military and business elites, and their long-​held claim to be upholding a national integrity that was incompatible with democracy. Peoples granted ‘independence’ in the twentieth century bemoan their postcolonial path under a ruling elite that often grew rich rather faster than they did, often tracing the problem to the inequalities, arbitrary borders and inappropriate institutions bequeathed by a departing Western elite. Longer-​established democracies in the United States and Europe appear no less vulnerable to the sudden rise of ‘grass-​roots’ protest, which incumbents dismiss as populist but which voters greet voicing grievances that elites had long silenced. Opponents once silenced by the appearance of democracy and meritocracy are now in full cry against elites’ ability to stay on top by rigging the labour-​market competition (Reeves 2017), twisting welfare-​ state arrangements to their own benefit (Hayes 2012) and tuning the political machine to their own preferences (Gilens & Page 2014), partly by tying their economic interests to those of the better-​off groups above them (Bartels 2008 29–​126), helped by their control of biased media (Chomsky 2002). The counter-​cry is muted. Former supporters conceded long ago that societies’ most privileged have ‘lost touch with the people’ (Lasch 1996:  3), succumbing to self-​interest and forgetting the social duties once attached to great wealth and political power. In short, the ‘glaring invisibility of elites’ (Savage & Williams 2008:  2), if it ever really existed, has given way to a searing visibility –​and apparent vulnerability. Elites are accused of recapturing political and economic control (or never really ceding it, despite the ostensible spread of democracy and containment of monopoly), and of failing to exercise their power for the common good. They are blamed for catastrophic losses of national security (symbolized by the 9/​11 Twin Towers attacks of 2001 and subsequent worldwide terrorism outbreaks), of social cohesion (strained by policy changes

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and population movements which shake the suburbs while not waking the gated communities) and of economic prosperity (destroyed in the global financial crisis of 2008, whose legacy of slow growth and bad debts was shackling recovery ten years later). Anger against them has moved beyond television studios and debating chambers, causing electoral upheavals and spilling out onto the badly potholed streets.

A Plague on All Your Palaces Coordinated attacks on elites, and swiftly rising anti-​elite protest movements, are hardly new. The People’s Party in the United States rode a wave of rage against elite corruption at its Omaha convention in 1892. Europe experienced a wave of populism, targeting the then numerically dominant peasantry, in the mid-​and late nineteenth century, calmed by strengthening dictatorships in the east and grudging franchise extensions in the west (Mudde 2015). Many Africans and Asians suffered for the first half of the twentieth century under the alliance of local and foreign elites that ruled them as colonies; a suffering extended through the second half as national political and business elites proved the big winners from independence, using superior wealth, education and language skills to stride the global stage while problems of poverty and illiteracy persisted at home. Those leading the new charge against elites often give the impression that they have recently emerged or re-​emerged, acquiring power that used to reside in more representative and accountable institutions. But elites were no less powerful half a century ago, when the long post-​war economic boom collapsed into a decade of ‘stagflation’ in the West and even longer, costlier economic malaise in China, the Soviet Union and the global South. Or a century ago, when their mismanagement of domestic policy and international relations created conditions for the First World War, and its gory second coming. Willingness to submit to them has been eroded by suspicion that elites have decayed, losing the capacity and incentive to deliver competent rule. This performance-​ related attack on the powerful and privileged easily converts into the belief that their ascendancy is fundamentally wrong, that the time when elite rule was workable and desirable has passed. But history suggests that if they reform and redeem themselves sufficiently quickly, by steering away from the rocks, societies will soon stop questioning their right to stay at the helm. Past elites were generally even less representative of general populations than today’s –​ invariably more dominated by males, the racial majority and those from privileged social backgrounds. Yet they managed to remain in place, even while yielding to more democratic procedures –​sometimes through repression and misinformation, but more often by shaping political, business and military strategies that delivered good results. The Bretton Woods system, designed by a handful of officials from Europe and America and extended globally through their still-​vast empires, oversaw a post-​war boom that reversed the damage of the Great Depression and the Second World War. The equally top-​down United Nations structures imposed ‘liberal’ values on the subsequent decolonization, while small cliques of military strategists preserved a Cold War balance of power despite nuclear proliferation. Multinational corporations and their equally globetrotting financiers concentrated corporate control (and employment contracts) into

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unprecedentedly few hands, but could justify such dominance by delivering full employment with rising living standards and consumption opportunities. Scientific research, while still a preserve of rich amateurs and selectively educated white males, delivered path-​breaking discoveries in nuclear physics, organic chemistry, mathematics, computerization and disease control. Elites could admit to unwarranted privilege while still justifying it through performance that brought social benefits. When they made expensive mistakes –​as in Suez in 1956, or the Bay of Pigs in 1961 –​they admitted and quickly corrected them. For a long time, publics appeared to acquiesce in elite rule if, on reasonable calculation, the benefits outweighed the costs. Benefits were measured by (usually counterfactual) comparison with the situation under non-​elite rule. How would life be if major-​consequence decisions were transferred to a ruling group composed of ordinary citizens, or of representatives who were much like them in terms of income, wealth, social status and knowledge? Costs included the financial and social impact of nurturing and maintaining an elite, given that more public and private money tends to be absorbed in accumulating and maintaining its superior ‘human capital’ and ‘social capital’ stocks. More recently, provenance has been added to performance as a second condition for public acquiescence. Elevation into the elite must be genuinely (and visibly) meritocratic, involving some demonstrated ability and effort rather than (just) connections and resources for fast-​track promotion. If unjustified social privilege trumps merit in the battle for elite training places, the rest of society is seen to lose twice over. It pays to turn an already advantaged group into an elite, and then suffers less-​than-​competent rule, through top jobs being assigned by who can pay the most rather than those who do them best. Radical political activists and social commentators complained for decades about a ‘conservative elite’ or ‘establishment’, which represented and defended traditional concentrations of wealth and power. The old anti-​elitism targeted a ruling clique which defended its right to rule on the basis of superior knowledge (conferred in ‘elite schools’) and awareness of the wider social interest, reflected in noblesse oblige. These left-​ leaning complainants now find themselves under return fire  –​as representatives of a ‘liberal’ (metropolitan) elite, whose opposition when ineffective merely strengthens the conservatives, and when effective supplants them with an equally remote elite that serves society even less well. Over time, radicals from deprived social origins have given way to those who share the old elites’ educational and economic privileges, becoming comparably distant from those they seek to represent. Socialist and social-​democratic movements have thus succumbed to the accusation of tolerating, even colluding with, structural trends their founders sought to oppose. In particular, rising inequality is accepted on the assumption of a ‘trickle down’ which never reaches the ground, and cosmopolitan entitlements promoted against the wishes of local and national constituencies who expected preference over ‘outsiders’. Erstwhile supporters’ complaint, that their interventions have done nothing to redistribute wealth and power, then dovetails with opponents’ long-​levelled charge that these interventions stifle wealth creation and put jobs and incomes in danger. In consequence, the political left around the world was largely sidelined after a global financial crisis that would logically have moved it centre stage.

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Conservative elites were forced into retreat by the need to instil greater administrative competence, often after military defeat (Neild 2002: 12). During the twentieth century, ‘reformers’ ousted older parties and leaders from government –​through electoral contests or coups –​with the aim (and claim) of bringing more efficient policy design and implementation. Hereditary or cronyistic company bosses were swept from their boardrooms in a similar way, by executive high-​flyers schooled in new disciplines of management science and financial engineering. And as weaponry melded with high technology, it passed to a new officer class trained in strategic analysis and game theory, displacing the military ‘old guard’. Steeled with seemingly evidence-​based, scientifically informed policies, modernizing elites launched more boldly into managing economies, restructuring businesses and re-​engineering societies. It is these meritocratically authored, liberally motivated grand designs that are now being shot down by the people they sought to serve. In the United States, Democrats who believed unshackled science and regulated economics would restore security and sustainable prosperity were beaten to the White House (and both houses of Congress) in 2016 by more demotic Republicans, with their promises to shield low-​skilled workers from harms blamed on globalization and automation, and solve ‘global warming’ by simply pretending that it did not exist. European elites, trying to match America’s achievements, were assailed for mimicking its misjudgements. The EU, which for its first 40 years appeared to restore the economic viability and democratic accountability of its constituent member states (Milward 1992), now seemed doomed to undermine them through inept elite initiatives. An ill-​judged single currency experiment robbed its core members of fiscal and monetary policy discretion, condemning them to decades of restrained economic growth and rising debt (Stiglitz 2012; Bibow 2017). The ‘democratic deficit’ rendered member-​state governments unable to tackle social problems by traditional fiscal means, leaving voters’ anger to be deflected against migrants when it could not be defused. Publics around the world have signalled their disillusionment with elites by electing or accepting alternative leaders who convincingly style themselves as anti-​elitist, however privileged their own backgrounds or crude their tactics. In the Philippines, suspicion that neither the dictatorship of the Marcoses nor the democratic Aquino governments had tackled the country’s fundamental problems led to the election as president in 2016 of Rodrigo Duterte, whose approach to prominent people suspected of corruption or drug dealing moved quickly from naming and shaming to naming and extrajudicial execution. Thousands of citizens were either executed on the streets or left to rot in jail. In Italy, the Five Star Party founded in 2010 by comedian Beppe Grillo became the largest parliamentary party in 2013 and won the mayoralty of Rome in 2016 on an anti-​corruption platform, seizing the initiative in a referendum campaign over the ruling Democratic Party’s constitutional reform plan. In Iceland, the realization that established party leaders had not only presided over a ruinous financial boom and bust in 2000–​8 but also made secret deals to protect their personal finances from it drove an electoral swing towards the anarchic Pirate Party, which held the balance of power after early elections in 2016. Colombia’s voters in October 2016 rejected a deal to end the 52-​year conflict with FARC guerrillas, forcing president Juan Manuel Santos into a revision of the peace

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deal, which he then refrained from putting to a second referendum. Globally, populism is on the march against elites deemed too distant from everyday reality. The political upsets of 2016–​17, including Trump’s election as US president and the United Kingdom’s vote to leave the EU, followed successful campaigns against ‘consensus’ views of what was in the public interest, to which all traditional parties of government had subscribed. Some parties forged in opposition to rampant capitalism were caught in its driver’s seat –​not sufficiently twisting the wheel –​when it financially crashed in 2008 and had to be rescued with public funds diverted out of social welfare and infrastructure. Left-​wing groups lucky enough to be out of power when it crashed were unable to capitalize on capitalism’s crisis, because it threatened to staunch the flow of wealth their redistribution plans relied on. So the initiative was seized by new activists whose chosen scapegoats for stalled living standards –​free trade, immigration, multinationals, multiculturalism and the politicians who had encouraged them –​enabled them to harness radical rhetoric to a conservative retinue, giving new sheen to a centuries-​old populist reaction. Wherever and whenever they do it, those protesting against elected or appointed authority around the world appear to be expressing six common beliefs: 1. A small number of very powerful individuals and organizations wield enormous and inordinate power, shaping the lives and livelihoods of many others who lack such power. 2. This elite does not deserve its power, and exerts it in ways which work to the disadvantage of the majority –​who are left worse off, or not as well off, as they would have been without elite rule. This disadvantage may occur despite the elite’s intention to benefit the wider society, or because it has no such intention. 3. Elites have become more powerful over time, and their actions have become more inimical to most people’s interests over time. 4. Most elites combine inordinate power with inordinate wealth, one being the cause or the consequence of the other. Even when the ‘power elite’ consists of different people from the ‘economic elite’, it tends to implement policies that benefit those with the highest income and wealth, and this is often the reason why elite rule disadvantages the majority. 5. Power elites have survived democratization without perceptible reduction or redistribution of their concentrated power; and economic elites have survived democratization without noticeable reduction or redistribution of their concentrated income and wealth. 6. In consequence, meaningful change (in the interests of the majority) can only be achieved through extra-​parliamentary or extra-​congressional action –​which might include profit-​making entrepreneurship, social entrepreneurship, voluntary ‘third-​ sector’ activity, violent overthrow of the ‘system’, or establishment of alternative communities outside the present ‘system’. The intellectual, technological and economic progress made by most societies, despite their being ruled by small elites for all or most of their history, challenges the idea that elites are inherently inimical to the wider social interest and deliberately choose policies

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from which elites gain and most others lose. Instead, the present (seemingly existential) challenge to elites results from twin performance-​related problems:  incompetence in implementing policies designed to improve society, and corruption which dulls the incentive for better implementation. The resultant lapse in performance has combined with rising expectation to create a crisis of elite legitimacy. When publics challenge their elites, the unrepresentativeness long characteristic of elites becomes a particularly important focus of attack. The elements of this sequence (incompetence, corruption, rising expectations and unrepresentativeness) can now be assessed in more detail.

Incompetence Times that were far more elitist (with fewer people at the top, wielding far more power than today’s rulers dream of) have also tended to be times when a majority acquiesced in elite rule, and even applauded it. Such times could be dismissed as those in which the majority was deluded, lacking the education or accurate information that would have allowed it to recognize its masters as oppressive and incompetent. But the evidence favours another interpretation:  elite rule is usually regarded as acceptable, and even desirable, provided the elite justifies its place by setting and achieving goals that serve the majority. Privilege survives if performance related, whether good performance precedes the bestowal of privilege or occurs when this has already been bestowed. Any belief that a small group of people are inherently superior, and deserve to rule others whatever they do, tends to have disappeared by the time societies industrialize. Modern elites must demonstrate their superiority by measurably outperforming others at particularly important tasks. Royal descent or divine right are no longer sufficient to merit elite status, unless accompanied by superior performance as an outward sign that subjects are following the right leader. This opens up the possibility of a ‘circulation’ of elites, with new talent being promoted to the top jobs if the existing holders are not doing well enough. Only when success is immeasurable, as in some areas of priestly or poetic art, can top-​tier posts still be arbitrarily assigned. Field Marshall Arthur Wellesley was a British aristocrat who bought his first army commission, received a knighthood and peerage between battles, and lived at a stately home in Hyde Park, then (and now) the location of the world’s most expensive apartments. But he left its palatial splendour to lead crucial victories at Salamanca and Waterloo, and –​as the Duke of Wellington –​is regarded as Britain’s Greatest General (according to a poll by the National Army Museum in 2011). His family wealth and inherited social status may have brought him into the officer class, but he could not have risen within it (or seen off Napoleon) without displaying strategic merit. Even the less well-​fated Earl Cardigan half a century later, in leading the Light Brigade, showed impressive personal courage and bullet-​dodging prowess while misdirecting its charge. While performance-​related privilege might have been expected to tighten its share of the total as ‘modernization’ proceeds, the reverse appears to have happened. The creative and professional credentials which lift individuals to posts of high authority seem insufficiently aligned to their achievement once they are in those posts. Misfiring grand designs, from Pakistan’s independence to Europe’s diesel engine drive and St Louis’s

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Pruitt-​Igoe housing complex, are blamed on ‘intellectual elites’ who lost touch with their wider publics. Meritocratic military shifts fare little better than those in civil decision-​ making. From the Russian invasion of Afghanistan in 1979 (and arguably for the preceding century), Western elites combined to fight a threat from militant Islam in ways that seemed only to inflame it. Armed-​force planners and commanders, with less public funding and more public scrutiny than in the century of World Wars and the Cold War, were laden with blame for misadventures that could only in part be displaced onto the politicians who despatched them. The Chilcot Report on UK involvement in the 2003 invasion of Iraq, published in 2016, stated that ‘UK forces withdrew from Iraq in 2009 in circumstances which did not meet the objectives defined in January 2003’ (8: 471) and that ‘the UK failed to plan or prepare for the major reconstruction programme required in Iraq’ (9: 529), as well as highlighted numerous deficiencies in the conduct of the military campaign (Chilcot 2016). Despite its frequently damning criticisms, the conflict’s UK architects (including former prime minister Tony Blair and foreign secretary Jack Straw) endured nothing worse than muffled public opprobrium, their post-​retirement commercial and lecture-​circuit opportunities not perceptibly diminished. Russia’s loss of Soviet ‘empire’ appeared for a time to sharpen its leadership, as Vladimir Putin exploited a lack of political or media opposition to outfox his American and European counterparts on a range of foreign policy issues. With the support or connivance of Trump he was able to sustain the Assad regime as a Middle East ally, albeit it at the cost of destroying major cities such as Aleppo, and grab parts of Ukraine as compensation for losing the whole. At home, Putin also neatly sidestepped term limits –​ designed to stop an electorally removable politician turning into a permanent bureaucratic installation  –​by serving one of his terms as prime minister before reverting to president. But a failure to diversify the economy beyond suddenly devalued oil, or to prevent the large industrial groups that backed him from demanding expensive state support when recession struck, threatened to disable his war machine as he approached his fourth re-​election. Far from overtaking the old superpowers by avoiding such missteps, the largest ‘emerging’ countries seem now to be repeating them. China’s elite appears to have lost control of the economic growth which for decades was all that legitimized a corrupt and nepotistic ruling party. While expansion remains rapid (if official data are to be believed), it has ceased to guarantee quality-​of-​life improvement for the average household, which instead often struggles with dirty air, contaminated water, cramped apartments and worsening congestion in hastily built cities. Meanwhile the ruling party’s officials have fared so well that it has to ration their gambling trips to Macao; and it fatally responds to public disquiet by reversing rather than reinforcing its previous concessions to democracy and human rights. Similar shortcomings trouble those running China’s main rival for emerging superpower status. The Indian elite presides over a nation that sends satellites into space, rules the global outsourcing business and runs some of the most successful multinational enterprises while millions still lack basic sanitation and nutrition. ‘India still has a higher proportion of undernourished children than almost any other country in the world, even after thirty years of rapid economic growth’ (Dreze & Sen 2014: 33). All this despite the country having long endured a ‘Hindu rate of growth’ less than half that

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of China on the understanding that a democratic system would spread the rewards more widely, losing fewer to corruption and exorbitant wealth. Pakistan fared little better after its 1947 secession, the succession of military governments and underachieved economic plans, leaving many regarding it as a creation of elites (Peshkin 1962, Malik 1997) that neither reflected nor fulfilled the needs and wishes of its majority population. Even if they were installed arbitrarily and had no special talent, past elite members were often helped to justify (and retain) their top roles through the special resources that these made available. Those who join an elite, even if through luck or coercion rather than proven judgement, can take up favourable positions in which they enjoy superior resources. Top-​rated managers are appointed to head the strongest companies, top drivers are given the fastest cars, top politicians get first call on public monies raised by tax or borrowing. The higher people rise in an organization, the more minions and electronic systems they tend to have on call, delivering privileged information and ensuring implementation of the decisions that follow. If a dictatorial president, chief executive or trade union leader avoids pursuing too many unwinnable battles or private-​life indiscretions, he or she can often cling to power because the top job’s superior resources enable him or her to do it well enough. Those who could have done it better, given the same advantages, are unable to prove that without access to those advantages. Perceptions of supremacy can be self-​fulfilling. By a reflexivity (or, under a Calvinist approach, privilege bestowed is itself a confirmation of privilege deserved). When it is unclear what distinguishes a great from an average performance, incumbency has distinct advantages. It may be up to other aspiring artists, philosophers or evangelists to ‘prove’ that they are better at the task than those already doing it, a feat often hard to accomplish when only part way up the heap. Elite circulation will never be friction free. Access to information is one of the biggest incumbent advantages, one that grows in importance as populations (and their movement) rise and societies become more complex. Those at the top of a government, army, business or other organization tend to have a view of the whole operation that is not available to those further down. Elites can be ‘masters of all they survey’ in part because of the extent of their surveillance. Their position enables a top-​down view of operations beneath them, and a reasonably comprehensive picture of who is where, intending to do what. This leaves them better placed (than subordinates) to anticipate the likely results of their (and others’) actions as well as to implement those actions. Advisers, informants and ministers can also form a protective belt, whose members can be blamed and dismissed when a major failure occurs. If the boss seems to know more than anyone else about what is going on, and hence what to do, this does not necessarily reflect any superior ability to comprehend and decide. It may just be the result of getting faster, better information about more live action. But it cements the power of those at the top if those further down cannot get a similarly detailed top-​down view. Sports stadium winners are treated as heroes and heroines, despite their privilege, because they are credited with the ultimate union of natural talent and selfless application, without which they would not excel at the highest level. Their superiority is proven by fierce competition with the elites of most other countries. This ensures that the teams which select them seek the very best talent, regardless of circumstance, and cannot afford

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to retain any second-​rate contenders who merely bought their way in. Amid its Olympic and World Championship successes of the 2000s and 2010s, the United Kingdom’s social researchers drew attention to the very high proportion of ‘Team GB’ sports men and women who came from high-​income families and had been to fee-​paying schools and elite universities. Their concerns were drowned out by the cheers of spectators who were mostly from far less privileged backgrounds, but recognized world-​class success and did not care if its exponents’ had cut-​glass accents (even in traditionally ‘working class’ sports whose postcode areas were off the talent scouts’ map). Mass audiences were likewise unruffled by the revelation that the superstars of the acting and rock music worlds were disproportionately from affluent backgrounds and exclusively educated. All was redeemed by the knowledge that they were obviously the best, as evidenced by their Oscar and Grammy nominations and global sales of DVDs. The playing fields (and playrooms) of Eton and other private schools still provided a disproportionate number of UK sports and screen stars in the early twenty-​first Century (Social Mobility and Child Poverty Commission 2014), but this did not dampen the applause of their audiences, who reserved their heckling for those who combined privileged roots with power they could not be proven to exercise well.

Corruption The term ‘corruption’ reflects a presumption that its perpetrators were doing no harm, until internal weakness or external temptation turned them bad. In relation to those wielding power, this reverses history. ‘It is uncorrupt government that is exceptional […] For much of recorded history, societies have not been governed by rules of the kind we take for granted today’ (Neild 2002:  1). The puzzle is why, in some specific times and places, governments become less corrupt, and private wealth holders less prone to corrupt them. And why public attitudes to corruption fluctuate, occasionally tolerating much and then revolting when the level seems much lower. The billionaire (but tax-​immune) Trump derailed Hillary Clinton’s once-​assured 2016 presidential run by painting her as the candidate of a corrupt and callous elite, promoting its own power and wealth behind a veil of empty liberalism and faux philanthropy. America’s elite was judged after 2008 to have caused a global financial crisis through its own greed, then bailed itself out at ordinary taxpayers’ expense. To the extent that they restored any sort of economic expansion, it was one in which the rich got richer while the rest found their incomes and public services pared further down. Ironically, the real-​estate sector inhabited by Trump loomed large in triggering the crisis, and his business empire gained from the rock-​bottom interest rates and buying opportunities that flowed from it. But this only strengthened his hand in pointing to political professionals who succumbed to inducements and deflecting attention from the dealmakers who might have offered them. Beyond the realms of feudal systems and oil sheikhs, governments must fund their activities from a tax base built around private business. The same is true of most political parties that form governments. The inevitable need for some alignment between government and party programmes and commercial interests (explored further in Chapter 6)

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blurs the previously bold lines between public and private, a fuzziness not resolved when both entrust key activities to a non-​government, non-​profit ‘third’ sector. This blurring has been heightened since the 1980s by the privatization of public assets and switch to private-​or voluntary-​sector provision of formerly public services. In an ironic twist of the ratchet, opportunities for corruption grow when the state apparatus expands, and grow again when effort is made to shrink it by selling bits off. This, even when spurred by belief that it will yield better value for public money, invariably channels some of that money into private profit makers’ pockets. Such additional private enrichment seems obviously wrong when public officials hand private monopolies to their closest friends or the highest bidders, and collect rewards for doing so. It can seem more subtly wrong when the extra layer of profit absorbs the efficiency gains, and when private contractors’ commercial confidentiality prevents these ever being confirmed. A weakening link between (fluctuating) corporate performance and (ever escalating) chief executive pay has heightened suspicion of business elites as corrupt, while companies’ growing reliance on state-​provided contracts and regulations widens their opportunity to act as corruptors. While runaway executive pay was first detected in the United States, the millennial ‘fat cats’ were scarcely less rotund in the United Kingdom, where in 2015 the average chief executive officer (CEO) of an FTSE 100-​listed company earned 147 times their employees’ median wage, after rising 10 per cent across the year and 33 per cent across five years (High Pay Centre 2016). Although executive pay gaps were still substantially smaller elsewhere in the EU, and in Switzerland, Australia and Japan, all were rising rapidly. Connections between this jump in pay and the CEOs’ performance were hard to establish. Few of these companies recorded consistent improvements in profitability and share price over the period, and many were slow to seize new market opportunities, which smaller competitors got to first. After 2008 many of these firms sat on piles of cash, earning them nothing, unable or unwilling to find any profitable investment opportunities. Yet while financial theory and forensic evidence could directly link their conduct with the Global Financial Crisis, and to fraudulent practices that often continued or intensified when the crisis broke, there seemed to be little punishment for the perpetrators and no interruption to modern societies’ ‘Matthew effect’ (donating to those who have, depriving those who do not). For turning the Royal Bank of Scotland into the biggest recipient of combined UK and US bail-​out funds, involving it in every available scheme to mis-​sell products and mislead regulators, and rendering it so financially black-​holed that it ran up £58bn ($75bn) of losses in the first nine years after being emergency nationalized for £45bn (BBC 2017), former CEO Fred Goodwin received the ultimate punishment of … being stripped of his knighthood and taking a diminished pension of just £345,000 per year (Inman & Tryhorn 2009). Financial propriety at the helm of multilateral banks was no more in evidence than atop the national variety. Of the International Monetary Fund (IMF) managing directors who oversaw the crisis and its aftermath, Rodrigo Rato (in office 2004–​7) was handed a 4.5 year jail sentence in 2017 for permitting $12.7m embezzlement at the two Spanish banks he subsequently ran (Barriaux 2017); Dominique Strauss-​Kahn (2007–​14) was forced to resign when accused of raping a maid in a hotel room; and Christine Lagarde

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(appointed 2014) was convicted in 2016 of allowing a corrupt payment to a disgraced French business tycoon while serving as finance minister, though –​unlike the ultimately acquitted Strauss-​Kahn –​this was not deemed serious enough to force her resignation. To allay any suspicion that those on the former communist side were culturally more prone to disguise private gain under public policy, a senior Harvard-​based architect of Russian privatization used inside information to make a killing via his wife’s hedge fund (McClintick 2006), escaping with professorship and tenure intact.

Unfulfilled Expectation Growing resentment of today’s elites, even when they seem no less competent or incorruptible and more attuned to public need than those of the past, highlights a rising expectation of what elites can (and should) do for society. This elevation of hope has coincided with an erosion of what even the most capable elites can realistically achieve –​ much of which results from structural changes and knowledge advances due to progress under past elites. This makes the raised expectations impossible to fulfil. The task of running government, businesses and other organizations does not necessarily become more difficult as societies grow bigger, more productive and more specialized. Some aspects of social management undoubtedly become more complex, but there are several offsetting tendencies. Among these, the growing size and diversity of populations enables the spreading of risks and creation of insurance pools, potentially reducing the range of ‘social’ insurance obligations. Advances in knowledge and technology raise productivity and attainable real income, while lessening or removing various natural uncertainties and hazards, and providing more solutions to practical problems. Improved communications and process design techniques make large-​scale management easier. Despite these potential advantages, it has become harder for elites to design effective policy. The scope for enacting successful public policy has diminished, and there is ever more potential for visible mistakes that drive the statecraft off the road. Even when effective policies are designed, their implementation has got harder. National political institutions prove resistant to radical change. International law and governance are an even bigger obstacle to the increasing number of solutions that need multi-​country implementation. Bright ideas for making people richer, healthier, freer and happier roll daily off the world’s presses and screens, cogently outlined by their scientifically credentialed authors and distilled into appealing 10-​point programmes. Yet political and commercial elites routinely fail to understand them, fall at the first hurdle of implementation or introduce a scheme which turns out disastrously different from the one the experts advised. What Deborah Stone (2002) terms the ‘rationality project’, designing efficient political constitutions in the eighteenth century and then harnessing the technical breakthroughs of the nineteenth to the policy challenges of the twentieth, is thwarted by the difficulty of steering expert plans through unruly legislatures and the unintended consequences when they get through. ‘From inside the rationality project, politics looks messy, foolish, erratic, and inexplicable. Events, actions, and ideas in the political world seem to leap outside the categories that logic and rationality have to offer’ (Stone 2002: 7). The problem runs

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deeper than ingenious plans being thwarted by tortuous political processes. Legislative obstructions are often caused by, and offer a rescue from, policy designs whose logic and rationality evaporate on impact with the real world. President Trump’s initial plans for replacing ‘Obamacare’ fell so far short of his campaign promises that its stalling in Congress relieved many on his own side who were soon to face re-​election. Even when it continues to advance, elites’ capacity to direct social change has been overtaken by popular expectations of what they can and should do to improve it. Rapid progress in the natural sciences –​diseases cured, sustainable energy sources developed, supercomputers shrunk into mobile phones –​has sown a belief that political and social sciences should progress at the same speed, with governments finding solutions to new economic and foreign policy challenges (including those posed by progress in the natural sciences). Despite long liberal efforts to show that collective-​action problems can be solved by governance that need not involve the intervention of governments, even the most ruggedly individualist electors tend to look to the state to take the lead, on issues ranging from local nursery provision to global emissions reduction. If politicians opt out, expectation is deflected to other elements of the elite: the large corporations that turn hard science into easily affordable technology, or non-​profit foundations through which all-​conquering corporate chiefs now seek to dispel any deprivation that commerce could not. From a public standpoint, the capacity of elites to promote the interest of those they rule has steadily increased, to unprecedented levels. Advances in science, technology and organizational technique, properly harnessed by public policy, can conceivably raise and spread quality-​of-​life across the world. Challenges such as climate change, exhaustion of natural resources, rising and ageing populations can be contained or even turned to advantage, so long as social and economic policymaking raises its game to match that of research and development (R&D) and private entrepreneurship. Unfortunately for elites, public expectation of what they can and should accomplish has outgrown their actual capacity to deliver, however knowledge enhanced. In declaring (as did France’s National Assembly in 1789)  that the sovereign state is the source of human rights, and other benefits of national citizenship, elites were probably trying to stifle a liberal ideology that traced such rights and benefits to each autonomous, sovereign individual. But they thereby took upon themselves responsibility to deliver and protect essential aspects of their subjects’ welfare (Turner 2006: 2–​3). The range of ‘essentials’ has inexorably extended ever since, to include adequate healthcare, housing, education, nutrition, relief from poverty and access to justice as well as freedom from undue restraint. In allowing such responsibilities to be ascribed to government, elites gave the classes below them an ever larger stick with which to beat them if the ‘quality’ of life and public services fell below what average citizens viewed as adequate, or observed elsewhere. Elites have tried various ways of closing this expectation-​execution gap, almost always counterproductively. Democratization was –​at least in some contexts –​an attempt to stop the ordinary people condemning their elite by giving them the power to select it, if not the belief that it was drawn from their own ranks. It has rarely worked this way, for reasons Chapter 8 will explore in more detail. ‘Accountability’ was stepped up, as a

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complement or substitute for democracy, in the hope that more chance to view officials and assess their results would heighten respect for their efforts. But shining a light on the mess has generally meant a better-​illuminated mess, without much enlightening the general public on the complexities and inevitable compromises that led to the mess. ‘Privatization’ of industries the state used to run, and the contracting out of services it used to provide, was intended to deflect and defuse responsibility for some of society’s most essential outputs, if not to boost efficiency so that more could be delivered for less (Osborne & Gaebler 1990). But when private management falls down, voters still blame their political masters for wrongly assigning or mismanaging the contract. Some elites, such as those of post–​Soviet Russia, have largely managed to avert such public expectation. As pretensions of ‘communism’ were shed in 1990–​91, the governments of Boris Yeltsin and Putin (by accident or design) revived a traditional Russian scepticism of their function. Even if the acts of politicians still loomed large in people’s lives, they were not necessarily there to serve them, or to prevail on their business friends to be socially responsible. Voters were conditioned to be thankful if the government channelled some of their tax and oil revenue into public service delivery, and a small proportion of business profits escaped the capital flight to be reinvested at home, rather than questioning where the rest went. But such lowering of expectations is increasingly difficult, and needed a degree of opposition-​and media-​restriction even in Putin’s strongest years. Any government that spends an appreciable proportion of national income –​whether the funds are taxed from the people or borrowed in their name –​risks provoking the belief that such outlays should bring general public benefit; and an ageing society may find it needs state assistance with pensions and eldercare, even if rugged self-​reliance was the ethos before retirement. Most other elites, in one-​party states as much as in democracies, struggle to retain their status without delivering some achievements commensurate with it –​typically striving to conceal their power and wealth advantages by concealing their fortunes and citing international or constitutional constraints on what they can do. Even when their policy choices are well informed and vindicated by available evidence, political elites encounter problems of acceptance, by those they impose the policy on and by the institutions of implementation. ‘Ordinary’ people are no longer willing to accept the automatic authority of (and public subservience to) their political masters, even if elected. And they now view the political arena as one compartment of decision-​ making, no longer superior to (and possibly more limited than) other areas covered by business, civil society, religious or cultural leaders. Politics is reduced to being part of a detailed division of labour, ranked alongside other occupations and professions rather than accorded an overarching role. Publics feel freer to define their own concerns as falling outside politicians’ remit, and to challenge policy professionals even on issues to which their remit is acknowledged to run. This insubordination is made plainest in the rise of ‘deliberative democracy’, in which people demand dialogue with their ‘representatives’ and assert the freedom to ignore or override them, opposing the ‘aggregative democracy’ in which the public trusts its named representatives to decide (Mouffe 2000:  114–​19). It is also reflected in public acquiescence as an increasing number of widely impacting decisions are spun out from politicians to less accountable agencies

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including high courts, central banks, private companies put in charge of formerly public services, or the programmers who substitute algorithms for judgements previously made by the human hand or mind.

Unrepresentativeness and Illegitimacy When publics start to perceive elites as more corruption prone and less competent, thus falling short of expectation, the elites’ unrepresentativeness and inequality of entry becomes a point of contention. An elite whose genetic luck, location and lifestyle place it beyond reach of (and sensitivity for the general population can avoid its resentment if seen to act in ways that benefit that mass). A key aspect of early ‘modernity’ was the growing expectation –​eventually insistence –​that elites should justify their role at the top of society by serving the good of the wider society and being accountable to it. As modernity matures, justification by results gets harder, as the growing complexity of decisions ensures a rising proportion will be wrong however sound their intention and reasoning. Procedural justification –​showing those in power to have made sensible judgements and assumptions –​rarely satisfies an audience that always ranks lucky success above heroic failure. Representational justification emerges as the default. It is harder to claim that leaders should have done better, if the ones we have are people like us, and are people we chose. But disempowering and replacing an unrepresentative elite, far from solving the problem, brings it closer to home. Full representativeness is an aspiration similar to meeting a childhood hero: mostly unattainable, and usually a let-​down when attained. A manageably small group that speaks for the whole can rarely be assembled, even in the smallest of countries with the best-​designed democratic procedures. If ever assembled, it would still fail –​because people’s wishes can never be distilled into one coherent programme, and few accept their representatives’ mistakes as their own. For this reason, few electorates wish their governments to be full likenesses of themselves. Publics’ desire for higher power to be displaced from ordinary people is captured by their past respect for the Establishment, and a very different understanding of its role. Before its current pejorative usage, the Establishment meant something more benign: a network of liberal-​minded people who could counteract the excesses of autocratic and short-​sighted governments’ (Sampson 2001: 354). Establishments were a counterweight to governments elected by the people or professing to serve them, and their tendency to do what was popular or expedient for immediate results. As governments took on more responsibility and grew in size, past roles were reversed. Establishments became the entrenched, self-​interested holders of power and privilege, and elites became the small group that could challenge and break its malign grip, having greater capability and fewer vested interests. As currently understood, the Establishment ‘is unified by a common mentality, which holds that those at the top deserve their power and their ever-​ growing fortunes’ (Jones 2015:  5). Having briefly swapped roles, elites then slid back towards elision with the establishment, coming to resemble its executive committee, or the small subsection that politically develops and defends its advantages instead of just enjoying them.

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Rescuers Gone Rogue: Establishments and Bureaucracies To detractors, an Establishment comprises everyone who has done especially well out of the present system (in terms of income, wealth, status and influence) and who deploys these assets to prevent extensive change to the system. These characteristics may enable Establishments to protect democracy against ‘populist’ disruptive change, imposed by the people or their ephemerally elected representatives. Although often elided with ‘elite’, the Establishment is a much wider group that forms its support base –​including those who have retired from it or are being prepared to enter it, those supplying funds and ideas to it, and those whose interests its protects even though they never formally join it. Sometimes the distinction is one of significance and seniority: the elite are the handful who take key decisions and wield exceptional power, while the establishment forms a longer and less recognizable list of ‘great and good’ from whom the elite picks its committee chairs and assembles its influential cheerleaders when a policy needs selling to the public. Sometimes it is a distinction of recency: the elite are those currently occupying top jobs and wielding the maximum power, while the Establishment are a wider group on either side of this pinnacle –​those who used to be at the top before retiring or being eclipsed, and those on a career track who will reach it when the necessary experience and contacts have been amassed. Sometimes it is a distinction of visibility: the elite are those who exercise so much power that they may not want to do so in direct view of the public, or under arrangements that make them directly accountable to the public. So they erect a human shield of more numerous, less powerful ‘establishment’ figures, who either build support for the elite through their popularity or deflect criticisms from it through their unpopularity. Establishments may have many members in common with elites (active or retired) and may be comparable in size, but their relation to power –​and the reasons wider society may resent it –​differs in terms of motivation and consequences. Establishments form the often invisible barrier between an educated society and the meritocratic assignment of jobs requiring formal education. They keep back non-​members who meet all the formal requirements for advancement, while waving through members who do not yet keep moving forward all the same. Whereas elites occupy the seats of power, and are faulted for power abuse, establishments are the seedbeds of corruption, on lower administrative levels whose subcriminal trail may never (detectably) loop upwards to the figures at the top. The main charge against establishments is that they channel resources and responsibilities to people, forms and other organizations that are not the most deserving or best placed to receive them. Social justice and economic efficiency are eroded as a result. Insofar as they occasionally yield up public shame for a middle-​level name –​the incompetent health authority executive, the bribe-​taking police chief, the overpaid special adviser –​ they can also conveniently distract from the more consequential misdeed of their more powerful superiors, who can deflect the blame-​by-​association onto appointment panels whose workings they never observed. Conflating the ‘Washington elite’ and America’s wider establishment –​as the problem to which his transcendental Republicanism was the solution –​worked unexpectedly well for Trump in 2016. The billionaire was able to present himself as the political equivalent

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of a ‘disruptive technology’ despite deriving his wealth from traditional real estate rather than path-​breaking technology  –​not least because breaking into the property market (with only a seven-​figure sum in parental help) implied that he had taken on entrenched interests and shaken hands with construction crews as well as men in suits. In his indictment of the UK Establishment ‘and how they get away with it’, commentator Owen Jones (2014) finds it to be a hydra-​headed tangle of all the strands that Anthony Sampson had carefully separated a decade earlier. Westminster politicians, senior judges, conservatively edited newspapers and television news channels, tax-​dodging corporations, rich City of London financiers and chief constables re-​meld into a monolithic block, more insidious because its disparate components seem so often to be hitting against one another. This is possible because, in Jones’s definition, the Establishment (although ‘born to rule’) does not seek to lead the country in any particular direction, and so does not need to unify its economic or political agenda. It is engaged, more defensively, in protecting its existing privileges (of income, wealth and status) from the levelling forces of universal franchises and economic turbulence. ‘Today’s Establishment is made up –​as it always has been –​of powerful groups that need to protect their position in a democracy […] The Establishment represents an attempt on behalf of these groups to “manage” democracy, to make sure that it does not threaten their own interests’ (Jones 2014: 4). Bureaucracies once seemed primed to take over, systematically, the role that establishments had performed haphazardly before relinquishing. They would make political, business and military leaders more effective, enhancing their power to implement good decisions and averting too many bad ones. A clear assignment of roles and responsibilities would ensure their accountability so that lessons were learnt and guilty heads rolled when waste or error came to light. A  stable, salaried bureaucracy that is not directly appointed by politicians can ensure continuity of policy formulation and implementation that politicians rarely have –​especially when they are forced to change their minds in order to reflect fickle public opinion and get re-​elected, or are frequently thrown out of office for not doing so. However, bureaucracies invariably lapse from this ‘decision support’ by providing less than complete and unbiased information and advice (Hammond & Thomas 1989). What bureaucrats tell leaders may be distorted by their own agendas, or those pressed on them by external lobbyists. They may deliberately twist information towards what the leader wants to hear, to avoid confrontation and argument; or they may choose to highlight awkward and obstructive information, to deter decisions that radically change policy and disturb their quiet life. So despair at ministers’ lack of principle and willpower can quickly spread to the mandarins that were supposed to keep them informed and in check. In principle, bureaucracies can be the guardians of long-​term strategies that must be maintained over several parliamentary or presidential terms to tackle large problems (such as curing cancer, building large infrastructures or curbing carbon emissions to arrest climate change). Bureaucrats’ insulation from direct elections also allows them (in principle) to stick to unpopular but necessary policies, and to avoid ‘time inconsistency’ in decisions (for example, pledging never to negotiate with terrorists so as to deter any terrorist acts, but then caving in and talking to terrorists when they arise). A well-​designed bureaucracy will also filter and allocate tasks so that decisions are taken by those best

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equipped to make them –​the most important being passed to those in the most authoritative positions, who are freed to focus on them because less important decisions are dealt with at lower levels. Bureaucratic regulation can provide a cheaper and more reliable alternative to litigation or brute force when problems arise in the pursuit of self-​interest through free markets (Glaeser & Shleifer 2003). This benign contribution to economic efficiency and social justice breaks down spectacularly when bureaucrats develop their own agenda or become susceptible to the agendas of especially powerful members of society. Publics’ willingness to indict their senior bureaucrats has escalated as their past superiority of knowledge is eroded by rising general educational standards, and as their pay and pension packages begin to converge with those of private-​sector executives. But there is a more fundamental cause of growing mistrust, arising from the mandarins’ widening remit. Like establishments before them, bureaucracies are seen to have let the public down by either shrinking from responsibility –​letting leaders escape with ill-​informed or self-​interested decisions –​or by overexpanding their responsibility, dictating to those they were merely meant to serve. A neutral, disinterested bureaucracy is vital to the public acceptance of policymaking and regulatory institutions, and their growth. Voters who install a new leader in the hope of radical change often blame its subsequent non-​appearance on entrenched bureaucracies, resisting the new programme (especially if it includes trimming of the number and power of the bureaucrats, or an attack on corruption). But leaders’ efforts to bypass an obstructive bureaucracy, by surrounding themselves with ‘special advisers’ and ‘kitchen cabinets’, often worsen the situation, by draining administrators’ energy into interdepartmental turf wars and eroding the accountability that formal bureaucracies were meant to provide. Bureaucratization may once have been viewed as disempowering elites, with some bureaucracies deliberately designed to displace them or stand in their way. A structure of offices detaches powers from individuals and assigns them to posts, whose holders lose authority when dismissed. It dilutes ostensibly power, spreading it across many specialized functionaries, few of whom can take any big decision without the involvement and approval of others. It routinizes decision processes, reducing the scope for individuals to distinguish themselves by devising new ways to get things done, or claim credit for things done well. But if anyone is disempowered by bureaucracy, it is the middle levels of power below the elite, whose absorption enhances the grasp and reach of those above. Bureaucracy strengthens elites by amplifying the power they can wield over the average citizen, and the number of citizens over whom that power extends. In the absence of an effective national bureaucracy, the elite at the political centre must reply on an elite in each locality to enforce its policies and rally popular support for them. Bureaucracies’ facelessness and unresponsiveness are bound to tarnish their utility (and mask their necessity) when people deal with them daily in the private sector as well as more infrequently in the public. Corporations and state agencies cannot deal with their millions of customers without assigning them numbers instead of names and exposing them to escalating levels of telephone and online automation. The substantially quicker processing of routine demands has a raw underside when something non-​routine occurs, requiring the customer to make contact and seek redress. Increasingly fraught

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battles to find a contact address and a human operator, let alone one with the authority or knowledge to handle the enquiry, are bound to give bureaucracy in general a less than shiny image. It also increases envy, and resentment, of the select few who are still known to ‘the system’ by name, and are accorded immediate service while others are held in the jingly-​muzacked queue. The slide into pejorative use of a term that originally conveyed rationality and reliability in administration is partly a consequence of bureaucracy’s durability. Politicians and their advisers come and go –​more rapidly if voters have a say in the matter –​leaving their longer-​serving bureaucrats to flow through the detail and pick up the mess left by their decisions. But the public has found other reasons to distrust bureaucracy, and blame it for enduring social and economic problems. If they like their politicians, recalcitrant bureaucrats are a convenient excuse for favoured policies failing to take effect, or having the unintended effects. If they dislike their politicians, there is comparable anger against the assistants who brief them and follow their orders (and who, unlike their ministerial masters, cannot be voted out). Because bureaucracies have tended to expand, even across decades when governments were trying to downsize and disengage from past duties (Parkinson 1961), they are quickly associated with aggrandizing tendencies that waste taxpayer resources. This suspicion is compounded when mandarins are observed to be in regular turf wars with other departments, and rearguard actions against reformers who seek to boost their efficiency or trim their power. Even before the end of the Second World War, whose winners owed much to large project management, James Burnham (1944) proclaimed a ‘managerial revolution’ that would hand power to those running the large-​scale corporations that now dominated production  –​in capitalist countries as inexorably as in those that had switched to a version of socialism. Another disillusioned communist, Milovan Djilas, foresaw Eastern Europe’s efforts at state-​led modernization being captured by a ‘new class’ of bureaucrats appointed by the ruling party, who warmed to the task of running (and extracting commissions from) newly nationalized commercial assets until they replicated the capitalist class they had aspired to replace. Such bureaucratic self-​enrichment, promoted by the rise in revenues and assets put at public disposal, was supposed to subside when the fall of this ‘new class’ led to mass privatization in the east, alongside attempts by western governments to scale-​down their public sectors. But the bureaucracy’s new role, presiding over asset sales and large contract awards, brought unprecedented scope for ‘commissions’ other favours, and fuelled suspicion of these even when administrative hands stayed palpably clean. The instant profits to be gained from public assets sold below their true value, and franchises that gave private suppliers an effective monopoly over former public services, gave a strong incentive for prospective private owners to offer bribes; shrinking public-​sector pay, as spending was ratcheted down to match the disappearing tax base, gave an equally strong incentive to accept such inducements. The professionalization of management, engineering and corporate finance appeared to complete the assimilation of the ‘new’ middle class, supported by private-​ sector business, and the older middle class associated with the non-​profit sector (teachers, doctors, priests) and the public sector (public servants, lawyers and judiciary). Their

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integration into a broad middle class, outnumbering the upper (landowning) and lower (working) classes for the first time, was promoted in the later twentieth century by steady economic growth and by the closely related expansion of the public sector. As countries industrialized the government took responsibility for (and became the major employer of) professional services that were previously traded privately, including education and healthcare. The massive expansion of these required by maturing economies almost always took place within the public sector. While the state was absorbing parts of the formerly private or non-​profit sectors, private enterprise was seemingly converging with the public sector, as larger firms became longer-​lived and more bureaucratic in structure, and (according to popular ‘managerialist’ theories) subordinated the profit-​maximization objective to those of expanding production, employing more, and paying more (both to management and workers). Far from killing the entrepreneurial spirit, greater state involvement appeared consonant with private business growth. Governments became valued customers, sponsors of long-​term investment and –​as their budget constraints tightened –​keen to bring private management techniques into public enterprise through secondments, subcontracting or outright privatization. For the generation after Burnham, the rise of professionals and their entry into private-​sector management constituted a ‘third social revolution’ (Perkin 1996: ch. 1), but not of the type that swept them to power. The new ‘professional elite’ might displace an old political elite, or surround it by better-​informed advisers who sharpened its thinking. But their more substantial contribution was to render all elites subsidiary or ceremonial, by spreading decision-​making power much more widely across the nation’s boardrooms, lawyers’ offices and city halls. It was possible to invert the economic wisdom of the ‘new right’ –​viewing markets as dominated by bureaucratized producers, who steered consumer preferences (Galbraith 1958, 1967)  –​and still characterize power as dispersed across a new white-​collar class. This made it immune to elected radicals who wanted to reform it, as well as to the pre-​industrial elites who would have preferred to disinvent it.

Sniping at Science In an otherwise far-​sighted analysis of the rise of professional elites (in England) from 1880, which anticipated (among other things) the ‘squeezed middle’, Harold Perkin (1996) offered what seemed an obvious observation about the effects of rising levels of mass education. ‘It is no longer possible for controlling elites to rely on the ignorance of the people to accept their propaganda […] The politics of the new society has to become far more sophisticated and directed to the rational self-​interest of a more intelligent population’ (1996: 18). Elites took the message –​calling on expert advisers, formulating evidence-​based policy, acknowledging their power to order people around relied on being better informed. The scale of miscalculation became clear 20  years later, when supporters of EU membership marshalled copious expert evidence of its strengthening effect on the United Kingdom’s economy, society, sovereignty and security. ‘In a pivotal moment of the campaign, challenged to name a single expert who thought that Brexit would economically benefit Britain, Justice Secretary Michael Gove’s defiant response was “I think

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people in this country have had enough of experts.” The reality is that experts no longer relate to ordinary people’ (Das 2016). Gove, who (typically for a British politician, had attained a degree from Oxford but avoided the escalator to doctoral and postdoctoral research) had seized on two ways in which the wider community felt disengaged from the ‘research community’ –​whether this still resided in university faculties and public agencies, or commercially funded think tanks and financial institutions. The ‘experts’ had ceased to speak ordinary language, framing their findings in abstract theoretical terms supported by impenetrable mathematics and statistics. And most  –​pushed by institutional pressure to multiply their publications, raise external funds and competitively differentiate their ‘product’ from others in the same field –​appeared to view their enquiries as a means of building a career and winning peer-​reviewed prizes, rather than making useful discoveries that served the common good (Collini 2012, Altbach 2003, Shipman & Shipman 2006). Social scientists and forecasters, with their tendency to miss incipient crises (as in 2008) and overcompensate by falsely prophesying doom, were especially open to such partisan dismissal. But natural sciences and engineering, once winners of wars and conquerors of poverty and disease, have encountered a comparable ebbing of public trust. Research promotes specialization, leaving non-​politicians more willing to entrust political decisions to political professionals (and corporate decisions to top managers) without critically assessing those choices. It generates a torrent of research which even the speediest of readers cannot fully absorb, enabling popularizers to ‘spin’ its conclusions in particular directions, and members of the public to select the results that most match what they want to believe. It has also built new media channels that can ‘personalize’ the news flow, amplifying favoured results and filtering out those that challenge firmly held beliefs. Relentless refinement and redefinition of knowledge cast doubt on past concepts of ‘fact’ and ‘truth’, leaving people freer to believe that they want and reject contrary statements, however firmly these are based on evidence or logical reasoning. No amount of scientific consensus could dissuade President Trump from rejecting any evidence for man-​made global warming, or accepting a link between vaccinations and autism despite doctors’ roundly debunking the research that had suggested it. Those seeking a philosophical escape from hard reasoning, if not seduced by the deliberate riddles of postmodernism, can turn to the ‘deflationary approach’, which sees nothing more in ‘truth’ than ‘the proposition that snow is white if and only if snow is white […] traditional theories, which identify truth with one or another analysable, complex property (such as correspondence with reality, coherence, pragmatic utility, or provability) are mistaken […] [there is] no reason to think that truth has an “underlying nature” remaining to be characterized’ (Horwich 2004: 38–​39). Elites’ ability to justify their prescriptions –​whether effective or backfiring –​on ‘science’ was compromised by scientists’ increasingly self-​critical approach, which prompted some to question whether the stock of reliable knowledge was really expanding. Areas of study directly relevant to public policy  –​notably psychology, biology and medicine  –​found themselves engulfed in a ‘replicability crisis’, researchers generally failing to obtain the same result when they tried the same experiment a second time (Rehman 2013, Yong 2016). Replicability testing may be counterproductive if it repeats any errors that

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produced the original result: early confirmations reinforce belief in a discovery, leading those who fail to replicate it to assume they got the method wrong, and try again until they get the ‘right’ finding. Among the observations that had passed into professional consensus and been widely applied to public policy was the ‘optimism bias’, a systematic overexpectation of better outcomes and underestimation of the risk of worse outcomes on the part of a typical individual. Experimental results that indicate this bias can be produced with a decision simulator whose ‘learning’ is strictly rational –​making it entirely possible that the bias was always an artefact of the earlier experimental methods (Shah et al. 2016). As cognitive psychology has been a major source of the experiments that are now proving hard to replicate, this suggests a challenge to various other decision-​making ‘biases’ whose pervasiveness is now assumed in social policy design. ‘Confirmation bias’ may turn out to be the only one that flourishes on retest, and even this appears most prevalent among paradigm-​trapped researchers (Kuhn 1970). These could still argue that past findings sometimes prove unrepeatable because they have enlightened the general public and changed its behaviour, improving its judgements. When psychology results proved non-​replicable in almost two-​thirds of cases (Open Science Collaboration 2015), it was on the basis of the ‘null hypothesis’ (no significant result) being wrongly rejected in fewer than 5 per cent of cases. Although it has been used for decades in numerous disciplines to sort meaningful from chance associations, this ‘p < 0.05’ approach has often been wrongly applied, drawing complaints from eminent statisticians. These eventually forced the American Statistical Association to issue a long advisory statement confirming that ‘the widespread use of “statistical significance” (generally interpreted as” “p ≤ 0.05) as a licence for making a claim of a scientific finding (or implied truth) leads to a considerable distortion of the scientific process’ (Wasserstein & Lazar 2016: 131). Influential journal editors admitted to a ‘publication bias’, under which reports of positive results (medicines working, variables correlating, models fitting data) were more likely to be published and cited than those reporting negative results (Meier 2004, Dubben & Beck-​Bornholdt 2005). Although most notorious for exaggerating the effectiveness of medicines by keeping negative trial results under wraps, this problem extends well beyond the natural sciences: ‘suppressing studies that have yielded insignificant findings is precisely what almost all academic journals do daily in the social sciences’ (Starbuck 2006: 71). Experimenters may come under institutional and sponsor pressure to find significant results, leading to self-​selection of positive results, reporting the trials that ‘worked’ and abandoning those that did not. This bias, or persistent positive results due to experimental error, may not come to light unless studies are routinely repeated by other groups. But with appointments and promotions dependent on new findings there is little incentive for such retrospective replication. It was often only when researchers new to a field retried a past experiment to refine their technique, or invited a trainee to do so, that the non-​replicability of some path-​breaking studies came to light. Non-​replicability might arise from honest mistakes in experimental design or implementation, but the dissemination of non-​replicable findings appears to be encouraged by the premium placed on interesting or counterintuitive results, with the same incentives deterring studies that simply seek to replicate what was previously found.

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Commercial pressures that prejudice scientific research results are hardly new, and were probably far more egregious half a century ago when there were fewer proficient peer reviewers and weaker requirements to make raw data available. In late 2016 it emerged that nutritional research at Harvard in the 1960s, which steered health services and food technologists towards targeting cholesterol rather than sugar as the root cause of heart disease and obesity, had been censored and rewritten by the sugar industry (Bailey 2016). Sugar is part of a complex food production system that depends on its being consumed in large quantities; usage reductions in one area having to be offset by increases in another (Fine et al. 1996: 77–​145). So an industry-​wide drive to cut down sugar would have been ruinous for the growers and refiners, whose Sugar Research Foundation managed instead to co-​opt the two Harvard researchers into promoting the low-​fat diet, knowing this would increase the intake of sugar, negative findings on whose health effects were simultaneously suppressed. Even when commercial pressures are absent, institutional pressures can drive misleading results into print by compelling researchers to rush half-​formed results into print, emphasize unusual findings (even if the unrepeatable result one rogue trial) or withhold results that contest a widely accepted result. The health researchers who found that psychiatric help and exercise could ‘cure’ chronic fatigue syndrome, confounding victims’ (and immunologists’) belief that a virus might be at work, exaggerated their case studies’ frequency of recovery not because of inducements from the food or drug industry but because of unforced errors in the way they measured treatment success (Rehmeyer 2016). Thousands of sufferers were, in consequence, recommended to step up activities they knew made their condition worse. In 2016, it emerged that thousands of scientific papers tracing the cerebral origin of thoughts and actions using functional magnetic resonance imaging (fMRI) might have reported misleading results because of an error in the analytical software (Eklund et al. 2016). This recalled the previous discoveries that thousands of early econometric investigations had reported false correlations due to use of non-​stationary time series (Engle & Granger 1987), and that careless use of scanning electron microscopes could create many newsworthy but non-​existent cellular phenomena (North 2006). Although serious, these problems were eventually identified and addressed, showing sciences’ capacity to correct procedural errors and detect professional malpractice. But public attitudes were becoming more hostile to scientific judgements, and policies that use them as justification, even when the research has stuck to agreed rules and been copiously corroborated. Taking after those they advised, scientists and the methods they used were perceived as increasingly distanced from (and indifferent towards) ordinary people and their everyday reality. This impression was fuelled by the escalating complexity of scientific argument, increasingly conveyed in mathematics, statistics and technical terminology which even the best-​educated public could not fully understand. It was reinforced by the realization that most science, natural and social, now engages with models and theories that deliberately abstract from the real world, often losing its human detail. The loss of public confidence in science and expertise has occurred just as policymakers place more reliance on them, to override the often ill-​informed and inconsistent choices

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people make in areas where mistakes have a public cost. Knowing or fearing that people react negatively to being told what to do by governments, or having those choices made for them, elites now favour an approach that steers people towards ‘freely’ choosing the option that seems best for them. This involves modifying the conditions in which individuals made their own choices –​ostensibly still allowing them to do what they want, while guiding them towards the action the experts though best for them. This approach –​variously termed ‘choice architecture’, ‘liberal paternalism’ or ‘nudging’ –​promises to make the elite less dictatorial over the public it seeks to direct. But if the public does not trust the choice architects’ underlying science, they might still reject the ‘nudge’; and if they are right to be sceptical, following the expert-​guided choice might still take them in the wrong direction. If the public has become more sceptical about science-​based lifestyle and policy advice than it once was, this may be due at least in part to its having suffered directly from the effects of past mistakes and misdemeanours. The eventual demolition of past wrong conclusions by new research hardly helps in this regard. Underlying a rising scepticism of science and its prescriptions is the public’s realization, often ahead of the philosophers of science, that what is regarded as proven truth today will probably be discarded tomorrow as outmoded or discredited. When such one-​time certainties as Isaac Newton’s physics, Benham’s Economics and Ptolemy’s cosmology are seen to have succumbed to ‘pessimistic induction’ (Stanford 2006: 43–​47), superseded or rendered a special case, it is hard to be sure that anything we now ‘know’ will still be believed by the next generation. The generalized public confidence in challenging elites’ expertise, promoted by an expansion of education across classes that was meant to cement their authority, gives those at the helm of government and business an unprecedentedly bumpy ride.

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Chapter Two POWER, NETWORKS AND HIGHER CIRCLES The return of popular anger against elites challenges a number of bold arguments among social scientists, who have expended much effort in conceptually disempowering them. Once easy to comprehend, power has been successively redefined to drain it of menace, to shift its location (from the holders to those on the receiving end) and eventually to make it vanish altogether. Once this diffusion, dilution and dissolution of power is accomplished, it becomes a retrograde step to start pinpointing small, identifiable groups that hold concentrations of it or make coordinated use of it. So elites have remained invisible in many accounts of contemporary economic and social change, even when their restored or never-​ended presence is being plainly felt elsewhere. This analytical disinvention of power disposes of the concept of elites as wielding it in disproportionate amounts, or for sinister purposes. As classically defined by C. Wright Mills, power elites consist of individuals who ‘are in positions to make decisions having major consequences’; and ‘given the enlargement and the centralization of the means of power now the decisions that they make and fail to make carry more consequences for more people than has ever been the case in the history of mankind’ (1956: 4 and 28). The ‘major consequences’ of their decisions –​transforming hundreds or thousands of lives at a time through a policy change, design choice, plant closure or troop deployment –​distinguishes the power elite from ordinary technocrats or professionals, reducing its numbers to a nameable headquarter-​dwelling handful. The means of power, and the concentration of economic resources that can buy power, have enlarged and centralized further since Mills’s assessment, extending the reach of the US power elite across the world while enabling other large countries’ power elites to engage with and challenge it. Their success in wielding such magnified power without correspondingly increased public protest –​despite the frequently adverse consequences of their power-​play –​owes much to their capacity for cloaking the reins.

Softening, Diffusing and Dissolving Power At its simplest, power is exerted on a person when they say, do, think or believe something they would not have done willingly. It entails enforcing a non-​preferred option or removing a preferred option. The exercise of power is most visible when it involves the use of physical force (or threats of force) to compel the less powerful into actions they dislike, and that do not best serve their interests. But as force causes resentment, and invites counterforce, the most durable and effective applications of power avoid

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its use. Propaganda, persuasion, education and ‘the threat of a good example’ are among elements of the ‘soft’ power which has complemented and often substituted the ‘hard’ variety since the Cold War (Nye 1990), and of the ‘conditioned’ power which redirects people’s priorities and actions by changing their beliefs (Galbraith 1983: 6). Financial inducements can also wrench a person’s actions a long way from their initial preferences and intentions, and are viewed as non-​coercive by mainstream economists, though political scientists like Joseph Nye (2003) regard monetary rewards as a form of hard power given the forces that lead to the unequal assignment of income and wealth. After dispensing with physical force, power’s effectiveness can be further increased by removing or concealing any element of coercion. Through broadcasting, brainwashing, browbeating or bribery, an individual or institution can gain ‘the power to’ alter another’s behaviour without appearing to make them do anything against their will. ‘Action upon other individuals […] is called persuasion when the deception is so complete that the subject is unaware of being coerced’ (Knight 1982: 247). Power elites’ ability to deploy power without visible force or deflection was fully recognized by Mills in his best-​known assessment of how educated publics could oppose them. ‘In the last resort, coercion is the “final” form of power. But then we are by no means constantly at the last resort. Authority (power justified by the beliefs of the voluntarily obedient) and manipulation (power wielded unbeknown to the powerless) must also be considered, along with coercion’ (1959: 50). Softening of the way that decisions are shaped dovetails with a multiplication of the numbers who do the shaping, recasting power as many-​headed and multiple-​centred. Fifty years ago, pluralist critics like Robert Dahl (1968) half-​conceded the existence of a ‘ruling elite’ but denied there was any empirical proof that it systemically imposed policies or choices that were not wanted by the mass of ordinary people. Today’s pluralists go further, arguing that power –​even if once concentrated in a few hands –​is now dispersed among many thousands, and that such dispersion is inevitable for the progress and stability modern societies. Friedrich Hayek’s (1944) claim that economies grew fastest when scattered enterprises competed in unregulated markets was controversial at the time, when centralized plans were being credited with helping the Western Allies win the war, and were not yet blamed for the subsequent stagnation of the Soviet economies. Today it is an axiom as much of ‘social’ as of ‘liberal’ democracy. When it is protested that a handful of big banks and businesses dominate national and even global markets, market liberals counter that these megacorporations have merely internalized the great power diffusion, recreating market chaos within their boundaries. Precisely because the biggest companies have become so organizationally large and geographically spread, and produce such complex products, their chief executives would be powerless without the delegated authority of literally thousands along their supply chains. Once power is diffused and softened sufficiently, people fail to notice their actions and beliefs being deflected, or notice without objecting. Submission to a teacher, in recognition of learning through instruction, involves accepting the imposition of power

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in anticipation of gain. There may be similarly profitable capitulation to instructions from an employer (motivated by pay, perhaps embellished by company loyalty) and from agents of government (obeying rules and regulations in the belief that this does everyone good). A  similar response can be observed in voluntary exposure to persuasive advertising. Entry into a romantic liaison can be interpreted as another form of willing submission to another’s power, often non-​coercive or invitedly coercive (Scruton 1986: ch. 5). It might seem preferable for people to choose ways of acting (and reacting) on their own initiative than through being cajoled or steered towards it. But while morally questionable in procedural terms, soft power’s harnessing of consent and rejection of violence make its consequences hard to oppose. Whether hard or soft, power tends to become problematic when its subject would think or act differently (or not at all) in the absence of its exertion, and would be better off as a result. A holder of power can make subordinates do things they would not freely have chosen to do, and prevent them from acting in ways they would like to. This appears objectionable, both procedurally and consequentially. The exertion of power becomes more insidious when it takes a form which involves mental rather than physical pressure, which is harder for the subject to detect. Steven Lukes (2004) and Peter Bachrach and Morton Baratz (1970) identified this in the ‘agenda-​setting’ power of political and business leaders. Their power lies in circumscribing the alternatives an individual views as relevant and feasible, and the attitudes they bring to those alternatives, until there is nothing in that individual’s ‘free’ thinking that is inconsistent with what the leader wants them to do. Subordinates may then ‘accept their role in the existing order of things, either because they can see or imagine no alternative to it, or because they see it as natural and unchangeable’ (Lukes 2004: 24). Societies have long been alert to violence and physical bullying, seeking to outlaw and punish these (first among the population at large, and eventually extending these strictures to the police, military and other arms of the state, and to the private armies of its allies). With industrialization, protections have also been installed against instruments of power that carry the clear threat of physical violence, such as usurious debt contracts extended to households that are desperate for money, and labour contracts that subject workers to unacceptably hazardous conditions. Only with the move beyond machine-​ based industry, with working life and home life carrying fewer routine physical dangers, has attention turned to the more subtle forms of coercive power, such as psychological bullying in teenage social networks, coercive control in outwardly peaceable marriages and marketing scams that entice large voluntary payments for the chance to win an ultimately trivial prize. Because it ceases to be so obvious, and so obviously objectionable, non-​physically coercive power can deflect its targets away from their stand-​alone preference far more drastically and lastingly than power that relies on physical force. The holders of power who make others do what they otherwise would not wish to can gain considerably more traction over them when its exercise is detached from any violence. A victim of mind-​directed power might not know that the action they take is not in their best interests –​through being persuaded that it is their best option, or through being kept ignorant of alternatives.

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Structurally Ingraining Power Most holders of power want a lasting and praiseworthy legacy. When an action is known to have gone wrong, they are glad if it can be wiped from the record. But when intended change has been achieved, and is delivering what was promised, the nightmare prospect is its annulment by a successor. While every battlefield decision tends to have knock-​on effects on the next, actions taken in peacetime are typically reversible, unless their impact ensures that no future decision maker can occupy the same place or select from the same options. Knowing this, the best-​remembered reformers are those who not only took bold decisions but also embedded the consequences of that decision so that its results could fully unfold and endure. The impacts of Kemal Ataturk abolishing the Turkish caliphate in 1925, Felipe Gonzales leading Spain into the EU in 1986, Margaret Thatcher deregulating London financial markets in the ‘Big Bang’ (also 1986) or newly elected Donald Trump securing the appointment of a relatively youthful conservative judge (Neil Gorsuch) to the US Supreme Court (along with many others to the lower courts) were felt long after their more transitory achievements were forgotten. The most significant decisions are inevitably those that impose or change a structure that will determine or influence many subsequent decisions and policies. For those who join the power elite, structurally embedding the results of a decision is a crucial step for securing its long-​term impact –​without which their acts, however explosive at the time, can be quickly erased. Some structures that enshrine a particular action, or certain procedures for taking action, are built on the belief that certain actions are inherently superior or right. Others reflect the conviction that the policies they generate, while not perfect, will be better than those that would follow from a more competitive political process. Democracy permits (and even encourages) the structural shielding of some policies from elected policymakers who might be deflected (through ignorance or short-​termism) from making the ‘best’ choice. Organizations also acquire structures which, though not consciously designed or imposed, are left in place because they steer the outcomes or procedures of decisions in a way that no one wants to contest. One pretext for such structuring –​the ‘scientific’ planning of economies and societies based on economic calculation and discernment of historical patterns  –​was decisively rejected by bitter twentieth-​century experience in Europe and Asia. But other reasons for depoliticizing important decisions, shielding them from the political ebb and flow, have strengthened in line with those decisions’ spatial and temporal impact. Structural power can impose a ‘spatial’ rationality on decisions that are better left to experts than elected or appointed political and business leaders, and a ‘temporal’ rationality on decisions where continually shifting here-​and-​now judgements would bring inferior long-​term results. The depoliticization of economic policy is an example of both rationalities –​monetary decisions (on interest rates and credit volumes) delegated to independent central bank committees guided by a medium-​term inflation target, and fiscal decisions increasingly wrested from politicians who would otherwise undeliverably promise to spend more while lowering taxes and not increasing public debt. When shielded in this way, decisions still tend to be taken by small groups of powerful individuals. But they are knowingly constrained by rules, or ‘scientific’ principles, on the grounds

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that experts are better placed to know the public interest and no less motivated (than elected leaders) to serve it. Structural constraints can also be imposed through actions taken at different times and places, by large numbers of people who have little power in themselves. This emergence of macro-​level inevitability from micro-​level choices is lamented with equal force by (among others) socialists who view capitalism locking initially free-​thinking citizens into the values of competitive free enterprise and by climate scientists who predict unstoppable global warming when individually tiny carbon footprints come together. Individuals who are structurally constrained by the collective outcomes of their voluntary actions are not well placed to change their actions in ways that roll back the constraint –​sealing the case for political authority to compel different actions, by deliberately designing structural constraints to replace those that uncoordinated actors have inadvertently wrapped round themselves.

Power without the Powerful Structural power can operate without the need for coercion (physical or psychological) or persuasion, and without the vesting of power in any visible agency. It is exerted by restricting its subjects’ choices and the range of imaginable outcomes from choices still available. The emergence of structures as an unintended consequence of many scattered decisions, as well as from intentional actions by particular decision makers’, enables the conceptual distinction of power from individuals and from the posts and offices they occupy. Those subjected to power appear no more restricted than composers who can choose from the whole chromatic stave or chemists unaware of undiscovered elements in the periodic table. The removal of force from its exercise, and structural embedding of its operation, opens the way for power to be depersonalized and ultimately dissolved. Its effects may be seen, but its causes become invisible. There are no longer identifiable people or organizations wielding power, even if others still exhibit its effects. The subordinate might have power exerted on them  –​adopting actions or attitudes they would prefer not to take –​without any obvious superior being the source of this power. This ‘structural’ power might be exerted by (for example) the subordinate’s physical environment, work situation, financial position or psychological state. If someone takes on a deeply unpleasant job because they need money, there is not necessarily any identifiable agent (person or organization) forcing them to do the job, or causing the lack of money that forces them to do the job. Power is at work here, but it is the structurally embedded power of a situation which makes it necessary to have more money, and necessary to do unpleasant work in order to get more money. At best, structural and pluralist approaches push those exercising power into the background. It becomes the product of many untraceable agencies, mostly large-​scale organizations, each of whose members can claim to be small cogs in a large machine, each just following orders. At worst they dissolve it entirely, power being experienced but not exercised, having objects but no subjects. Modern states comprise many competing agencies, a proliferation promoted by rising populations with more complicated needs,

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if not deliberately imposed by constitutional designers and industry regulators. The US federalists famously enshrined a ‘separation of powers’, ensuring that federal authority could be held in check by the powers of states, and presidents’ programmes restrained by a Congress and Supreme Court. The dispersion of political power was subsequently reinforced by the rise of large commercial organizations and non-​profit institutions as alternative sources of power. Even in a country proclaiming the sovereignty of parliament, as in the United Kingdom, the most electively dictatorial of governments can in principle be held to account by a loyal opposition and unelected second chamber, and find its enforcement powers circumscribed by corporations, independent regulators, independent senior judges and the threat of losing popular support. To its critics, the diffusion of power from individual agents into the structure of society is the essence of capitalism, and the feature that makes it immutable. ‘Until the emergence of capitalism, power was largely separate from and situated above the processes of production and consumption. It was administered by large doses of force sprinkled with small promises, mostly for afterlife fulfilment. The new regime of capital introduced a whole new technology of power, one that penetrates and shapes the very souls of its subjects’ (Nitzan & Bichler 2009: 217–​18). Another modification continues to recognize the existence of superiors who consciously wield power, but dissolves the role of subordinates as those who are knowingly subjected to power. The structural embeddedness of power is extended so that there is no obvious agent (person or organization) exerting it, and no agents who are obviously succumbing to it or having their thoughts and actions modified by it. Pierre Bourdieu (1991) captures the generalization of non-​coercive compulsion in his idea of ‘symbolic power’. Powerless people act as if a power is being exerted on them, but only because their past and present conditions induce them to follow instructions even when no agency is issuing them. The distinctiveness of symbolic domination lies precisely in the fact that it assumes, of those who submit to it, an attitude which challenges the usual dichotomy of freedom and constraint. The ‘choices’ of the habitus […] are accomplished without consciousness or constraint, by virtue of the dispositions which, although they are unquestionably the product of social determinisms, are also constituted outside the spheres of consciousness and constraint. The propensity to reduce the search for causes to a search for responsibilities makes it impossible to see that intimidation, a symbolic violence which is not aware of what it is (to the extent that it implies no act of intimidation) can only be exerted on a person predisposed (in his habitus) to feel it. (1991: 51, italics in original)

Symbolic power is inimical to the past hope (of many social and political analysts) that subordinates will resent the exertion of power over them and mount a resistance against it. If modern society can generalize this form of power, it rules out rebellion by dissolving the roles both of superior and of subordinate. People may accept a ‘consensus’ approach to government and policy which they believe has emerged from democratic discussion, and is functional for economic efficiency, when it is actually the product of biased discourse due to power differences which also prevent people from recognizing how dysfunctional the outcomes are (Milner 1987). The structural embeddedness of

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power is extended so that there is no obvious agent (person or organization) exerting it, and no agents who are obviously succumbing to it or having their thoughts and actions modified by it. Michel Foucault presents a similar structural assessment in arguing that in ‘basically any society, there are manifold relations of power which permeate, characterize and constitute the social body, and these relations of power cannot themselves be established, consolidated nor implemented without the production, accumulation, circulation and functioning of discourse’ (1980: 93). By packaging ‘discourse’ into the terms traditionally attached to commodities in a capitalist economy, Foucault makes it clear that (contrary to optimists such as Jürgen Habermas) discourse and its claims to ‘truth’ are another form of capital that is controlled by (and constitutes) the more privileged in society. But by building it into the fabric of thought, and the very language in which people must express themselves (even when trying to express dissent), power’s ‘manifold relations’ conceal the identity of those who mainly wield it at the same time as helping them accumulate more of it and extend its geographical reach. Liberal theorists, while not wishing to dissolve power completely, are meanwhile drawn towards a pluralism which spreads its exercise so widely that everyone exerts a bit, so none is held responsible for the whole. In this view, decisions with major consequences might formally appear to be taken by one powerful individual, but actually flow from hundreds or thousands, forming a chain whose weak links are as powerful as the strong. Whether cast as traditional bureaucracies or more specialist ‘technostructures’, organizations subdivide the formation and implementation of any major decision until its authors are almost as numerous as those it affects. To present the elites who dwell in cabinet rooms, corporate boardrooms and military command posts as powerful is to overinflate the figurehead. ‘Modern society can only be understood as an effort, wholly successful, to synthesize by organization a group personality far superior for its purposes to a natural person and with the added advantage of immortality […] the final decision will be informed only as it draws systematically on all those whose information is relevant’ (Galbraith 1967: 69–​70).

Power in Networks: Positions over People The neglect of power as inherent in decisions exerted by a few human agents over many, and its infusion into structures that constrain behaviour without apparent agency, has been made easier by recasting society in terms of networks (e.g. Castells & Cardoso 2005, Castells 2009). Social sciences’ recurring debate over the balance between ‘structure’ and ‘agency’ distracts from the networks that connect the two, whose intermediating function long predated their new digital forms. Networks entwine agency with structure by depicting individuals as ‘nodes’, selectively connected by flows of information and command. The power a person can command through their network depends on the number and importance of other people they can connect with, and the way they interact with other network members. Networks can contain both individuals (legal persons) and organizations (legal persons). Individuals occupy both personal networks (built directly around them) and positional networks (build around the formal, contractual post

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they hold). Organizations are themselves networks, so the people within them can be connected to those outside via an organizational channel as well as via links in their personal and positional networks. Unsurprisingly, power in this complex entanglement of networks can be difficult to identify and measure. Disproportionate power can be exercised by individuals whose location in the network allows them to draw resources from many others and send commands to many others, without their possessing an obvious concentration of authority and wealth. Most network theory is ambiguous between people or positions as the seat of power. The ‘nodes’ in typical network models are occupied by agents which are individuals or organizations. When they are individuals, it is usually unclear whether their position has been attained directly through personal qualities or because of a role they have been assigned (through appointment to head a large organization or election to lead a government, which might indirectly reflect personal qualities). Abstract network analysis is often neutral between extreme Weberianism, in which power resides entirely in bureaucratic positions whose individual occupancy is unimportant, and what could be called extreme Carnegieism (after Carnegie 1936), in which power resides entirely in persons who have won friends and influenced people (or enjoy affluence and attractiveness that win them friends) until a powerful network is built around them. Much network analysis also blurs the distinction between individual and collective agents (‘natural’ or ‘legal’ persons), both types being representable by its nodes; and between intra-​and inter-​organizational communication, both of which can be represented by the links between the nodes. David Rothkopf (2008) begins his study on the fringes of the World Economic Forum in Davos, a forum of global business leaders now attended by an equally global array of senior politicians, and largely designed to promote networking between them. Rothkopf ’s ‘superclass’ is largely comprised of ultra-​wealthy big business owners, who are assumed to exert power directly through their business decisions and indirectly through their priority communication with political leaders. ‘For the members of the superclass, there is a commodity more precious than gold, silver, gems or oil. It is access’ (2008: 42). While the person/​position distinction rarely matters to network theorists, who can merge the two, because a node is a position that may represent a solo person if it is not a larger team or organization. The distinction gains a new importance when network ideas are applied to politics, society and business. While all power is ultimately exercised by persons in networks using communication through personal networks, there is a significant difference between networks that are built around a person due to their inherent qualities and networks into which a person is inserted through appointment to a position round which the network is built. Popular accounts of networks and networking tend to obfuscate their effect by blurring the distinction between person-​based and position-​based power. In a typical foray, Rothkopf (2008) appears to assign power to charismatic and uniquely capable individuals, but periodically jumps to equating power with position. Visiting the annual World Economic Forum at Davos, Switzerland, Rothkopf observes a gathering of individuals propelled into the elite by their own unique personalities and accomplishments, such as the Brazilian novelist Paul Coelho (‘after the Harry Potter author JK Rowling, the second-​best-​selling author on the planet’, Rothkopf 2008:  5) and the forty-​third

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US president, Bill Clinton. But immediately after identifying ‘just over 6,000 people’ whose business-​generated wealth and consequent political influence qualify them as the Superclass, he refuses to name any on the membership list because ‘the day after it was published, it would be obsolete. As I noted earlier, power is transient. Many members of the superclass qualify because of the jobs they hold, but people come and go from such jobs. Some retire, some die. Others suffer financial or professional calamities’ (Rothkopf 2008:  xiv). The power is, it seems, vested in the position and the flow of information and orders. Individuals gain power by virtue of holding the position, and are stripped of power as soon as they lose the job. Ten years and a financial crash later, but starting with a similar Davos diary, Sandra Navidi (2017) skates effortlessly between the personal and the positional. Her ‘superhubs’ are alternately defined as uniquely effective individuals (meriting long profiles that emphasize their personal history) and at times as impersonal network positions in which individuals can be installed (by talent, popularity or luck) and equally quickly disconnected. At the outset, she promises that the world around her will be rendered intelligible ‘through the prism of networked systems […] technologization, financialization, and globalization have created an intricate web of interconnections within the financial world itself and between the financial world and other sectors such as the economy and politics’ (Navidi 2017: 8). But having asserted that power lies in the structures and patterns of the network, she is constantly distracted by the individuals who inhabit this architecture, crediting them with building this around themselves. She remains studiously unclear as to whether the ‘superhubs’ are the impersonal structure of nodes and spokes or the forceful personalities enmeshed within them, the networks or the networkers. Navidi depicts a global financial system that is dominated by ‘unique personal networks’ (2017: xxiv), built by individuals with breathtaking leadership skills and magnetic personalities. Yet her preferred applications of power actually take place through large financial organizations and their top posts, whose placeholders are often transitory. Business leaders such as George Soros and Klaus Schwab, who could retain their influence for as long as they were active (having detached their networks from any one hedge fund or conference circuit), are elided with chief executives such as Christine Lagarde (International Monetary Fund) and Jamie Dimon (JP Morgan Chase), who are powerful only so long as their organization keeps them in post (as Lagarde’s predecessor, Dominique Strauss-​Kahn, discovered on being abruptly forced to quit in 2011). Sections that describe a depersonalized world of command and information flows conforming to ‘network science’ are interspersed with sections depicting individual superhubs –​Soros, Dimon, Robert Rubin, Tony Blair –​who are personally so influential that they need no formal institutional exoskeleton to exert their outsize power. To add to the confusion, global finance is also equated with human brains and ant colonies in being ‘complex self-​ organizing systems’ (Navidi 2017: 6), leaving it far from clear how individuals can drive them in unique directions whether empowered personally or through position. Without conceding outright victory to Max Weber, the past century has witnessed a significant effort to shift power from personal to positional networking. Hereditary crowns and other ruling dynasties have been replaced, in most countries, by top political offices whose holders’ powers come and go with the job, whether or not they gain this

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by democratic election. Companies of all but the smallest size have developed organizational structures which dethrone the once dominant founder, in favour of senior management posts that predate and outlast their appointed holder. The growth of organizations (public and private) left them too large to be personally ruled, requiring responsibilities to be divided and clearly assigned to specified posts to ensure the necessary coordination. A faster turnover in positions of power –​caused partly by the growing power of dissatisfied electorates and shareholders to ditch underperforming leaders, partly by the greater pressures on them –​required the transfer of power from person to post to ensure continuity. A rising demand for accountability –​of political offices to the public and corporate boardrooms to shareholders –​forces closer specification of the rights and duties attached to different posts and sharpens the safeguards against conflicts of interest, again promoting position-​based networks over those built idiosyncratically around one special person. In a world of large commercial and political organizations, an individual’s network may not be the principal source or expression of their power. The position they hold, with its allocation of powers and assembly of resources to support those powers’ exercise, is a more significant determinant of an elite individual’s membership. Growing bureaucratization leaves few remaining cases, even in the highly personalized worlds of entertainment and arts, of someone’s position in the institutional network being entirely traceable to their place in a pre-​assembled personal network. Some well-​networked individuals may still use their ‘contacts’ to secure top jobs in business, politics and other organizations. But democracy and meritocracy, driven by countries’ and corporations’ increasing need to have at least modestly competent people at the helm, have tended to reverse the sequence of earlier centuries, assigning power to the post and making this the main source of an individual’s networking ability. The structural embedding of power therefore tends to entail not its outright depersonalization but the transfer of power (and the networks that convey it) from individuals to positions. These confer power on whoever holds them, and impose obedience on those in subordinate positions. Bureaucratization, the reassignment of power to position (frequently accompanied by shortening of tenure in the most powerful positions) is now as characteristic of large corporations, large voluntary and charitable organizations as of public administration, and has always been a feature of military forces. Personal networks undoubtedly still exist: they are often essential to an individual’s getting installed in a position of power, and usually amplify that power, enabling top post holders to acquire more information and implement more instruction than their position’s formal remit would suggest. But the large personal networks observed to surround today’s elite members are generally the consequence of the positional network they entered on getting a senior appointment. Organizational networks have become the primary source of personal power –​which an individual only acquires on being installed as president, prime minister, chief executive or chief of staff, and loses when displaced or retired from that role. It is through this depersonalized assignment of powers that large organizations (including governments and corporations) transcend and outlive the individuals who comprise them. The fully depersonalized bureaucracy has long been recognized as an ideal type: powers can detach from a post and attach to a person, so that some leaders

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wield more power than their predecessors and successors, and some organizations are inordinately influenced by members who have little formal power. The means by which depersonalization is resisted, and positions’ powers made conditional on who holds them, has been clarified by studying the networks that embed the organization. Personal networking may have been inevitable (for the conduct of politics and business) in premodern conditions, which lacked the legal facility and organizational capability for positional networking. Without strongly defined, enforceable property rights and contract laws –​which tend only to appear late-​on in a country’s industrialization –​the amassing and retention of family fortunes depended on dense social ties and networks (Greif 1993). Exchanges of money and goods were only safe if they involved counterparties whose character was known and with whom interaction was ongoing, to give a high assurance that deliveries would be made, disputes amicably settled and debts repaid. But such socially rooted commercial networking, reliant on small circles of socially similar families, was inimical to newly arrived industrialists and traders who were often from non-​standard or foreign social backgrounds, and whose business relied on impersonal connections with counterparties who were socially or geographically distant from themselves. As soon as they could gain access to the lawmaking system, new industrialists pushed for ownership rights and contract laws that could be enforced by the action of police and courts, when social pressures and felt obligations were no longer enough. Institutionalized, legally enforceable commercial arrangements ensured that those who could pay, would pay. Knowing that a trading partner had the money or the goods, and that a borrower could obtain the income to repay debts, was now a strong enough assurance that they would do so. Once strangers could be safely engaged with solely on the signature of a contract, the commercial advantage gained by old establishment members through their exclusive social networks began to fall away. Under financial pressure as inflation eroded their rental and interest incomes, establishment members often accelerated this decline by becoming less reliable, breaking contracts and exploiting its long-​accumulated trust to run up unaffordable debts. The newly emerging business elite meanwhile used its growing political power to launch two other changes that were to hasten the retreat of the old establishment: income and inheritance taxes that drained the fortunes of those who did not get jobs or buy new industrial assets, and free trade arrangements that left only the largest landowners still able to finance a city life from agricultural rent. The existence of personal networks as a precondition for gaining power in a positional network, and their transformation after such positional promotion, complicates the location of power and explains why it remains so elusive even in book-​length searches for the Power Elite. Everyone who attains an important organizational post brings a personal network to it, having often drawn on this network to attain it. Once in post, the holder is inserted into a network that has already been constructed around it –​internally connected to others within the organization, externally connected to individuals and organizations outside. But this network is immediately complemented by the personal network that is already assembled around the individual. Some important areas of activity –​including high finance, real estate, venture capital, headhunting and the matchmaking that keeps

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privately owned firms within an extended family  –​have resisted Weberian formalization and remain heavily dependent on informal interpersonal dealmaking. So, inevitably, do the sometimes-​related illegal activities of back-​market trading and organized crime. While they usually converge during an individual’s tenure in a senior job, personal and organizational networks are sometimes driven apart by the tensions that develop in an organization, as bosses assemble a ‘kitchen cabinet’ to battle or bypass obstructive structures and colleagues. Unless wholly satisfied with present arrangements, most top post holders expand and reconfigure their personal network partly as a counterweight to the organizational network set up around them, or at least as a way to defend against rivals who covet their positional power and want to oust them from the post. The separation and divergence between personal and organizational networks is most sharply observed when a politician reaches the top of a government or ministry they profoundly want to change. Knowing (or assuming) that the existing public servants and special advisers are wedded to an unacceptable status quo, the newcomer tries immediately to sideline them or replace them with their own, more personally attuned administrators and advisers. When the ‘old guard’ cannot be easily replaced or disempowered, the would-​be reformer tries to bypass them by forming an alternative network, shadowing the entrenched bureaucracy and replicating its powers with a view to overwriting its decisions. The scale of special advisers and kitchen cabinets has continued to expand even when new arrivals have ceased to want radical change, or wave ambitious alternative programmes.

‘Deep State’ Distress: The Presidential Pushback ‘Outsider’ politicians and businesspeople who seek to break into the mainstream have exploited the personal/​positional distinction by presenting their opponents as weak individuals empowered only by the positions they hold, and themselves as strong individuals who have assembled the personal power network needed to overthrow the bureaucratic ‘establishment’. This enables them to promise unprecedented and beneficial change, at a previously impossible speed, as they deploy their own network to force through reforms that the bureaucratic network cannot make (because of ineptitude) or will not make (because it has developed self-​interests which are devolved from the public interest). Political systems built around strong elected presidencies tend to be most open to irruptions by outsiders, enabling a charismatic individual to seize significant power even without a majority in the legislature or a large party machine. Hugo Chavez in Venezuela in 1998, Putin in Russia in 2000, Trump in the United States in 2016 and Emmanuel Macron in France in 2017 were among those who won executive power first and built a supportive power base later, by framing themselves as single-​handed slayers of convergent two-​party elites. When their promises prove undeliverable, outsiders complain that their personal power is being thwarted by the institutionalized power of their predecessors, and of the bureaucrats left in place. Embedded structural power underlies the concept of a ‘deep state’ –​a set of rules (for conduct and selection) and self-​perpetuating official attitudes which force governments down a particular political path however much they pledge to

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slay the old order or change its direction. The secularized Islamic system imposed on Turkey by Ataturk after 1921 has long been offered as a paradigmatic ‘deep state’ –​as has its nemesis, the respiritualized Islamic system built in Iran after 1979 by Ayatollahs Khomeini and Khamenei. After his inauguration in early 2017, Trump’s supporters used the term to characterize the array of judges, mayors, state governors, federal security services and congressional opponents who impeded implementation of the president’s agenda. Some easily conflated an anti-​democratic ‘deep state’ with the fully democratic checks and balances built into the US constitution (Graham 2017). The allegation of a deep state, installed by decades of essentially interchangeable Democratic and liberal Republican governments, enabled Trump to justify an unusually extensive rotation of top posts –​dismissing the outgoing administration’s ambassadors and agency heads without the usual grace period –​and assembly of a large ‘shadow elite’ of senior advisers beyond the range of the congressional approval process. Distracted by the larger-​than-​life personalities who cluster at Davos and other global gatherings, on-​the-​ground power sleuths such as Rothkopf and Navidi actually stumble across the ‘shadow elite’, an alternative group who gather outside former power-​network structures and try to disrupt them, by bypassing them or crashing into them. Janine Wedel (2009) typifies shadow elites through the group of advisers (including Richard Perle and Paul Wolfowitz) who steered president George W. Bush into the 2003 invasion of Iraq, and the former public servants or black marketeers who made financial fortunes in 1990s Eastern Europe through a state asset sell-​off which they came to design and control. Popular accounts of today’s ‘networks of power’ continue to reference Mills (1956) as their intellectual ancestor, interpreting his Power Elite as a prototype network analysis. Mills does indeed come close, at times, to depicting elite power as bound up in personal networks, accepting that members ‘know one another, see one another socially and at business, and so, in making decisions, take one another into account’ (1956: 11). Later developers of his ideas, notably William Domhoff (1967), used network analysis to trace the sources and applications of concentrated individual or corporate power. Domhoff’s main findings –​that people in powerful positions are well networked with one another, and that those with the most connections in the power network tend to have the most conservative political opinions, as well as the power to translate these into government priorities –​have been widely replicated, especially by studies of interlocking corporate directorships (Burris 1991). The shift from person-​centred to position-​centred power can look like a big step towards meritocracy. If entry to top positions is governed by demonstrated worth and qualification, it potentially prevents a self-​appointedly superior social group from taking and perpetuating control. Personal networking was central to old elite-​ based, pre-​ democratic forms of government and business, with ‘who you know’ counting for more in reaching powerful positions than ‘what you know’. This enabled a small social group (often arbitrarily selected by ancestry, ethnicity, class or successful opportunism) to lock-​ in control of top positions by maintaining strong connections between themselves and selected others, and denying connections to the rest. Their successors, dependent on the right introductions, were recruited from the same restricted pool, severely limiting the scope for social mobility through an open contest for top positions.

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But the person-​to-​position shift has been welcomed by individuals from socially advantaged backgrounds who generally find ways to survive the shift towards meritocracy, and can use it to legitimize their continued ascendancy. The persistence in power of people from privileged backgrounds, and scions of leading families, is conveniently ascribed to ‘social capital’ acquired through social connections, good education and the self-​projection skills that seem to go with these. Stored in personal networks, the ‘social’ is the one form of capital that can still pass down the generations, when taxes and transparency have trimmed other capitals’ heritability.

Power in Networks: Strong, Weak and Old-​School Ties According to its contemporary critics, networking status has replaced ownership of the means of production as the principal source of class division and social inequality. Even if access to physical capital (machines, computers, vehicles) has been made more equal by lower equipment costs and wider credit availability, access to other forms of capital has become more restricted, enabling privilege to be further concentrated on a talented or lucky few. ‘Connections’ take the place of possessions early in life, enabling those blessed with them to reverse any dents in the family fortune that may have been inflicted by progressive tax or comprehensive education. The other, dematerialized forms of capital revolve around ‘social capital’, the links and shared values that underpin social cohesion, and the closely related ‘symbolic capital’, the resources and status attached to a position in society. These new forms of capital exist interpersonally, in what are now interpreted as the ‘networks’ that form among individuals. Network analyses of power have meanwhile grown inexorably as the mathematics of networks are formally developed, and empirical studies of networks are facilitated by cheaper computing power allied to large-​scale databases. But as well as lulling unwary analysts into eliding the personal and positional networks, these developments have challenged them to clarify what form of network configuration actually enables the extremity of power that confers elite membership, and that members can exert once installed. Two ways have been identified in which particular members (individual or corporate) can use a network to amplify their power over others and their profit-​generating ability. One is to form such strong links with others in a particular part of the network as to achieve ‘social closure’, monopolizing resources and excluding new entry (Coleman 1990). Another is to forge weak ties with several parts of a network so as to form the ‘bridge’ between them, gaining a uniquely important role in channelling resource and information flows (Granovetter 1973, Burt 1992). The density of networks required for closure is rarely compatible with the extensity of networks required to forge weak ties and fill ‘structural holes’ (Burt 2000), but they provide alternative ways in which strategic positioning within a network can amplify the power of particular members, by raising their social capital or command over other forms of capital. Since analysis of networks began, there has been an apparent conflict between density and extensity as the source of power within a network. One approach, focused on ‘social capital’, traces power to a dense network of strong ties. People at the centre of

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such networks are empowered by the large number of others they can draw information from or give requests and instructions to. Network centrality ensures superior closeness to others (making them easier to bargain with, give orders to and extract information from); superior betweenness (standing between others, so becoming the go-​to-​person when they want to deal with one another); and the maximum number of people to turn to, often termed superiority of degree (Hannemann & Riddle 2015). The other approach views questions the value of dense personal networks, by arguing that most contain significant redundancy. Those closest to a ‘central actor’ tend to be similar, with overlapping knowledge and interests, and few useful connections to different people outside the group. Empirical studies suggest not only that the political impact of dense networks is contradictory between those of powerful individuals and of powerful institutions, but also that such networks have tended to thin out over time as the biggest corporations expand their market share, even in the United States and other very large economies. Greater power may therefore be associated with ‘weak ties’ to people who are more distant in terms of knowledge, interests, location and other affiliations (Granovetter 1973, Burt 1982). In terms adopted by one of the leading modern network theorists, the power elite combined ‘centrality’ and ‘power’ in the social and corporate networks constructed around them. Centrality came from the density of their connections to powerful others: they could quickly receive important information from those who first got it, and quickly pass instructions to those best placed to get them carried out. Network centrality appears to add some definitional precision to the differences noted elsewhere in relation to ‘power topology’ or ‘power geometry’. ‘Different social groups, and different individuals, are placed in very distinct ways in relation to these flows and interconnections […] some people are more in charge than others; some initiate flows and movement, others don’t; some are more on the receiving-​end of it than others; some are effectively imprisoned by it’ (Massey 1994: 149). Power came from the number and shortness of links to less powerful others, who could be tapped for knowledge or issued with instructions. The relevant networks harboured ‘power hierarchies’ configured to empower a small minority, rather than ‘exchange hierarchies’ that linked everyone on roughly equal terms. ‘In a power hierarchy, one’s power is a positive function of the powers of those one has power over’ (Bonacich 1987: 1181). While the status of contacts may not be a necessary component of the power attained through networking, the number of contacts is unlikely to be a sufficient component. A contact’s degree of centrality to the network is also a key factor. For example, a national newspaper journalist or entertainment celebrity might be widely networked with the country’s top wealth and power holders, without being central to that network in the sense of being often called on by those holders when making decisions. In the terms of another prominent theorist, the new networks enable a power elite to combine the strong ties to powerful others that permit network closure with the long ties to less powerful others that widen freedom to act and reduce external constraint. The technocrats in an organization, widely networked with other specialists in their area, are free from external constraint in that generalists around them will defer to their expert judgement on technical issues –​to their cost, if they turn out to be less than expert in

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Table 2.1  Degree of closure and extent of ties Network closure (freedom from internal constraint) Extended ties (freedom from external constraint)

High Low

High Power elite Establishment members

Low Technocrats Administrators

Source: Adapted from Burt (2000), Figure 3.

what they do, as with rogue financial traders or IT specialists who do not deliver the promised time-​saving solution. Many organizations also contain establishment members who are senior, respectable and whose judgement is hard to challenge, but whose lack of contact with relevant experts and slowness over continuing professional development impose severe external constraints, which limit their impact on top decision-​making. The administrators in an organization lack power, even if their pay and job titles rise to an impressive scale, because of their lack of close ties within the organization or extended ties running outside it. The most powerful are therefore the small group who combine strong short links within the organization with extended ties outside it (Burt 2000), giving them both the means and the ability to take high-​powered decisions. It is here that the power elite is most likely located, as Table 2.1 illustrates. People are more comfortable communicating with others in their own specialist area, and of comparable rank, than with superiors in their own field, or people of comparable rank in different areas of specialization. Thus, for example, a finance director (or programmer or cleaner) will more readily swap notes with their counterpart finance director (or programmer or cleaner) in another organization than with the managing director, chief information officer or estates manager of their own. The tendency for professionals to network with their peers (even those in rival organizations) at least as readily as with colleagues within the organization, has long been observed in private companies –​and credited with the rapid diffusion of new standards and techniques as well as the ethics that motivate whistleblowing. Cross-​boundary linking is just as prevalent between public officials, helped by the assumption that governments should cooperate even if private corporations are meant to compete. ‘Former EU trade minister Lord Brittain [sic] and former United States trade representative Charlene Barshefsky both spoke to me about the close ties they formed with their counterparts in the trade community and the fact that many maintain ongoing relationships today’ (Rothkopf 2008: 179). To acquire and assert authority (over policymaking and law enforcement), governments must engage with the networks already formed by those they seek to govern. In his influential assessment of the problem, Charles Tilly (2004) identifies networks’ engagement with government as lying on a spectrum between complete segregation and complete integration, with ‘negotiated connections’ lying in between. Governments can move networks of citizens towards greater integration by applying force (coercion), deploying financial incentives (capital) or achieving a ‘commitment’ that does not require the threat of force or promise of enrichment. Democracy, in this view, features a high level of

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network integration achieved largely through commitments, which ‘can take the form of shared religion or ethnicity, trading ties, work-​generated solidarities, communities of taste, and much more’ (Tilly 2004: 13). Counterposing the interests of ‘government’ to those of the social networks beneath it assumes that governments have a unity of structure and purpose (an assumption made artificially safe in analyses such as Tilly’s that tend to use historical examples dating from times of monarchs’ personal rule). As governments become more modern and (almost invariably) larger, they start to resemble another form of network, especially when comprised of democratic rather than dictatorial institutions. Tilly’s definition of a ‘trust network’ –​‘ramified interpersonal connections within which people set valued, consequential, long-​term resources and enterprises at risk to the malfeasance of others’ (2004: 5) –​could apply equally well to a modern parliamentary government or presidential administration. Even a government formed of a small and unaccountable elite, put there by economic resources or self-​appointed political power, will in practice have the same characteristics as the trust networks that operate in the society around it. This similarity does not alter the problem of government Tilly identifies  –​how to integrate the civil society trust networks so that policies can be enforced and state institutions financed –​but it suggests a rather different approach to solutions. ‘Trust and rule’ interact in a way that reinforces central power when a well-​integrated governmental network connects with and co-​opts the more active civil society groups. But a commoner pattern, as governments expand in size and complexity, is for sections of those who rule to form links with selected civil-​society groups, forming a ‘bridge’ across which each side may exert some leverage over the other. Wedel (2009) argues that the ability to ‘bridge’ gave substantial power to particular individuals in Eastern Europe after 1989, and explains how some networkers rose so quickly to oligarchic levels of wealth and power. She identifies these as ‘flexians’, who slot easily into several geographically and functionally dispersed roles (symbolized by their multiple business cards) and make themselves the kingpin of the various command lines needed to do profitable business in an environment where laws are weak, bureaucracy heavy and financial resources scarce. The ‘flex nets’ she describes as being built around these individuals sound sometimes like the weakly tied components of an extended network, sometimes like the densely packed ties of a closed one, perhaps confirming the unusual conditions which enabled post-​communist political and business empires to be built uniquely fast. Whereas defenders of elites would equate these skewed network structures with oligarchy, and blame it on the haphazardness of reform plans when the Eastern Bloc dictators fell, Wedel identifies the same asymmetries in Western European and North American networking. Similar ‘flexian’ scheming is used to explain how a small group of political and military advisers reoriented the Bush administration’s (2001–​ 8) foreign policy around the invasion of Iraq, and how the IMF and World Bank as well as Russian state-​owned funds flowed to the beneficiaries of former Soviet privatization after 1991 (Wedel 2009: ch. 5 and 6). Building on empirical work which shows that centrality does not equate to power in ‘exchange’ networks, Phillip Bonacich (1987) theorizes that it pays to be strongly connected to weaker parties (and weakly connected to other strong ones) when

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negotiations or bargaining are called for. ‘Power comes from being connected to those who are powerless. Being connected to powerful others who have many potential trading partners reduces one’s bargaining power’ (1987:  1171). Those with equivalent power have others to turn to, so can stand up against you, whereas those with lesser power are more likely to accept whatever you propose.

Don’t Look Down The consistent defining feature of power elite members is not the strength and number of their ‘horizontal’ communication links to other powerful individuals, but the strength and number of their ‘vertical’ command links to subordinates who pass information up or operationalize and implement the decisions handed down. The sheer number of people engaged in supporting them, informing or implementing their decisions and following their instructions, vastly exceeds that of any wielders of power on the next rung down. As the number of people they can issue instructions to or summon information from inexorably rises, a new ring of subordinates must be installed –​to filter their calls, regulate access to them and manage those other staff. Photographs of power elite members sitting alone in gilded cabinet rooms or boardrooms convey a splendid isolation, and the most powerful are often lonely and personally disconnected figures whose appeal ironically lies in their inaccessibility to others. Theirs is a ‘wired’ inner sanctum, and their power is ultimately indexed by the number of people they can call and who will take their calls. What most strikes even the most presumptuous high-​flyers, on entering a top post in government or business, is the number of people on hand to support them in their new role. There are informants and advisers to brief them on the decisions to be taken, bureaucrats and fixers to enforce what gets decided, diplomats and press officers to convey and explain decisions to the outside world, and an army of subordinates from drivers and interpreters to chefs and hairdressers ready to take the ordinary concerns out of their extraordinary lives. What often strikes them with equal force, especially in the heat of battle over changes in policy or product, is their loneliness in the post, and the absence of people in the same post they can confide in or pick up the phone to. There are many who can play a small role in reaching big decisions or enforcing them once taken. Very few who have shared the experience of such decisions and know the strains and uncertainties involved. Access to the people at the top is gained only via dense filters of secretaries, diary managers, personal assistants, security detail, spokespeople and deputies, whose buzzing communication lines intercept and parry most attempts to approach their boss so that the top table stays uncluttered. By focusing either on top decision-​making roles or their occupiers, most network studies (other than those developed along the lines of Burt and Bonacich) ignore the distinctive way that power elites preside over two networks, one based on positions and one on persons. There are the dense ‘vertical’ connections to people of lower status, and the much sparser ‘horizontal’ links to others with comparable power. As a further distractor, there are horizontal links to partners, other family members and close friends, some of whom may be outside the network of power and some of whom may use their connection to bypass the other two networks and covertly influence policy. The number

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and strength of the vertical connections to subordinates, and the quality and competence of those below in the vertical network, are often a more important determinant of power (and how effectively it is exercised) than the number, strength and composition of the horizontal links which mostly feature in network studies. Indirect horizontal communication, upwardly filtered through the vertical network, is often as significant as direct horizontal communication between the holders of power. The world may hold its breath when the president of one superpower gets on the hotline to the president of another, but the real ‘power-​broking’ and its consequences play out through the more complex channels lower down.

Translating the Social Network Aside from (and sometimes in place of) specific ability to do a high-​level job, power-​elite members are often seen to have had two advantages. They have acquired (or naturally possess) certain attitudes and self-​presentational techniques which facilitate entry and advancement in social networks. ‘Learning to climb requires interacting with those above (and below) you in a very particular way: by creating intimacy without acting like you are an equal. This is a tricky interactive skill, pretending the hierarchy isn’t there but all the while respecting it’ (Khan 2011: 15). They have also been able to practise these skills on a subset of people destined for the highest-​powered jobs, through privileged access to elite social networks. It may be in conferring these interactive skills, and the sense of self-​worth and confidence they require, that elite schools and universities deliver value in excess of their curriculum. But their selection methods ensure that, as well as teaching pupils how to network, they give them the best possible selection of whom to network with. Indeed, well-​developed networking skills are unnecessary for reaching the top when an individual can get fast-​tracked into a corporate or party-​political post around which the influential connections are already assembled. And such skills are insufficient for success, because no amount of networking proficiency can blaze a trail to the top if there is no chance to meet any others who dwell there. New attitudes require, and new technologies allow, that people network on the basis of their educational status and professional interests, not on accidents of birth or location. But ‘who you know’ is still essential to a rise up any hierarchy, even if it is now a complement and not a substitute for ‘what you know’. The extension of networks, across and between the social commercial and political worlds, goes further than widening recruitment to elites and making them more meritocratic. According to advocates, it eliminates the need for elites and the conditions in which elites or oligarchies can take hold. Exclusivity falls away if everyone can connect to everyone else, on broadly the same terms. Unless stout walls are built around them, small networks will quickly break open or give way to larger ones, because of ‘network economies of scale’ that make membership more valuable as membership numbers rise. However ‘ordinary’ you are, your addition to a network increases its usefulness to those already inside it. If this were the case, if they had not vanished already, the rise of the ‘network society’ should have hauled the power elites down to earth. But the networks that offer this potential are those in which politics are discussed but not actively engaged in, or in which people make profitable trades without considering the profit silently

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flowing to the network provider. They may even be a distraction from the networks of power. If anything can rein these in and disperse the power, or call its holders to account, it is likely to be a more powerful democracy than the online vote. The old ‘establishment’ elite networked in person, through acquaintanceships struck up in the dormitories of public schools and the corridors of the colleges or collegiate financial houses to which they led. Defenders of the new elite argue that it forms through more open, electronically mediated forms of networking, linking people on the basis of professional expertise rather than social status. If there is still exclusivity in access to such links, it is because entry requires meritocratically attained qualifications and association memberships rather than arbitrarily bestowed social status. The new networks are assumed to be open to new membership, and to give each member an equal chance to link and exchange with every other. This results, if true, in a more defensible inequality of wealth and power, assigning the largest amount to those who show themselves most worthy of acquiring it. The ‘new’ networking has gained appeal because of its contrast not only with the old form, but also with the main apparent alternative –​market exchange. Markets have often been identified with capitalism, giving them a superficial appeal to all who subscribe to it –​now the majority, when social democratic forms of capitalism are included. But a dedicated contingent still opposes the market economy in principle; and a much larger, politically diverse group condemns the market when its ‘rules’ start to exert themselves outside the economic sphere. The shift from market economy to ‘market society’ is routinely condemned for restricting the concept of value (now viewed solely as the price or wage commanded in the relevant market), and for devaluing (by pricing) the many commodities which we instinctively feel should not be bought and sold. Analysts of today’s elites who write for a popular audience, and politicians who take office on an anti-​elite ticket (with or without the popular vote) delight in invoking ‘networks’ as the dominant way in which power is exercised. By enabling a few individuals to concentrate power, and exert it directly or indirectly on many others, networks rescue the Power Elite concept from pluralist portrayals of highly diffused power, and socialist suggestions of a ruling class or of depersonalized and structurally embedded power. Before telecommunication and large-​scale organization, personal networks are assumed to have dominated politics and business activity. Decisions with major consequences were made by a handful of individuals in each company and country, often in close contact with one another but with very little communication or consultation with the many who felt the impact of their choice. Enthusiasts for ‘open’ networks present them as opening up an alternative form of exchange, which frees society from the various defects of markets. Networks offer more choice  –​enabling prospective buyers to specify exactly what they want, rather than settling for a product devised impersonally for an ‘average’ customer with whom few real customers can wholly identify. Allied to this advantage, networks offer more genuine competition. Whereas markets can quickly become monopolized, by companies whose expansion due to success undermines the responsiveness that brought this success, networks appear to keep even their biggest players under permanent pressure from rivals. Any upcreep of price or complacency over service can cede the ground to new

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entrants, spelling rapid decline for such one-​time giants as the AltaVista search engine, the MySpace social network or America Online, the Internet service provider. Problems arising from markets’ inability to coordinate the many individual decisions taken at a particular time, and to sustain strategic actions that incur short-​term cost for longer-​term benefit, are potentially solved by organizing people into networks. When people commit themselves to risky long-​term enterprises whose outcomes depend significantly on the performances of other persons, they ordinarily embed those enterprises in interpersonal networks whose participants have strong incentives to meet their own commitments and encourage others to meet theirs. Such networks often pool risks and provide aid to unfortunate members. (Tilly 2000: 12)

Early visionaries of the Internet, and the social networks it enables, almost uniformly viewed it as the electronic high road to democracy or anarchy. It would break down the old concentrations of political, economic and social power. Commercial monopolies would disappear because networks delivered ‘friction free capitalism’, in which rivals could easily enter with a cheaper or better product, and new supplies would plug any artificial scarcity before it could force prices up (Gates 1995). Political power monopolies would dissipate because governments would now be subjected to unprecedented levels of transparency and accountability, with citizens overriding any ‘representatives’ who proved less than representative. Social distinction would be stripped from individual trendsetters and spread across the mass because now anyone could advertise their accomplishments and directly trade their wares. Electronic networks, especially those created online in an age of low-​cost Internet access, initially promised to reverse the exclusivity of the old ones, and challenge their capacity to concentrate power. Subscription-​free access and ‘net neutrality’ ensure that anyone can join, with no one expecting unduly privileged membership terms. Once made publicly available, the Internet initially promised to be the ultimate ‘random’ network, in which the establishment of connections was freed from constraints of geographical and social location. This was the world of ‘six degrees of separation’, in which everyone on the planet could in principle contact everyone else via (on average) five to six mutual friends. Online, the typical distance between ‘nodes’ was slightly larger –​around 19 in 1997 –​but still showed a remarkably ‘small world’ given the 800 million nodes in existence at that time (Barabasi 2003: 27–​40). As a metaphor, and on the two-​dimensional diagrams that populate most papers on the subject, the network implies that most members are on the same level. Connections are horizontal, between people with comparable interests and running both ways –​in contrast to the vertical links of the old power structures, in which a few big nodes were clearly superior and sent one-​way commands to the rest. Networks thus suggest a departure from, and destruction of, the hierarchies that typified previous forms of government or corporation. This did not mean, however, that the previously powerless could somehow connect with the most powerful, breaking through the previously formidable access barriers. Anyone can email the prime minister’s office or respond to the chief executive’s tweets, but personal replies are actually rarer than when paper correspondence ruled.

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Networks’ online migration has, instead, sharpened the contours of offline power chromatography. The already powerful gain more power by unbounding their small world, connecting to global equivalents in place of local subordinates, while the less powerful become more immersed in their small world of the similarly less powerful.

Institutional Networks, Interlocks and the ‘Great Vampire Squid’ As well as personal networks that individuals assemble around themselves, and positional networks configured around the jobs that people occupy, institutional networks form among the large organizations whose top posts confer elite power. Studies of institutional networks ascribe them very different patterns and implications from those of individual networks. This is unsurprising, given that organizations are likely to behave very differently from the individuals who comprise them. Even if organization members are similar in terms of professional aims, knowledge and social status, they necessarily differ in terms of responsibility, accountability, seniority, outside-​work interests, career plans, temperament, age and experience. This amplifies the likelihood of the organization having emergent behavioural properties that are not simply the sum of the activities that comprise them. Organizations can also have aims that depart from the professional and personal aims of their members, and are constrained by different laws (despite legal attempts to conflate the rights and duties of legal and natural persons). Whereas the most powerfully networked individuals tend to adopt conservative political opinions, a number of studies up to the late 1980s suggested that the most powerfully networked corporations tend to adopt a pragmatic, non-​ideological approach or even throw their influence and funds behind progressive causes (Burris 1991). The concept of corporate community, ‘which can be defined in network terms as all those corporations that are linked into a network by common (interlocking) directors’ (Domhoff 1983a:  124), may also leave an incomplete picture of the nature and scale of actual networking among corporations. A  range of other influential individuals can provide communication links and information flows among companies and other organizations –​including consultants, lawyers, public servants, regulators, trade union leaders and large customers. All of these tend to deal with a number of corporations in the same industry, at least as regularly and intensively as the interlocking directors and sometimes more so. The interactions of others who network across an industry may be harder to track (and often subject to commercial confidentiality), leaving interlocking directorships to be used as the ‘index’ of interconnection merely because they are easiest to catalogue. Interlocking company directorships have been especially keenly studied, for several decades, for signs of a few individuals acquiring substantial power within the business world and, in the process, creating concentrations of commercial power. Through interlocks, seemingly diverse interests of unconnected businesses might come to be represented by a small group of powerful managers, who network with a select group of others with comparably diverse directorship portfolios. Rather than constantly changing corporate hats to shield their heads from any conflicts of interest, this ‘C-​suite’ cluster could then fashion the competing interests into one common view. The discovery that

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individuals who unexpectedly lose a directorship tend to find other ones, using their personal connections to retain or regain a seat at the boardroom table, has been taken as evidence that a ‘ruling class’ appropriates such top institutional posts, channelling personal power into these rather than deriving power exclusively from them (Ward & Feldman 2008). Such power was evidently alive and well when, for example, US entrepreneur Elon Musk used his roles as chief executive of electric car firm Tesla and chairman of battery maker SolarCity to set out plans for merging the two companies in 2016, despite little consultation (or support from) the other directors. But even if such evidence shows personal networks shaping business networks in some cases, it is difficult to generalize, and assumes that hands are strengthened as managerial fingers are extended into more pies. In practice, multiple directorships could represent either an extension or a dilution of a business executive’s power, depending on the amount of time and energy they must expend on each company to understand and wield influence on its activities. The scale of interlocking directorships showed signs of decline in the United States after the governance shocks (notably Enron) in the late 1990s and the 2008 financial crisis –​largely because of regulatory action to deter them, based on the perception that many external directors had spread themselves too thinly and were doing too little to monitor and control the firms with which they held top posts. In smaller countries, multiple directorships appear to have declined because corporate expansion ran up against national limits. Large firms speeded their growth by merger and acquisition, reducing the number of boardroom posts available. And as they reached the maximum market share that national competition regulators could allow them, they tended to sell out to foreign acquirers, partly because of a removal to cross-​border acquisition barriers by governments which saw this as a way to keep domestic giants under a competitive rein (Shipman 2002). This led in smaller economies to a ‘thinning of the old boys network […] attributed to a new regime of corporate governance in which multiple directorships are no longer the norm’ (Carroll & Klassen 2010: 5). The link between large corporations’ power and their degree of top management interlock appears to have weakened towards the end of the twentieth century –​even in the largest economies –​according to these studies. But this weakening of network effects may be illusory if, as these studies also suggest, national networks were mainly being disrupted by the globalization of economies and international expansion of corporate activity. With a suitable extension of the data for network analysis, it might be possible to observe the re-​emergence at the global level of the networks that were previously confined within national boundaries. This would be an international extension of the trend observed in the twentieth century within the United States and larger European countries –​for local ‘metropolitan elites’ to lose their significance and network density as power filtered upwards to the emerging national elite. A study of ownership patterns among transnational corporations (TNCs) in 2007 (Vitali et al. 2011) concluded that 147 of them (0.3 per cent of the 43,060 total) controlled almost 40 per cent of the total ‘economic value’ of TNCs, and 737 (1.7 per cent) accounted for 80 per cent. The highest-​ranked TNCs (in terms of equity owned directly and indirectly) form a densely connected ‘core’ with a disproportionate share of

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corporate wealth. The inner core (of 147) owned most of their own shares as well as held large stakes in many other TNCs, and three-​quarters were financial institutions (mainly commercial banks, investment banks and insurance companies). ‘From an empirical point of view, a bow-​tie structure with a very small and influential core is a new observation in the study of complex networks […] the fact that the core is so densely connected could be seen as a generalization of the “rich-​club phenomenon” with control in the role of degree’ (Vitali et al. 2011). A study of the international banking network using Bank for International Settlements data on the major players, and treating national banking systems as the ‘nodes’, confirms the network centrality of the United States and United Kingdom and shows it to have changed little between fourth quarter 2007 and third quarter 2012, despite the intervening global financial crisis which had epicentres in these two countries (Winecoff 2015) and had threatened in 2008 to cause systemic collapse. ‘The US remains the world’s banker: a tremendous proportion of overall network activity can be described as the rest of the network depositing assets into US banks. In some ways […] the US as a global banker has even been enhanced by the crisis’ (Winecoff 2015: 507). The United States retains ‘structural power’ in the world through its ability to absorb and relend the world’s savings, thereby financing its large current account deficit without having to weaken the dollar, and retaining the dollar’s global status which allows the Americans to do all their borrowing in their home currency. This power devolves to an extent onto US businesses, non-​financial as well as financial, and is likely to slant both intercorporate and interpersonal business networks in a North American direction. Financial institutions are portrayed as gaining ascendancy over the world’s productive activities (and politics) by putting themselves at the centre of a giant corporate network, kept in motion by a personal network of the men (and occasionally women) who wield the most money and power. Suspicion that bankers rule the world has a long history, across a wide geography. One reason that Americans often chose to overlook the more manipulative and monopolistic side of their big industrialists a century ago was the perception that they represented ‘real’, productive economic interests against those of the bankers, who merely redistributed the proceeds of production, usually from poor to rich (Fraser 2005). Bank regulation after the 1929 Wall Street Crash gave those industrialists’ successors a freer rein in the next half-​century, enabling them to compromise with unions over higher pay and with governments over fairer regulation as reinvested profit made them less dependent on banks to arrange their loans or float their share issues. But a modern version of the secret bank elite, shorn of its traditional anti-​Semitism, emerged as financial regulation was stripped away at the turn of the century, and gained new force from the global financial crisis that began in 2008. Two years after the global financial crisis of 2008, a Rolling Stone journalist distilled what many (even on Wall Street) were silently thinking about Goldman Sachs by remarking that ‘the world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity’ (Taibbi 2010). Such insults were doubtless read as compliments by Goldman’s top bankers, who referred to their more lucrative clients as ‘muppets’, according to one of their early departing recruits (Smith 2012). Goldman’s and other big banks’ bounceback from an apparently inescapable bad-​debt vortex –​hardly missing a

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bonus –​with near-​trillion-​dollar assistance from the world’s governments –​had rekindled the idea that bankers ruled the business world, as well as overruling governments when they dared to propose interventions that might trim the bankers’ profits. New York’s ever strengthening centrality to the global financial network enabled some critics to track down control of the global purse strings to the tower blocks on a single street. Noting the remarkable frequency with which top executives of the biggest banks are called in to advise or run government departments, they suggest that the course of world events is now charted largely from Wall Street and a handful of other financial districts under its direct control. Goldman Sachs ‘alumni’ who have reappeared in influential government roles include Robert Rubin, who as President Bill Clinton’s treasury secretary oversaw the financial deregulation that swelled investment bank profits (and bankers’ salaries) in the boom years up to 2007; Henry Paulson, who as George Bush Jr’s treasury secretary brokered the bailout of troubled banks and insurers (widely ascribed to Rubin’s removal of controls) in 2008; Joshua Bolten, who was Bush’s chief of staff from 2006; Mario Draghi, who more than matched Paulson’s skills at stabilizing financial systems with public funds as president of the European Central Bank from 2011; and Malcolm Turnbull, who ousted the elected Tony Abbott to become Australian prime minister in 2015 (Foley 2008; Dayen 2015). In 2016 Goldman signed up Juan Manuel Barroso, who had recently stepped down as EU president, to a post that included advising it on the financial implications of the United Kingdom leaving the Union. This reward, to a leader whose tenure had incubated many of the grievances that led UK voters to decide to leave, drew the concern of the EU’s new ethics watchdog (Davies 2016). But it seemed unlikely to do more than force a slight extension of Mr Barroso’s ‘gardening leave’, before he stepped up to the post that was likely to secure him a rather larger garden. While Goldman Sachs appeared to have had a particularly high success rate in parachuting its footloose high-​flyers into high political office, numerous ‘alumni’ of Citigroup, Morgan Stanley and other big investment banks had made similarly profitable detours into senior public service. President Trump, arriving in Washington in 2017 promising to ‘drain the swamp’ of powerful financial interests, found it impossible to do so without recruiting poachers as gamekeepers, appointing Goldman alumni Stephen Bannon as chief strategist, Steven Mnuchin as treasury secretary with James Donovan as his deputy, Gary Cohn as National Economic Council director and Dina Powell as senior counsellor. Studies of intercorporate and interpersonal network links therefore tell an overlapping but not verbatim story. Commercial power can be conferred and exerted between institutions directly, or via individuals who move between them or take roles in both. Personal networks, tending to be less visible than those between organizations, may become the vehicle for traffic of items or information that individuals or their employers do not which to see exchanged. But individuals may act either for their organization or for themselves, and the purpose they pursue when networking privately may not be the same as that ostensibly shown in their places on interlocking organizational charts. The tension between networking among institutions and among individuals was on display (unlike the full roster of offending messages) in a public-​sector context in the email scandal that rumbled through Hillary Clinton’s 2016 presidential campaign. Clinton was

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accused, as secretary of state, of using a private email server to separate her personal networking from the job-​related networking she undertook as global representative of the United States. But her purpose if so doing was never made explicit by her critics, and despite their efforts it became overshadowed by other accusations in the long and bitter campaign.

The New ‘Higher Circles’ Network theory was a nascent discipline, no more advanced than the room-​ sized computers that inspired it, when Mills (1956) launched his critique of the United States’ ‘higher circles’. Surveying a United States that was enjoying a seemingly endless post-​ war economic boom, yet apprehensive about its social and political future, Mills (1956) identified three ‘higher circles’ whose few select members dominated the lives of millions of others. The order in which he presented them reflected the institutional balance that enabled president Dwight D. Eisenhower’s re-​election later that year. Big business led, because the fast-​globalizing US corporations now underpinned the American superpower. The business-​owning Corporate Rich had absorbed the old landed aristocracy (forced to reinvest in industry or finance in order to survive) and opened their ranks to their hired chief executives, who took the day-​to-​day decisions and reaped large rewards if these proved successful. The Warlords remained prominent, having successfully pursued the war in Korea and stood by to defend against fallout from the Anglo-​French misadventure in Suez. The Political Directorate appeared towards the end, able to take a back seat because business appeared able to thrive without state help, and military power was preserving Cold War peace. The ability of the military-​industrial complex to promote affluence and defuse political tension –​as a US alternative to the centrally planned, publicly owned economies of the Soviet Union –​was soon to be explained (with similarly ambivalent approval) by the most prominent American economist of the time (Galbraith 1958). Mills’s definition of ‘higher circles’ attracted criticism for imprecision over how many people they comprised, whether members typically knew or communicated with one another, whether there was hierarchy within them, and the degree of coordination and consensus within them. But subsequent research showed the term to have been carefully chosen, or at least remarkably predictive of the way it was later deployed. A ‘circle’ is a group which mixes short, strong connections to other members of the circle with longer, generally weaker connections to others outside the circle. It includes ‘cliques’ that communicate directly and regularly, with no intermediaries. But it also extends to people who ‘know of ’ rather than directly know one another, communicating less frequently and more indirectly. Social circles are ‘cohesive groups Circles can be viewed as webs of intricately interlaced cliques, in which indirect communication is facilitated because circle members are also members of these highly overlapping cliques’, where cliques are ‘tightly knit, face-​to-​face groups’ (Moore 1979: 679). A higher circle is one in which the cliques are clustered, with horizontal links between them complemented by vertical links extracting resources from and sending commands to the lesser nodes below. ‘Higher circles’ continuously revolve and evolve. Even as the controversy over Mills’s tirade against elites raged, the Political Directorate stepped up to co-​star with

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the Corporate Rich  –​through social and industrial policy reforms under Democratic administrations of 1961–​68. ‘Mutually assured destruction’ meanwhile allowed the Warlords to retreat to barracks and move more fully under civilian political control. The Kennedy-​Johnson ‘Great Society’ program, and comparable reforms in Europe, showed that bigger government could peacefully coexist with big business: taxing and regulating it a bit more heavily, but offsetting this with better public infrastructures, a better educated and more contented workforce, a more stable economy achieved through ‘demand management’, and specific financial help if an industrial or financial giant hit the rocks. So long as they are successful and their intersections harmonious, those who occupy the ‘Higher Circles’ are not averse to publicity and scrutiny. The Power Elite they formed had, as Mills noted at the outset, achieved (inter)national prominence and happily ‘taken the spotlight of publicity’ from the aristocratic socialites of the nineteenth and early twentieth centuries (1956: 71). Public approval in this glare of publicity was ensured by close association with the emerging world of entertainment celebrity, soon to be exemplified by the arrival of the Kennedys (and Camelot) in the White House. Today the Political circle has largely absorbed the Military, with defence ministers from civilian backgrounds more willing than during the ‘Cold War’ to restrict the generals’ budgets and restrain their more ambitious foreign adventure plans. The Commercial circle has expanded –​a consequence of unusually uninterrupted growth since the last World War that enabled giant corporations to emerge, and a cause of growing fear that governments now ignore democratic mandates in order to do what business wants. In perhaps the biggest departure from Mills’s 1956 inventory, ‘Civil Society’ has become a third circle –​comprising a wide but consonant range of non-​governmental organizations (NGOs), non-​profit businesses and research groups, pressure groups and think tanks, education providers and charitable foundations. The much expanded Commercial circle has sought influence over this ‘third-​sector’ circle, as it has over Politics, a drive encouraged by the substantial flow of funding from the Commercial to Civil Society under the banner of ‘corporate social responsibility’. Commerce and Civil Society coalesce in the emergence of ‘philanthrocapitalism’, whose significance will recur as the sources and uses of power are investigated further.

Global Business According to many contemporary commentators (e.g. Klein 1999, Monbiot 2000, Hertz 2001, George 2004), the world is now principally run by large corporations and banks, which ride roughshod over governments and other formerly powerful agencies. These hold the purse strings of government and span the globe in a way that national governments (by definition) cannot. So governments must turn to them for the delivery of the jobs, goods and services their publics expect; and must enforce the policies they ask for in order to keep corporations faithful to this mission. ‘A corporate rich led by the chief executives of large corporations and financial institutions […] by now can be clearly seen as the driving force within the power elite’ (Domhoff 2006: 547). Mills coined the term ‘corporate rich’ to include the chief executives of the largest corporations and banks, the controllers of major investment portfolios (such as, in the recent past, Warren Buffett

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and George Soros), and the holders of great private wealth (often derived from earlier ownership of industry) who had kept their fortunes together through the establishment of tax-​efficient trusts and family offices and the acquisition of land.

Government Governments are still powerful, can still do many essential things that private corporations cannot, and must do certain things in order for private corporations to survive. This is demonstrated, by, among other observations, the keenness with which corporations try to bend the ears of government on issues that affect them. But the power of governments to affect the ‘macro’ economy through fiscal, monetary and industrial policies is now an asset fully matched by liabilities, since they must continually prepare the pitch and repair the safety net for private-​sector players. These players –​large corporations and small and medium enterprises –​stand between governments and electorates in providing the jobs, incomes and social protections that publics (even when not electorates) now expect from their governments. Electorates and businesses seeking political influence must also grapple with the tangled lines of command within the Political Directorate, a term coined by Mills to denote the complexity of the modern governmental machine. It comprises (but not exhaustively) elected parliamentarians, elected presidents, permanent bureaucrats, shadow bureaucrats brought in as advisers and assistants, devolved state agencies and unelected former politicians who retain a behind-​the-​scenes influence. A political elite emerges from these various branches, but its members may not be those the Commercial and Civil Society circles engage with most of the time.

‘Civil Society’ Organizations Governments have tended to grow, by taking on new responsibilities (for social and corporate welfare and the natural environment) and by absorbing the previously separate military circle. The ‘corporate’ sphere has similarly grown, as private companies take on new activities contracted out from the public sector, and pursue new profit opportunities opened up by technological innovation (including the widening range of Internet ‘applications’) or deregulation (for example, removal of protections for public broadcasting networks and relaxation of gambling restrictions). The non-​profit sector by 2013 accounted for 5.4 per cent of gross domestic product (GDP), 9.8 per cent of wages and 10.3 per cent of employment in the United States, according to the Bureau of Labor Statistics, having outgrown both the public and the private sector since 2000 (McKeever 2015). This ‘third’ sector –​mainly comprising charities, community organizations, pressure groups, religions, and non-​commercial health, care and education services –​has been enlarged by the expansion of its traditional activities, and by the acquisition of activities from other spheres. Spread across thousands of small charities, civic associations, church groups, mutual savings societies and parent-​teacher associations, as they were for most of history, this non-​profit institution (NPI) contribution has not delivered the concentrations of power associated with state agencies in the public sector and corporations in the

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private. Even where particular NPIs grew large, at a regional or national level, their managers characteristically eschewed a headline-​hitting or agenda-​setting role, on the basis that trustees who served a wider public should not be dictating to it. But the past 20 years have witnessed the rise of giant NPIs whose leaders are unafraid to acquire and exert power, which they then extend by capturing further ‘business’ from the private and public spheres. The power of NPIs has been promoted by their growing economic presence in, and the growing political and social importance of, four expanding areas of activity:  education, healthcare, poverty reduction, and the science and technology research that underpins progress in these and other areas of quality-​of-​life improvement. Governments look to non-​profits to take over the provision of various services that it wishes to privatize (to reduce treasury costs or raise efficiency), without making them a direct source of private-​sector profit. For corporations, contributions of money and paid employee time to non-​profits is an increasingly essential way to signal ‘social responsibility’, in a tax-​efficient fashion. Spinning out such activities as research and employee welfare to non-​profits, or giving away such assets as patented drugs and software so that non-​profits can use them, enables the corporation to renounce any direct profit-​making intention while still indirectly benefiting from the assets’ charitable use. The power of non-​profits to complement profit-​driven activity is revealed by the rise of the corporate foundation (CF), which, while fulfilling the legal requirements for a stand-​alone foundation, remains reliant on the parent corporation for recurrent funds and tends to have its senior managers on its board. These close links ‘represent a significant opportunity both for the firms and CFs given that many advantages can be exploited by activating effective knowledge transfer processes’ (Minciullo & Pedrini 2015:  216). As it grows, however, non-​government activity has increasingly divided into two. The commercial branch still recovers its costs (and tries to make profit) by charging for what it produces. The non-​commercial branch seeks only to cover its costs, and does so with revenue drawn from commercial investment, raised in charitable donations or transferred by government.

The Indispensable Military Mills’s (1956: ch. 8) identification of the ‘Warlords’ as a separate ‘higher circle’, independent of corporations and governments, is often viewed as an artefact of unusually elevated international tensions in the year of the Suez crisis, Russia’s invasion of Hungary, and the arrival of the Castros’ rebel force in Cuba. As defence budgets were pared at the end of the Cold War, and the World Wars sank further from view, otherwise sympathetic readers of Mills suggested he ‘was wrong to give them [the military chieftains] equal standing with the corporate rich and appointees to the executive branch from the policy-​ planning network’ (Domhoff 2006: 548). But the armed forces still loom large in most government circles, even in the United States, where three former generals (Defence Secretary James Mattis, National Security Adviser H. R. McMaster and White House Chief of Staff John Kelly) became early mainstays of President Trump’s administration, which counted a 10 per cent rise in the defence budget for 2017 (to $639bn) (Ser 2017) as a main first-​year achievement.

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The military has retained a greater role in many national elites outside the United States and Western Europe, as a participant in government or a wielder of power over civilian governments, and as an owner and operator of major commercial assets. In 2016, to take just a few examples: Egypt was under the military rule of Abdel Fattah el-​Sisi, who took over from the elected Islamist government of Mohammed Morsi in 2014, only three years after a popular rising led to the overthrow of veteran military-​ backed dictator Hosni Mubarak; a military junta was ruling Thailand, having dissolved parliament, disbanded opposition parties and acquired key media outlets also in 2014; and China’s People’s Liberation Army exercises significant economic control through its setting of contracts, direct ownership of enterprises and regulation of entry to key sectors, alongside its defence and peacekeeping duties. In many countries the army remains the only organization apart from the government (and in some countries the only organization) able to marshal resources, coordinate activities and enforce orders on a national basis, sometimes more efficiently and less corruptly than any political authority. It often retains the role of clearing out governments that are incapable of ruling, or threatening to erode democracy and economic livelihoods if they continue trying to do so. This has given some countries’ militaries the power, and incentive, to displace the Political circle and extend control into the others even when the state of the economy and democracy do not obviously merit this. But it is a gradually waning power: the inability of military interventions in Thai, Egyptian and Pakistani politics to turn the political situation round highlights a growing gap between what the polity needs and what the military can deliver, especially when its traditional roles of national and civil defence are demanding more serious attention. The past half-​century’s shrinkage of Military higher circles in Europe and America is likely to continue, even if tensions with China and Russia remain. Armed forces in other countries –​even China, if its economic expansion can continue –​are likely to follow the same path of coming more firmly under civilian political rule, and losing important resources to private corporations.

The Performative Elite: Celebrities Appearing early but remaining somewhat liminal in Mills’s account, celebrities now occupy a clearer role as figures who have transcended one higher circle and can appear in several, or float between them, with apparent public approval. Old and new media enable the most prominent celebrities to become nationally or internationally known ‘household names’. This accords them wealth through marketing of the product with which they are associated, and power through the shaping of popular preferences and judgements through their public statements. While a few business, government, military and voluntary-​sector figures acquire celebrity status, it is mostly attained by cultural, entertainment and sporting ‘stars’ who have moved beyond their day job to take up a commercial, political or civil society role. While a few attempt to stay outside and attack them, most celebrities help legitimize the other higher circles, allowing them to mix with a group whose disproportionate power and wealth have been gained by audience acceptance and meet with public approval. The public following and private fortunes

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amassed by celebrities at the height of their fame give them access to the highest political and commercial networks, conveying opinion to other decision makers which carries the force of their vast general audience (whether or not it distils and conveys their views). The biggest celebrities are also unique in dissolving the distinction between personal and positional networks, their power (and wealth) arising from who they are, with any formal post being in organizations built exclusively around them.

A Cognitive Elite? Technocrats, Intellectuals and Experts Assassination-​prone political leaders have always been careful to look behind them. Political analysts know to do the same, from a different angle  –​to identify the power behind the throne. In fifteenth-​and sixteenth-​century Europe (stretching into the nineteenth in some parts of its east) established churches were the most common source of privileged advice, with assorted archbishops, cardinals and popes dispensing earthly advice on foreign, social or economic policy. Through the twentieth century, in the New World as well as the Old, their place was taken by scientists, technologists and experts from the newly flown intellectual planes of organization, management and social science. Today no government is complete without a permanent layer of in-​house experts and special advisers, and a crusty integument of summonable secondees and subject-​matter experts, to which are glued a further rind of think tanks, lobbyists and others eager to pitch expert insight and opinion. However, the power that flows from supplying expert knowledge and opinion does not make its holders part of the elite. Experts have traditionally been ‘on tap but not on top’ –​a function of their relatively large number, caused by expansion of research as a social activity and growing specialization in each research area. This has eroded the exclusivity of experts, few of whom now have a large field to themselves, and increased the scope for public or business policymakers to pick the expert whose views support their own, discarding those that clash with the official line. Although some ‘ideas merchants’ and ‘policy entrepreneurs’ gain prominence by pushing certain research outputs into the public domain, they enter the higher circles by invitation only –​rarely staying long unless they can burnish the burst of fame into celebrity or public-​intellectual status. The same applies to top journalists, who may enjoy some influence through channelling and publicizing new findings or ideas, but whose role –​unless they shoot to stardom –​remains one of lobbing ideas into the higher circles from a distance, subject to those inside consenting to let them in. Like the pioneering analysis of power elites by Mills (1956), the analysis that follows is made by observing elites from the outside, and revolves around an extended examination of who comprises these ‘higher circles’ and what they do. Although the world has doubled in economic and demographic size and changed radically in social and political structure since Mills wrote, his arguments remain remarkably applicable to contemporary conditions. But grasping their full implications depends on developing aspects of power, networks, distributional coalitions and social class which were only just becoming visible at the moment he wrote.

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Chapter Three SOURCES OF STABILITY: ELITE CIRCULATIONS AND CLASS COALITIONS For a brief instant in the fall of 2011, the world’s political and financial elites seemed wrong-​footed to the point of overbalancing. That September, a small protest group in New  York’s Zuccotti Park began to swell as more angry young (and middle-​aged) people joined their camp, defying official notices to leave. The movement did not literally Occupy Wall Street, being sequestered several blocks from it. But this and the parallel protest camps across the world conveyed a clear current of discontent –​at the way rich financiers and businesspeople, with governmental connivance, had ‘crashed’ the global economy in 2008 and then forged further ahead through a publicly funded rescue effort that left ordinary people facing years of austerity. The previously inchoate ‘anti-​ capitalist’ and ‘anti-​globalization’ movements had found a unifying new target: ‘the 1 per cent’ of ultra-​rich people and the financial markets that seemed to redistribute wealth from those who created it to those who merely placed bets on it, and that were ‘too big to fail’ when their gambles went wrong. Five years later, anti-​globalization had a new figurehead, who had grabbed not only attention but also real political power. Public disaffection with the free global movement of products and people, and the loss of secure unskilled jobs, drove Trump to the US presidency. Across the Atlantic, it led to the United Kingdom becoming the first country to vote itself out of the EU, with a majority believing that curbing immigration and reasserting national sovereignty would bring economic and social gains (Swales 2016); and to Hungary being proudly declared an ‘illiberal national state’ by an emphatically re-​elected prime minister who had fought to rescue liberal democracy from the ashes of state-​planned socialism 15 years earlier (Toth 2014).

Renounce and Renew When enthusiasts for these changes were asked how the insurgency against elites had come to be led in the United States by a self-​professed real-​estate billionaire (surrounded by former chief executives and Goldman Sachs alumni), and a similarly wealthy group of former businessmen with rich commercial sponsors in the United Kingdom, they had ready answers. Only people with comparable wealth and power to the elite could take them on, electorally and once in office. And they were eager for such a contest because, while being the elites’ equal, they were also the opposite. Trump and the Brexiteers were outsiders who had been systematically excluded from the elite, giving them a unique incentive to derail its projects and dethrone it. Trump and his father had been kept out

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of the Manhattan real-​estate fraternity (Cillizza 2017) and shunned by the Republican Party ‘establishment’ (Page & Heath 2016). Jared Kushner, the president’s son-​in-​law and special adviser, was similarly steeped in outsider battles, taking over the family real-​estate empire when his father was jailed for tax fraud and illegal campaign funding, and even buying up New  York gossip columns to counter the adverse publicity. ‘The Kushners are not on the city’s bold-​faced cultural boards or civic institutions’ (Freedlander 2017). Comparable directional changes were being forced in Europe by movements that had likewise been long excluded from mainstream politics, accused of extremism and racism –​ such as France’s Front National, the United Kingdom Independence Party (UKIP), and Italy’s Lega Nord. But if these were propulsions into policy of ordinary worker and taxpayer grievances, something was seriously distorted in translation. Protest leaders who matched the elite on wealth, and broke into its political strongholds, soon seemed intent on continuing an elite agenda in ways their ousted predecessors might never have dared. Trump’s early reforms focused on cutting corporate taxes, reforming healthcare to cut higher earners’ premiums (by paring lower earners’ coverage) and relaxing the Dodd–​Frank rules that had curbed bankers’ risk-​taking (and bonus-​making) to avoid a repeat of 2008. His proposed replacement for his predecessor’s Affordable Care Act (Obamacare) was accepted by a Republican-​controlled House of Representatives, despite clear warnings on the regressive impact of the first draft, which promised substantially lower premiums and taxes for those earning $50,000–​$75,000 at the expense of lessened coverage and higher costs for those below or not far above the median income of $30,000 (Congressional Budget Office 2017). An initial Congressional defeat for ‘Trumpcare’ had enabled the president to withdraw federal funding and scare off the private health insurers, ensuring that the previously fast expanding Obamacare imploded as he had predicted. An emboldened Trump moved on to an unprecedented reduction in business and high-​income personal taxes, to be ‘financed’ by import tariffs, a plutocratic mercantilism that no Democrat or mainstream Republican could possibly have pulled off. Elected through a combination of new-​media-​driven campaigning (tied to clever amplification of his rivals’ flaws), astute targeting of Electoral College swing states and vulnerable voters’ difficulty getting to (or registering for) the polls, Trump set off on a reforming path whose apparent chaos masked a huge and ingenious effectiveness. Whereas Ronald Reagan, the Republicans’ post-​war poster cowboy, had cut taxes but left big government in place, Trump manoeuvred to eliminate large swathes of public bureaucracy by rendering it ineffective or (if it still had teeth) leaving it unstaffed. Reagan’s effort at ‘neo-​liberalism’, mirrored by Thatcher in the United Kingdom and John Howard in Australia, had transferred public agencies and assets into private hands, enabling business to tap secure profits from activity previously run as a public service. But its tax-​reducing, enterprise-​freeing potential had been negated by the rise of public regulation, a panoply of rules and standards to stop the assets’ new owners exploiting and neglecting customers or abusing a private monopoly (Moran 2001, Glaeser & Shleifer 2003). Trump used his exceptional mandate for a frontal assault on this inadvertently created ‘regulatory state’, tying the arms of government in knots where he could not lop them off. Agencies charged with keeping air and water clean; widening access to

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education, healthcare and housing; combating climate change; keeping alive the arts and public broadcasting; and promoting reproductive health and other public services were calculatedly starved of funds, or any nominees to lead them. His staying of government’s ‘visible hand’ even extended to the banking and corporate conduct rules enforced (by past Republicans) to stop a repeat of the 1990s corporate scandals and financial crash of 2008. Trump’s radical attempt to crash and burn the regulatory state attracted strong opposition from philanthropists and activists previously viewed as sponsors of the elite. Four weeks into the new presidency Charles and David Koch, past champions of conservative causes, were already pledging up to $400m on campaigns against Trump’s signature protectionist, anti-​immigration policies ahead of midterm elections (Forster 2017). But they were pitched against another strand of corporate and private billionaires who viewed Trump as completing the Reagan legacy –​replacing a state that redistributed money and power from capital to labour with one that opened more profit opportunities for capital at labour’s expense. An unprecedented number of ultra-​high-​net-​worth individuals (from within and beyond the first family) and financial-​sector alumni took top jobs in Trump’s first cabinet, and others gladly backed his campaigns for election and re-​election. This was a particularly stark example of dissensions within the ruling elite, which stay unresolved until one fraction reaches beyond the ‘higher circles’ and rallies a wider section of society, whose open rage forces other fractions to accept the new tune. In the post-​Reagan United States, elite members who had prospered with the help of government regulations and contracts clashed with those who felt marginalized and constrained by them. When disputes of this kind cause major and prolonged disagreement, they threaten the elite’s ascendancy by weakening its effectiveness, raising its vulnerability to corruption and incompetence and to economic breakdown that exposes these to full public view. The dispute is then sped towards resolution when one elite fraction successfully rallies other social elements, forcing rivals to make peace before the whole elite can be undermined. Trump’s elite-​seeking genius was to recruit working people and small business owners who felt betrayed by corporate interests, which they viewed as having captured mainstream Democratic as well as Republican candidates. One side’s rallying of the lower middle class and the ‘mass’ is often decisive in resolving intra-​ elite disputes, especially when it can be done through electoral processes. This gives the appearance of elites breaking up and becoming vulnerable to overthrow, or being forced to open their doors to previously excluded members and interests, as the war among fractions precludes any central stage-​management. On rare occasions, the chaos extends its reign to the point where the elite as a whole loses control, and an ‘anti-​elitist’ insurgency sweeps to power. But far more usually, enrolment of other social groups enables fractions to resolve their strife in a way that restores and strengthens elite rule, sending the non-​elite foot soldiers back to their downtown barracks. And when a ‘revolutionary’ overthrow does occur, those who find themselves in the corridors and boardrooms vacated by the old elite slide easily into the role of a new one, finding that grand designs for change need the grandest of designers to impose them.

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Top-​Down Transformation Caesar never feared the Roman mob. His assassin was the henchman Brutus, who struck with the declared aim of stopping a first-​among-​equals seizing too much power. Britain’s post-​war Tory government was rocked in 1820 not by the London mob that rallied for the returning Queen Caroline but by the aristocratic Whigs and Radicals (and Tory leadership challengers) who used the queen’s case to block the legislative programme. China’s Communist Party wobbled in 1989 when leader Zhao Zhiyang appeared ready to listen to Tiananmen Square democracy protesters, and regained rigidity when party rivals jailed him and crushed their tented tormentors. Thatcher rode untroubled over massed miners’ pickets in 1985 and poll tax riots in 1990, her reign ending quietly in the barbed apologias of party grandees. A similar clique of party and secret police colleagues spirited president Nicolae Ceauşescu and his wife away from baying Romanian crowds in December 1989, shooting them before the mob could demand a more extensive trial and keeping the world’s largest People’s Palace to themselves. Mass protest has featured in all ‘revolutions’ but invariably as a backing track to changes hammered out within embattled ruling circles. Even the apparently literal overturnings –​such as France 1789, England 1649, Russia 1917, China 1949, Poland 1989 –​led to new orders reminiscent of the old ones or to a desperate scramble to restore these when replacement institutions proved unworkable. The arrival of democracy and stronger civil society has done little to break this top-​table monopoly on radical change. While conflict among elite members is almost always attended by displays of public anger ‘in the street’, such anger rarely spawns a coherent movement that overthrows the whole elite and installs a lasting alternative. More usually, it is commandeered by one elite fraction against another. Distilled public anger is sometimes used by those in power to put down their intra-​palace challengers, sometimes by those challengers to break down the doors and put themselves in charge. The crowds that riot outside may be seeking genuine political change, but almost invariably achieve only a changing of the guard, whose new elements then drive them back. In channelling anti-​globalization to seize the White House, Trump retraced a familiar path that delivered Oliver Cromwell in place of Charles I, Napoleon over Louis XVI and Vladimir Lenin above the tsars. Far from weakening them, these very public circulations renew and reinvigorate the elite, helping avert a more comprehensive change by convincing the public that it now serves their interest (or that alternatives would be far worse). There is nothing new in the suggestion that elites lose control (of political and economic power) when they become internally divided. ‘Every writer from Tolstoy to Skocpol mentions divisions in the ruling class as the key to the success of a revolution and usually even to its occurrence’ (Johnson 1983: 183). Even when crowds join the call for the crowned heads to roll, the axe is typically swung within elite circles. The chances of the grass roots driving change recede further as political and economic power structures expand and interlock, so that viable adaptation requires coordinated reconfiguration. While protest groups try tirelessly to rouse the numerically dominant ‘general public’ as a vehicle for transformation, elites’ greatest danger comes from their own unruly elements. Internal division can wreck an elite in two ways. It can create a surfeit of rulers and

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reform plans, resulting in closely sequenced coups and counter-​coups which render the state ungoverned or ungovernable, and spark economic decline. Or it can cause a leadership vacuum, which non-​elite forces gladly fill. Those forces are usually foreign elites, acting individually or through a rival government, exploiting another country’s divisions by seizing its land (and other assets) and imposing colonial rule. Occasionally, when no foreign power intervenes, a domestic non-​elite group grabs the power which their divided elite has let go of. This tends quickly to become a new elite, even when it sets out to build new institutions and eliminate all fractions of the one it replaced. Egalitarians end up emulating the elites they sought to annihilate through a combination of the need to impose rapid change, the indispensability of central ministry structures and the temptation to reoccupy high offices with the drinks cabinets and chandeliers still in place (Djilas 1982, Michels 1962). To survive, however, an elite also depends on internal divisions. These keep it dynamic, enable it to adapt quickly to external change by promoting the fraction best able to handle it, open its doors to new talent and persuade the non-​elite that entering or influencing it are better routes to change than overthrowing it. The ‘circulation of elites’ requires competing fractions with alternative agendas and a regulated entry of disruptive new members, who can reform it from within and thus desist from assailing it from outside. While echoing the consensus that ‘elite conflict is the primary threat to elite capacities’, Richard Lachmann (2003: 352) shows historically how elite stability can be equally pernicious. It must be challenged by restless fractions within the elite if it is not to expose the whole elite to risks of overthrow by the larger groups below. Stability engenders stagnation, according to Lachmann, if it is achieved by setting up institutions that prevent the elite squabbling over powers and resources by freezing their allocation. These tactics for elite consolidation block the flexible reassignment of resources in response to new political and economic challenges, leading quickly to a more general social stasis. Guilds that control entry to a trade or profession, protective barriers against imports, or bans on new entrants to monopolized industries were typical of the institutions that healed elite divisions in fifteenth-​and sixteenth-​century Europe but sent the Florentine, Spanish and Dutch hegemonies successively into decline (Lachmann 2003:  352–​64). Elite-​preserving institutions lead to economic stagnation through blockage of social and technical change, which in turn causes the inability to defend against external attack or internal lower-​class insurrection. Stagnation is ended not (as Marxists believed) when a newly strengthened class dethrones the old elite but when a rebellious elite fraction challenges the incumbents, wrests their power and enacts changes at the top which defuse the social tensions below. The importance of elites in driving major social and economic change, and the importance of internal divisions in enabling them to do this, loom large in the history of Europe since the World Wars. Political elites, whether on the ‘winning’ or the ‘losing’ side, initially divided over whether further conflict could best be avoided (and rising US power countered) through an immediate move towards federation or to reconstitute their patchwork of nation states. The nation state was revived through an alliance between its political elite supporters and the heads of major (sometimes nationalized) industries, who formed a common market that retained and reinforced

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the independence of national governments (Milward 1994), whose discretionary powers extended to the social and fiscal policies essential for maintaining diverse industrial bases in a Bretton Woods fixed exchange-​rate system that extended far beyond Europe. This alliance resisted the deepening of ties into a more federal union by promoting waves of widening, with enlargements to the north in 1973 and 1995, the south in 1981 and 1986, and the east in 2004, 2007 and 2013. The elites of new member states, some having only recently regained democratic national sovereignty, counterweighed those in the ‘core’ who still sought ever closer union. But the concession of power to a central ‘Eurocratic’ elite, compelled especially by the detailed rule-​setting needed to unify goods and service markets after 1992, empowered a new elite fraction with more supranational interests. This forged alliances with member-​state federalists and, by recruiting sections of the multinational business leadership, managed in the 1990s to secure the single-​currency project that most member states had previously rebuffed. The creation of a new elite fraction devolved from member states led to ‘the emergence of a “Eurelitism” that is characterized by a stronger attachment to Europe, a stronger support for the process of European integration, and a stronger willingness to transfer substantial elements of national sovereignty to the European level than is found in the general population’ (Best 2012: 2008). The underestimated loss of sovereignty entailed in surrendering a national currency, and the disproportionate allocation of economic gains (foreseen by Wynne Godley and Marc Lavoie (2007)), sparked a severe backlash against the Monetary Union project when it measurably weakened members’ resilience to the global economic shock of 2008. But even in Greece, victim of the most painful ‘adjustment’ policies, elite fractions that had resisted the euro currency adoption were unable to reforge an alliance with suffering households and businesses that was sufficiently strong to push for renewed monetary independence. This may confirm the argument of Heinrich Best et  al. (2012:  2) that Europe’s integration drive developed an ‘endogenous logic’ that enabled elite fractions to keep pursuing it even when external (geopolitical) and internal (economic) justifications had receded. Or it may just reflect the success of the ‘Eurelite’ in designing a single-​ currency arrangement that was costlier to withdraw from than to conform to, so that crisis ultimately compelled further steps towards a more complete monetary union with common banking rules and a fully fledged central bank. Elites must walk a tightrope between rigid alliances that cause them to rot from within, and bitter conflicts that expose them to overthrow through riot from without. Tensions can arise both within each higher circle, as when businesses that favour protectionism clash with those that want free trade, or political parties cannot converge on the centre ground. They can also arise between higher circles that are relatively harmonious within, as when political parties have agreed on a relatively interventionist, redistributive state but the business community solidly backs deregulation and privatization. ‘The power elite is not a homogeneous circle of a specified number of men whose solidified will continuously prevails against all obstacles’ (Mills 1968: 242; italics in original). These tensions can reinforce the elite if creatively managed, or undermine its rule if allowed to spill over. Open warfare between elite factions can leave the gates of their citadel open to non-​elite invaders. The threat of displacement is raised if one or more elite factions

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strengthens its assault by recruiting reinforcements, from lower down the social order or from abroad. The idea of elites as agents of social and economic change has rarely appealed to political parties, commentators or theorists. Most political traditions have come to view power elites as inimical to justice, fairness and progress, hence destined to be broken down as societies make economic progress and education spreads. To the Left, elites comprise the holders of undeserved privilege, who are motivated to stop its meritocratic reallocation; or self-​made commercial and intellectual high-​flyers, whose rapid distancing from the ordinary people they left behind has drained them of capacity and motivation to improve their situation. To the Right, elites are yesterday’s winners standing in the way of new contestants, an obstacle to good governance if they impose generational closure of key positions (Dijkstra et al. 2004: 98) or block technical change to preserve the rents from past investment (Cantner & Krueger 2004: 177–​78). The concept of classes as agents of change has been consistently more appealing to those describing past social change or prescribing its desirable next phase. Even if an elite holds power, it cannot do so without active support from some of those it rules over. The blessing of spiritual leaders is never persuasive enough as a sole justification. Force and other forms of repression are never pervasive enough for its preservation. For elite rule to last, it must deliver enough benefits for at least one group of subjects to uphold it politically (defending it against internal and external threats) and economically (paying the taxes that finance its activities). Those benefits may be limited to defence of the realm and preservation of public order, or may extend to more discernible provision of public services and goods.

Class Coalitions, and Elites’ Role in Building Them Historically, phases of social stability in which elite rule prevails and gradually evolves outnumber the crisis moments in which elites feud and abrupt changes happen. The ways in which elites’ ascendancy is strengthened and sustained through wider alliances, which strengthen the fractions and help them to coexist, must be understood before appreciating how elites’ ascendancy can be endangered when conflicts among two or more fractions draw in other social groups. The role of alliances between elite and non-​elite groups in driving ground-​shifting conflict is sometimes noticed late, or missed altogether, because such alliances are also vital to elite ascendancy and stability. Elites’ power to implement decisions with wide social repercussions is enabled and constrained by coalitions with classes below them (Higley & Burton 2006), as is their ability to keep the fractions cohesive and avoid too much vertical distance between top, middle and lower social strata. If they fulfil the feudal mission and enable a pre-​industrial society to defend its borders and expand its population, elites will eventually experience the growth of a land-​and factory-​owning ‘middle class’ below them. How they react to this new group decisively influences the course of social development, as long noted by political theorists of all political persuasions. If they seek to subordinate the emerging middle class, and stop it accumulating private capital along with power over its propertyless employees, elites will

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choke off economic development –​the fate of expropriating governments from France in the late eighteenth and Russia in the late nineteenth century, to the Soviet Union in the late twentieth and Venezuela (and Russia again) in the early twenty-​first. Elite survival depends on forming a durable coalition with the middle class. Such coalitions enable a few of the most successful merchants and financiers to join the elite, acquiring political power to fit their extraordinary wealth and command over labour, while most are kept contented in the level below, enjoying the freedom to keep getting richer and a degree of electoral control over who sets their laws. If the middle class is able to keep accumulating in this way, a sizeable ‘working class’ builds up below it. How the middle class reacts to this new group decisively influences the next stage of development, shaping the fate both of the middle class and of the elite with which it has formed a coalition. If working people are drawn into the existing coalition, social order can be preserved and accumulation continues. The ‘grand coalition’ of middle classes, working classes and elites has been central to most explanations for the rise and durability of capitalism. The unity may sometimes have to be sustained through declaration of imperial duty and war against external enemies, or an ‘enemy within’ comprising the ‘underclass’ and revolutionaries claiming to liberate the working class. But its strength can also be traced to the all-​round economic and social benefits of the three classes coexisting, under a political agenda that supports capitalist investment and innovation while giving labour more pay for less work as its productivity rises. But other possible alliances and oppositions arise. The elite may abandon its coalition with the middle class and form an alternative alliance with the working class. Or it may solidify its coalition with the middle class in order to crush the expanding working class’s claims to workplace and political power. Barrington Moore (1966) influentially argued that a coalition between the old land-​owning elite and the new urban middle class which disempowered the workers led characteristically to fascism, whereas a seizure of the old aristocratic polity by workers and peasants was the route to twentieth-​century communism or state-​planned socialism. Fascism sowed the seeds of its own demise by resubordinating the middle class to an elite which stifled its commercial freedom and forced it to finance a ruinous external expansionism. Communism suffered a similar fate, for similar enterprise-​stifling reasons. When elites are composed of the ‘new’ heads of successful businesses, rather than the ‘old’ pre-​industrial aristocracy, the same coalitions can have rather different consequences. An alliance of elite and middle class to contain the power of workers can emerge as neo-​liberalism rather than fascism, showing more compatibility with democracy and a much longer shelf life. A  coalition of elites with the working class can unfold very differently from communism, again finding traction in countries that were previously ‘better dead than red’. In North America and parts of Western Europe, a new elite drawn from the top levels of business and finance has forged an alliance with the less aspirational working class which excludes and disempowers the middle class of professionals, small-​company bosses and affluent workers. Influential research by Joan Williams (2017) holds that members of the US white working class dislike those immediately below them (the unemployed and sick who are regarded as free-​riders) and those immediately above (the professionals who condescend to them and order them around),

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finding the corporate elite much more impressive and worth aspiring to. This steers non-​college-​educated workers towards a political agenda that politically and financially pressures the middle class  –​withdrawing its accustomed subsidies to industry, higher education and other public services; reviewing its free trade pacts, dismantling rules that protected non-​financial companies against the financial and real-​estate barons’; and disbelieving its ‘mainstream media’. Such previously unholy alliances are observable not just in the ‘Western’ countries where business elites are seen (since the early twentieth century) to have arisen from free-​market competition but also in those where ultra-​high corporate wealth arises from close links to political power, as in China, Russia, other former Soviet republics, India and Turkey. In a fourth possibility, the elite uses the middle class’s new distraction, with the expanding ‘labour movement’ below it’, to distance itself from any class coalition, acting instead as ‘referee’ in a mutual engagement between the middle and working classes that stops either from gaining control.

Elites as Creators and Destroyers of Coalition Systematically missing from most of these accounts is a social agency that can negotiate and sustain class coalitions. In any large-​scale society (even before industrialization) there are serious conflicts within each class that prevent it from achieving ‘class consciousness’, devising a clear set of preferences for reform and acting in a coordinated fashion. There are equally serious conflicts between classes, which make it hard to discover and pursue shared interests between them. While progressive distributional coalitions can be shown with hindsight (or game theory) to be functional for development, historical detail of how they came into (and remained in) existence is hard to find. Some theorists have identified a particular social class as assembling and aligning a coalition’s diverse constituents, by exercising ‘hegemony’ over other classes. This involves ‘a dominant class renouncing a strictly corporatist conception of itself by concerning itself with the specific interests of other social groups’ (Lester 1995: 5, italics in original). But to do so (and hence attain such dominance) the class must either compromise its own interests or be sufficiently skilled with propaganda and persuasion as to convince other classes it now upholds their interests, even when it does not. Unless unusually uniform and compact, a class lacks the coherence to achieve such an alignment or the agency to impose it. Agreements are never formally negotiated, but emerge implicitly in a cooperation among classes that is invariably moulded and maintained by elites that stand detached from them. Other (liberal as well as socialist) theoreticians cite ‘the state’ as an architect and guarantor of class coalitions. But governments capable of balancing the interests of capital and labour, or middle and working classes, are generally the consequence of stable class coalitions and not their cause. Rule of law, secure property rights, functioning democracy and other features of the modern developmental state are rarely in place when such coalitions start to form. Past ‘class coalition’ approaches to political history have neatly sidelined elites, which are merged with the class immediately below them or simply ignored. But while coalitions of classes provide an initially powerful top-​down picture of how major change is achieved, the detail proves more difficult. It is rarely demonstrated that the ‘middle’ or

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‘working’ (or even ‘aristocratic landlord’) classes share a common set of interests and political preferences, or can organize in a concerted and coherent fashion, even if members all agree on what needs to be done. Class consciousness appears slow to develop, even with extensive general and political education. By the time these arrive, both ‘middle’ and ‘working’ classes have begun to fragment, through social stratification (and differentiation of economic or cultural interests) related to income, ethnicity, gender, location, employer type and other sources of heterogeneity. In practice, political elites from the previous phase of economic development play a crucial role in brokering and maintaining class coalitions. They coalesce not with the whole of a rising class, but with selected representatives who match their ability to take decisions shaping many less consequential lives. Liberal and socialist political thinkers (and doers) admit this in practice, always resorting to a small group to ‘guide’ or ‘represent’ the supposedly dynamic class and distil its otherwise inchoate and unenforceable interests. Elite members have the power to secure the loyalty of the wider classes below them, through the carrot of favourable policies and the stick of coercion. They also have the means to deploy such power, because of their small numbers and coherent networks, and have the incentive for such deployment, because their survival in authority depends on it. This is not to suggest that elites always operate as a coherent agency with clearly formed plans: their divisions and internal battles are as significant for social development as any shows of unity, as the next chapter makes clear. Power elites’ foremost chronicler insisted from the start that it is ‘too rationalistic’ to assume that ‘the unity of the elite must be based on conscious interests, or even ideology’ (Mills 1968:  240). The elite wants to rule  –​some fractions to preserve their own interests, others to steer society in ways they think are good for it –​but is continually challenged to heal its own divisions and keep those below the elite convinced of its legitimacy. External threats, of war, terrorism and economic sabotage, are a recurring rallying point, but one that often brings only temporary solidarity and deeper division when this ends. Adam Smith added an intriguing geographical twist to this dynamic tension between past and present elite fractions in the brief third book of his Wealth of Nations (1776), which provides the economic-​history antidote to the ahistorical and frequently refutable parables that punctuate the first two. Smith observes that pre-​industrial elites, controlling the agricultural surplus, habitually reinvest it in agriculture, unless they are compelled to divert it into industry or commerce, or are promised far greater returns from doing so. ‘Upon equal, or near-​equal profits, most men will choose to employ their capitals rather in the improvement and cultivation of land than either in manufactures or in foreign trade […] Had human institutions, therefore, never disturbed the natural course of things, the progressive wealth and increase of the towns would, in every political society, be consequential, and in proportion to the improvement and cultivation of the territory or country’ (Smith 1979 (1776): 480–​81 and 482). The disturbance ‘to the natural course of things’, which first enables the towns’ industrial production to start outgrowing surrounding villages’ agricultural production, requires a double shift of power. First, the landowners who form the rural elite must take up residence in the towns, or ally with the merchants who already live there, so that exchange of rural for urban products picks up

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and more of the surplus is reinvested in industry. Second, power must shift from the elites of each city to the elite of the rudimentary national government. The self-​governing European city state, which later economic historians have claimed to be unique to Europe and essential for the launch of industrialization (Landes 1998: 36–​ 37), is actually a serious roadblock to it, promoting an excessively stable coalition of merchants and landowners which reinvests in commerce and holds back the expansion of manufacturing. City states’ command of long land or sea trade routes ensured an inflow of cheap imports which deterred local farm and factory production as well as invited logistics for foreign invasion forces. ‘A city might in this manner grow up to great wealth and splendour, while not only the country in its neighbourhood, but all those to which it traded, were in poverty and wretchedness’ (Smith 1979 (1776): 502). Only with the subordination of city states to a larger nation state could the late medieval economy based on external trade –​shackled by ‘mercantilist’ trade barriers that (in Smith’s well-​ known terms) restricted the division of labour and extent of the market –​give way to the early modern economy based on manufactures. This internal geographical power shift was usually achieved when the political elite around a sovereign allied with smaller-​town elites to overpower the cities’ economic elite. England was to achieve this, restoring a financially viable monarchy in 1660 and shifting economic power from coastal ports to inland industrial centres in the subsequent century. Italy, failing to do so, lost its chance of early industrialization as the unchallenged Florentine and Genoese city states slid into terminal decline (Arrighi 2010: 127–​29).

Progressive Distributional Coalitions Liberal traditions have seized on the middle class (bourgeoisie) as the engine of development. A large and expanding middle class is credited with driving economic advance through industrialization and technical innovation, political advance through democratization and expert organization, and social advance through the values that accompany decentralized, border-​crossing exchange upheld by legally protected private property. In contrast, socialist traditions identify the working classes (whether industrial employees or peasants) as the decisive force –​curbing the bourgeoisie’s excesses and rescuing capitalism from its inherent tendencies to stagnate and self-​destruct, or hastening its downfall if those tendencies prevail. Between these, various strands of centrism and social democracy deny that any one class can be the sole agent of political or economic change, this depending instead on effective coalitions of classes. When governments and policies are decided by voting, working-​class movements are forced to seek an alliance with the middle class because (socialists concede) they are never a numerical majority (Przeworski & Sprague 1986:  31); and (liberals add) they cannot devise and implement successful political action, which depend on the middle class’s ability to regulate, accumulate and innovate (Weber 2003. Even without electoral democracy, workers’ movements must retain the support of the middle class to stop them withdrawing, consuming or mismanaging their capital. The middle class can make itself an essential coalition partner of elite rule as soon as elites cease to control all the resources they need for the activities that legitimate their rule

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(by showing their effectiveness as rulers). Elites can self-​finance while their governmental duties remain small, and financeable through their own resources (such as generous landholding or monopoly of a valuable resource such as gold coinage or oil). As the public comes to expect more from them, and such resource monopolies dwindle, the political elite is forced to reach out to the business elite. Except in a few oil-​rich states, the middle class is central to the tax base that funds provision of essential public services (including defence against external enemies, relief for those in poverty, dispute resolution and essential physical infrastructures). Its cooperation is also needed to keep the economy and its productivity growing so that general living standards can rise, and ensure that working people have the jobs, pay and conditions to keep them content. As well as paying business and personal taxes, the middle class supports government by buying its debt, paying employees enough to open up another strand of tax revenue, and providing incomes, jobs and pensions, which would otherwise be the state’s responsibility. The sociopolitical conditions required for sustained industrialization are now commonly traced to ‘distributional coalitions’, through which holders of ‘new wealth’ from the latest forms of industry and trade form an alliance with the holders of political and social power derived from ‘old wealth’. Its key contribution is to seize the surplus which rural societies have always produced, and reinvest it for additional production instead of consuming it. Whereas feudal exploitation of peasants keeps them perpetually poor, bourgeois exploitation of workers imposes poverty which can give way to affluence if the ongoing accumulation of capital is subsequently redirected at serving the needs of the mass market. But the middle classes have no easy road into power. They must first clear the obstacles to building their businesses and amassing capital, then convert their wealth into political power enabling them to build the physical and legal infrastructures an industrial economy needs. Countries’ development is sustained, and low-​or middle-​income traps avoided, if their political elites (or factions within them) form coalitions with the social rank immediately below them. Development is interrupted, with political institutions destabilized and accumulation processes halted, if political elites (or factions within them) successfully reach further down the ranks, enlisting the much more numerous worker and peasant groups in a movement to effect change at the top. The choice between these two options arises if there is a middle class of business owners, managers and affluent workers who aspire to join (or gain influence over) the political elite, and which can be recruited by factions of the elite on the promise of eventual membership. If the middle rank is too small, as in Russia in 1917, disaffected elite members only have the proletarian tier to turn to, making political disruption and economic derailment almost inevitable. A willingness to coalesce with the more profit-​minded fraction of the elite is only half of the middle-​class contribution to social stability. Its other great contribution –​again first claimed by Whig historians, then reluctantly acknowledged by those on the left –​ is to anchor and pacify the working class. This is done by driving productivity growth which, contrary to early Marxist expectations, allows average wages to rise above ‘subsistence’, even when subsistence definitions are ratcheted upwards to account for new wants becoming needs. It is also done by holding out the hope among more able workers that they may rise into middle-​class positions, and by recruiting enough of them to keep the

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hope realistic. The ‘alliance’ between the middle class and lower social groups becomes a complementary form of distributional coalition. Working people’s interests are moved into line with those who employ them, to the extent that they will eventually gain if they work to generate profit which the bosses reinvest to ease their workload and raise their productivity (and will suffer if they expropriate the bosses, interrupting production). Workers also find an affinity with state-​employed professionals. They must increasingly pay the bulk of the taxes that foot the public paybill, but they receive in return affordable flows of education, healthcare and other public services, which gradually approach the superior standard for which the richer classes used to pay privately. In the most extensively studied coalition, England became home to the Industrial Revolution when the rising middle rank of merchants and industrialists  –​previously unable to covert economic power into political influence –​struck a deal with disaffected fractions of the feudal aristocratic elite. The monarchy, from Henry VIII (reigning 1515–​ 47) onwards, could not heal its rift with other landowners and the well-​endowed church, and did not succeed (as did French kings from Francis I 1515–​47 to Louis XIV 1643–​1715) in creating institutions that kept the nobility dependent on monarchical favours. The absence of elite-​consolidating institutions in England enabled the merchant and proto-​ industrial middle class to flourish in the sixteenth and seventeenth centuries (Lachmann 2003: 364–​67). While they looked down on the newly rich traders socially, and may have viewed them as a political threat, some fractions of the land-​owning and clerical elite were willing to enlist the middle class in their battle against other fractions; and none was able or willing to rally the ‘masses’ against the rising middle class. The English Civil War (1642–​51) saw a few anti-​monarchists come close to attempting such mass mobilization. But the Parliamentarians under Cromwell quickly suppressed any peasant or worker revolutionary tendencies and  –​when victorious  –​set up a quasi-​monarchical system which was easily allowed a Restoration of the original when Cromwell’s son Richard was removed by disaffected soldiers in 1659. So from the restored Charles II (reigning 1660–​85) onwards, the English elite formed an alliance with the emerging middle classes, gradually opening the franchise to them so that they could provide an effective counterweight to the king in Parliament. This access to power also enabled the emerging middle class to secure the legal changes –​particularly an end to protectionism and restrictions on labour and capital markets  –​which promoted rapid industrialization from the early nineteenth century. ‘The success of the British experiment was the result of the emergence of a progressive oligarchic regime that divided the surpluses generated by the new economy between the large landholders and the newly rising businessmen, and that tied both groups to the centralized government structure that promoted uniform rules and regulations at the expense of inefficient relics of an economic ancient regime’ (Mokyr & Nye 2007: 54). The success was endangered when rapid industrialization and the Napoleonic wars further unbalanced the income distribution and pushed more into poverty, while heightening middle-​class resistance to redistribution and franchise extension. Some members of the elite, alarmed that the middle class might be overexploiting its employees and servants rather than co-​opting them, flirted with the idea of fomenting industrial unrest to compel a more enlightened social policy. Benjamin Disraeli, as a junior Conservative shocked by

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lower classes’ disaffection and disconnection in the 1840s, dreamed of a ‘One Nation’ coalition of aristocrats and working people to outflank the factory owners and enforce stronger welfare measures. But mid-​century instability at the height of the Chartist and other protest movements alerted Disraeli and his ‘Young England’ allies to the dangers of breaching such old alliances, and as chancellor of the exchequer in the 1850s and prime minister after 1868 was careful to keep them intact. A distributional coalition between elites and newly resourced groups rising up beneath them provides a third alternative between the intra-​elite pacts which Lachmann identifies as rigidifying, and the extra-​elite pacts which in the past disastrously unleashed uncontrolled mass protest. Once a middle class arises, it can connect with change-​seeking sections of the elite and form consolidating links which neither lock things up nor shake them up too much. But such progressive coalitions are historically contingent. In many other countries, rising inequality at the dawn of industrialization has swung elite opinion behind the reactionary alternative –​an alliance with the expanding working class and its radical political movements to halt the middle classes’ economic expansion and political ascent. In the nineteenth century, this resulted in unnerving convergence between the old conservatism that sought cooperation between elite and mass to keep the middle class small and subservient, and the new socialism which envisaged an elite-​led working class deposing and expropriating the middle class. The twentieth century brought renewed demarcation among the coalition strategies. In the United Kingdom and the United States, elites glimpsed the horrors of ‘mob rule’ and restored their alliance with the middle class, relying on it to keep working classes quiescent through a combination of redistribution and co-​optation. In large parts of Latin America, Eastern Europe, Central Asia and Africa, elites deepened their alliance with the working class to contain the middle class, under the alternate guises of revolutionary socialism or conservative ‘Peronism’. In Western Europe, unusual progress was made towards a grand coalition of elite, middle and working class, exploiting the ‘Keynesian’ compatibility between redistributive social policy with growth-​and profit-​promoting economic policy.

Conservatives Learn to Trust the Crowd The tying of workers’ interests to their employers, through a need for regular work and belief that cooperation will make it pay more, has enabled elite observers to stop fearing ‘the crowd’ and learn to accept it, or even admire it. The ‘mass’ is harmless, and useful, so long as it stays loyal to those it works for and does not answer siren calls from renegade groups among those who rule over it. This represents a decisive break with conservatism before the emergence of sustainable distributional coalitions. From Plato’s Republic to Thomas Hobbes’s Leviathan, those who reflected on humanity tended to despair of its capacity to regulate itself or guide its own affairs. These have to be entrusted, if not to philosopher-​kings, then to suitably selected experts, to stop uneducated inclinations becoming collective ruination. ‘The only way to erect such a Common Power, as may be able to defend them from the invasion of Foreigners, and the injuries of one another […] is to confer all their power and strength upon one Man, or one Assembly of men, that may reduce all their Wills, by plurality of voices, unto

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one Will’ (Hobbes 1968:  227). However charitably disposed the early social scientists tried to be towards ‘average’ people, these proved consistently to be ignorant and uninspired as individuals and prone to delinquency and delusion when assembled as a ‘mass’. Industrialization, despite its promise of greater prosperity and technological advance, seemed only to compound the scope for herd-​like follies from which benign intervention by experts was the only escape. ‘Popular delusions began so early, spread so widely and have lasted so long that instead of two or three volumes, fifty would scarcely suffice to detail their history’, warned Charles Mackay (2006: ix), at the outset of his 600-​page catalogue of investment bubbles, witch-​hunts and bizarre futurologies unleashed by the unregulated crowd. The conservative insistence that power must be confined to an elite, to rescue the mob from its own sad misconceptions and savage impulses, escalated in the late nineteenth and early twentieth centuries as the spread of democracy threatened to overthrow these valiant guardians. ‘Today the claims of the masses are becoming more and more sharply defined, and amount to nothing less than a determination to utterly destroy society as it now exists, with a view to making it hark back to that primitive communism which was the normal condition of all human groups before the dawn of civilisation’ (Le Bon 2005: 8). There seemed to be no hope of redeeming or safely empowering the ordinary person, because immersion in the crowd had stripped him of any autonomy (or denied her the chance to attain some). ‘A mass man can be defined as a psychological fact; we do not need the presence of the individuals in a conglomeration […] Mass is any man who does not value himself, who feels instead that he is like everybody, who has no anxiety, and who feels satisfied in being identical to others’ (Ortega y Gasset 1943, quoted in Giner (1976): 77). As such depersonalized mobs grew larger and more prone to being whipped up by revolutionary ideologues, the need for responsible elite rule seemed inexorably to grow. As the twentieth century unfolded, however, conservatives came to trust the crowd and lost their faith in the elites. Ordinary people turned out to be capable of acquiring education (when offered it), submitting to workplace discipline in return for a living wage and even of assembling in the fast-​growing towns and cities without running amok. When permitted to vote, they tended to opt for mild-​mannered reformers of the system rather than firebrands committed to sweeping it away. While crowds were showing sense, elites were no longer acting like the guardians of propriety and progress. Their older constituents had succumbed to the vanity and venality of excess aristocratic privilege, while new arrivals in society’s upper tier seem increasingly ill-​equipped to rule. Those made newly rich through investment or industry seemed too preoccupied with the ongoing business of making money, and interested in acquiring statecraft only to the extent that it could protect and augment their profits. Those who ascended through intellect seemed intent on using it to rally the masses in alarmingly inappropriate directions. Hayek (1949), defining ‘intellectuals’ to include the leading practitioners of science, law, medicine and other professions, found it ‘not surprising that the real scholar or expert and the practical man of affairs often feel contemptuous about the intellectual, are disinclined to recognize his power, and are resentful when they discover it. Individually they find the intellectuals to be mostly people who understand nothing in particular

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especially well […] [yet] these intellectuals are the organs modern society has developed for spreading knowledge and ideas, and it is their convictions and opinions which operate as the sieve through which all new conceptions must pass before they can reach the masses’ (2005 (1949): 111). Because the initial coalition of elites and middle class generates economic growth (and concentration of wealth) which expand the ranks of working people, a viable distributional coalition must eventually extend to include them. It is now commonplace (in socialist as much as liberal accounts) to ascribe capitalism’s success to its tying-​together of working-​and middle-​class interests, forcing their members to cooperate in the workplace and their political representatives to cooperate in government formation. While production and income growth (and the return on capital) depend on the working class, its efforts are useless without the support of the middle class –​which supplies the ‘social capital’ that organizes production and makes contracts enforceable (Josten 2013) as well as the physical and financial capital that enterprise depends on. The strength of this alliance explains why –​across the industrialized world –​working people have mostly voted for ‘middle-​class’ parties, despite post-​war electoral systems offering communist and socialist alternatives. (And why, when they do intermittently gain power, these ‘left’ parties’ programmes are geared to rescuing an embattled middle class). The economic incentive to support the bosses and oppose their expropriation explains the quiescence of the ‘mass’ more satisfactorily, and less condescendingly, than appeals to structural power or propaganda. The foremost contemporary analyst of media bias and the language it deploys is right to observe that ‘controlling the general population has always been a dominant concern of power and privilege, particularly since the first modern democratic revolution in seventeenth-​century England’ (Chomsky 2004: 5). Believers in a Gramscian hegemony concur. ‘Throughout history, the elites’ superior influence over the generation and nature of ideology has usually played a decisive role in its ability to appropriate disproportionate shares of society’s output’ (Wisman 2013: 913, paraphrasing Gramsci 1971). But the need for such control lessened in the two centuries that followed, and the means of control steadily shifted from propaganda to education. It was the subversive middle-​class newspaper owners, wanting to attract a mass audience for its advertisers by selling news people wanted to read, who threw off previous partisan affiliations and adopted editorial independence in the late nineteenth century (Hamilton 2004: 37–​46). A typical class-​coalition account of Western societies argues that governments need an electoral majority, which can only be achieved through a coalition appealing to a gradually expanding ‘middle class’ and a ‘working class’ steadily shrinking through upward mobility. Socialist parties are kept in opposition unless they can achieve an appeal to middle-​class voters without losing their traditional worker support. Liberal or conservative parties are similarly relegated unless they can extend their appeal from the middle class to at least the more affluent segment of working-​class voters. A powerful prediction of the theory, apparently fulfilled in post-​war Europe and the United States, is that ‘big’ party programmes will converge on the middle ground. The decline of socialist and social democratic parties in Europe (which accelerated after 2008), and the Democrats’ loss of a congressional majority in the United States (along with their defeat in the presidential election in 2016), are ascribed to their

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struggling to maintain a programme that simultaneously attracts widespread middle-​ class and working-​class votes. In adopting business-​friendly policies to win over the middle class, parties originating in the labour movement narrowed down their working class base to the minority of (mostly high-​skilled) workers who gain from deregulation, trade liberalization and restricted welfare support. Surveying industrialized democracies before the global financial crisis, David Rueda (2007) finds plentiful evidence that social democratic parties had narrowed their focus to ‘insider’ employees with secure and well-​paid jobs, neglecting the more casualized ‘outsiders’ who were vulnerable to unemployment. In seeking to keep taxes and regulations low for ‘insiders’, they erode the protections that ‘outsiders’ need to keep out of poverty and debt. ‘In the presence of conflict between different groups within labor, social democratic governments often do not promote the interests of the weakest members of society’ (Rueda 2007: 3). The perils of this strategy were exposed after the global financial crisis and recession of 2008–​9, which enabled parties of the right –​especially those promising to ‘protect’ unskilled workers by restricting immigration –​made election-​winning vote gains from the social democratic left across Europe, the United States and Latin America. Traditional (conservative) elites can survive without unskilled working-​class support provided they can capture that of the middle-​class and skilled workers who aspire to join it. Such sponsorship is inevitably conditional on middle-​class interests being sufficiently served by the policies elites follow. The middle class has three significant weapons if its coalition ‘agreement’ with the elite is not sufficiently reciprocated with business-​and profession-​friendly policies. It can withhold taxes, constraining the government financially. It can stage an ‘investment strike’, refusing to maintain the economic activity required to provide adequate jobs and incomes to the rest of the population. And it can allow workplace conditions to deteriorate, robbing the elite of its human shield against the grievances of the working population. Modern liberal (‘neoclassical’) economics, promoted by Hayek’s Austrian School and the Chicago School later personified by Milton Friedman (1962), contributed much to conservatives’ rehabilitation of the crowd as well as their corresponding rejection of the elite. Learning to trust the crowd (and distrust the elite) moved the conservative political tradition into line with that of economic liberals who had despaired of benign dictatorships (and warmed to democracy and markets) long before. A modicum of private property was needed to give people the stake in society that ensured they exercised political votes responsibly, and enable them to deliver economic ‘votes’ in the marketplace. But by the same token, there was no place in the new society for the great concentrations of private property that had underpinned past elite rule. ‘As much as any one can make use of to any advantage of life before it spoils, so much he may by his labour fix a property in. Whatever is beyond this is more than his share, and belongs to others’ (Locke 1924: 131). Liberals had worried from the outset that government, unless privately supplied by self-​supporting individuals, would grow by expropriating private property and upset any social order founded on it. ‘It is true that governments cannot be supported without great charge, and it is fit everyone who enjoys his share of the protection should pay out of his estate his proportion for the maintenance of it. But […] if any one shall claim a power

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to lay and levy taxes on the people by his own authority, and without such consent of the people, he thereby invades the fundamental law of property, and subverts the end of government’ (Locke 1924: 189). John Stuart Mill, although observing an England with much stronger property protection laws and still-​weak tax-​raising powers, developed similar misgivings after reading Alexis de Tocqueville’s (1840) second volume of Democracy in America. Such concerns inevitably mounted as previously cautious and church-​influenced forms of socialism, which focused on assisting working people through cooperative self-​ help, moral improvement or a return to the land, gave way to the more revolutionary intellectually spearheaded versions But in the industrial states of the late twentieth century, as under the monarchies of the late seventeenth, it was a runaway elite that most threatened to overexpand central rule and fund it with arbitrary expropriations. Democracy promised a safeguard against concentrated political power, just as the market was trusted to break up any concentrated commercial power. Post-​war pluralists promoted the shift of allegiance from elite to mass by claiming to demonstrate how far power had already been diffused, to the benefit of the free-​market economy rather than its detriment. The liberal pluralist Robert Dahl struggled to find in Mills (1956) or other critical analyses any evidence of a well-​defined ruling elite, or of such an elite exerting significant power. To do this, Dahl argued, would require demonstrating not only that a small and cohesive elite existed but also that its policy preferences regularly differed from those of the rest of society, and that ‘the preferences of the elite regularly prevail’ (1968: 31). Dahl’s subsequent research found power to be irreversibly spread among numerous competing organizations and actors, its diffusion promoted by democracy (with its numerous levels of government) and the profusion of competing enterprise in a market economy. Democracy was, in turn, reinforced by the multiplicity of institutions with competing aims (Dahl 1970). The ‘masses’ would, it turned out, make far better decisions on the allocation of society’s resources than any group of experts, whether a ruling council of the old regime or a central committee of the new one. All they needed was a free-​market system, enabling them to sell their labour (or seize an entrepreneurial opportunity if they saw one) and to spend the resultant income on whatever they chose. Compared with any remote decision-​making elite, detached from the realities of life, ordinary people had the incomparable advantages of local knowledge (Hayek 1945) and unique insight into their own preferences. ‘If we can agree that the economic problem of society is mainly one of rapid adaptation to changes in the particular circumstances of time and place, it would seem to follow that the ultimate decisions must be left to the people who are familiar with these circumstances, who now directly of the relevant changes and of the resources immediately available to meet them. We cannot expect that this problem will be solved by first communicating all this knowledge to a central board which, after integrating all knowledge, issues its orders’ (Hayek 1945; italics in original). The problem Friedrich Hayek identified of communicating relevant knowledge to the elite at the centre was compounded, as other critics of ‘planning’ pointed out, by the equally serious problem of centrally processing all this knowledge, if it ever arrived. In modern terminology, the market enabled ‘distributed processing’ among the many millions of individuals and

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small enterprises, whereas any central plan required a bombardment of bytes that would overwhelm the central processing unit. The madness of crowds had given way to the wisdom of crowds, through which averaged public opinion (calculated by the market) systematically outperformed expert judgement (Surowiecki 2005).

The Left Keeps Its Class In contrast to conservatives who traditionally feared the crowd, ‘radical’ thinkers started out revering it, even ascribing to it the historic role of ending old orders and ushering new ones in. This faith had been heavily eroded by the early twentieth century, after crowds had repeatedly failed to move in the predicted or prescribed direction, and proved vulnerable instead to being steered by the concentrated powers they were meant to overthrow. From a Western perspective, constructive revolution from below was a hopeless quest. An energized ‘mass’ would either march uniformly off a cliff or surge in contradictory directions, enabling a demagogue to hijack their efforts and steer them counterproductively. Intellectual despair at the inability of the mass to take control, and sensibly use any power it acquired, was never more eloquently expressed than by the socialists who most wanted them to do so. ‘That crowd, as astute political observers from Plato to de Tocqueville amply demonstrated, becomes harder to evade the more you make it master,’ observed France’s most prominent Marx-​disillusioned left intellectual after witnessing American workers align with the rich to elect Trump (Levy 2017). Or, as a British counterpart anticipated eight decades earlier: The point to note is that in the unplanned scramble of human life through the centuries of the horse-​and-​foot period, these incessantly recurring outbreaks of the losers against the winners have never once produced any amelioration of the common lot […] Slave revolts, peasant revolts, revolts of the proletariat have always been fits of rage, acute social fevers which have passed. The fact remains that history produces no reason for supposing that the Have-​nots, considered as a whole, have available any reserves of directive and administrative capacity and disinterested devotion, superior to that of the more successful classes. (Wells 1940: 41–​42)

This ‘fact’ was an awkward one because, despite the heroic efforts (by Bernard-​Henri Levy, H.  G. Wells and others) to spread education and popularize science, the ‘have-​ nots’ appeared to get no closer to formulating a coherent alternative design for society, or developing the interests and capabilities that would enable them to enact the designs various socialist factions had drawn up for them. So the vacuums stirred by proletarian revolt continued to be filled by political opportunists, who consistently hijacked grass-​ roots movements and drove them in directions that served more leisured classes’ interests. Whether the detour was deliberate (as with Cromwell’s steering of the English Revolution from the egalitarianism of the Levellers back to the neo-​royalism of hereditary rule) or accidental (as with Lenin’s ill-​fated ‘vanguard of the proletariat’), it suggested that elites could not be trusted to resolve proletarian grievances if they appeared among the people on the streets. ‘Crowds terrify intellectuals. They see in them a new, specifically modern

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threat to civilisation’, chuckled a Conservative architect of Thatcher’s later reign (Mount 2004: 145). Lenin’s fate was a big contributor to the pessimism of the European and American ‘left’. The chequered history of elite attempts to speed up social change, in the name of socialism, heightened aversion to the concept of elite rule. Given that the direction of social change had apparently been scientifically (or at least dialectically) established, showing the direction in which history should be pushed, Lenin had hoped that expert organizers could quickly construct the new socialist state. But an early retreat from authorizing workers’ control of each enterprise left him struggling with a lack of administrative capacity to expunge the old order or usher in the new. ‘The nature and dimensions of the social changes taking place, the rapid growth of the party and the enormous size of the country meant that it was impossible for the small group of professional revolutionaries to occupy every key position and keep control of the whole administration’, observes Michael Voslensky (1984: 43), who then quotes Lenin’s last article, lamenting a government that is ‘suffering from the general conditions of our truly Russian (even though Soviet) bureaucratic ways’. With too many positions of power for dedicated, competent revolutionaries to fill, many were inevitably grabbed by the Communists’ less capable followers, or even of less-​than-​loyal survivors from the tsarist bureaucracy. Stalin resolved Lenin’s problem by forcefully removing the Bolshevik (and tsarist) ‘old guard’ and assigning his own party loyalists to the top posts, frequently replacing those who missed targets or exceeded their powers. But the immediate brutality and longer-​ term efficiency of the new Soviet bureaucracy, with its small group of ‘experts’ pursuing a ‘central plan’, reinforced the liberal belief that power could never be reasonably or sustainably wielded by an elite (Voslensky 1984: 22–​65). If society were to be bureaucratically managed, as seemed to be advocated by many of those proposing a more ‘scientific’ approach to its development, there would always be more positions of power than could be filled by competent managers. The rest would be filled by those who lacked competence, or secretly wanted to sabotage the system, with fatal consequences for its survival. Worse was to come when economists assessed the calculations that would be needed to plan production in a modern economy, and found them to be beyond the reach of even the most gifted central planner. The claim by Hayek (1944) and Friedman (1962), that only a decentralized market system could efficiently coordinate producers to meet the expressed needs of consumers, could be directed against the benign bureaucracy implied by Europe’s ‘mixed economy’ (with its selective public ownership, Keynesian demand management, welfare state and indicative planning) as well as against the malign bureaucracy of the post-​war Soviet bloc. When Karl Marx and Friedrich Engels (2004 [1848]: 4–​5) argued that ‘the executive of the modern state is but a committee for managing the common affairs of the whole bourgeoisie’, they assumed that central government will only take on the subset of tasks that industrial owners cannot perform individually. These are (in terms developed later) activities with ‘external benefits’ which will be undersupplied if each enterprise must undertake them separately. The number of recognized ‘public goods’ and ‘public services’ increased as industrialization proceeded, to include education and training, transport and communication infrastructure, healthcare, social insurance schemes to protect

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workers against the effects of economic downturn, and even countercyclical monetary and fiscal policies to stop such downturns happening. But in the past half-​century the list has been chopped down to size again, as ways are found (even by socialist governments) to narrow down state provision. Public goods can, it turns out, be adequately provided by the private sector (as when employers sponsor education and training, or give health insurance, and bridges are built by public subscription). Public services can be provided by insurance pools or consumption clubs, as when lower-​income households enrolled in savings-​and-​loan institutions to finance a house purchase; and some become privately purchasable, or turn out not to be needed, as the economy develops and (against Marx’s original expectations) private incomes rise. The state in capitalist society has kept growing, despite this recent scaling down of its perceived role in ‘demand management’ and goods and service provision. It typically appropriates and spends 20–​30 per cent of a country’s national income, the proportion rising to over 40 per cent in richer countries when tax-​financed redistributions are included. The wider tasks of government –​regulating private enterprise, settling inter-​capitalist disputes, protecting private property, promoting foreign trade –​continue expanding even if its role as a direct producer or purchaser of goods and services is scaled back. In capitalism’s latest mutation, ‘private enterprise’ depends on state-​provided insurance –​for the commercial activities it otherwise cannot risk, the employees it cannot afford to keep healthy or to pension off, and its inherently fragile financial sector. But this growth in the ‘common affairs’ of the bourgeoisie (or of society more generally) extends the range of tasks assigned to government well beyond what any elite can be expected to handle. When working people sought to right injustices or seize power, it would be from a whole class, not just a small executive committee representing that class. Most left-​leaning social analysts remain wary of elites, unconvinced that they can ever act progressively –​and not just because Robert Michels (1962), one of the original elite theorists, used the leadership of the German Social Democratic Party (Europe’s oldest) to illustrate his ‘iron law of oligarchy’. Some acknowledge their existence and dismiss them as an inherently malign force, however progressive their initial intentions and provenance. Others concur with the pluralist view that power is now widely diffused, their objection being that its diffusion gets arrested by a property-​owning class. This then uses its dual channels of power –​through control of production (and employment relations) and control of centralized politics –​to disempower all other classes. Socialism is then recreated with the aim not of reconcentrating power on behalf of those without property but of further diffusing it to ensure its exercise on behalf of the majority. But it lacks a means to this end, unable to trust the working class to act for itself in this direction, or an elite to enforce it on the workers’ behalf. Knowing that the people immediately below them are their most likely challengers, elites tend to choose between two lines of defence. One is to co-​opt the middle rank, enabling it to extract power and wealth from the ‘mass’ below so that it does not need to grab these from the level above. The other is to court the ‘mass’, protecting it against the middle rank –​its most visible oppressor –​so that those in the foothills warm to the elite and leap to its defence if it is challenged from immediately below. At the outset of industrialization, the sheer size of the near-​subsistence labouring class (urban and rural) was

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the obvious ally for an elite mainly drawn from pre-​industrial landowners and bankers and their political representatives. Aristocrats and labourers typically found common ground against the rising ‘middle class’, using a combination of legislative and extra-​ parliamentary action to curb its appetite for low wages and long work hours. The growth (in spite of these restrictions) of professional and supervisory roles, and of skills whose relative scarcity gave more collective bargaining power, prompted a historic realignment between elites and the expanding middle class. An alliance dominated the political process at a time when votes (and ability to exercise them) were largely confined to property owners. Even after franchises were extended, the support of the middle class gave elites an indirect route to controlling the ‘mass’, far more effective than any indirect co-​optation achieved earlier. Economic progress reduced workers’ antipathy to the supervisory and managerial rank, enabling more to join it, and allowed most households to acquire a stake in the system (rising income and property ownership), which lessened their incentive to overthrow it. In the first half of the twentieth century, elites in Europe and America relied on the emerging middle class to quell mass discontent, via the stick of tough action against organized labour and the carrot of rising living standards. In the second half, elites relied on a resurging middle class to reach an accommodation with organized labour, defusing any threat from revolutionary politics and opening the way for a ‘reformism’ confined to shades of liberal democracy. To gain and retain support from middle-​class industrialists, professionals and skilled workers, the elite had to open its doors to them. This was achieved by expanding the room at the top and promoting social mobility between middle and upper strata. A rising number of elite positions eased the promotion of mobility, by allowing this to be much more upward than downward. In the United Kingdom, the drift after 1870 of the biggest bankers and corporate bosses to the Conservative Party while smaller manufacturers and merchants stayed with the Liberals (Perkin 1989: 40–​48) signalled the assimilation of new money and new power to the traditional elite, and helped establish the Conservatives as the dominant twentieth-​century party. While the ‘mass’ grew less resentful of their middle-​class employers (driven by trade unionism to share more of the gains during a boom, and seeming also to share the losses during slumps), the middle class also shifted from antagonism towards accommodation with the elite –​helped by assimilation into it. The growth (across the industrial world) of white collar professional employment opportunities helped defuse mass discontent by accelerating promotion  –​and sowing the expectation of promotion –​from working-​into middle-​class occupation (Duverger 1972: 56–​67, Perkin 1989: 343–​436). Governments assisted this growth by supporting new channels of promotion, notably selective schooling, expanded higher and further education, competitive public service recruitment and ‘tripartist’ involvement of trade unions and employer groups in policymaking. Complementary –​and essential –​to this opening of the middle class to ‘mass’ involvement was the increased chance of middle-​class professionals and businesspeople to rise to elite positions. Heads of the biggest banks and businesses acquired ineluctable economic power through the impact of their decisions on employment, investment and growth (as well as their growing influence over policy through the impact of their party sponsorship and the importance of their tax). The most successful professionals could

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now rise to situations of unprecedented political power, as bosses of much-​expanded public services, trade union or professional association leaders, judges, top civil servants, and the parliamentary or congressional members most favoured for top government jobs. A nineteenth-​century balance of forces, in which elites sought to repel the emerging middle class by co-​opting the ‘mass’ against it, gave way to a twentieth-​century harmony of forces in which the elite co-​opted the middle class, which co-​opted the mass. The consequent subsiding of class antagonisms proved to be more than an ephemeral product of the unprecedented 1950–​70 post-​war boom, surviving the subsequent fierce downturns of the 1970s and early 1980s. Concerns about the decay of American free-​enterprise culture in the 1950s (Riesman et al. 1950) and the peak of student-​fuelled rebellion in the late 1960s even prompted the suggestion that public discontent was more likely to break out during economic upturns, when full employment made strikers and rioters feel secure. Suspicion of procyclical protest was reinforced when Western publics went largely quiescent during the ‘stagflation’ of the 1970s, before voting for Reagan-​and Thatcher-​ite neo-​liberalism as the chosen way out. The apparent alignment of interests between elite, mass and all in between seemed so complete as to allow proclamation of ‘the end of history’, as ‘An unabashed victory of economic and political liberalism […] [that] has occurred primarily in the realm of ideas or consciousness’ (Fukuyama 1989: 1). Economic liberals who since the 1940s had fought for that victory, against the seemingly unstoppable slide into ‘mixed economy’ and ‘social democracy’, were palpably wrong-​footed by the scale of their triumph. At the outset ‘we were a scorned, dismissed, heretical minority. There was a preordained path for the state to regulate, to plan and to direct –​as in war, so in peace. If you questioned it, it was like swearing in church’, recalled Ralph Harris, architect of the Atlas Foundation and other post-​war free-​market think tanks (quoted in Blundell 2003: 20). By the 1990s, critics of the liberal counter-​revolution were convinced that privatization, unfettered big business and deregulated labour markets were the norm (Harvey 2007). Crucially for its continuation, neo-​liberal advocates still viewed it as an incomplete and still-​reversible crusade. ‘As central governments become larger, more intrusive, more impervious to political change, and more irrelevant to economic progress, people in many parts of the world –​Quebec, Croatia, Bosnia, northern Italy, Scotland, and much of Africa, not to mention the 15 new republics of the old Soviet Union –​are challenging the nation-​states that they find themselves in […] What the world needs instead of greater centralization is further progress toward free trade and devolution of government decisionmaking to smaller units’ (Boaz & Crane 1993: 10–​11). Neither side denied that employers, employees and the self-​employed had acquiesced in a remarkable rolling back of restraints on market forces, while elites embraced the ‘restoration’ of private enterprise and unfettered markets as keenly as they once rushed to override them. Neither needed convincing that alternatives, social democratic as well as statist, had melted away.

Contemporary Discontent: The Storms below the Summit If history ‘ended’ with the fall of non-​market governance in 1989 (Fukuyama 1992), why had it restarted less than 20  years later? What happened to elites’ impregnable

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foundation of intertwined employer-​employee interests and free-​market consensus? For those who always opposed the conflation of political and economic liberalism, the consensus broke down because the vulnerable ‘mass’ withdrew its support. Working people found that freewheeling capitalism gave rise to imbalances in riches and rights that could not be justified as giving absolute gains to the least well-​off. The system had been disproportionately benefiting the already advantaged well before the financial crisis of 2007–​8. After the ensuing recession, the disadvantaged found themselves paying to prop up the richest –​still locking in their bonuses –​even as basic welfare was declared unaffordable and the last guarantees of decent family and work life were swept away. But this interpretation of the revolt against elites is incompatible with the reaction of those most vulnerable to crisis in the countries hit hardest by it –​at least as expressed by employee and voter behaviour. Electoral swings post-​2008 went in favour of presidents and parties still committed to neo-​liberal approaches. Europe’s social democratic parties, ascendant in the post-​war boom period, were never weaker than in the aftermath of the ‘great recession’, the United States never more assured of a Republican Congress steering presidents towards corporate welfare and away from the household variety. The anger of citizens stuck with stagnant private and social wages, while executive salaries rocket, has been directed against the traditional ‘left’ as much as the parties that promoted market freedom, and channelled in favour of a political and economic nationalism that disparages both. In Europe, socialist and social democratic parties, whose strategy had long been to forge a parliamentary majority by allying harassed middle-​ class voters to their working-​class support base, expected to gain from elites’ alienation of those once immediately below them. Instead, left-​leaning parties continued to suffer electoral setbacks across Europe, even those that had been comfortably out of office when the financial crisis struck. The social democratic left as much as the neo-​ liberal right has been gleefully condemned as elitist, for agreeing on principles –​especially of free international trade and movement of people –​which gave disproportionate rewards to the top of society and rapped those at its base with disproportionate risks. While middle-​class sections of the social democrats’ electorate may have moved leftwards, seeking more labour protections and a stronger welfare state even if this may require higher taxes, parts of the left’s working-​class support have simultaneously moved rightwards. The tide has been turned against elites by an erosion of their alliance with the middle class, which regards the costs of present political arrangements as no longer justified by the benefits –​and has lost the ability and willingness to keep their employees or clients loyal to the old consensus. Arrival in the middle class no longer guarantees a fair chance of advancement into the elite –​because the number of elite positions is declining (as each expands its locus of control) and because assignment of those positions is increasingly determined within elite networks. Conversely, security of tenure within the middle class is increasingly jeopardized, with downward mobility of status or income an expanded threat for many. Workers stay peacefully ‘aspirational’, managers and professionals maintain their comfort margin over mere employees, and elites retain pre-​industrial levels of privilege for as long as jobs and incomes keep expanding for the professional middle class. Today’s

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malaise reflects a disruption to this continual updraught through the social tower block, causing those just below the top to bang their heads on a ceiling they expected to break through, and those in the middle to fear a drop into the shadowy stairwell below. Elites’ efforts to maintain a class coalition that achieves stability without stasis, and the catastrophic consequences when their enrolments of the classes below them go wrong, are given fuller historical, sociological and political analysis in Chapter 4.

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Chapter Four ROUSING REBELLION: ELITE FRACTIONS AND CLASS DIVISIONS Elites’ effectiveness in forging and maintaining class coalitions is highlighted when they periodically break down. If not quickly resolved, elites’ internal battles can reshape the societies they lead, by bringing new interests to the top or letting subordinates seize the initiative while there is no one in control. Rival elite fractions initially manoeuvre behind closed doors, trying to settle their scores without alerting or involving outsiders. But when these rivalries spill over, an embattled fraction may seek extra firepower by rallying discontented elements of the non-​elite. When tactfully and tactically done, this tilts the balance with a minor skirmish which hastens the elite’s dispute resolution, restoring political order. But summoning support from outside the elite is always a risk, because it involves fomenting division in the coalition that keeps the elite in place  –​setting one constituent element against another, or empowering a group that felt left out of current distributional arrangements. Class division can be a cause of political conflict and social change, as well as its effect. Indeed, political history has tended to be written as one in which classes are the scriptwriters, with elites just the actors conveying their plot (with some minor ad-​libbing), or impresarios who curate the creative forces. But when one class seeks to expand its role (or shrink another’s) in the prevailing distributional coalition, the struggle invariably features an elite as referee, and reinforces its preferred side. And when an excluded class tries to force its way into the ruling coalition, or knock another class out, its success depends on resourcing and gatekeeping by elite members. Class divisions achieve their political and economic impact through elite fractions. Far-​reaching changes occur when one or more elite fractions tries altering the supporting class arrangement –​triggering a realignment that may shore up the cracks in the foundation or saw through the main supporting beam. The multiplying possibilities for elite-​class interaction, and their role in contemporary political disturbances, are made clearer by empirically refining today’s social class-​ification.

Reclassifying Classes A stylized three-​level view of society –​elite, middle class and subordinate ‘mass’ –​is enough to give an outline explanation for major turning points in economic and political development. Finer detail can be provided by more recent social class research, which typically finds up to seven identifiable gradations (Savage et  al. 2014:  Appendix 1). Approaches based on employment status (Goldthorpe & Marshall 1992)  and on

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economic, social and cultural capital (Savage et  al. 2013), while disagreeing on the source and description of class differences, concur that meaningful distinctions go beyond the simple breakdown into proletarian, bourgeois and rentier. New distinctions arise within the employment status categories as structural change stretches the spectrum of ‘employees’ from low skilled to highly professional, and that of ‘employers’ from business-​park shed to corporate tower block. These finer distinctions, based on comparison with adjacent groups and opportunities opened up by ‘social’ as well as ‘economic’ capital, are the ones people actually perceive and operationalize through choices and behaviours (Runciman 1966, Bourdieu 1984). Any scope for the New World to escape the historically rooted hierarchies of the Old was quickly extinguished by the contrasting family fortunes of latecomer industrialization. With the early exception of Helen Lynd and Robert Lynd (1929), who found no appreciable tier between the hard-​pressed workers and more leisured rentiers in late-​1920s ‘Middletown’, US sociologists have competed to refine their schemes of social stratification, with race and gender adding further to the endless gradations of status. However, a focus on power changes the nature of the classification, and justifies a simpler division which more clearly identifies the scope and motives for two groups to ally against the third. It identifies a power elite which is numerically much smaller than the topmost ‘elite’ category in sociological classifications, needing allies in the ranks below to survive under democratic pressures, and thus needing to deploy its highly concentrated power in ways which maintain those allies’ support. A threefold division into elite, middle and mass, observing the subgroups within each that seek to move or connect across class boundaries, retains its explanatory power over changes in North America and Europe and is extendable to many non-​Western contexts. It stands between the modern sociological approach, with its division into seven classes, and ‘political economy’ approaches to be reviewed later which eschew the middle ranks and rely on an even starker division into ‘elite’ and ‘mass’].

Class Divisions in Practice: Characters and Capitals Class analysis, sometimes viewed as a competitor to elite analysis, is in practice its indispensable complement. Classes and their interests make a vital contribution to explaining how elites secure their ascendancy (renewed by local, controlled circulation) for long periods; how and why elites periodically succumb to more radical turnover, often accompanied by social instability affecting all sections of society; and how such phases of instability are brought to an end, often with a new elite whose personnel resemble the old but whose policies and outlooks are much revised. A clear picture of the division among classes is needed for understanding how coalitions’ formation shape a country’s political and economic organization, and how disintegrations and reconfigurations reshape it. But past empirical assessments of class based on income levels, or the production relations that determine them, have not been the most useful for understanding class divisions’ political impact and elites’ role in healing or exploiting them. The ‘capital’ held by different groups, as a common source both of power and income, offers a more

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effective way to calibrate the constituents of distributional coalitions, and examine the causes and consequences of their breaking and re-​forming. The capital-​based class analysis of Mike Savage et al. (2013, 2014) supplies a level of detail that can illustrate the general variety of elite-​class interactions when applied to a typical industrial economy (in this case the United Kingdom). Relative holdings of six elements of capital are used to identify and quantify the class division. Two relate to ‘economic capital’ (income and wealth), two to ‘cultural capital’ (consumption of ‘highbrow’ and ‘emerging’ types), and two to ‘social capital’ (the number and status of others with whom they have social contact). Relating social status to households’ economic, social and cultural capitals avoids ‘sundering the concept of class from some kind of theory of inequality’ (Savage et al. 2014: 1017), without necessitating a theory of exploitation to explain the inequality. It also avoids the earlier recognized problem that ‘occupations that are found in close proximity to each other on scales of prestige or status need not, and often do not, have much else in common with each other, and may indeed hold quite disparate locations within the social division of labour’ (Erikson & Goldthorpe 1993: 30). Moving away conceptually and methodologically from the class classifications long used to study social mobility, this approach to class ensures that the qualitative differences in power identified by locating individuals in relation to their access to the means of production are not blurred by quantitative differences in ‘socio-​economic status’, which are often narrowed by a convergence of consumption patterns. Well-​off households spending a fraction of their incomes might consume little more than low-​income households that boost their expenditure through borrowing. But the richer households’ accumulation of assets (including claims on lower-​income debtors) means a growing superiority of power, opening up consumption opportunities that depend on access as well as power. In a first operationalization, Savage’s team applied their capital-​based differentiators to the Great British Class Survey (GBCS, a 2013 large-​scale self-​reporting exercise conducted by the BBC), using a representative sample of the British population (polled by the consultancy GfK) to correct the GBCS data for its overrepresentation of affluent groups. This approach revealed seven ‘latent classes’, whose characteristics and representation in the British population are summarized in Table 4.1. Differences of culture and religion, ethnic composition, economic structure and past upheavals affecting wealth distribution limit the extent to which one country’s latent class structure can be generalized internationally. But the UK analysis identifies categories that are relatively durable and can be found in most other countries, even if the population proportions in each can vary substantially across space and time. The main advantage of Table  4.1, and comparable classifications based on command over broadly defined resources, is in indicating the social groups around and immediately below the elite that can challenge it or be co-​opted to it; and those further below, from which fractions of a divided elite can draw reinforcement when unable to settle their differences among themselves. The social hierarchy is topped by an ‘elite’ that leads the field in economic, social and highbrow cultural capital. Immediately below is a very large ‘established middle class’ –​ one-​quarter of the UK population –​which ranks high in all these forms of capital, but not high enough to count among the elite. Knocking at their door, lacking only the ‘highbrow’

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Table 4.1  UK latent class structure Class

% population (UK)

Economic capital

Social capital

Cultural capital

Elite Established middle Technical middle New affluent workers Traditional workers

6 25 6 15

Very high High High Moderate

High High High Moderate

Very high(brow) High Moderate Moderate

14

Low

Low

Emergent service workers Precariat

19

Moderately poor (mainly housing) Moderately poor

Moderate

Moderate

15

Low

Low

Low

Source: Savage et al. 2013, distilled from Table 5.

cultural capital of the ‘established’ middle, is a small but significant ‘technical middle class’. The middle class ends there, comprising just over 30 per cent of the population. But below it is a wide band of ‘new affluent workers’, whose moderate levels of all three capitals keep them in touch with the aspirations and consumption patterns of those ranked just above them, to which their children (if educationally successful) might upgrade. Newly affluent workers typically have some accumulated wealth in addition to housing, along with more social and cultural capital than ‘traditional’ workers. Combined, traditional and newly affluent workers comprise just under 30 per cent of the UK population. Below those traditional workers are two less privileged groups that  –​even in an ‘affluent’ society  –​outnumber the working class, together comprising over one-​third of the UK population. ‘Emergent service workers’ usually lack housing wealth, but build up moderate levels of social and cultural capital. The ‘precariat’, deprived of secure jobs and generally having to top-​up the pay these bring, are low on all three forms of capital, sometimes struggling to survive. The expansion of precariously casual and low-​paid service jobs, until they employ more than traditional wage work, is frequently the obverse side of rising living standards for traditional and newly affluent workers. Employers defray the risk of granting full-​time, full-​life jobs, and the cost of paying them a living wage, by maintaining at the margins a more flexible force, on zero-​ hours contracts or free from fringe benefits as self-​employed (Standing 2011). An analysis based on households may exaggerate the numerical size of the lowest two classes if poverty and unsocial work hours fuel family fragmentation –​but the outnumbering of the working class by less privileged groups below it is wide enough to persist when individuals are the unit of analysis.

The Dynamics of Division As revealing as these divisions in the traditional middle and working classes, are the implications for interchange between them. The Established Middle Class comprises a

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large group, biting at the heels of the elite, its most successful members close to matching its lower bound in terms of decision-​making power and financial reward. The Technical Middle insulates the Established Middle Class from the most upwardly mobile Affluent Workers. Those who fall from the Established Middle can drop a fair way, in terms of erosion of their capital, before they fall seriously below their accustomed work-​and lifestyle. While economies are stable and growing, this is still a fraction of the class whose frustration arises more from blocked upward mobility than the threat of serious downward mobility. But in purely economic terms, the Established Middle Class may have a hidden vulnerability. Its non-​capitals enable it to borrow for housing and consumption choices it cannot outrightly afford. Any sudden drop in income could make its debt and spending commitments difficult. New Affluent Workers who rise may not make it immediately into the Established Middle Class. Their route is often through the Technical Middle, where their rise may be capped. This is also a group that cannot afford a large downward movement. To drop into the realm of Traditional Workers is often to lose the dream of owning a home. Those Traditional Workers are now bordered by an Emerging Service group which matches or exceeds their levels of capital, when housing status is set aside. Both are aware that, in a wavering economy, their margin over the Precariat may not be too wide. Executive power from a Left perspective still resides with a much larger ruling class, defined specifically by its control of economic resources. This class might fall in number as corporations expand and merge, but (from the left viewpoint) it always remains a class, too numerous and diverse (and too historically condemned to profit-​sapping competition) for the concentration and cohesion associated with an elite. Indeed, most countries’ ‘middle’ class has tended to be expanded in relative terms by long phases of post-​war economic growth, lifting more households into higher labour-​income brackets (supplemented by a measure of capital income) as well as expanding in absolute terms due to population increase. Savage et al. (2013) find higher professionals, senior managers and large employers comprising almost 10 per cent of the British population, with ‘lower managers’ making up another 24 per cent. Small employers comprise another 8 per cent, and just over 14 per cent are ‘intermediate’ between small employers and professional employees. This leaves, at most, 44 per cent of the population identifying as ‘working class’; and even this includes almost 9 per cent in supervisory roles and 3 per cent professing ‘no class’, both groups likely aspiring to escape the ‘working’ category. A  near-​concurrent British Social Attitudes Survey shows very similar results (Savage et al. 2015). The division down the middle of the working class –​almost half of it owning ‘property’ at least in housing equity terms, the rest having little or none –​helps explain why, even when still numerically superior, it does not unite in militant action to redistribute income, wealth and power from the top. Those with something to lose, especially their job and the part-​purchased roof over their heads, hesitate to join the same revolt as those with nothing to lose, who might look no further than the neighbouring owner-​occupiers for something to seize. Traditional Workers’ shortage of social capital, confirming the extent to which they become isolated by day as formerly large workplaces disperse,

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and often isolated at home by long hours and family break-​up, is a further obstacle to coordinated political or self-​help action. The more plentiful social capital of Affluent Workers, in the level above, tends to consist in the links they cultivate to the Technical and Established Middle, in hope of joining them, and trades-​off against links to those with Traditional backgrounds even if this is where they came from. The expansion of a precariat and low-​paid service class, to numbers that exceed the traditional working class, helps shield Traditional Workers against economic insecurity and strengthen their loyalty to present political arrangements. Precarity increases the security of full-​time, full-​life, professionalized or unionized employees objectively by creating a pool of flexible labour that boosts the productivity and durability of inflexible contractual jobs, and subjectively by reassuring the holders of those jobs that they have moved above the bottom rung. But there is a social cost to the sharpening contrast in resources enjoyed by the top and bottom brackets in this analysis. The relegation of almost one-​third of households to ‘precarious’ or ‘emergent service’ work –​with 15 per cent in the most deprived and precarious category whose insecure income prevents the acquisition of capital that might enable escape –​highlights the extent to which expansion of the elite and insulation of the middle layers have become detached from any Rawlsian elevation of the least well off.

An Elusive Elite The elite identified by such large-​scale surveys as reviewed here is substantially larger than that observed in most ‘power elite’ analysis, whose control of life-​changing decisions is so extensive that they could gather at a single ski resort, or be listed by name. Members of the UK elite were 6 per cent of the population in 2013, according to the representative sample survey (by consultancy GfK) reported alongside the GBCS by Savage et al. (2013). This meant almost 4  million; or 19  million in the United States if the same proportions held. Its over-​representation in the GBCS (of which it comprised 22 per cent of respondents) has made this a key resource in understanding contemporary elites, broadly defined. But only a fraction of the ‘elite’ identified in typical class surveys can be counted as members of the ‘power elite’. Many, even when ranked near the top in terms of the three capitals, do not have the right allocation of economic capital or the right form of social capital connections to exercise substantial power, or hold strong influence over those who do. This underlies the social tension that arises when as much as 6 per cent of the population have the right formal competences and qualifications to exercise power and take important decisions affecting many others –​and aspire to do so –​but only a fraction are able to do so. Squeezing 6 per cent into 1 per cent leaves a lot of frustrated rejects, and even those who make it can be left dissatisfied because the proportion actually holding the levers of power is a lot smaller than 1 per cent. While useful in assessing the relative scales and interrelation of the elite, middle and lower classes, the classification used in Table  4.1 appears too broad to distinguish the Power Elite within the identified social elite. While the true takers of ‘decisions having major consequences’ are likely to be within this top 6 per cent, this is not guaranteed; and so are many others whose configuration of ‘capitals’ does not distinguish them as power

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elite members. Issues arise over whether all the measured ‘economic’ and ‘social’ capitals are of the type that confers significant power, and whether ‘cultural capital’ is either necessary for the exercise of power or likely to be featured highly in those who hold it. In common with earlier analyses (stretching back at least to Marx), the studies of Savage et al. and others use ‘wealth’ alongside income as constituents of economic capital, the economic differentiators of class. High income leads to high wealth because it enables people to accumulate physical and financial assets. High wealth may reinforce high income by furnishing flows of unearned investment income (interest, dividends, capital gains), which supplement unearned income and, for the Leisure Class, render it unnecessary. But the inclusion of wealth as a determinant can skew the identification of elites, and especially power elites. Some of the wealthiest are still those whose fortunes are largely hereditary, and who may not be able or inclined to turn that wealth into significant political power. While including these, the ‘very high economic capital’ category will exclude some ‘self-​made’ business or professional leaders who –​if still near the start of their careers –​will not yet have been able to use their high income to amass personal wealth, but who may already be turning their business’s future promise into appreciable power. Economic capital confers the ability to exert power, both directly and indirectly, if physical or financial capital is held in very large amounts. All capital is at root economic, in that it is (or represents entitlement to the financial proceeds of) a bundle of resources that can finance a flow of production and so generate a future flow of income over time. Economic capital is the subset of capital assets –​comprising physical means of production, firms that assemble such means of production or financial instruments (shares and bonds) issued by those firms –​that can be readily bought and sold in a capital market. The power conferred by such economic capital is held by its legal owners or the senior executives and managers who control it. Such power is proportional to the relative capital holding: in a war-​ravaged land the controller of a single grain mill or armoured vehicle can wield enormous power, whereas in an internally peaceful and high-​income country it may take a capital holding worth billions to be measurably more powerful than others. In a rich-​country context, the heads of large corporations exert direct command over employees, customers and suppliers, and can influence the political process through lobbying and sponsorship of political parties. Individuals with large inherited or business-​ derived fortunes can also use them for political influence, or use philanthropic foundations to take direct command of social or research activities that were once mainly left to government. But such ‘capital’ is neither necessary nor sufficient for the exercise of power. Many possessors of great wealth use it for their own benefit in ways that impact few in the wider society, and avoid political involvement. And while money appears increasingly influential in determining both who gains high political office and what they do with it, there remain roles wielding significant political power which do not depend on, or lead to, the holder enjoying high income or wealth. Social capital overlaps increasingly with economic capital, and has been widely depicted as a key catalyst if not an actual generator. Idea-​swapping social exchanges are often the generator of new technological or creative ideas (intellectual property), which are now a major form of ‘intangible’ capital that rivals traditional physical forms

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in terms of income generation and durability. Once created such ‘intellectual capital’ resides in, is sustained by and reaches its most productive uses via the networks that comprise entrepreneurs’ and venture capitalists’ social capital. Individuals high in social capital can also amass economic capital in large quantities through redistribution, even if they have no direct hand in its creation. A  recent illustration was provided by the Clintons, who could rightly claim to have enjoyed very little private wealth from their years of public service –​Bill’s two terms as president and Hillary’s as a senator and secretary of state –​but who quickly amassed it ahead of Hillary’s 2016 run for the presidency. ‘Holding and serving in public office provides a platform from which they can monetize experience, connections and prominence’, observed Fortune magazine, presenting estimates that the family received income of $28  million and had a $110 million net worth in 2014 (Gross 2016). In Britain, Blair, a Labour Party prime minister from 1997 to 2007, had amassed a personal fortune of £60 million by mid-​2015 (including 10 UK homes) and was charging £200,000 per public speaking engagement, according to a Daily Telegraph investigation (Readhead 2016). As well as monetizing into economic capital for those with the right connections (whose ‘rightness’ is explored further in Chapter 11), social capital can sometimes substitute for economic capital. It may allow an individual (along with family members and friends) to act as if they have ultra-​high net worth when this is not strictly the case. Individuals in this situation get into the back of limousines, attend red-​carpet receptions, settle shop and restaurant bills on expense accounts and holiday on celebrity yachts or private islands even if their assets are modest or offset by liabilities. In none of these acts are they required to draw on their own wealth or income, or even show that these exist. With the right associations, their dearth of underlying assets need never be exposed. The converse example is provided by individuals who suddenly lose a lot of economic capital and have not amassed the social capital that normally goes with it. The individual Lloyd’s insurance ‘names’ whose unlimited liability drained their funds in the 1980s and 1990s included some former Precariat members who had struck hard in the boxing ring or lucky in their stage acts. Although they matched the business-​made millionaires in wealth, they still mixed more happily with those they had known in the backstreets. And so were forced to creak into comeback tours or auction off memorabilia, while the whiter-​collar bankrupts got help from their fifty-​ carat friends. At times when structural change is causing private companies (and the value of their financial assets) to rise and fall rapidly, social capital gives its holders two valuable protections. It props them up and helps them out if they are suddenly displaced from the high-​flying job. And it enables them quickly to acquire (or persuade others they have) the skills to switch to prestigious new employment if the old disappears. ‘People who are self-​ directed and cognitively capable can keep adding to their advantages’ (Kling 2011). They are especially well placed in the new ‘knowledge economy’ to step out of comfortable executive posts with large employers to try their luck with a high-​tech start-​up, and leap back to the safety of their former corporate office if the new venture misses the jackpot. In contrast, those who just acquire knowledge and skills –​even to first-​or second-​degree level –​may find themselves lower down the hierarchy than their less-​educated parents,

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because such merely ‘human’ capital can increasingly be substituted by less-​educated workers, distant outsources or machines. Social capital exists in the connections among individuals (Scrivens & Smith 2013), so is a product of the ‘networking’ that was traditionally person-​to-​person and has recently developed a ‘virtual’ dimension. Savage et al. (2013) measure the strength of an individual’s social capital by the number and status of others with whom they are connected. One drawback of this measurement is that it does not gauge the strength of connections, and may miss or underrate the ‘weak’ ties that form an unusual source of strength by enabling individuals to ‘bridge’ different networks (Granovetter 1973, Burt 1982). Distant ties to a low-​status individual might confer far more power than close ties to some of equal or superior status –​as, for example, in the path-​breaking engineering partnerships of Matthew Boulton and James Watt, or Charles Rolls and Frederick Royce. A related and more serious drawback is the assumption that the social importance of a network connection rises with the status of those connected. From a social perspective, the most significant social capital has historically been that connecting lower and middle status, held by those in the lower reaches of the middle class (or upper reaches of the working class) who advance themselves through trade. The networking that proves essential to societies’ investment and growth is not the one among elite members but among the much larger number of small-​time producers and traders who need a low-​cost, reliable way of making market transactions work. ‘The fundamental cause of economic growth and development […] are resources embedded in social networks of mutual trust and cooperation’ (Josten 2013: 5). Only with this trust –​ensuring that buyers pay up, sellers deliver the goods and borrowers honour their debts –​can people safely make unrecoverable investments in taking up a particular specialism and installing equipment for a particular type of production. Cultural capital is not an especially reliable clue to power-​elite membership, except to the extent that it might be a proxy for social capital. Over time, new forms of networking and tightening time constraints have disentangled these two forms of capital, making it less necessary (in most parts of the Higher Circles) to command the cultural alongside the social. There may have been a time when the holders of high political office and extreme wealth met at exclusive operas or galleries, making attendance at these a ready identifier of power-​elite members. But there are now many more reliable ways in which those members can mix and communicate exclusively with other members, untroubled by the presence of those with less significance. Perhaps consequentially, ‘highbrow’ culture has become more democratic, even demotic –​golf courses must offer cheaper access and end sex discrimination in order to sustain a flagging membership, the once entirely classical p now admit rock groups and gospel choirs. Many in the power elite are so focused on running their business or their country that they rarely indulge in any cultural consumption, while those who do are seeking relaxation which often leaves them disinclined to engage with ‘heavy’ highbrow productions (Turner & Edmunds 2002). The inclusion of ‘cultural capital’ serves to blur class distinctions –​overstating the size of the middle layers and underplaying their distance from the top ‘elite’ rank –​ because it is largely a feature of people’s consumption rather than access to means of production. In principle this is an equalizing force, since cultural capital comprises

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non-​material assets (including learning, speaking style and status) that amplify the size and impact of other capitals –​promoting people’s upward social mobility (social capital accumulation) and the returns on their economic (capital) investment (Bourdieu 1991). The tendency of the rich and powerful to broaden their tastes away from the ‘highest’ and ‘finest’ arts, and impresarios’ consequent need to attract a wider audience by ‘democratizing’ these, gives the impression of an ever expanding ‘middle’ class as employees, technical staff and junior managers acquire cultural capital previously confined to senior executives and professionals. In contrast to the downward diffusion of ‘cultural’ capital, economic and social capital have tended to become more concentrated at the top, for reasons explored in Chapters 5 and 6. All these forms of capital can give their holder ‘symbolic power’, an ability to command and (re)order the lives of others that has all the force of more traditional forms of power but avoids coercion because it can happen with the full consent of the powerless. ‘Symbolic power is that invisible power which can be exercised only with the complicity of those who do not want to know that they are subject to it or even that they themselves exercise it’ (Bourdieu 1991: 164). In practice, cultural capital can enable a cognitively privileged elite to elevate itself further above the middle and ‘mass’ ranks, while using easier engagement (and apparent consonance) with those ranks to defuse their resentment against this elevation. Elite schools and universities are often accused of sealing off their students from the wider society, helping them network with one another while ensuring they never have to mix with those who carry their own satchels or butter their own bread. But in the past 30 years, under guise of widening access in order to heal social divisions, they have steered their students away from such ‘educational apartheid’ in a way which makes those divisions more sustainable. Selective-​school environments now enable their pupils to widen their cultural exposure so that they can (when necessary) consume the same goods and services as the rest of society, and their social exposure so that they can engage with ‘ordinary’ people in ordinary ways. By learning to engage with those below them, members of the elite can dispel any charge of snobbery while subtly reinforcing their privilege. ‘For them the masses are a natural force which, suitably harnessed, can be made to generate money, power or position’ (Walden 2000: 62). But the confidence to mix with and ‘leverage’ society’s less-​privileged members in this way is based on elites’ new-​found ability to dilute their cultural capital and stop it becoming a barrier to communication or cooperation. Consuming the same, less-​than-​ highbrow culture is an effective way to blur class distinctions arising from differential access to the means of production. This was long understood by company bosses who mixed with their employees on the weekend football terrace, and has now become a generalized technique gladly promoted by the educational channels the elite still tends to pass through. Observing how privileged young Americans grow more at ease with their privilege when their private school opens itself to pupils from lower socio-​economic status and ethnic minority backgrounds, Khan (2011) concludes that ‘the “commonness” of the elite is both a consequence of the democratizing demands of the past fifty years and a mechanism to obscure the still very real categorical distinctions that help maintain American inequality […] The new adolescent elite listen to classical and to rap; they

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eat at fine restaurants and at diners. They are at ease everywhere in the world’ (Khan 2011: 150–​51).

Cooperation, Co-​optation and Confrontation Table 4.2 gives a stylized view of the traditional class structure and direction of travel, in high-​income countries and the middle-​income countries now catching them up. The working class remains the largest group, but its relative size declines as more successful members ascend from it. The middle class, and affluent workers who aspire to join it, have reached a comparable size to the working class. Elites can survive, even after conceding democratic voting, by forming an alliance with the middle class and affluent workers, on the promise of protecting them against the extreme redistributionist policies that a working-​class government might impose. But dissident elite fractions have a chance of unseating their rivals, and significantly changing the style of government and business, if they can rally traditional working-​class support. This opportunity may recede as ascent into the affluent or middle-​class category shrinks the traditional working class (and as the possibility of such ascent, for their children, if not themselves, steers traditional workers away from old-​style socialist programmes). But the opportunity to pitch the lower social tier against the middle may also remain, or reappear, if an alliance of elite and middle class moves too far towards a laissez-​faire system and re-​expands the working class. When anti-​elite parties win elections, the recognition of their shrinking working-​class base will generally drive them to adopt policies not dissimilar from those of the middle-​class-​supported elite they replace. But those policies will typically alternate between market liberalization and, when this stalls the embourgeoisement process, reversion to market interventionism. This was evident in the convergence of social democratic with Christian democratic and conservative party policies in Europe after 1945, with consensus first on the public/​private ‘mixed economy’ and then, from the mid-​1970s, on a more neo-​liberal approach based on reprivatization, scaled-​down welfare states and labour market flexibility. At present, most high-​and many middle-​income countries are at the end of a long neo-​ liberal phase. This has divided their working classes into an ‘insider’ group that is assured of regular hours, job security, generous pay and pensions, and reliable career structure, and an ‘outsider’ group (in which unskilled and immigrant non-​citizen workers loom large) that lacks such assurance. This has changed the stylized class dynamic from that of Table 4.2 to Table 4.3. Automation and globalization have brought the same insider/​ outsider tension to a growing proportion of the middle class, by deskilling its occupations or opening up cheaper, less demanding sources of the skill. Recent empirical studies confirm the expectation, dating back at least to Daniel Bell (1973) and James Bellini (1982), that the post-​industrial societies pioneered in the United States and Western Europe –​ to which the rest of Europe and much of Asia are now advancing –​are substantially more reliant on casualized, low-​wage, non-​citizen labour than the industrial societies that preceded them. Outsiders simultaneously shield the insiders, by ensuring the peripheral flexibility that allows solidity at the core, and threaten them by offering a cheaper and more flexible non-​core alternative. ‘As flexible labour spread, inequalities grew, and the

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Table 4.2  Yesterday’s harmonious trajectory Elite Middle class Affluent workers Traditional workers

20% 30% 50%

Expanding Expanding Contracting

Table 4.3  Today’s discordant trajectory Elite Middle class/​Affluent workers Traditional workers New service class/​Precariat

40% 30% 30%

Stagnant/​Contracting Contracting Expanding

class structure that underpinned industrial society gave way to something more complex but certainly not less class based’ (Standing 2011: 6). The previously enlarging and now squeezed middle of Table 4.3 is consonant with the empirical findings of Guy Standing (2011) and Savage et al. (2013, 2014) but already outlined almost 20  years ago in the synthesis of Will Hutton (1995). There is now ‘a fractured “30/​30/​40” society –​30 percent disadvantaged and marginalized; 30 percent insecure; 40 percent privileged’ (Hutton 2005). The ranks of traditional workers are still contracting, but there are now relegations (into the unprotected new service or low-​wage manufacturing sectors) as well as promotions into affluence and the middle-​class lifestyle. Confronted with such a social divide, elites can still try to protect their ascendancy by rallying the middle class and affluent workers –​scaring them with the spectre of an uncontrollable precariat with nothing to lose by violent rebellion, as well as of militant traditional workers who seek to seize others’ riches rather than work harder to enrich themselves. But opposing elite fractions can now turn to an alternative support base, beneath the middle class. No longer hopeful of moving upwards, because of stalled social mobility, and fearful of dropping downwards as their social protections and bargaining power drain away, the working class re-​expands as insiders and outsiders sense a shared fate, and returns to constituting a clear majority over the middle class. If opponents become too successful, by rallying either the vulnerable working class or the disaffected middle class, incumbent elite fractions still have a third option. They use rising social inequality and polarization to re-​form a traditional coalition between the middle class and the new service class. The strategy is to abandon ‘one nation’ ideals and recreate a vertical master-​servant relationship, persuading the least privileged that they have common cause with the most affluent so that an even thicker wedge can be driven between them. Some elite fractions keep their programmes sufficiently ambiguous to rally the precariat for contradictory purposes  –​reclaiming economic and political resources both from the traditional working class immediately above them and from the middle class (and affluent workers) further above. This is often the most electorally

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effective stance, for getting everyone on board  –​the middle class induced to view as allies those working-​class elements that are actually being rallied against them. It is also the most dangerous in terms of post-​election outcomes, once the triumphant coalitions’ conflicting interests come back into view.

The Fragility of Class Coalitions Unlike the political coalitions that keep fragmented parliaments functioning, social conditions follow unwritten rules, and are inherently unruly. Too firm an alliance between elites and the middle class provokes overexploitation of the working class, whose more successful members may be kept content by economic growth but whose less successful –​ underpaid and unintegrated –​become a dangerous underclass. But wider redistributive coalitions that incorporate the working class come to rely on a second tier of marginal labour, whose assignment to the most arduous and least rewarded tasks without the standard protections and entitlements can give superficially harmonious social democracy an equally rebellious underside. And ‘socialist’ alliances between elite and working class have traditionally suffered from the stifling of middle-​class accumulation, their redistributive intentions sunk by a lack of resources to redistribute. Every type of distributional coalition thus becomes vulnerable to one or more classes upset by the level and direction of redistribution. Whether such grievances spur political action again depends on the decisions of elites, whose role in stabilizing societies by bringing social classes together is matched by their role in transforming society by breaking them apart. Elites’ key role in building and maintaining social and political stability through class coalitions is starkly revealed when they become divided, and cease to prioritize such stability. As architects, elites can authorize demolition as easily as construction. Their failure to repair and develop an existing coalition, or their decision to replace it with a new one, has major consequences for all other social groups. When rebellious elite fractions that cannot resolve their differences internally arise within the core of the elite, among its more peripheral members (wishing to enter or influence the core) or among non-​ members whose abilities, resources and ambitions match those of the elite to the extent that they believe they should be in it. Divisions within the core are as commonly personality as policy based. They frequently involve succession, dynastic or otherwise –​as when rival politicians vie for the leadership of a governing party, or offspring of the founder fight over ownership of a firm. Core-​ periphery divisions usually occur between members of different ‘higher circles’ when one follows policies inimical to another –​as when business leaders impose a deregulation agenda on political leaders they view as excessively interventionist and redistributionist, or political leaders strengthen tax, labour protections and anti-​trust policies against a business elite that has exerted too much power. Divisions between elite members (core and peripheral) and those who feel wrongly excluded from the elite have tended to be the most destabilizing, even though they usually arise from the similarity between members and non-​members in terms of economic resources and political priorities. Past examples have included large landowners excluded from a royal court despite their property matching or exceeding the ennobled aristocrats, and rich merchants

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excluded from political and commercial circles by their nonconformist religion. Whereas disaffected elite members want the reins of power to remain, so that they can seize them, non-​members may lack such loyalty to the principle of elite rule, and be less afraid to stage rebellions that make it wobble for long periods or even come crashing down. All three types of renegade groups –​core, peripheral or liminal –​try to settle their differences ‘internally’ in the first instance. This means keeping the conflict confined within elite circles, maintaining a semblance of unity when on public view. But if internal dispute resolution breaks down, rebel fractions of any type start to strengthen their case by reaching out to groups outside the elite. Before the emergence of modern nation states, support was often sought from the elites of another country. Once such foreign help became offensive to newly roused nationalism, reinforcement started to be drawn from other strata of society, below the elite. Business owners and bankers had the financial means to promote a renegade fraction, and the incentive to do so if it proposed policy changes that furthered their interests. Industrial and rural labour, if sufficiently organized, had the raw numbers and strike power to support a political challenge, and could again be incentivized by appropriate promises of fairer treatment. When elite fractions fail to settle their differences behind closed doors, one or more tends to fling them open to appeal for wider support. Again, those on the margins of the elite –​if perceiving themselves as unfairly excluded from it –​are most likely to resort to rallying other disaffected groups. But members, even at the core, have similarly reached out for lower-​ order help if their demands to the inner sanctum fall on too deaf an ear. Splits within an elite, although a necessary condition for its downfall, are far from sufficient. Those in the lower levels of society, though more numerous, are rarely united in their view of what elites are doing wrong or their choice of solutions. They lack the resolve or resources to step into the vacuum left by elite division unless recruited and assisted by a renegade fraction within the elite. Regime-​changing insurrections occur when core members of the elite who are losing their dominant role, or peripheral members seeking centrality, rally a disaffected group below them to strengthen their hand in battle. Elite dynamics may be confined to the higher circles for lengthy intervals, but eventually spill over. The political redirections that follow depend on the configuration and motivation of the social classes below. Two tactics are commonplace in stirring middle-​class militancy. An elite fraction can recruit the ‘upper’ middle class, whose members lie just below elite status and have come close enough to covet it –​promising to help the most upwardly mobile break into the higher circle, provided they form an alliance with those rebellious elite members leading the charge. Alternatively, an elite fraction can rally the ‘lower’ middle class, whose members do not expect to join the elite but do expect it to respect and defend them in various ways. In particular, the lower middle class expects elite-​led policy to maintain their advantage over the working class –​preventing it from closing the income gap through rising earnings or redistributions while giving it enough to defuse any militancy. And the lower middle class expects action to stop it falling too far behind the upper middle class. Middle-​class households which feel the workers snapping too closely at their heels, or their more affluent neighbours climbing too far above them, are open to persuasion that the present elite has let it down –​neglecting its security, against recalcitrant

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workers or foreign powers, or failing to manage the economy in ways that raise its living standards in line with expectations. Enough felt themselves to have lost out, in the fall of 2016, for Trump to line up lower-​middle-​class alongside working-​class voters to form a viable electoral protest movement, outnumbering the more affluent groups. ‘At first glance, Trump’s success among middle-​class whites might seem surprising, given his own wealth. But his movement was about class, not money […] His supporters have no problem with the rich. In fact, they admire them. The enemy is upper middle-​class professionals: journalists, scholars, technocrats, managers, bureaucrats, the people with letters after their names’ (Reeves 2017: 4). Efforts by a breakaway elite fraction to seize control by rallying the middle class almost invariably invite a counter-​reaction –​especially when the middle class has expanded and fragmented to the extent of Europe’s and America’s today. The besieged elite members target a rival section of the middle class, urging it to protect its own security by restoring the status quo. If no such section is available, because those immediately below the elite are uniformly in favour of dislodging and replacing it, those defending their ascendancy in the elite reach down beyond the middle class, seeking to rally the ‘mass’ of workers and peasants. This ‘mass’ mobilization is also resorted to by renegade elite fractions if those they attack have cemented their position by co-​opting the middle class. Rousing the ‘mass’ is a substantially riskier move than seeking middle-​class support, with less predictable outcomes. For revolutionary elite fractions, the hope is that mass protest will propel wholesale change at the top, going beyond the changes sought by the middle class, whose aim may go little further than gaining control of present power structures and leaving them unchanged. For counter-​revolutionary elite fractions, the ‘mass’ is usually unleashed in order to scare the middle class, sufficiently to swing it back behind the current holders of power to stop a wider inversion of the social order from which all will lose. Any breakdown of cooperation, with middle-​or working-​class elements, endangers elites’ ascendancy. Occasionally, such breakdowns of cooperation begin from below, with a middle-​or working-​class movement that raises protest against the corruption, inefficiency or social injustice arising from elite rule. But such risings rarely occur from the base up. And when they do, mutually destructive conflict between working-​and middle-​ class elements is far more common than one or both attacking the elite  –​which frequently promotes itself as the peacemaker among the warring factions below, or secures the support of one class by curbing the financial excesses and power abuses of the other. Far more commonly, class-​based protest is fomented from above, when one fraction of the elite views it as expedient in a conflict against others. Achieved by the late nineteenth century in Britain, a progressive distributional coalition of political elites with big business occurred later in other parts of Europe, for example taking shape in France only after 1945 (Maclean 2002). In Germany, Italy, Spain and Portugal, development was derailed by a fascist interlude in which ultra-​nationalists in the elite rallied mass movements of workers to displace the other, more internationalist elite factions (a feat also attempted by Philippe Pétain in interwar France but with less success). Fascist elites distinguished themselves from the contemporaneous communist movements by rallying workers and peasants against other elite factions and in support of the industrial-​owning middle class, rather than using it as an instrument to expropriate the

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middle class. The ensuing corporatist arrangement aimed to satisfy both employers (with a quiescent workforce) and employees (with full employment and rising wages). It tended to fail, even when not embroiled in war, because (in line with Lachmann’s analysis) the institutional arrangement proved too stable: shielding the major producers from international competition (and trapping them in a small domestic market), deterring investment that would lead to structural change and stifling the creation of small firms that often initiate product and process innovation. Post–​Second World War China demonstrates the rapid redirection of social and economic development that can occur when an elite, consolidating institutional arrangements, fails, and when an elite faction abandons its attempts to rally the ‘masses’ against other factions in favour of forming an alliance with the emerging middle class. Chairman Mao Zedong’s success in rallying peasants and workers to defeat and exile the Nationalist elite faction in 1949 inspired him to carry on using the ‘mass’ as a weapon against other factions in the now communist-​dominated political and economic elite. The resultant chaos of the Great Leap Forward (1958–​61) and the Cultural Revolution (launched in 1966)  held back economic growth and structural transformation until Mao’s death in 1976. Although organized under the banner of communism rather than fascism, the proletarian alliance created a distributional coalition in which any productive surplus was dissipated in elite corruption or basic welfare payments (the ‘iron rice bowl’) to keep the peasants and workers loyal. Reinvestment took place, but only in an outdated range of basic industries, intentionally designed to stop structural change in the economy so that a new middle group of rich peasants and entrepreneurs could not gain strength. Thereafter the previously purged faction led by Deng Xiaoping abandoned the Party’s regressive distributional coalition with the mass and reached out to the previously suppressed middle group. This largely consisted of enterprising party officials who had controlled –​and tried to run commercially –​large state enterprises while holding posts in the bureaucracy or military, and a smaller group of private citizens who had amassed resources while dealing on illegal and ‘black’ markets. This alternative coalition consolidated Deng’s faction within the party, delivering the policy change that unblocked capital accumulation and income growth among the emerging ‘middle class’, which in turn generated the production and revenue growth that enabled the party to re-​establish popular legitimacy without the use of force. The subsequent prolonged economic boom lifted the ‘mass’ out of poverty far more effectively than the previous distributional coalition with it, and created enough room at the top (in terms of new well-​paid management and public-​service provisions) to shield the old elite against a challenge from the now fast-​expanding middle group. Post–​Second World War Argentina provides one of many twentieth-​century examples of elites forming a dysfunctional distributional coalition with the disaffected ‘mass’. An elite had ruled in the first half of the century with limited democracy, presiding over internationalization and growth of the economy which left the country as rich as some in Europe on a per-​capita basis. But a nationalist coup in 1943 prompted the arrival in 1946 of Juan Perón, heading a military government. Backed by the military, nationalist and Catholic Church elements of the elite, Perón won the 1946 election by rallying the

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support of small industrialists and workers against the other elements, which included most of the large industrialists and landowners as well as the intellectual left (Waisman 1989: 165). Business owners were attracted to Peronism by the promise of elevation to the elite, helped by protectionism and corporatist industrial policy that would build their personal fortunes. Working people were attracted by the promise of redistribution from (and welfare financed by taxation on) the fortunes of the old and new elite. A degree of elite support was retained through the promise of averting any working-​class rebellion, even though there was little evidence that this was likely to happen. The combination of protected, internally focused industrialization and corporatist management-​labour relations with large-​scale public-​sector employment put an end to Argentina’s once impressive economic progress (Waisman 1989: 160–​63). Phases of rapid industrial growth –​of which 1950–​70 was, for most European countries and US states, probably the best on record  –​can be politically disruptive in at least two ways. They may cause structural changes that undermine the previous income source of one or more fractions in the elite, and they may deliver new fortunes to an excluded group which then seeks entry to the elite. But economic expansion can finance the redistributive welfare and industrial assistance that eases the shifts of locations and resources wrought by structural change. And newly enriched groups can find their way into the elite without displacing its existing members, provided a growing economy, with more to administer, expands the number of top political and professional posts. But even before the world economy slowed at the start of the twenty-​first century, Western countries were suffering the effects of a culling of elite posts. Large businesses were shedding management posts and downsizing; government departments were enduring budget cuts that mainly had to fall on the payroll; professions that had once grown fast through their absorption into the public sector were now encountering the same recruitment block and frozen salaries; even the once unshrinkable military was losing battalions in the absence of winning wars. The effect of these top-​level restrictions, in both the public and private sectors, was to block the channels of promotion to which commercial and professional high achievers had grown accustomed. Class analysis has often been viewed as a competitor to elite analysis. Liberal and socialist scholars advance social classes and their frictions as the major source of stability and of change, viewing elites as an obsession of conservatives who cannot acknowledge that those without privilege can constructively shape history. Students of elites retort that classes are too large and diverse to have a definite directional interest, to form an awareness or consciousness of such interest or to mobilize effectively even if such unified consciousness is somehow achieved. Working-​class quiescence has frustrated generations of left-​leaning commentators, driving even the most empathic to despair of the majority’s ignorance or ‘false consciousness’, and dictate solutions to it rather than let it speak (Carey 1992: 3–​45). The middle class –​though smaller, more powerful, better educated, better resourced and with some unifying interests –​has rarely served its liberal champions any better. Some fragments stay loyal (and assimilate) to the old aristocracy (Wiener 1985), some (from Robert Owen to Engels) switch allegiance to their suffering employees, and inter-​company or finance-​business rivalry overrides any unified objectives for those in between.

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Militant Middle Classes and Mobilized Mobs While elite fractions have often recruited the middle class in pursuit of change at the top, they also risk political action by elements of the middle class to change the composition and policies of the elite. Middle-​class militancy can break out during economic upturns when entrepreneurs’ and professionals’ rising affluence gives them aspirations to join the elite which its incumbents block. And it can occur during economic downturns, when their commercial survival depends on state assistance and working-​class suppression which the elite (fearing anger from ‘the mass’) refuses to grant. Even when sections of the middle class continue to do relatively well in terms of real income –​evidence for which will emerges in the assessment of inequality in Chapter 6 –​discontent may continue to bubble within it. Those left behind in the upturn see injustice in the others’ move ahead. And all can feel resentment at a perceived decline in meritocracy and social mobility, as rules designed to level the playing field appear to be sloping it in favour of those who scored the early goals (Hayes 2012). In most countries, elites have lost their fear of a working-​class uprising, having realized that it can quickly be defused unless a rebel elite fraction chooses to foment it. Divisions in the working class put an end to most grass-​roots revolts, to the distress of most revolutionary socialists (except, possibly, Marx). In contrast, uprisings by the middle class strike fear into many elites because of its ability to self-​organize and the economic weapons it can wield. Divisions in the middle class are central to the rebellions now breaking out. Positioned between those who work for wages and those who own sufficient capital to live off dividends and interest, the middle class mixes these two forms of income and achieves intermediate social status. With its rise, rebellious elite fractions can reach down for lower-​level support without having to shake the hands that have directly held the instruments of production. The middle class is an exceptionally potent ally because of its capacity to stage an ‘investment strike’ –​refusing to channel its surplus income back into expanding economic activity, and so stalling the economic growth which is essential for working-​class contentment with elite rule. The ‘multiplier effect’ of investment makes capital strikes far more disruptive than comparable withdrawal of cooperation by labour –​and no more difficult to precipitate, as discovered by rich-​country governments which eternally struggle to keep the private sector investing enough for growth and full employment without state support. As well as withdrawing cooperation over capital deployment, the middle class can threaten elites by ceasing to contain working-​class resentment on their behalf. By simply letting the treatment of their workforce deteriorate, or withholding the taxes that finance improvements to its condition, those who normally form a buffer between elite and ‘mass’ can stand aside and let the numerous have-​nots directly confront the privileged few. Middle-​class motivation to unleash worker anger against the elite is tempered by the risk of drawing some of the fire themselves –​the factory being easier to storm than the parliament –​and of seriously destabilizing a government when the intention was only to reform it. A second powerful check on middle-​class militancy is that elites can turn the tables, inciting working people to rise against the managers and professionals they take orders from. But by reaching out to the more numerous classes and interest groups below

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them, renegade elite groups are playing with fire. Mobs usually disperse when their show of force exhausts itself, and often create sufficient fear that elites’ habitual opponents welcome their return as an assurance that public order will be restored. But mass mobilization always has potential to get out of control, and spawn non-​elite leaders who can mount a wider challenge than their privileged sponsors intended. Occasionally, they unleash a popular force they cannot control, and are swept off their podium along with the elite groups they sought to displace. But such instances of genuine ‘revolution’ are historically hard to find. Even such vaunted episodes as France 1789, Russia 1917 and Ukraine 2005 appear on closer inspection to involve mass protests shuffling an elite rather than shoving it aside. When revolutionary forces get out of control and displace all elite fractions, the usual result is a period of chaos in which one fraction regains control, often restoring elements of the previously hated regime because those who fought it can now be persuaded that the alternatives are worse. Paradoxically, rallying the working class under an autocracy is viewed as democratic, while rallying it under a democracy is viewed as anti-​democratic. The boom and bust that began the twenty-​first century placed new strains on a growth-​ oriented distributional coalition (in Europe and America) that had already encountered increasing turbulence through the twentieth. Although the initial breakdown was no one’s intention, it appears to have triggered deliberate political actions –​ directed at the elite –​which further destabilized the economy and chipped away at the political settlement that had long been built around it. After accidentally stumbling into their first expression of discontent, those running the world’s businesses took a deliberate second step that proved far more disruptive. An ‘investment strike’ is high risk because of the harm it does to social groups both above and below the militant middle. Those trying to run government and the economy find public finances and national income shrinking. But those just trying to run their lives, as employees or small business owners, are similarly hit by the stalling of activity when corporate savings go unspent. The alternative tactic for a rebellious middle class is to shake the balustrades above it by seeking the support of those below. It was a familiar scene in feudal times: the barons summoning their serfs to march against the encroaching lords, or battle the king’s army. Modern-​day recurrences are less openly confrontational, but follow the same destabilizing pattern. The middle level breaks from its progressive coalition with the elites and appeals for support from below to arraign the abuses of power perceived to be happening above. Its chances of success are raised if the public is angry at economic stagnation, and not yet aware of their employers’ role in knocking the hole in the circular flow of income. If well timed, an investment strike can be a stirring prelude to mobilizing the mass. Raising voices and shaking fists is alien to middle-​class mores in most places, the sort of unrefined activity that is excluded by their ‘cultural capital’ and associated with the rougher classes below them. So the middle-​class contribution to rebellious mass movements is largely passive: it withdraws the service traditionally provided to elites by keeping the working class quiescent, and tying its interest to those of capital. Active participation in the revolt extends to voting for parties whose core support comes from workers or peasants rather than managers and professionals, and perhaps channelling some campaign finance to them. The rallying of the masses is typically led by factions of

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the elite dissatisfied by the distribution of responsibilities and resources within it, or the direction of its policies; and by high achievers within the middle class who are ready to transcend it but cannot gain admission to the ranks above. Lower down the social ranks, economically strained middle-​class households which risk dropping out of the respectable bracket willingly join the cause of the elite rebellion, lining up with affluent workers discontented with the lack of opportunity to join the middle class. The traditional working class and precariat are usually absent from the ballot box or extra-​parliamentary protest, being under-​resourced and too risk averse to participate in change despite being the group with potentially the most to gain. Whereas the withholding of investment was an unintentional act taken for widely shared reasons by a very large number of people in business, public mobilization was the intentional act of a very small number, often for idiosyncratic reasons. Businesses dislike uncertainty and instability; the vast majority would have preferred more coordinated action along the lines of existing policy –​led by the same elites –​to get the world economy out of its trough. But a small number wanted the architecture of policies changed and the existing elites replaced, and viewed fragile economic times as the best moment for political action needed to achieve this. The businesspeople-​turned-​politicians who led the revolt against the old consensus were active across Europe after 2010, and all too visible in the United States by 2015. Understanding why public opinion was so susceptible to them requires a closer look at what exactly it now means to be ‘middle class’.

Obsolescent Coalitions? Personalizing Protest Politics Even a sixfold social classification, as in Table 4.1, contains some dangerous generalizations. Members assigned to the same class can differ substantially in their actual social and economic capital (and ability use these), and may think and act very differently despite near-​ identical socio-​economic conditions. Elites thus seek support from a ‘class’ in the way that advertisers pitch their products at a ‘market’ or ‘demographic’, and broadcasters aim programmes at a target audience. Appeal must be made to a broad and potentially diverse group in the absence of detailed information about individuals or direct ways to connect with them. If such direct, individualized appeals can be made on a large enough scale, the need for class-​based politics falls away. Private enterprise has moved beyond traditional sales with the arrival of modular production and personalized data-​driven marketing, which can individually match offers to likely customers. Having long known that half their advertising works, they can (for the first time) discontinue the half that does not, considerably boosting cost-​effectiveness by moving beyond the general sales pitch. Programme makers have achieved the same with the move from ‘broadcast’ to ‘narrowcast’, using online channels to find appropriate viewers and listeners regardless of social class. It is no surprise that politics –​part private enterprise, part docudrama entertainment –​now deploys big data and new media to stage a similar escape from old class boundaries. The shift from class-​based to personally crafted appeals can be used by ascendant elites for building the necessary coalitions, or by renegade elite fractions for undermining them. While its practitioners have an interest in exaggerating the state of their art, the

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substitution of individualized for class-​based appeals is visible in several key election results since 2010. Trump’s presidential victory in 2016, with a solid electoral college majority despite substantially fewer votes and much smaller campaign spending than his opponent, reflected an ability to track down the necessary swing voters in geographical and demographic constituencies past Republicans had never addressed –​addressing them with language they had never dared adopt. The narrow margins with which Leave campaigners secured the United Kingdom’s 2016 EU referendum vote, and Recep Tayyip Erdoğan the sweeping increase in his presidential powers in Turkey in 2017, reflected a similar narrowing of focus from broad classes to specific locations, household types and individual voters. When politicians and sympathetic private business leaders can assemble enough information on individual subjects’ circumstances and preferences, class coalitions may be superseded by virtual coalitions whose members span all classes as traditionally defined. Elites may eventually forge distributional coalitions from individuals profiled without regard to class, and rebel elite fractions may sunder such coalitions with comparably targeted appeals to those whom geography or demography mark out as discontented. But elites will remain the architects of social fusion and fission, just exploiting divisions other than those of class –​Big Data reinforcing the power of their small numbers.

Restoring Order The UK vote to leave the EU, in a June 2016 referendum, illustrated the destructive consequences that can arise for all social groups when an elite divides, and one of its discontented factions abandons the traditional coalition with the upper reaches of the middle class in order to rouse working-​class protest, which some ‘squeezed’ elements in the middle also join. The ‘Brexit’ decision was often ascribed to disillusioned voters in the deindustrialized north of England, and working people wanting lower immigration in the hope of higher pay. But the vote against Europe was as solid in the affluent south of England as in its less prosperous north and west. The majority rejecting membership came as much from Sunningdale as Sunderland, was no less emphatic in Dorking than in Doncaster, and united the affluent London commuter belt with the deindustrialized northern rust belt. It was also supported by Members of Parliament (MPs) who had been Eurosceptics all along. Company directors and their more junior employees may have voted ‘Leave’ for very different reasons –​the ‘haves’ to escape bureaucratic regulation so as to exploit free international markets more effectively, the ‘have-​nots’ to get a wage boost by curbing immigration even if it meant the loss of market access. Whatever the disparity in motives, they ended up supporting the same withdrawal –​leaving a hapless government to mould one settlement out of two conflicting visions. Two diametrically opposed Leave minorities slightly outnumbered a Remain majority, creating an electoral coalition of convenience which exposed a political coalition of maximum inconvenience. The reunion of middle class and ‘mass’ achieved its ultimate Schadenfreude (or Anglicized equivalent) when it left the London-​based elite to deliver a secession plan that was probably impossible, and bound to damage its own interests if achieved. ‘Leave’ voters ignored warnings of

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economic downturn and loss of trade links because they felt they had nothing to lose from reimposing a tough border, and were soon blaming the slowness of ‘Brexit’ on an elite which had plenty to lose, so dragged its over-​shiny heels. The Conservative government (under new prime minister Theresa May) which tried to pick up the pieces after the Brexit vote was forced to adopt the rhetoric of the anti-​ establishment UKIP, which had spearheaded the successful ‘Leave’ campaign alongside many Euro-​sceptics from the Conservatives’ own ranks. UKIP policies were essentially libertarian, opposing both the socialism of the left and the sympathy for big business on the traditional right wing. To win back middle-​and working-​class voters who had swung behind UKIP, May and her ministers had to adopt some unaccustomed anti-​business rhetoric –​promising to isolate the country from a free-​flowing international labour market so as to limit immigration, condemning the large and small employers who employed migrants, ordering those employers to recruit and train local people instead of relying on talent from further afield, ratcheting up the minimum wage, and accepting reduced access to the country’s largest (EU) market in order to impose these other restrictions. Nationalistic leaders like May, and Trump in the United States, recognized that free movement of labour and free trade had to be restricted simultaneously, because if the world’s low-​waged could not move to higher-​paying areas, they would stay at home and attack those same areas with low-​cost exports. Economic immigration, by far the most convenient scapegoat for real wage erosion actually traceable to the austerity measures of May’s own government, is less a corollary of free trade than the consequence of its not working fast enough to lift today’s poor out of poverty before they grow old. Leaders of the Confederation of British Industry (CBI) and the Institute of Directors, normally contented guests at Conservative gatherings, openly expressed their disquiet at Prime Minister May’s first, proudly nationalistic October 2016 party conference speech. Days later, the heads of the CBI and other employer groups fired off a letter to the new prime minister warning that loss of access to the EU single market –​seemingly inevitable if her promised anti-​immigration measures were taken –​could ‘do serious and lasting damage to the UK economy’ (Rawlinson 2016). The Institute of Economic Affairs, once a consistent Conservative cheerleader, found itself lumped with ‘the libertarian right’ and expressed grave concern for the future of a free economy. The ‘hard Brexit’ to which May (who had supported remaining in the EU) appeared to be heading at this time threatened to reimpose barriers to half the country’s trade; stall the inward investment that was vital to financing the country’s chronic trade deficit (which had reached record levels under the Conservatives); stop the inflow of talent to key activities like research, development, medicine and higher education; and thereby undermine the employment and wage gains which 52 per cent of those who voted had expected when opting to leave the EU. Although the Conservatives –​in government for 41 of the 66 years 1950–​2016 –​had inflicted significant economic damage before, they had never done so by deliberately adopting policies condemned as ruinous by large sections of the business community. It was widely assumed that May would quickly remember where her party’s votes and funds traditionally came from, and revert to a more business-​friendly tone once the UKIP threat subsided. But the centre-​ground compromise which often resolves elite tensions was unavailable in this case, since supporters

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of ‘hard’ Brexit viewed a watered-​down ‘soft’ option as worse than staying fully in. The lengths to which May had to go to win back a ‘squeezed middle’ that had flirted with economic nationalism highlighted the void over which an elite can be left dangling, when professional supporters below it suddenly pull their platform away. The elite has also traditionally provided top-​level unity of direction for an otherwise divided business ‘community’. Companies must compete for customers, funds and new technologies, in order to deliver the innovation and efficiency that justifies unfettered private enterprise. There are shared commercial interests –​in private property protection, relaxed regulation, national defence, low borrowing costs –​to which most of a country’s businesses (large and small) would generally subscribe. But a commercial need to beat, outfox and preferably annihilate rival businesses is not conducive to the joint assertion of those interests. When infighting among the elite leads some of its factions to forget that shared interest, they can fan antagonisms in the ranks below that ‘socialist’ parties were never able to unleash. The economically troubled times when such elite divisions most often open are also those times in which working-​class anger is most easily inflamed, and a disaffected middle class is least able or willing to contain it. While social order is almost always restored, it can take a while, during which unusual political realignments can take place. Etched into northern hemisphere election results between 2010 and 2020, the damage from the recent lapse in traditional social and political alliances may take at least another decade to repair. The explanations of elite circulation and political change advanced in this chapter remain controversial. There are (and always will be) ways to account for the origins and maturation of an industrialized economy, and accompanying inequalities, that discount the political dynamics of class coalitions and orchestrated revolutions emphasized here, turning instead to such factors as legal property rights protections (de Soto 2000, O’Driscoll & Hoskins 2003), entrepreneurial culture (Landes 1998), cooperative culture fuelled by nationalism (Morishima 1984), high-​quality institutions (Rodrik 2000), Western ingenuity unleashed by free markets (Ferguson 2012), Western greed and brutality (Diamond 1998), or the interaction of industrial scale economies and transport costs (Krugman 1991) for decisive effect. Even if they correctly describe the past, the picture of elites as resilient through their capacity to make peace with those on the middle rungs, and dissuade those at the foot of the ladder to kick it away, is not assured of indefinitely representing the reality. Sweeping changes have, up to now, usually been achieved with the help of (and often in the name of) the mass or ‘vast majority’ by fractions of the elite, and middle-​class groups forcing entry into it. Disruptions that began with elites looking confused, disunited and embattled have therefore ended with a realigned, reinvigorated elite in firmer control. But continual effort has been made –​by social reformers, progressive politicians, educators and applied scientists –​to stop the pattern repeating itself. Those efforts have sought, and incrementally succeeded, in making the less advantaged people in society more knowledgeable, better resourced and clearer in understanding of their current situation. Eventually, they might pay off. A  push from below might become orchestrated from below, not reliant on direction from the top and disorganization among conservative elements in the middle. It might be genuinely aimed at overthrowing the elite, not

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just knocking out some members so that others (not from the mass) can get in. And it might succeed. Thinkers on the left have always argued for (and promoted) this possibility. Those in the centre have thought it unlikely. Those on the right raise alarm at the prospect. The current strength and geographical breadth of anti-​elite protest, and the disturbing political trends associated with these protests, have led some to predict that elites have finally lost control of their and society’s destiny, for better or worse. Reasons to doubt this lie in the sources of the inequality that enriches and empowers elites, the way this power is deployed and the way it survives democratization, which together form the second half of the book.

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Chapter Five POLITICS AND MONEY Societies are not troubled by the ‘rich and powerful’ being the same people, so long as the connection seems natural. High power, high status and high net worth will go together if they are all outward signs of great personal quality (especially when a respected religion affirms the sign as divine). Early social sciences largely endorsed the coincidence of money and power as inevitable and acceptable. Political economy identified income and wealth as generated by contribution to production and innovation, and as generative of large-​employer status and market power. So not only would power and status gravitate to those who made money (and money and status inevitably flow to those who used power constructively), but also the consequent unequal distribution was a necessary source of incentives for beneficial economic activity, and social progress. Sociology identified a distribution of natural abilities whose winners could be expected both to wield great power and attain great wealth, in a way that could benefit all, including those of lesser ability. Before the rise of large, democratically elected governments and large limited liability corporations, the pinnacles of wealth and power were commonly inhabited by the same people. Those who held political power were typically from dynasties that already held great wealth, or rapidly assembled it once they captured the throne. Those who owned the biggest banks and businesses also ran them, and thereby commanded great commercial power –​taking decisions on whom to employ, what to supply and how to price it which shaped the lives of most ordinary households. Until the early twentieth century, the small size of government (in relation to national income) and the lack of industrial or financial regulation left much power directly in the hands of leading land, bank and factory owners. The subsequent rise of ‘big government’ made political power a potential counterweight to the power of big business –​provided it was held and exercised by different people following independent programmes. Problems arise when money is seen to buy power, or power to procure money, rather than both resulting from a common trait –​or when the trait that lifts the same individuals to riches and to power is viewed as a vice and not a virtue by those they rule.

Money Buying Power, Power Grabbing Money Launching the modern study of elites, Vilfredo Pareto (1902) noted a close association between the measured distributions of political power and of wealth. The same individuals tend to occupy the upper ends of both (Bottomore 1964: 8), for reasons that conservative theorists rarely view as inherently troubling. Consummate business skills might be eminently transferable to high political office, and derivable from it –​a belief reflected

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in the revolving doors that, in many capitals, see industrialists drafted in to assist the ‘business’ of government and retired or ousted politicians return with lucrative consultancies. Free marketeers welcome the reinvention of government along commercial lines, delivering ‘public’ services privately wherever feasible and otherwise running offices of state under the ‘discipline’ of market forces (Osborne & Gaebler 1992). The possibility of interaction between political power and economic resources causes more concern for liberal and socialist theorists. Their earliest stand (clearly expressed in the writings of John Locke and Adam Smith) was against governments that seized or overtaxed private property and robbed entrepreneurs of their full market proceeds. But they also acknowledged from the start that private enterprise might use ‘market power’ to extract excess profit, concealed or actively supported by government (Locke 1924: 129–​41, Smith 1979: 227–​33). In the twentieth century, markets’ opponents and liberal supporters found common ground against ‘rent-​seeking’ businesses that twisted the arms of the state to grant them subsidies or monopolies (Krueger 1974, Stiglitz 2012: 119–​27), rather than using their entrepreneurial skills for private gain that served the public purpose. Pre-​industrial business owners, in the Smithian vision, implored governments to ‘laissez-​nous faire’ (Kennedy 2005: 141), looking to the state only as a guarantor of free markets and private property rights. Political elites had traditionally been an enemy of private commerce –​shackling it with regulation, taxing its income to finance wars and other wasteful state spending, disrupting its markets with licensed monopolies and entry restrictions, expropriating the assets of entrepreneurs who fell out with them and debasing the currency when their funds ran short. The new industries and trading operations which grew out of feudalism seemed to have little to gain from government, and much to lose to it. So any shady payments from proprietors to politicians were to buy them off rather than buy any favours off them. But by the late twentieth century, these roles appeared largely reversed, in most ‘emerging’ economies as well as those further up the national-​income scale. Private businesses had found ways to protect its own property rights, still requiring commercial courts but generally keen to bypass government, whose involvement often meant disclosing commercial secrets and incurring higher tax bills. At the same time, they were becoming increasingly reliant on government as customer, financier and insurer. The enlarged public budget had become an essential source of recession-​fighting ‘demand management’, and of specific demand for the growing number of industries for which the state was a principal customer (Galbraith 1967:  203–​37). Although companies vie among themselves for market share, and large or mature firms’ priorities often differ from those of small innovators, an informal social contract had evolved between ‘business’ and ‘government’. The private sector paid taxes, employee insurance contributions, minimum wages and pensions which significantly financed and capped the government’s welfare costs, in return for economic stability, market-​expanding and competition-​reducing regulation, and a seat at the table when major policy changes or trade deals were discussed (Mizruchi 2013). Publicly financed transport, communication, education and healthcare had become a vital underpinning for private profit, a dependence only underlined by difficulties in privatizing these and other ‘hard’ and soft’ infrastructures without continuing

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to subsidize their corporate providers or periodically bailing them out. Central and local governments became equally important to the shaping of decisions by companies of all sizes in their role as architects of their national and international markets and regulators of their finance (Prechel 2000). State-​funded research provided much of the groundwork for private profit-​making innovation (Mazzucato 2011), and publicly issued debt was core to the compound interest that further feathered already luxurious nests. Elite alliances with the emerging middle class are usually associated with economic and social progress provided the middle class remains an ally of the elite, without seeking to capture or displace it. This condition is hard to satisfy in the long term, because those who make the biggest fortunes through middle-​class activity (running industries or banks, trading on financial markets, rising up the professions) almost invariably seek a place in the political elite. Being a loyal sponsor and supporter no longer satisfies, even if lawmakers are doing all that the middle class wants. Its urge to power is magnified if the present elite moves away from a pro-​business agenda. The ‘very wealthy elite at the apex of the class structure […] is fundamentally a senior corporate managerial group’ (Savage 2015: 1022). Growing interdependence between government and business suggests the relentless rise in corporate wealth will be an incentive for commercial power to exert political power, and a result of its successfully doing so. Erosion of power/​money boundaries brings significant challenges for the legitimacy of elites.

The Quest to Separate Policy from Profit For widening economic inequality to do no political harm, the elite ‘higher circles’ must be relatively autonomous. Those at the top of the income distribution must in general be a different set of people from those at the top of government, armed forces and civil society institutions. There must also be barriers that stop those with the most money co-​ opting those with the most power, or arrangements that remove any incentive to do so. Public power can be an effective check on private money’s excesses only if officials do not have an excess of money, so are shielded from the interests of the mega-​rich. The converse also holds. Private money can be an effective check on excessive public power only if business leaders can stay detached from government, avoiding excessive regulation and taxation, or the collusion required to prevent these being imposed. Cross-​party concern about power being illegitimately used to make money, and money malignly acquiring or influencing power, have led modern states to legislate for a stricter separation between the two. Such separation serves at the macro level to prevent the circles corrupting one another so that they cease to serve the public good; and at the micro level to preserve a citizenship that confers similar status on all individuals, regardless of how powerless or impecunious they may be. The intention is to lever the ‘higher circles’ some distance apart, ensuring that different sets of people occupy the core of each, and do not interact or influence one another to the point where they start to converge. The twentieth century brought three developments which, in principle, broke the power over the populace of the industrial elite: the expansion of government, democratization and stock-​market flotations that devolved and dispersed corporate ownership. Social reforms in the aftermath of the two World Wars, pushing on the door apparently

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opened by these systemic developments, raised sincere hopes that the power-​wealth nexus would finally be broken. The reduction of educational inequalities would mean that everyone with the appropriate talents would acquire the abilities (and university-​ forged connections) needed to rise to the top of the business world, the professions and public administration. Extensions of the franchise would ensure that elected officials became representative of the whole population, not just its privileged upper tier. Large companies’ need to stay competitive would compel them to seek talented managers from outside the founding family, whose scions would be quietly sidelined with a boardroom portrait and passive shareholding. An enlarged public sector –​absorbing the ancient professions including lawyers, doctors and surgeons, school and university teachers, and creating modern professions to run the new welfare and public services –​held out particular hope of careers open to talent and commitment, without any capital requirement. The hope was reinforced by the belief that strengthening meritocracy (and destroying plutocracy) was an economic as well as a moral imperative. Nations would lose efficiency, and fall behind in the global order, unless they wrested appointments from the influence of affluence. Making wealth neither a necessary nor a sufficient criterion for high office appeared ever more essential for the economic survival of America and Europe, as (in turn) reinvigorated Soviet, Japanese and Chinese economies bounced back to challenge their global domination. In most occupations, for most of history, there had been little to ensure that the best practitioners rose to the top, or that authority was commensurate with ability. Hierarchies more usually reflected aristocracy, with the top ranks reserved for those of a social class largely determined by hereditary landholding. Industrialization gave them a tendency to be reshaped by plutocracy, with top posts’ accessibility determined by financial resources. Survival in a post-​industrial world seemed, finally, to demand that wealth and power be assigned to those who could handle them best, acknowledging that very few were equally competent with both. Power/​money separation was promoted by a post-​war boom that helped detach social status from economic resources. There was scope to live well, and consume conspicuously, without a large family fortune or top salary. So long as the middle-​ranked schoolteacher or magistrate could live well on a middle-​ranking salary, careers in public service could be chosen over careers in private business with no sense of financial sacrifice, and little temptation to supplement state salaries with commissions or bribes. While the middle-​ranked bank clerk or factory supervisor could easily afford a home, a car and a degree of conspicuous consumption, the good life did not necessitate a cut-​throat battle for promotion, or indulgence in high-​risk or scarcely legal trading to match the pay that might have come with promotion. This made it possible to prevent the highest political posts from requiring the highest financial rewards, and preserve the belief that ‘public service’ is a fundamentally different realm from ‘private enterprise’ –​where performance is driven by sense of duty and desire to serve rather than pursuit of financial gain. If politicians were paid by results (increases in national income, poverty reductions, success of foreign conquests), the same problems would arise as are encountered when corporate managers and their bankers are given performance-​related pay. They find ways to deliver the performance, whatever metric is chosen, which get them the bonuses but do not necessarily deliver sustainable results

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(and may have severe side effects). Worse, they will only deliver good performance if adequately financially incentivized. And if money is the prime motivation for pursuing public office, its holders will surely find more direct ways to obtain it, such as taking it directly from business and other taxpayers or opening their policy choices to the highest bidder. Organized religion, when it still had broad appeal across society, also helped weaken the connection between power and money, and soften its impact. Churches typically preached that poverty was no vice, and even a virtue, while promoting charity to keep it at bay; and their less corrupt clergy showed that power and respect could be commanded on the smallest of stipends. But with the fragmentation and fading of such faith, constitutions and legal frameworks took over the task of keeping the higher circles separate. Recognizing the problem, political constitutions were rewritten and new regulations introduced with the aim of strictly separating economic wealth and income from political power and status. Two distinct separation strategies have been tried since the mid-​twentieth century, punctuated by the ‘lost decade’ of the 1970s. The first relied on regulation, building walls between the public, private and non-​profit sectors and limiting the movement of top people between them. The second, of which the remnants are still in evidence, relies on centrifugal and repulsive forces to drive the circles apart when they get too close.

Institutional Power/​Money Separation, 1950–​70 Recognition of the need to keep a distance between government and business, to ensure they complement without co-​opting each other, has prompted regular efforts to create an international ‘architecture’ that keeps the political and commercial spheres institutionally separate. These are usually most intense, and successful, after major international crises. The most significant today remains the Bretton Woods (BW) agreement, signed by the world’s major powers in New Hampshire in 1944. BW was negotiated by governments whose remit already ran well beyond their national borders, through the retention of colonial control over large swathes of African, Asian and South American territory, and encapsulated ‘government-​led’ globalization. The agreement kept economic activity largely contained within each nation state by putting strict curbs on the movement of capital and labour across national borders. With this shield in place, governments could continue to set national regulations, welfare arrangements, interest rates and budgetary policies designed to reflect their own priorities, or those of their electors. BW supported regimes of relatively high tax, high welfare spending and extensive regulation of business, because even the largest corporations could not easily move operations abroad to escape these impositions (or credibly threaten to do so). BW enshrined a post-​war ‘settlement’ under which economic resources would be concentrated in the private sector, while political power stayed assigned to a public sector that was institutionally protected from commercial interests. The holders of wealth would finance the exercise of power through strictly arm’s-​length instruments of taxation and public borrowing. The holders of power would observe a similar neutral detachment in their dealings with business, pursuing measures designed to benefit all (free trade,

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infrastructure provision, welfare safety nets and recession-​curbing ‘demand management’) and refraining from intervention that favoured one company or sector over others. An intentional consequence of this separation of public (power) and private (wealth) interests was the separation of power and wealth in high-​profile careers. Those with ability and ambition could pursue power in public service or wealth by joining or founding a private business. Public servants were, as the title suggested, not expected to be primarily motivated by money; indeed, the wielding of power (and the status that might go with it) would in part be a compensation for forgoing the rewards of a commercial career. Businesspeople were expected to be motivated primarily by money, and not unduly interested in the exercise of power. Market power –​the ability to dictate product prices through monopoly or large market share –​was explicitly proscribed by anti-​monopoly and anti-​trust laws. The power to set exploitative wage rates was similarly curbed by labour union rights and minimum wage laws. To exercise political power, business leaders were expected to make politics a career change, quitting the boardroom to seek election. Public-​sector pay was kept at levels that meant career politicians and public servants could retire rich, not needing a pre-​retirement detour through the multinational boardroom to secure their pension. Having been set different objectives, the public and private sectors played by different rules, with the public further differentiated between civil and military, and the private between profit-​ making and non-​ profit. The contrasting career paths attracted different types of people. Public service, private business and the charitable ‘third sector’ offered comparable power and status at the top levels, which required comparably high qualifications and achievements to reach. High achievers allocated themselves across these alternative paths according to motivation, temperament and family background, helped by the comparability of financial rewards between them at the highest levels. Crossovers were rare, except in retirement, when retired politicians might supplement their pensions through business consultancy or gloss their legacy through charity work, and retired businesspeople might enter or advise on politics. The troubled fate of the few who did cross between the tracks –​such as Robert S. McNamara (who moved from Ford to become President Kennedy’s defence secretary, escalating the Vietnam War) and H. Ross Perot (the computer outsourcing pioneer whose splitting of the Republican presidential vote in 1992 assisted the election of Bill Clinton, and the approval of the North American Free Trade Agreement (NAFTA) he campaigned against) was a salutary warning to others on the perils of transition from business to politics. Institutional separation of power and wealth was vital in a world where government was growing. The range of goods and services that public authorities were expected to provide grew inexorably after 1945, from the ‘security’ essentials of armed forces, policing, judiciary and prisons to transport, telecommunications, healthcare, education, social housing, broadcasting and a long list of other public works and public services. While some of these could later be privatized, demand for others rose faster than national income. As the productivity of most public services is difficult to raise without eroding quality (as recognized by economists since William J.  Baumol and William G.  Bowen (1965)), it meant that ‘final’ public expenditure inevitably rose as a share of national income. In addition, growing demand for social and corporate welfare  –​increasingly

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viewed as complements rather than impediments to economic progress –​meant a rising proportion of private incomes redistributed through the public budget. As they provided more goods and services directly, governments became major purchasers from private corporations, for many of which the state became the biggest and most reliable customer. Where they sought to combat the growth of the state through privatization, governments encountered an ever-​growing need to regulate private enterprises, which might otherwise harm the public interest by pushing prices up or standards down. At industrialization’s outset, the logic of an institutional public/​private separation was understood on both sides. Commercial projects and political projects require fundamentally different skills. Business and political leaders have different aims:  business leaders want to make money for themselves and their shareholders, whereas political leaders want to stay popular and get re-​elected. Popularity rests on economic buoyancy and flows of tax revenue which depend on the general health of business, but this is far from forcing government to do exactly what business leaders want, even if there is any unanimity on what they want. Agenda-​setting and decision-​making styles that are appropriate to business rarely work as well in the political arena, or vice versa. The bilateral deals and trades that are essential to much business, in which one side’s gain is often the other’s loss, are scant preparation for government’s relentlessly multinational engagements, which if well devised can benefit all sides. The attractions of a new approach that strictly separated business profits from social objectives were enhanced by previous embarrassments in trying to ally the two. Tycoons who develop a radical social vision occasionally make some progress towards achieving it within their enterprise, but almost invariably fail when they move beyond it. Robert Owen’s ‘new view of society’ (1927) took apparently convincing shape in his own New Lanark and New Harmony factory complexes. But his success in persuading other industrialists to do likewise, and in building a political movement around his communities, went little further than boosting sales of his book. A  century on, Henry Ford triumphed in his demonstration that paying higher wages would boost corporate profits, by making the workforce more motivated and better able to buy the product. But his political and humanitarian projects outside his own supply chain –​such as the Fordlandia and Belterra rubber plantation communities in Brazil, and the 1915 ‘Peace Ship’ expedition to end the First World War –​were mostly expensive embarrassments. If ‘capital’ is power, because its exercise depends on controlling flows of income that are ‘capitalized’ into today’s physical and financial assets, then power by definition still rests with capitalists (Nitzan & Bichler 2009). But the diffusion of capital ownership and the disappearance of physical force from the workplace enables the declaration that all are now capitalists (Duca 2001, Drucker 1976), with the concentration of stock ownership among the rich ironically neutralized by the powerlessness of shareholders to control what corporate bosses do. In highlighting the separation of ownership from control half a century after its first observation, Eugene Fama and Michael Jensen (1983) helped spark corporate governance reforms designed to end it. But the ensuing wave of incentive schemes and investor activism inflicted such long-​term damage on ‘shareholder value’ (Montier 2014, Kennedy 2000) that a counter-​wave soon restored the safety barriers between corporate money and power.

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Table 5.1  Phases of political and commercial elite orientation

1918–​39 (Interwar) 1950–​71 (Bretton Woods) 1973–​2007 (Globalization) 2008–​

Political power

Commercial power

National National Internationalizing Renationalizing

National Internationalizing Internationalizing Internationalizing

Institutional separation of the ‘higher circles’ does not stop interaction between political and business interests but tends to equalize the interaction and steer it towards social as well as economic priorities. In post-​war France ‘the pace of change quickened after 1945, when political and business elites joined forces to promote industrial concentration’ (Maclean et al. 2003: 335). But here and elsewhere, the progressive joining of forces later became a regressive merger, as big business ‘barons’ came to resemble too closely their absentee-​landlord forebears in terms of seeking political protection and neglecting their businesses’ competitive challenges. The United Kingdom similarly entered a ‘corporatist’ phase from the late 1960s, seeking to bury management-​union differences and shield key industries from international competition. In the United States, Eisenhower’s departing shot against the military-​industrial complex in 1961 gave a cue for the Kennedy-​Johnson ‘Great Society’ reforms, to redress the balance between corporations as producers and as citizens. The strategic alliance between political and business elites depended on each staying focused on its central task, with governments staying distanced from the running of industry, and chief executives accepting that ‘the business of America’ went beyond mere business. After an interwar period in which political and commercial elites sought to reconsolidate power at the national level –​with disastrous political and commercial consequences for most  –​the second half of the twentieth century brought increasing but asymmetric internationalization, summarized in Table 5.1. The Bretton Woods governance arrangements (agreed in 1944 but effectively in force from around 1950)  sought to rebuild political power at the national level while allowing commercial power to extend internationally. This was done by promoting international free trade (via the General Agreement on Tariffs and Trade (GATT), and the World Trade Organization (WTO) from 1995) while curbing international capital movements so as to keep exchange rates fixed and allow countries to choose their own monetary policy. When BW broke down in the early 1970s, blamed for the end of the post-​war boom and gradually undermined by currency speculation as capital controls frayed, the default solution was to internationalize political arrangements. National governments abandoned monetary policy discretion (and the budgetary freedom it had allowed) and submitted to a common set of policy constraints, leading to convergence of economic strategies. This was achieved by abandoning the Bretton Woods curbs on cross-​border capital movement. Once those lapsed, a government could no longer manage economic activity by setting its own interest rates. These were now determined by the capital inflow needed to finance the current account deficit (if it wanted to keep the exchange rate fixed), or by the level needed

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to curb inflation (if it let the exchange rate sink to close that external deficit). Freedom of fiscal policy action was similarly curtailed by corporations’ scope for moving to lower-​tax jurisdictions, forcing their tax rates down, and the government’s rising cost of borrowing as public debt increased, which forced it to cut public spending if tax receipts dwindled. These policy-​setting constraints were summarized in the ‘Washington Consensus’ (Rodrik 1999, Williamson 2004). This was a catechism of liberalized trade and capital accounts, privatization, fiscal discipline, floating exchange rates and strong property-​rights protections originally foisted on Latin American countries when forced to seek help from the IMF, to which even the more economically sovereign were forced to converge in the 1990s, with elements even incorporated into the European Commission’s rules for EU member states.

‘Symbiotic’ Separation, 1970–​2000 Although the BW system oversaw one of the fastest and most financial-​crisis-​free growth phases on record, the system barely lasted two decades (Bordo 1993). The erosion of the US current account surplus, by European recovery and repeated depreciations against the dollar, led the United States to drop out from anchoring the fixed exchange rate system in 1971–​73. Financial deregulation in the subsequent decade stripped away the controls that had curbed cross-​border capital flows, and enabled countries to vary their interest rates in line with domestic policy priorities and cyclical conditions. The ‘Bretton Woods institutions’ assigned to economic development (IMF, International Development Association, World Bank) lived on, but after ironically adapting to a world of floating exchange rates, liberalized current and capital accounts, and policies under which poorer and more indebted countries were solely responsible for ‘adjustment’ to correct the external imbalances that resulted. In its place, a system developed in which public, private and non-​profit sectors were kept apart by mutually understood differences of responsibility and interest, rather than explicit rules to keep their activities and personnel apart. Governments limited their tax and regulatory demands, and used their expanding role as a goods and services purchaser to create new, stable sources of private profit, offsetting the profits removed by anti-​monopoly intervention and occasional nationalization. They ensured that private business received a ‘return’ on their contributions in the form of macroeconomic stability (using policy instruments made newly available by the end of Bretton Woods), and publicly financed infrastructures and labour skills. Businesses sought to influence government policy through lobbying and threats to disinvest, but realized they could not shape every intervention around their interests, or prevent all those that curbed commercial freedom and profitability. They also extended some activities that complemented public policy and relieved governments of some cost, without an obvious direct connection to private profitability. These included vocational training, occupational pensions with employer contributions and sponsorship of public science and art. For frustrated socialists, this was a form of mutual parasitism, state and private sectors feeding off each other but learning to leech in a way that did not kill the host. For relieved neo-​liberals, it looked like a sustainable public-​private partnership in which state, private and non-​profit sectors stuck productively to their own field despite the fences being taken down.

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Confidence that governments could stay immune to business interests was boosted by the perception of increasing (national and global) private-​sector competition, which would allow lawmakers and regulators to divide and rule. The economy’s different sectors, and rival companies in each, were condemned to fight one another  –​giving governments a powerful independent role as rule-​maker, referee and occasional rescuer of floundering forms that were too big to fail. While many individual businesses (and high-​net-​worth individuals) had incentives to ‘invest’ in political support, there seemed little to align those interests. Businesses that (for example) export a lot and engage in overseas outsourcing have an interest in keeping tariffs and trade barriers low, while rivals that keep production at home and mostly sell domestically would prefer to keep them high. Those that spend heavily on a particular activity (such as R&D, training, energy input) will favour subsidies and tax breaks for such expenditure which others, lighter on such activity, see no reason to finance. Different sectors have different aims, and frequently disagree on how to achieve any shared aims. Although they often complain about the cost of new regulations, few businesses would want them all abolished, and most have shown that they can play by any rules. This gives governments an ongoing rule-​setting power –​and egregious corporate profits arise as much from exploiting lawmaker-​generated rules as from forcing privately written rules through the legislature. Oil companies, heavily invested in rigs and pipelines with no alternative uses, were accused for decades of twisting governmental arms to promote their trade and quell any restrictions based on air pollution, global warming or traffic congestion, as well as stifling any help to nuclear or renewable alternatives. But by the time the Paris Agreement on emissions reduction had received the required 148 governmental signatures needed to take effect, in November 2016, oil giants including ExxonMobil, ConocoPhillips and Shell had sufficiently diversified their energy interests to express support for the initiative –​and condemnation of President Trump’s announcement of US withdrawal in June 2017. Another recent example involved Americans’ increasing addiction to opioid painkillers, which often begins when patients are legally prescribed these medicines, in contrast to the less addictive substitutes used outside the United States. Pharmaceutical companies that make opioids were accused of encouraging their prescription, and resisting legislative attempts to control their use, putting their profit from mass-​marketing those medicines above the severe long-​run health costs and the ‘$7.7 billion in criminal-​ justice-​related costs, which was almost all borne by state and local governments’ (Drain 2016). But drug makers were in practice merely exploiting pre-​existing rules set by the government –​which give medical professionals a better performance assessment if their patients report low levels of pain and high levels of satisfaction. In other countries, where making patients pain free and satisfied as they leave the surgery is not such a legislated priority, the same drug companies push a different set of products, keeping painkiller addiction levels much lower. Big businesses will still lobby heavily to stop changes to rules they find especially profitable. But the vast amounts of time and money that corporations and rich individuals spend on political sponsorship and lobbying are rarely assured of swaying its outcome, unless the flow is unusually concentrated on one side. On many issues  –​commercial

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as well as social and moral  –​plutocrats’ publicly stated preferences divide. As well as contradictory aims between industries, and inter-​firm rivalries within each industry, the interests of small businesses may be in conflict with the interests of large ones, especially on issues of regulation and foreign trade liberalization. ‘Business interests […] are simultaneously united by common interests and divided by competitive struggles […] In the last thirty years, structural change, institutional evolution, and changes in the cultural environment of business have intensified the problem of collective action, even while they have empowered individual businesses and enriched parts of the corporate elite’ (Moran 2008: 65). Richard Cockett (1995) chronicles the role of business interests in sponsoring the original economic-​liberalism conferences and think tanks, notably the Institute of Economic Affairs (IEA) that shaped the agenda for Thatcher in the United Kingdom and (through its offshoots) Reagan in the United States. The IEA’s first sponsor, Anthony Fisher, was a pioneer broiler chicken farmer whose business employed 200 people when he sold it to reinvest the profits in free-​market ideology (Cockett 1995: 125). From the small-​employer perspective, big businesses exerted power which suppressed market forces and had long sided with left-​leaning governments to suppress the small trader –​while also stifling long-​term economic growth by absorbing innovation efforts that only worked on a small scale into giant, unproductive R&D units (Jewkes et al. 1969). The growth of monopoly power within sectors, and of dominant ‘strategic’ sectors within the economy, can give a small number of owners the means and incentive to swing public policy their way. But most monopolies have proved relatively short-​lived in the face of innovation, eroding trade barriers and anti-​trust enforcement, despite using their excess profits to lobby against competitive entry. When an industry cartelizes to wield more economic and political power, it usually prompts others to take countervailing action. The Du Ponts’ empire harmed the interests of many other industrialists who wanted the price of oil, industrial chemicals and transport to stay low. Those rivals’ opposition, as much as that of organized labour, stalled the cartels’ direct and indirect attempts to seize political control. Despite intense lobbying, the most concentrated business interests could not avert Roosevelt’s financial regulation, labour-​rights legislation and public investment programs in the 1930s, ‘Great Society’ welfare and environmental protection measures under John F. Kennedy and Lyndon B. Johnson in the 1960s, or Barack Obama’s healthcare reforms and fossil fuel restrictions after 2008. BW arrangements’ decline actually signalled the break-​up of a previously successful distributional coalition. For all its safeguards against convergence of the ‘higher circles’, BW was the incubator for the ‘military-​industrial complex’ already troubling a Republican presidency by the mid-​1950s. When BW’s macroeconomic underpinnings collapsed, financiers who had previously worked closely with industry under heavy regulation broke away –​lobbying politicians to rescind the regulation, and (with this done) pursuing a path of financial innovation that ultimately rebounded against non-​ financial companies. Trade unions that had previously worked with large-​company managements for harmonious industrial relations broke away and sponsored strikes for higher pay (or, in the United Kingdom, were powerless to stop their middle-​level organizers calling these). Governments that had previously convened for ‘indicative planning’ with big business and trade union representatives broke away to side with

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the small business owner against collective bargaining and ‘red tape’. Many of the internal and external forces that undermined BW were consequences of it succeeding in its bold post-​war objectives: rebuilding Europe so that it caught up with the United States and reeled in the once wide American trade surplus, endangering the dollar; restoring full employment so that unions gained power in relation to management; allowing companies to grow larger until they hit the limits of domestic markets and gained price-​setting power. The private sector’s conflicting priorities raised the hope that its efforts to affect governments’ composition and strategy would end in mutually assured destruction, neutralizing business influence and letting policymakers stick to the wider public interest. Even after formal regulatory separations lapsed there appeared to be few cases of many employers transcending firm and industry boundaries to pursue a common agenda, fewer still of such initiatives succeeding. Even the large cross-​industry lobbies in the United States against carbon emissions reduction policies, and in the United Kingdom against leaving the EU, were opposed by other industry-​backed campaigns and eventually lost the debate. Businesses compete for influence over government not only with one another but also with a wide range of other powerful actors including autonomous public agencies, unions, non-​profit institutions, academics, local authorities and foreign governments.

The Twenty-​First-​Century Breakdown of Money/​Power Separation Hopes that the commercial, political, military and non-​profit ‘higher circles’ could be kept apart, without strict institutional separation, were quickly undermined by governments’ own actions after 1970. Direct involvement of the business elite in government, embraced across the political spectrum in the 1960s as a way to guide rapid structural change and contain wage and price inflation at full employment, was seen to have failed in the ‘stagflation’ of the 1970s, and transmuted in the 1980s to the direction of government by business elites under Reagan and Thatcher. The erosion of public/​private boundaries gathered pace (in North America, Europe and beyond) as public assets were privatized –​ ostensibly to impose greater competitive discipline and better management, often to fund public debt reduction and temporary tax cuts –​and macroeconomic policies redirected from sustaining growth to stabilizing prices. Private-​sector management techniques were deliberately introduced into the remaining public sector, while private companies that had undertaken to provide outsourced public services found they could not do so without public financial support. Under pressure to deliver more public services and poverty relief while keeping taxes and public debt down, governments were easily enticed by promises that their work could be done better, faster and cheaper by a rolling back of bureaucracy and injection of ‘entrepreneurial spirit’. Tellingly, the foremost advocates of ‘reinventing government’ (Osborne & Gaebler 1990) expressly denied that entrepreneurship involved risk-​taking (xix–​xxi), and insisted that government could stay in charge of rule-​making, supervising the new marketplace rather than being submerged by it (290–​98). Neither principle fared well as governments rushed to offload an ever widening range of tasks which their electorates expected and no longer wished to pay for.

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Particular industries and their leading firms can directly exert power on government if they make a significant contribution to GDP, employment and tax revenue, so that collapse or relocation abroad would impose large social costs. In the United States an alliance of the oil, automotive and chemical industries enjoyed exceptional power long after the late nineteenth-​century assault on the ‘robber barons’, reinforced by extended links among the Rockefeller, du Pont and Morgan families (Colby 1984). Financial interests centred on Wall Street –​cemented by the same extended families and others –​ also became an unusually large and coordinated lobby, despite their 200-​mile displacement from the political capital. Countries rich in oil or other minerals have become especially familiar with the close interaction of government and large producers, promoted by their need to operate on a large scale in contested locations at home and abroad, and the exceptional profits available when one large extractor serves many industrial users. Russia’s hydrocarbon giants, Lukoil and Gazprom, have long led a cluster of oligarch-​controlled conglomerates whose influence has kept them dominant, stifling the expansion of new industrial sectors and the creation of smaller businesses. The scandal that emerged in 2016 surrounding Petrobras, Brazil’s state-​owned oil multinational, showed how such corporate interests can influence a government whatever its political stripes. It was accused of running up losses of $12.6bn in the process of bribing politicians of the ruling Workers’ Party (PT) sparking an outcry that led to the impeachment and resignation of President Dilma Rousseff and the eventual prosecution of her still popular predecessor, Luiz Inacio ‘Lula’ da Silva (Spagnuolo 2016). Few corporate ‘national champions’ have entirely avoided a hidden trade across domestic political boundaries, of favourable policy tweaks in exchange for personal or party commissions. Banks, or the financial sector more generally, have long been an unusually large if not dominant sector in the United Kingdom (measured by turnover, profit, share of GDP and exports), and one that can therefore tug the purse strings of government through its tax payments (large despite its mastery of low-​tax jurisdictions) and underwriting of public debt, as well as holding budgetary power over those non-​financial businesses whose retained profit cannot finance all their investment needs. This has led some authors to argue that the needs and prejudices of finance have shaped UK policy at the expense of other services and manufacturing. In contrast to the geographically dispersed and fragmented manufacturing sector, ‘after World War One the historically dominant part of business  –​the commercial-​financial sector rooted in the City of London  –​ developed powerful institutional and social mechanisms of cohesion’ (Moran 2008: 66). Longstanding tensions between non-​financial businesses and the financial sector (Ingham 1984) have grown as financial institutions (helped by deregulation) become more adept at making money from money without any intervening production process –​via deployment of ‘finance capital’ through such channels as derivatives, speculative trading and debt securitization. Whereas business executives once resigned their private-​sector posts before taking senior public office, to allay any conflict of interest, some now take the political helm without renouncing their commercial interests. Silvio Berlusconi continued to enlarge his media empire while serving as prime minister of Italy, a job which favourable coverage

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from his own television channels helped him retain. Petro Poroshenko, elected Ukrainian president in May 2014, had at midterm still not sold his controlling interest in the country’s biggest chocolate maker or many of the other corporate stakes which made him Europe’s richest head of state, and was revealed in the Panama Papers to have set up an offshore company three months after his inauguration (Harding 2016). Trump continued to apply for building permits and property rights while campaigning to be president (Kinetz 2017) and, on election, entrusted his business to his adult offspring rather than a blind trust, ensuring they could aggressively expand its assets (and pay down its liabilities) in an economic and foreign policy context he directly oversaw. Western economies advanced into industrialization on the basis of two liberal bargains. The first, identified prospectively by Adam Smith, was that businesses pursuing private profit would inadvertently (but invariably) serve the public good, by delivering desired goods and services in the most efficient way and constantly inventing new products to satisfy more desires. The second, identified retrospectively by John Maynard Keynes, was that businesses would respect a well-​delineated sphere of activities that were appropriately ‘public’, and kept beyond the reach of private profit. The Smithian bargain depended on there being competition among private enterprises sufficient to force them to make profit by delivering faster, better and cheaper, rather than by acquiring monopoly power and pushing prices up. The Keynesian bargain depended on there being sufficient private-​sector willingness to finance public provision, through the payment of taxes or acquiescence in inflation that kept public debt affordable when governments’ revenue fell short of their expenditure. Large corporations challenge the first of these bargains by gaining price-​setting power as their market share grows and the number of competitors falls. They breach the second by intruding into areas of the public sector from which they might derive profit, while persuading governments to lower their tax rates and open more loopholes enabling tax to be avoided altogether. After centuries during which they expanded their role in the economy and society (without derailing growth or technical progress) and acquired more public assets (without impeding the private sector), governments –​first in Europe and the Americas, now worldwide –​have entered a vicious circle that rapidly diminishes their role, endangering both bargains. Inability to fund all the expenditures their electorates expect through tax receipts forces them to incur more public debt, which eventually forces the privatization of state-​owned firms and other assets, which in turn further erodes the public sector’s income generation while worsening its balance sheet so that the ‘debt burden’ weighs more heavily. The steady fall in ‘public sector net worth’ gathered pace with the expense of the 2008 bank bailouts, the United Kingdom –​appropriately for a pioneer of privatization –​leading the way to its complete elimination by 2010 (ONS 2011). The disputed legal nature of the large corporation has made it easier to attack as well as enabling it to act in ways that incite attack. The corporation’s ambiguous identity as a ‘legal person’ allows it to exercise individual rights when these are in its interest, while avoiding individual responsibilities when these are not in its interest. Thus in America the corporation can operate comfortably under the Citizens United judgement, while avoiding charges of corporate manslaughter if a lax practice causes employees

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or customers to die. Ambiguity over who is ultimately in charge  –​the shareholders, top managers, wider stakeholders, or everyone and no one due to truly ‘public’ status (Deakin 2012, Lawson 2015) –​makes liabilities easier to avoid. The unclear extent of shareholders’ authority over managers (and the scattering of shareholders as they diversify their portfolios) adds to the ease with which top executives can be firmly in control of decisions that work while oddly powerless over those that misfire. While small and medium-​sized businesses are still widely viewed as creators of wealth and innovation, as well as being the sources of most working people’s income, big businesses have invited reclassification into the group which Adam Smith (well before the growth of large-​scale industry) had already condemned as ‘a great enemy to good management’ (Smith 1979/​1776:  251). Once a degree of monopoly power is established, businesses can stay profitable without deploying the most efficient technology, delivering the best service or cutting unnecessary waste. They can pass off as hard-​earned profit what is actually ‘rent’, the extra amount that consumers must pay for a product entirely because of its scarcity and the unavailability of substitutes. The sin is compounded when monopolists use some of their ill-​gotten surplus to engage in ‘rent-​seeking’, the acquisition of additional market power (and further monopoly rents) by becoming an exclusive supplier –​especially to government –​and persuading the government to keep rivals out of the market. Coalitions of business and political leaders are often the best promoter of expanding economies and benign business conditions; a coalescence of their interests is equally often the worst. Big businesses in America and Europe have seemed since the 1990s openly to advertise their successful quest for monopoly rents, by paying ever greater rewards to senior managers who have often done nothing obvious to earn them. By 2015 the average CEO pay package for one of the largest 500 US corporations (as listed in the S&P 500) was 204 times the median salary of their employees, according to research by accountability group Glassdoor (Dishman 2015). That was a conservative estimate according to the American Federation of Labor and Congress of Industrial Organizations (AFL-​CIO), which probed 350 of the same companies and found the CEO/​average pay ratio to have reached 373 in 2014, up from ‘only’ 46 in 1983 (Melby 2016). In the financial sector, the sharp rise in senior employees’ remuneration after 1985 links only with difficulty to any rise in the effectiveness of financial intermediation, but very easily with deregulation that promoted the capture of rents and capital gains (Philippon & Reshef 2012). The rising executive pay gap seemed more rooted in ‘free cash flows’ which large corporations enjoyed due to lack of competition, and top managers’ ability to channel these (assisted by a sympathetic remuneration committee) rather than remit them to shareholders who could better deploy them elsewhere. Ironically, this misallocation of monopoly rents had been identified in the mid-​1970s, sparking a drive to restore ‘shareholder value’ by sweeping away the executive perks and bonuses. Corporations were taken private, loaded with debt or made to link CEO pay to profits or share options in order to make better use of their internal funds, a ‘transformation’ eventually celebrated in the Harvard Business Review (Jensen 1989). CEOs proved endlessly adept at hitting the particular performance targets that would trigger the next rise, even if not quite clever enough to move the company upward as fast as their own pay.

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In the past it was usually older, larger and more mature corporations and sectors that became most enmeshed with public policy, often using it to shield their profits and avert decline. Smaller, faster-​growing ‘sunrise’ firms were more resistant to state involvement in the economy. This has now been emphatically reversed, with start-​up ‘entrepreneurs’ (and their venture-​capital sponsors) often no less covetous of public support than the sunset players they seek to replace. Governments now insure, at public expense, the risks that private firms once absorbed privately. An increasing number of non-​financial corporations have become ‘too big to fail’ (TBTF) because their main shareholders –​ who traditionally absorbed any losses via a fall in the value of their stake –​are no longer rich individuals but pension and insurance funds that channel the savings of ordinary households. Large banks have long been TBTF for a further reason: their intertwined financing arrangements and reliance on short-​term liabilities to finance long-​term assets meant the collapse of one overstretched bank could bring down the rest of the sector, however well managed. Reforms in the United States and EU after 2008 to cut the number of TBTF players, and force shareholders –​rather than governments and their taxpayers –​to supply extra capital if they become insolvent –​have brought little fundamental change, with some banks continuing to encounter sudden problems even after sailing through their ‘stress tests’. Governments also subsidize private businesses at the pre-​ competitive stage  –​ financing the research and early development from which corporations later select commercializable new technologies (Mazzucato 2013), and frequently at the competitive stage with assistance extended through a revived industrial policy. They provide infrastructures which extend to the basic education and health of employees, low-​cost contract enforcement and dispute resolution, and the product regulations that are much maligned but essential to competitive markets, as well as the more tangible necessities of transport, communication and other utilities. They provide the top-​up tax credits (effectively wage subsidies), flexible working arrangements and state-​financed pensions without which many new firms would be unable to recruit and retain for expansion, as well as the financial sector safety net that allows private lenders to fund them. It is no coincidence that governments have passed ever more ‘public’ sector duties to the private sector at the same time as sponsoring new models of risk-​insulated, expenses-​paid private-​sector activity. Truly ‘capitalist’ arrangements for education and healthcare provision would mean the continual closure or hostile takeover of hospitals, schools and universities that underperformed, explaining the inconvenience to their current customers as a necessary cost of maintaining the competitive system that benefited all the rest. Truly ‘capitalist’ supply of utilities would mean systems that ran without spare capacity, so that lights failed and taps ran dry if a particular area’s supplier failed its market test. A ‘capitalist’ railway system would not seek safety standards far above those observed on roads, where death and injury remained an everyday occurrence. The addition of substantial corporate subsidies to the rising social subsidies required by an ageing population has left most governments’ budgets in persistent deficit and led to steady growth of public debt around the world. In many ways, rising public debt is the obverse side of protected private-​sector wealth. Public debt, as a substitute for tax

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payment, in effect enables big corporate and personal income tax payers to turn their grant into a loan. They can now make a return on the money they give to government by turning it into an interest-​paying bond instead of merely handing it over. The public budget now redistributes wealth and income towards those who already have these rather than tackling inequality. At the root of rising public debt is governments’ need to spend ever more to keep the private sector expanding, even as they proclaim a ‘privatized’ and ‘free-​market’ economy to be taking over the work of government. Growth of the state’s responsibilities has, in the end, proved fatal to the power/​wealth separation that makes it essential. The incentive for private enterprise to capture the state, as customer and regulator, grew in line with the role of government in the economy. Its power to enact such capture rose similarly, as private-​sector pay and resources outgrew those of the public sector (helped by years of macroeconomic stabilization policy which helped corporations build up profits while governments ran budget deficits that built up public debts). If those who make money can also make the political rules, society becomes vulnerable to positive feedbacks of the most negative kind.

Evidence for Plutocracy If the corporate rich have escaped their old bounds and re-​exerted power over the political executive, can it be shown that public policy is being reshaped around commercial interests? Such evidence emerges in the United States from work by political scientist Benjamin Page, which finds that policies adopted at the federal level tend to reflect the interests of organized interest groups and economic elites, despite an electoral system designed to align them with majority preferences. Using Martin Gilens’s data set of opinion surveys in which respondents’ income was recorded alongside their yes/​no answers, Gilens and Benjamin Page (2014) were able to measure the extent to which US policy decisions from 1981 to 2002 matched the preferences of the ‘average’ citizen –​or at least the one with near-​average income. Three alternative sources of influence –​individuals with above-​average income, pressure groups and the subset of pressure groups representing large commercial interests –​were available for comparison. Representative democracy suggests that most policy choices should coincide with those preferred by the average voter, or at least the ‘median voter’ whose place in the distribution gives them a form of casting vote. When Gilens and Page tested the sources of influence individually, all were found to have a decisive impact on policy choice. Theories of majoritarian democracy, economic elite domination, pluralism in which competing interest groups convey general public opinion, and pluralism biased towards economic interests all found empirical support –​ despite their being mutually exclusive explanations. These authors then sought to break the deadlock by testing the four sources of influence simultaneously. Their multivariate results suggest that the average voter’s preferences have no significant independent impact on policy decisions, which mainly reflect the interests of the richest. People on average incomes only get their way when those with well-​above-​average incomes also want it. ‘Economic elite domination theories do rather well in our analysis, even though our findings probably understate the political influence of elites’ (Gilens & Page 2014: 573).

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Those who have attained political power in today’s societies tend to be rich. Increasingly, personal wealth –​or sponsorship from personal or corporate wealth  –​ appears a prerequisite for those who aspire to be powerful. Well before the 2016 US presidential contest, widely expected to be the most expensive ever recorded in terms of funds raised and spent, the price of congressional office appears to have climbed above seven figures. The median net worth of US Congress members rose above $1m in 2014, with the median net worth of Democrats ($1.04m) slightly above that of Republicans ($1.00m), and average senators much richer than members of the House (Choma 2014). US congresspeople’s rising fortunes owe a lot to superior returns on their stock portfolios, with inside information from corporations and regulators contributing much to their superior stock-​picking skills (Parloff 2011). In the United Kingdom, 23 of 29 cabinet ministers were millionaires in 2010, mostly though their property portfolios, with the centre-​left Liberal Democrat members no less wealthy on average than their right-​leaning Conservative cabinet colleagues (Owen 2010). The most satisfying explanation would be that those who are most competent at policy and administration will tend to be successful in business dealing as well as public office. But after reviewing their governments’ competence, many voters see money buying power as the more plausible link. Chrystia Freeland (2009) promises to expose the ‘Plutocrats’ and their political string-​pulling. But her tour of the billionaire chief executives and start-​up champions of the Americas, Europe and Asia rarely tackles the issue of how and why they exert political power, focusing instead on the way the ‘super-​elite’ acquired its wealth, and the lifestyles it supports. Freeland suggests that the richest corporate and financial managers shift their focus to political agenda-​setting once their businesses are up and running sufficient profits. But she finds that gatherings of the world’s rich and powerful  –​at the World Economic Forum, Boao Forums, TED Conferences, Bilderberg Clubs, and fringe meetings around G7/​G20 summits and World Bank Group or WTO annual gatherings –​mainly serve as ‘idea conferences’. Unless they have managed to hatch their global-​governance plots behind exceptionally closed doors, participants are observed to be far keener on swapping business and marketing ideas than conspiring over politics. ‘The most potent currency at this and comparable gatherings is neither fame nor money. Rather, it’s what author Michael Lewis has dubbed “the new new thing” –​the insight or algorithm or technology with the potential to change the world’ (Freeland 2012: 69). If business leaders attend such gatherings with the intention of converting their money into power, they seem remarkably easily distracted by new opportunities to make money, while the politicians listen in without taking instructions. David Rothkopf (2008) sets out with more determination to expose the roots of plutocracy, lamenting that ‘there have been many books written about the inequitable distribution of wealth on the planet, but few on the inequitable distribution of power’ (xxi). Yet he quickly loses the distinction, helped by a definition of ‘Superclass’ that comprises the roughly 1,500 individuals with ready access to a Gulfstream jet and the stewardship of ‘one of the world’s two thousand largest companies’ (2008: 25 and 120). His account quickly shifts to a consideration of how today’s rich made their fortunes, the history of elite theories and the changing nature of great wealth. In an intriguing subsection, ‘The Power of Money’, Rothkopf observes that big corporations and rich businesspeople

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can influence public policy in a number of ways: through the direction of their philanthropic sponsorships (if these are as big as Bill Gates’s or Warren Buffett’s); their financing of candidates’ or parties’ election campaigns (with an assumed payback if their favoured candidate wins); and their lobbying of whoever does get elected (Rothkopf 2008: 81–​85). This is followed by briefer sections on ‘The Power of Politics’ and ‘The Power of Force’, which review the things that government can do to promote (or not harm) business interests, and the consequent incentive for money to influence power (Rothkopf 2008: 85–​87). But the actual process of converting wealth into policy remains tantalizingly unclear. Lobbying, corruption and rent-​seeking by the richest are unlikely (on their own) to explain why major policy choices match the preferences of the richest when governments depend on fair elections. The economic elite are by definition too few to swing an election, and cannot usually bribe other voters on a scale sufficient to make them vote against their own interest. The coincidence could be benignly explained by harmony of preferences across different classes. In a perfect neo-​liberal plutocracy, the interests of the richest would entirely match those of the majority. But this is not the case in the United States, where –​at least since the 1950s –​the interests of typical working-​class households have not been best served by the Republican presidents and governments they have tended to vote for (Bartels 2008: 29–​63). While evidence that very rich individuals and corporations gain privileged access to legislators in return for donations is therefore inescapable, this does not constitute proof of a ‘wealth elite’ buying favours from and setting agendas for a political elite. It is, conversely, a provocation that leads to the emergence of a political elite that keeps its distance from the influence peddlers, rising above the political ‘marketplace’ to maintain the relative independence of government from business. The more time the publicly visible legislators are forced to assign to assuaging lobbyists, and soliciting contributions to the next campaign, the more decision-​making time and resources are ceded to this less visible, less purchasable elite. Although the later demonstration of close links between rich donor interests and political outcomes supports their claim of oligarchy in the United States, Jeffrey Winters and Benjamin Page (2009) presuppose a power-​money nexus, by defining individual power as the ratio between average income of a high-​income band (such as the top 1 per cent) and average income of the bottom 90 per cent, and group power as the ratio of their national income (GDP) shares. Wealth and power are equated because of the ‘extreme political inequalities that necessarily accompany extreme material inequalities. Oligarchs are actors who personally command or control massive concentrations of wealth –​a material form of power that is distinct from all other power resources, and which can be readily deployed for political purposes’ (Winters & Page 2009: 732). Mills (1956), writing at a time when funds from business and finance were already starting to pour into congressional and presidential campaigns in furtherance of the ‘military-​industrial complex’ –​stated that ‘what observers in the Progressive Era called “the invisible government” has now become quite visible; and that what is usually taken to be the central content of politics, the pressures and the campaigns and the political maneuvering, has, in considerable part, now been relegated to the middle levels of power’ (1956: 28). Above the lobbyists’ and think tankers’ war of attrition for legislators’

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attention, which the drive for transparency has made distractingly visible, different interchanges between money and power are less visibly at work. Those in politics’ higher circles can still surmount the battles beneath them to divide and rule, following an agenda combining different factions’ priorities and their own.

Slippage into Oligarchy Although other interest groups (including mass-​membership organizations) can exert some independent influence, those backed by the economically powerful are found to wield much more of it than those representing disempowered minorities, or the public in general. General interest groups’ influence is further weakened by a low correlation between these organized lobbyists and those they claimed to represent. ‘Reality is best captured by mixed theories in which both individual economic elites and organized interest groups (including corporations, largely owned and controlled by wealthy elites) play a substantial part in affecting public policy, but the general public has little or no independent influence’ (Gilens & Page 2014: 572). The United States resembles less a plutocracy, in which the richest rule on behalf of the majority, than an oligarchy, in which rich and poor want different things, with political contests consistently settled in favour of the rich. Oligarchy literally means rule by the few for the few, disavowing elites’ historically self-​ascribed ability (and duty) to rule on behalf of the many. Whereas plutocracy (government by the rich) might seek to serve the interests of a wider population, or at least a wider range of the better-​off, oligarchs do not look beyond defending and extending their own very narrow set of interests. The public may therefore become more hostile if it sees plutocracy sliding into autocracy; but the anger often manifests itself as cynicism and resignation rather than active opposition, because oligarchs are small enough in number and united enough in aim to crush any dissent, and avoid divisions that lead to one faction mobilizing popular opposition. Oligarchs also differ from plutocrats in being able to rule indirectly, influencing the choices and actions of top politicians without having to enter politics themselves (with its inevitable inconveniences of being distracted from enjoying and enhancing the spoils of business, and visibility that could attract public disapproval). As important sources of employment, investment, exports and tax revenue, those running big firms can credibly threaten to downsize or move operations abroad if dissatisfied with a government’s actions. As major funders of political parties and candidates, they can demand a return on their ‘investment’ when these are elected (Hill & Wang 1986). Oligarchy may be the degenerate form of elitism that results when land and other productive assets which were previously publicly or communally owned are ‘privatized’ in conditions of low democracy and high inequality. The inequality means that only a small number of wealthy individuals can afford to buy the privatized assets if they are sold at market prices. Lack of democracy increases the chance that they will be sold for much less than they are really worth –​to buyers with political connections who can bid in advance, by governments that are not under pressure to maximize revenue for the public whose assets they sell. Oligarchs generally made their first billion by negotiating

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the giveaway of a state enterprise which they then resold at market price; and made their subsequent billions by using their expanding fortunes to further plunder a public sector whose tax base was declining –​by forcing additional fire sales of assets, or lending on terms that allowed the seizure of those assets when the sovereign lapsed into default. Before the biggest businesses became noticeably larger –​and the 1 per cent of biggest owners noticeably richer –​than the rest, all were forced to play by the same rules. These included the ‘rule of law’, giving similar rights and obligations to everyone. Those with smaller business or personal fortunes benefited from the settlements negotiated by the biggest, which had to be applied universally. Under this liberal approach  –​still synonymous with Adam Smith’s social philosophy –​the exclusive assignment of subsidies and monopoly rights to special-​pleading businesses and bosses gradually disappeared. Preferential tariffs, which enriched favoured groups of firms and employees at the expense of the rest, gave way to free trade for all. Renewed widening of inequalities in power and wealth has reawakened the spectre of rules being customized, the richest and best-​connected carving out preferential deals. Businesses that can bargain for exclusive market access gain from a return of trade barriers. Individuals who can personally negotiate at the border lose interest in rules that allow free movement of people and capital. Banks that anticipate a state-​financed rescue through being ‘too big to fail’ can neglect international standards for solvency and liquidity. Those lacking such power can no longer rely on equality before the free market and the law. This return to the pre-​industrial age of bespoke baronial bargaining was typified by the Trump administration, whose top members were sealing bilateral deals to enter lucrative protected markets even while retreating from predecessors’ free trade pacts (Haas 2017). And by Sir James Goldsmith, the architect of the UK exit from the EU, who turned against the principles of free international trade and capital movement (Goldsmith 1995) once the size of his businesses and the strength of his political connections ensured a personal channel for his own acquisitions and contracts abroad. Where universal rules are not yet established or enforced, the biggest entrepreneurs are in no hurry to create them, having learnt to prosper in the absence. A commercial organization with better enforcement mechanisms than the state does better imposing its own case-​by-​case solutions than yielding to state agencies and courts to which all have access –​as confirmed by the activities of contemporary Central Asian oligarchs (Cooley & Heathershaw 2017), the Sicilian mafia (Gambetta 1996) and the robber barons of late nineteenth-​century New York (Fraser 2005: 139–​71). Countries of the former Soviet Union have, since 1991, seen many of their formally elected leaders rubbing shoulders with (and taking orders from) ‘oligarchs’, entrepreneurs who assembled financial-​industrial groups with astounding speed after the fall of communism and thereby made themselves integral to the emerging political process. The post-​communist Russian oligarchs amassed their fortunes exceptionally quickly by using inside knowledge of the political process to grab assets that were undervalued on privatization, and later using their wealth (and the public sector’s consequent impoverishment) to acquire more cheap assets in return for bailing out a cash-​starved government. Elected administrations were short of cash not least because they had taken over the many housing, social service and pension obligations previously taken on by public enterprise,

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while losing the corporate revenue base when that enterprise (on the earnest advice of Western economists and multilateral lenders) passed quickly into private hands. Under one ingenious scheme, ‘loans for shares’, Russia’s newly made industrialists lent to the government at interest rates they knew it would struggle to repay, taking shares in public enterprises as security. The inevitable default on public debt brought them a lucrative new wave of controlling stakes. Oligarchs engaged with the political leadership, some even getting themselves elected to parliament and appointed to the cabinet, because they needed political action to assign the assets and to maintain profitable markets around them once released. Their interests coincided with those of the wider public as far as maintenance of national defence and public order. There was otherwise little pretence that the heir to Marx and Lenin would be Adam Smith. Similarly oligarchic figures became familiar in the corridors of Middle Eastern power after the emergence of large oil interests, and in Latin America and South Asia where large landowners reinvested in the mining and manufacturing that now form much of the tax base and hard-​currency revenue flow. They were also visible in the United States over a century ago, especially after governments acquiesced in their formation of cartels and destruction of labour unions as a possible way out of the 1870s ‘Long Depression’. They are supposed to have been banished from the West under the onslaught from democracy, competitive innovation and trust-​busting legislation, the last of their ill-​gotten fortunes penitently channelled into charitable causes. But the inexorable growth of private enterprise, alongside a shrinking and cash-​strapped private sector, has led American and European corporate naturalists to some significant new sightings very close to home. Whereas membership of a plutocracy depends on absolute wealth and tends to expand as an economy expands, oligarchy confines power to the wealthiest, who are always few in number. If power is diluted by the number of members and increased by the absolute resources each member commands, then plutocracies will be weaker and oligarchies stronger in rich economies than in less-​rich ones. (Whether plutocracies weaken and oligarchies strengthen over time, will depend on whether economies grow under their leadership, which is not certain; the few durable oligarchies available for observation often appear largely stagnant, with the few enriching themselves further only by acquiring assets from other people or the state). The power of oligarchs (in terms of material resources commanded) may be generally underestimated, because it derives from personal wealth, which is easier to conceal than personal income; and because wealth must often be inferred from personal income, an incomplete measure because the wealthiest often avoid taking income to minimize their tax liability. Oligarchs tend to be fully aware that their power, financial success and personal security are ultimately precarious, relying on gradual (if any) change in economic and political arrangements, which in practice can change unexpectedly fast. The typical oligarch guards against such sudden usurpation by quickly disentangling their personal fortune from the businesses that generate their early fortune, and the locations in which that first fast accumulation took place. Wealth is parked at a safe distance from the home country, usually in a portfolio of properties and bank accounts around the world, any of which can offer a short-​notice refuge if luck and political protection run out at home.

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Compared to conventional elites, this preparation for fast exit tends to erode the loyalty of oligarchy to its country or region of origin, and increase the distancing between oligarchs and ordinary people. Because they do not intend to store much of their wealth in their local economy, or concentrate their new investments at home, oligarchs lack elites’ normal concern to strengthen property rights and promote favourable business conditions. They may even seek to keep property rights weak (as this makes it easier to expropriate less favoured rivals), and business conditions harsh (to stall the growth of private businesses that could challenge their market power). Because they are prepared to leave their homeland if their privileges come under attack (and have boltholes in lands where taxes and extradition treaties do not reach), the vast gap between their own affluence and non-​elite poverty tends not to perturb them. Lack of loyalty and of concern over inequality can escalate behaviour that hastens the flight to safety of the oligarchs, or their overthrow if they postpone the flight too late. The perception that democracy can be ‘bought’ by large commercial interests, even when these are far outnumbered by individual voters, has grown as big business profit becomes more reliant on public intervention, and as this intervention becomes less effective in aligning profit with public interests. The identification of direct links between financial firms’ communication with (and contributions to) Washington-​based politicians and their passage of deregulation measures that boosted financial profits (Igan et al. 2009) points to the effectiveness of lobbying expenditures, whose sustained rise has reshaped the character of policymaking in the United States (Drutman 2016) and the United Kingdom (Cave & Rowell 2014). In the United Kingdom, 90 per cent of people polled by Transparency International in 2013 agreed that ‘the UK government is run by a few big entities acting in their own interest’ (Transparency International 2016). In the United States, both main parties’ presidential candidates entered the 2016 presidential race with higher rates of disapproval than approval, and vied to be the candidate representing an underserved majority neglected by members of Congress and the special interests that ceaselessly lobbied them. Addressing the Republican National Convention as he launched his 2016 presidential campaign, Trump assured the national television audience that ‘I am your voice’, and then denounced his opponent, Hillary Clinton, as a mouthpiece of the moneyed elite: ‘They are throwing money at her because they have total control over everything she does. She is their puppet, and they pull the strings.’ (Trump 2016). When 50 Republican former national security officials signed an open letter denouncing Trump as a candidate ‘not qualified to be President and Commander-​ in-​Chief ’ who had ‘little understanding of America’s vital national interests, its complex diplomatic challenges, its indispensable alliances, and the democratic values on which US foreign policy must be based’ (Bellinger 2016), Trump rejected their opinion as the last gasp of a ‘failed Washington elite.’ Trump built his appeal on having never before held political office, and being so rich that he did not need sponsors who would later want a payback –​leading him to become probably the only candidate ever to demur from publishing a tax return, for fear it would show him much less wealthy than he claimed. Having never held political office, Trump could blame all contemporary ills on present and past politicians, and their professional advisers. A Pew Center survey conducted two months before the poll found 81 per cent

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of his supporters believed that ‘compared with 50 years ago, life for people like you in America today is worse’ –​compared to just 19 per cent of Clinton’s supporters, 59 per cent of whom believed that life had got better in that half-​century of rule by politicians like her (Yglesias 2016). Trump’s largely unanticipated success –​far greater than that of previous business-​tycoon outsider candidates, such as Perot in 1992 and Mitt Romney in 2012 –​arose from his ability blame the supposed deterioration on the commandeering of policy by a small elite (and by an influx of immigrants permitted by elite-​shaped policy). That Trump’s own attempts to win commercial favours from politicians had been rebuffed (by a rival Republican) actually worked to his advantage when the White House was in sight (Eichenwald 2016). While these results suggest that the United States is plutocratic (at least since Reagan’s inauguration), perhaps because of deeply ingrained elite structural power, they leave open several possible mechanisms by which political decisions come to reflect the preferences of the richest. The ‘American dream’ explanation is that everyone –​even on medium or low incomes –​shares the aspirations and policy choices of the rich, and happily ‘freeride’ on the rich, who expend the time and money needed to swing their Congress behind those choices. There was, indeed, a high correlation between average-​ income and high-​income preferences in the Gilens and Page data. This could still mask substantial disagreement across income brackets over the details of policies, and over which should be prioritized when there is insufficient time to debate and legislate all the issues on which opinion is surveyed. Winters and Page also conflate power and influence, bypassing the careful distinction between the two set out earlier by others (e.g. Willer et al. 1997). ‘The existence of oligarchy need not depend upon oligarchs’ holding formal government positions (indirect influence is sufficient) or upon explicit coordination or cohesion among oligarchs’ (Winters & Page 2009: 731).

Who Buys Influence, and How? ‘Left’ critics have three ready explanations for the rise of plutocracy and its transition into oligarchy. The poor are forced to endorse the political wishes of the rich not because of shared interest but shared fate –​their economic survival is tied to that of their employers and paymasters, whose interests they must therefore uphold, even though they may be sweated and short-​changed as a result. They are forced to ‘rally round the flag’, by the constant invocation of nationalism and security threats to which the government must respond, even though it means standing behind a regime that neglects their economic needs. And lower-​income voters may fail to recognize the policies that best serve them, voting instead for the agenda of the rich, because they are duped by slanted education and biased media. Charges of systematic media bias towards large corporations’ interests have been reinforced as traditional newspapers and broadcasters are taken over by them, and online news providers grow into them. According to the foremost exponent of the propaganda model, the typical message of mainstream media is that eliminating social programs has goals that go well beyond the concentration of wealth and power. Social security, public schools and other deviations from the ‘right way’ that US

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military power is to impose on the world, as frankly declared, are based on evil doctrines, among them the pernicious belief that we should care, as a community, whether the disabled widow on the other side of town can make it through the day, or the child next door should have a chance for a decent future. (Chomsky 2003: 119)

However, there is less need to explain why the less well-​off fail to vote for their own interests if they are denied the option to do so. A more structural explanation holds that parties are elected on programmes that do match the majority preference, but then have to ditch these in favour of policies that only serve the rich. Governments’ revenue needs and reliance on the private sector to meet people’s employment, income and consumption expectations may impose deep structural forces on governments that induce them to act for the particular benefit of business (Poulantzas 1973, Offe & Ronge 1975), even if this contradicts the wishes of those who voted them in. If a ‘pro-​business’ imperative is built into the political and social fabric, there may be a way that commercial interests are collectively served even though sectional interests appear hopelessly divided. The concept of structural power, with private profitmakers’ needs embedded in the workings of government and even the minds of the governed, may serve to remove any agency from the political process, leaving no identifiable actors (individually or corporate) visibly wielding power (Savage & Williams 2008: 2). The existence of a small number of individuals with multiple directorships spread across diverse sectors has in the past allowed the identification of a network which might push an agenda that transcends sectoral interests (an issue further examined in the next chapter). At its most generous, corporate welfare allows big businesses to tap governments for subsidies, concessional loans, monopoly privileges, education and healthcare for their employees, and fiscal or monetary efforts to stabilize the economy. If they give anything in return, it is usually on condition of future payback. Why do those who run the government accept such unequal exchange? A common explanation is that governments need big businesses to generate their revenue (from corporate or employee tax), turn public-​ sector science into technological innovation, and thus maintain the economic dynamism that helps ruling parties get re-​elected. This dependence creates scope for business to influence policy, even if corporations never ‘buy’ specific pieces of legislation and individual politicians never take bribes. It may render plutocracy unnecessary (or invisible), because business leaders never have to enter parliamentary processes directly or attempt the transition to political leaders. Such structurally imposed power renders unnecessary any ‘dominant ideology’, a mix of myths or propaganda ‘adopted by subordinate classes which are thereby prevented from formulating any effective opposition’ (Abercrombie & Turner 1978: 150). Like the propaganda model, ‘dominant ideology’ raises questions over how the ruling group manages to make others accept ideas and policies that are at variance with their interests, and why they find it useful to impose the same ideology on everyone, rather than leaving them with a scatter of inconsistent beliefs. Claims of the existence of a dominant ideology have rarely been accompanied by its detailed specification; and while it might in principle have helped achieve cohesion in the elite, it is ill-​defined in modern capitalism (Abercrombie & Turner 1978:  163–​64). The need for an ideology to preserve elite cohesion may also

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have faded as a clearer framework of property and commercial laws, and the judiciary to enforce them, took shape instead, perhaps as a consequence of governments accepting the ideology but with the effect of steadily eroding its importance. The super-​rich can use their major role in campaign financing to edit political choices, ensuring that hostile options are not available to voters (or are quickly dropped by those voted in). A  New  York Times investigation of US political donations in 2016 found that ‘to peruse the top donors in presidential politics is to take a cross section of the wealthiest 1 per cent of Americans’ (Confessore et al. 2016). The richest 0.01 per cent account for over 40 per cent of US campaign finance since 2000, for Democratic as well as Republican candidates (Bonica et  al. 2013:  111–​13). Almost half the total subscribed to political action committees (PACs) was traceable to fewer than 400 families, the Republicans (more favoured by large donors) raising more than half from just 130 families (Confessore et  al. 2016). Their role expanded after the Supreme Court’s 2010 Citizens United ruling, which removed previous caps on corporate and trade union donations and opened the way for unlimited contributions via ‘super PACs’ (Dunbar 2012). Such contributions may also be designed to open doors for selling policies to the winning candidate, with major donors ‘mostly looking for “access” and a “fair hearing”, not commitments on specific policy issues’ (Domhoff 1988: 591–​92). Money often flows behind measures that are generally useful to private companies and their senior employees  –​such as low personal and corporate tax rates, restricted trade union rights, public infrastructure provision, strong private and intellectual property rights and strong national defence. They can also include specific personal or sectoral concerns. Chart Westcott, a private equity investor, cited ‘a love of economic freedom’ as donors’ main motivation (Confessore et al. 2016). Westcott’s donations went mainly to Wisconsin governor Scott Walker, whose receipts included a six-​figure sum from a lead paint manufacturer, and comparable amounts from large companies with hostile records against trade unions. This became known only when the ‘John Doe files’, 1,500 pages of evidence on US political fundraising irregularities, were leaked to the press in September 2016. Wisconsin’s supreme court had ordered the files’ destruction in 2015 on the basis that they showed no wrongdoing on the part of the recipient or donors. Walker’s initiatives when in office included strong anti-​union legislation and measures that restrained compensation claims for lead-​paint poisoning. The judges who quashed the litigation had themselves received help from Walker’s allies in retaining their supreme court seats (Pilkington 2016). Business sponsors of political causes typically deny that they are buying favours or subverting the democratic process, often with a vehemence proportional to the amount they pour into political action committees. As evidence, they often cite donations made to opposing political parties and candidates, and pursuit of measures that do not reflect specific business interests. In the United States, the brothers Charles and David Koch, among the biggest donors of party funds from their industrial fortune, have claimed their motive as the elimination of special favours for firms and industries, condemning this as ‘corporate welfare’ using language identical to anti-​capitalist critics. Indeed, Charles Koch used a Washington Post interview in 2016 to condemn state support for private-​ sector banks and companies (on the grounds that it stopped business paying the price

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for unwise risks and so worsened inequality), and to explain that he funded economics research in order to keep alive a variety of viewpoints, including those of Marx and Keynes (Tankersley 2016). However, donating to all sides may be less a disinterested gesture to promote political pluralism than a hedging strategy to stay onside with all parties so as to remain in friendly contact with whomever wins power. Koch and his brother David had previously taken a more partisan approach, ‘reportedly spending $290 million in the 2014 electoral cycle to help Republicans gain control of the Senate and to push policies that limit the role of government’ (West 2014). John Kampfner (2014) finds that the very rich try to influence politics for more than selfish reasons, promoting general political agendas. He divides ‘The Rich’ into ‘sheikhs, oligarchs, geeks and bankers’, but makes clear that most have needed to use the political process in order to assemble their personal fortunes, and argues that all then deploy those fortunes to influence the political process. The ‘geeks’, although supposedly more interested in their technology’s intrinsic merits than its money-​making potential, turn out to be particularly strenuous power seekers, because they appear sincere in their desire to change the world. And, having often made their first billion just a few years after leaving (or dropping out of) college, they have plenty of time and energy for this pursuit. ‘Having made their fortunes, and grown a little older, these one-​time loners in front of their screens became the new aristocracy. The Californian Camelot had access to American presidents and world leaders whenever they wanted, sometimes inviting them into their lavish homes. They ensured they shaped policy not just in their field but far beyond, too’ (Kampfner 2014: 335–​36). However, in the majority of cases where someone of ultra-​high net worth engages in politics to influence key decisions, the major effort occurs before the enrichment, in order to secure it. Once the wealth is secured, continued networking of the rich with the powerful is focused on preserving it, keeping it growing and enjoying its social and cultural spin-​offs –​rather than continuing to manipulate rule-​setting and decision-​making in order to make wider policy changes. When an entrepreneur who has gained wealth through political opportunity (such as Carlos Slim, the big beneficiary of Mexican telecoms privatization) stays with his business instead of cashing in, the pressure applied to government is primarily to protect the monopoly and keep regulation favourable. Clearly, if every big business and rich individual steers the relevant governments to enable such preservation and expansion of private or corporate fortunes, the policy that emerges will have been predominantly shaped by commercial interests. But it will only be shaped by the commercial interest if all peddlers of influence have pedalled in the same direction. The cases observed by Rothkopf, Freeland, Kampfner and others rarely suggest this.

Raw Deals The capture of political priorities by commercial interests appeared especially prevalent in late eighteenth-​century Western Europe and the early nineteenth-​century United States, when businesses had grown big (and internationally active) while governments remained small and nationally or locally bounded. Much recent evidence suggests that such conditions have reappeared, with unprecedented corporate wealth wresting political

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power from geographically limited, financially delicate governments (e.g. Hertz 2002, Monbiot 2000, Klein 2009). But red-​handed instances of plutocrats suborning democrats have been hard to find, because commercial agendas differ. Almost every political action advantages some firms or sectors while disadvantaging others. The idea of ‘business leaders’ seeking a relatively unified pro-​business agenda, and using their economic might to impress this on political leaders, dates from a time when either entrepreneurs or the companies they founded enjoyed relative longevity. A company that was assured of consistent growth and profitability over a long period could provide a firm base for its owners and top managers to pursue a political agenda, through lobbying, party funding or applying direct pressure on government. This was especially the case if the company remained in the majority ownership and control of the founder or founding family. But it remained true even if the line-​ up of shareholders and top managers was rapidly changing, since the company’s survival kept a stable foundation for political activism even if led by a succession of individuals. The scope for this conversion of business success into political pressure has at times been significantly reduced by the growth of business competition and anti-​monopoly regulation, which makes it harder for any company to make consistently large profits over time. Sectional and economy-​wide business demands on government are both evident in recent business history, though often working in different timescales. The general orientation of government policy in the United States and Europe has changed over time –​from the New Deal economic revival strategy in the 1930s to wartime planning in the 1940s to mixed-​economy ‘managed capitalism’ from 1950 to the early 1970s, a reversion towards less regulated markets and strengthened private property rights in the 1980s and 1990s, and financialization in the early 2000s leading to a lurch into publicly underwritten risks and ultra-​low interest rates after the global financial crisis of 2008. It can be argued that these policies emerged because a majority of industries and major corporate players in them rallied round them and supported the parties that most clearly articulated them –​ either explicitly pushing governments to adopt key elements of the strategy or accepting and rejecting various policy proposals until the strategy took shape. A ‘New Deal coalition’ has been identified as rallying to Franklin Delano Roosevelt in the interwar period, its members later swinging back behind the Democrats for the Great Society reforms of the 1960s but then turning to Republicans’ more liberal vision as an escape from the 1970s stagnation (Domhoff 1988: 590). The transition between long phases of public policy may, however, be more easily explained by a shift in the relative strength of different business coalitions rather than a change the preferred strategy of one ongoing coalition –​especially when it comes to the 1970s transition from ‘organized’ to ‘disorganized’ capitalism. The 1950–​71 ‘Bretton Woods’ era was characterized by extensive regulation (notably of banking and finance), strong trade unions (under full employment), gradual reduction of international trade barriers alongside curbs on cross-​border capital movement and fixed exchange rates, and a focus on centralized solutions to inflation and trade-​balance problems, including ‘tripartite’ coordination between business groups, unions and central government. This tended to promote the profitability and growth of large corporations, but frustrated many small businesses, for which it meant additional costs and restricted financing opportunities

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that limited their scope for growing to challenge and replace their larger competitors. Small and medium-​sized firms, which had for years promoted a more liberal alternative agenda, were able to tip the political balance towards it as structural changes shifted employment (and votes) in their favour. Business elites can play by any rules, provided they enjoy the political connections that allow them to keep those rules consistent and stay profitable under them. The later revolt against EU membership, leading to the United Kingdom’s decision to leave, was similarly spearheaded by smaller businesses which –​compared with their larger counterparts –​stood to benefit less from EU market opportunities while feeling more of its regulatory costs. In general the largest corporations are able to profit under any political regime, provided it stops short of appropriating their assets, because of their ability to communicate and coordinate with it. Smaller businesses are much more sensitive to the economic and commercial impacts of different government policies, and more likely to show definite preference for some policies over others. Their ability to achieve these depends heavily on their scope for entering coalitions with big business behind particular policies, or assembling alternative coalitions that can outvote the big business. The second approach can be especially effective when big business interests are divided, or when disruptive change in technology and markets is causing the ranks of big business to turn over rapidly. While almost every big business leader builds political contacts, they are often exploited most intensively not to promote any wider economic or social agenda but to summon specific help when the corporation starts to crumble. The vulnerability of profit to miscalculation or disruptive innovation makes even large business empires a fragile basis for political activity, as experienced by such late twentieth-​century proprietor-​politicians as Robert Maxwell (whose Mirror Group slide from bankrolling parties to being bankrolled by its own pensioners), Bernard Tapie (political ascent derailed by charges of fraud and match-​fixing at his football club), and Carlo de Benedetti (undermined by the Banco Ambrosiano collapse and clashes with rival Berlusconi despite his eventual exoneration). The magnates who pursue a wider political agenda for long periods are generally those who have already made a fortune and extracted it from their company by winding up or selling it so as to escape the need to focus on business and its immediate political needs. Darrell West (2014) points out that billionaires’ attempts to ‘buy’ power do not always succeed if a sufficiently robust election system gets in the way. In 2012, ‘individuals such as Sheldon Adelson, David and Charles Koch, and the late Harold Simmons and a group of wealthy donors assembled by Republican strategist Karl Rove’ (2012: 1) used some of their spare millions to finance campaigns against President Obama, who nonetheless won re-​election  –​helped by his jibes against the ‘wealth creation’ attained by his opponent, the private-​equity billionaire Mitt Romney. But West notes the personal success in other elections of such billionaires as Michael Bloomberg (mayor of New York 2001–​13), and the contribution of Koch funds to the Republicans’ capture of both houses of Congress in 2014, which forced Obama into rearguard action for much of his second term. ‘Billionaires have run for office in Austria, Australia, France, Georgia, India, Italy, Lebanon, the Philippines, Russia, Thailand, Ukraine, and the United Kingdom as well as the United States. Most of them have won […] Their political involvement raises

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important questions about excessive influence, especially in places where there is weak rule of law, overt corruption, and limited opportunities for social or economic advancement’ (West 2014: 2). Jeb Bush was by some margin the best-​funded candidate for 2016, his super PAC entering election year with $103 million including 26 donations by individuals of $1m or more (Confessore et al. 2015), but his campaign quickly foundered at the primary stage, and the nomination went to the nominally self-​financed Trump. Although 2016’s was widely expected to be the first billion-​dollar election, participants as well as critics have spoken of an ‘arms race’ among the PACs and super PACs, candidates discharging ever better funded war chests leaving neither better off. While large sums of money may have become necessary to make a serious run for public office in the United States, they are by no means sufficient. In the end, the strongest objection to a money-​power nexus raised by recent critiques is that those (people and organizations) that accumulate abnormal wealth then persuade governments to retreat from policies that redistribute wealth and income, or relieve the plight of those with least. In the final chapter of her survey of modern ‘plutocracy’, Freeland (2009) recalls how in the 1970s the richest representatives of corporate America were stirred to action against the political elite of the time, condemning its members as a ‘New Class’ that had come to enshrine the ‘anti-​capitalist’ values of state intervention, social welfare and redistributive tax. If governments yield to these appeals from business in even a small way, the economy contains feedbacks that can turn an initially small adjustment into an unravelling. Inequality begets more inequality, with the onslaught on redistributive tax and welfare getting heavier as their shrinkage grows the arsenals of the super-​rich. ‘Some economists and political scientists are beginning to posit the theory that, far from a rising tide lifting all boats, contemporary market capitalism relies on entrenched and increased inequality […] The problem is that governments have been well and truly co-​opted, and even if they showed a determination to act, they would be unable, in any sensible or meaningful way, to tackle the root of imbalances such as unrestricted capital flows or tax havens’ (Kampfner 2014: 394). The reintegration of power and money, unnoticed in earlier good times, has become unacceptable because it has ceased to deliver economic growth, or is delivering the kind that no longer raises average living standards. Understanding the present discontent requires an assessment of the causes and consequences of the economic elite pulling away from the rest (Chapter 6), and the reasons that present democratic arrangements have not served to rein it in (Chapter 7).

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Chapter Six INEQUALITY: CAUSES AND CONSEQUENCES Unsurprisingly given the two-​way connections between them, the rising concentration of contemporary power has coincided with the rising concentration of income and wealth. A widening of economic inequality, characterized by especially fast-​rising prosperity at the top of the distribute since the 1970s, has been demonstrated across Europe, North America and larger newly industrializing countries, and given a range of mainly economic explanations (e.g. Piketty 2014, Atkinson 2015, Stiglitz 2012). Rising inequality challenges the long-​held assurance of the Kuznets curve, that economic inequalities would initially rise with per-​capita national income, but subsequently fall. It suggests that factors causing societies’ income and wealth distributions to become more even as they get richer (including the spread of education, redistributive taxation, welfare states and democratization which enforces these) may not be as strong as previously expected, or may be outweighed by forces that worsen the inequality. Intra-​country inequality appears to have widened even as inter-​country differences (in per-​capita national income) diminish, through lower-​income countries outgrowing and ‘catching up’ those that industrialized earlier. Disproportionate income and wealth gains at the top end of the distribution, alongside stagnant or falling economic fortunes further down, have important political effects. They can undermine an existing pact between elites and the social classes immediately below them, while creating unity between previously disparate social groups which now share a common sense of relative deprivation. In many countries, systems of government have evolved or been deliberately reformed to make it harder for the biggest wealth holders to grab or manipulate political power, as the complement to systems of law that stop political power holders from appropriating or illegally acquiring private wealth. Yet resentment of the ultra-​rich, and their suspected political influence, has grown since the turn of the century. This can be easily and plausibly explained by a widening of inequality in the distributions of income and wealth, in many countries, as the real incomes and investment returns of the best-​off inexorably rise (with no obvious connection to their productivity or management success), while the less well-​off find their living standards frozen, or even falling, as prices rise ahead of incomes.

Stretching the Top of the Pyramid Intra-​country inequality has widened because, in contrast to earlier periods, increases in income and wealth have since the 1980s accrued disproportionately to the already

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1949– 1954– 1953 1957

1958– 1961– 1970– 1975– 1982– 1991– 2001– 2009– 1960 1969 1973 1979 1990 2000 2007 2012 Bottom 90%

Top 10%

Figure 6.1  Distribution of average income growth during expansions, US, 1949–​2012 Source: Pavlina Tcherneva, Research associate, Levy Economics Institute of Bard College (2017).

better-​off. This can be illustrated by comparing the growth rates of average income for different groups, ranked by initial place in the income distribution. Figure 6.1, for the United States, compares the gains of the top 10 per cent and the rest of the population, in different periods between 1949 and 2012. Growth until 1979 is egalitarian, though steadily less so: more gains are enjoyed by the bottom 90 per cent than the top 10 per cent. After 1980, the pattern becomes increasingly inegalitarian. After the 2008 financial crash, the income share of the ‘mass’ actually falls for a while. As a result, large swathes of the non-​affluent population enjoyed no rise in real income after the early 2000s, and average real incomes for some disadvantaged groups actually fell. The share of US national income flowing to the top 10 per cent of earners, which hovered around 33 per cent from 1955 to 1980, rose to more than 45 per cent in 2000 and (after a brief fall) peaked at almost 50 per cent in 2008. It dropped only slightly in the financial crash that followed, and was climbing again by 2010 (Piketty 2014: 14, Fig. 1.1). The widening of income differentials in the United States from the mid-​1970s reversed the pattern of the previous 30 years, in which a comparable long-​term growth rate of national income had been associated with falling inequality in the distribution of that income. Between 1947 and 1973 family incomes in the United States rose in real terms by 116 per cent for the lowest 20 per cent, 98 per cent for the middle 20 per cent and just 85 per cent for the highest 20 per cent (Reich 2009: 39, Fig. 1.3). ‘For thirty years after World War II, America grew together –​with growth in income in every segment, but with those at the bottom growing faster than those at the top […] But for the past thirty years, we’ve become increasingly a nation divided; not only has the top been growing

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fastest, but the bottom has actually been declining’ (Stiglitz 2013: 5). ‘Things have just been bad for non-​college-​educated workers, but especially non-​college-​educated men in the United States, since Ronald Reagan took office. Their [real] wages have basically been falling or plateauing for 35 years, and their job stability has declined’ (Autor quoted in Aleem 2017). The distribution of wealth has shown a similarly rising imbalance. The slowdown in major economies and the slashing of their interest rates following the global financial crisis could, in principle, have punished those who relied on wealth to generate their income. But a rise in asset prices due to cheap credit, and the resilience of corporate profits despite slow-​growing markets, kept most rentiers closer to euphoria than euthanasia. So wealth and income inequalities continued to widen in tandem. Averaging across the Organization for Economic Cooperation and Development (OECD), the ratio of incomes received by the richest 10 per cent to that of the poorest 10 per cent rose to 9.5 in 2011/​12, from 7 in the mid-​1980s, while the Gini coefficient (a broader inequality measure) rose to 0.32 from 0.29 (OECD 2014). Rising post-​tax income from capital played a major role in this widening. Top salaries (and bonuses on paid top of them) also slipped their anchors in the early 2000s and continued to float upwards after 2008. In the best-​documented large European countries, Britain and France, ‘the capital/​income ratio fell by nearly two-​thirds between 1914 and 1945 and then more than doubled in the period 1945–​2012’ (Piketty 2014: 118), implying a comparably sharp increase in wealth inequality given the concentration of wealth-​holding among a small group of privileged households. The wealthiest 10 per cent of households in Great Britain owned 45 per cent of aggregate household wealth in 2014, up 21 per cent since 2012, while the least-​wealthy 50 per cent held just 9 per cent of aggregate wealth after a more subdued rise of just 7 per cent (ONS 2015). The ‘1 per cent’ pulled away from the rest (and the 0.1 per cent from the other 0.99 per cent) even when redistributive taxes and welfare arrangements stepped up (in Europe and the United States) through the 1950s and ’60s, and pulled away faster from the 1970s as redistributive taxes were lowered and became easier for movable fortunes to avoid. Assessments of global wealth distribution showed a similarly runaway top end. Digging into the data from which Credit Suisse had ascertained that the world’s wealthiest 1 per cent had the same combined net worth as the other 99 per cent, the development charity Oxfam in 2016 published evidence that the best-​off 62 individuals had equivalent wealth to 3.6 billion others (down from 388 individuals in 2010), the wealthiest benefiting from holding $7.6 trillion of their assets in offshore tax havens (2016). Wealth inequality can be expected to rise over time, even if income inequality stays unchanged, since the higher-​paid can add to their wealth at a faster rate by saving and investing more (and assigning more to the riskier investments that offer higher returns in the long run). When incomes at the top end of the scale rise faster than those lower down, top-​tier wealth can be expected to rise even faster. This corresponds with the experience in the United States, where the share of national wealth held by the top 0.1 per cent of families rose to 22 per cent in 2012 from 7 per cent in 1978, returning the country to the levels of inequality experienced a century earlier. The 2008 shock may have narrowed the wealth gap between the least well-​off and the moderately affluent, mainly through

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Income (2011$)

$150,000

$100,000

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$0 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

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Middle 40

81st–99th Percentile

Figure 6.2  Average household real income, US, 1979–​2011 Source: Reeves & Joo (2015).

a fall in residential property prices which reduced the rents paid by the poorest and inflicted capital losses on better-​off households that were trying to buy with a mortgage. But it widened the gap between all the lower percentiles and the one at the top –​drawing attention to the top 1 per cent’s gravity-​defying income and wealth. Figure 6.2 shows that in the United States, the rest of the top 20 per cent also pulled away from those below them, after dusting themselves down from the 2006–​9 property price correction. The middle 40 per cent experienced real income gains that were not appreciably faster than those of the lowest 40 per cent, and markedly slower than those of the top 20 per cent, in 1989–​93 (Figure 6.2). This followed a middle-​class income boost in 1983–​89 which the working class did not share, and was followed by a decade-​long boom (1997–​ 2007) when middle-​class gains were perceptibly bigger than those of the workers below them. This softened the blow of the top 20 per cent doing very much better –​especially as the eighty-​first to ninety-​ninth percentiles suffered a sharp reversal in 1999–​2003, from which the middle 40 per cent was largely insulated. Recent US political history closely tracks these changing relative fortunes: Reagan promoting (and profiting from) the middle-​class revival of the mid-​1980s; George H. W. Bush suffering from the middle-​ class backlash when taxes were raised to tackle Reagan’s deficit legacy; Bill Clinton engineering and riding another middle-​class uplift in the 1990s; George W. Bush exploiting the middle class’s millennial setback to beat Clinton’s chosen successor (Al Gore) in 2000; and Obama regaining the presidency for the Democrats after the shock to middle-​class incomes from the 2008 financial crash. Obama oversaw tax and social policy changes

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(notably affordable healthcare) which prevented a matching slide in lowest-​40 per cent incomes after 2008, while arresting the fall for the middle 40 per cent –​reviving the post-​ Kennedy Democrats’ working/​middle-​class coalition in time to secure his comfortable re-​election in 2012. Rarely have trends in income inequality and psephology aligned as neatly as in Figure 6.2. However, the 2008 crisis set in train a more complicated political process, as befits the worst global economic downturn since the Great Depression. The middle was still being squeezed, as Figure 6.1 clearly shows, middle-​income households’ self-​perceived plight being worsened by the way the top 20 per cent were getting rapidly richer again and the lowest 40 per cent were not getting any poorer. At the same time, the growth in lowest-​40 per cent incomes in the years before 2007 and their crash resistance after it masked a much worse fate for the already least well-​off. Outside the top 10 per cent, US wage earners experienced a real wage increase of just 15 per cent in the 30 years to 2010 (Stiglitz 2012: 9 and 16). That was enough for the more fortunate to continue gaining relative to their less upwardly mobile peers (who had no real increase), but insufficient to raise their living standards at a time when costs of education, healthcare, housing and other services were rising equally fast. Once private wealth becomes large enough to invest at rates of return which exceed the economy’s growth rate, the share of national income captured by the highest percentile will rise inexorably (Piketty 2014). ‘It is clear that the really dramatic economic gains over the past 30 years have been concentrated among the extremely rich, largely by-​passing even the vast majority of ordinary rich people in the top 5% […] current levels of inequality [in the United States] rival those of the Roaring Twenties, before the Great Depression wiped out much of the financial wealth of the nation’s reigning upper class’ (Bartels 2007: 13). But in contrast to the interwar period, there have been no internal or external upheavals to subdue those soaraway estates and reset the distribution to greater equality. Indeed, the super-​rich have been increasingly insulated from their governments’ foreign wars, and emerged as beneficiaries of the emergency action taken in 2007–​9 to defuse the global financial crisis. Even in the immediate aftermath of the crisis, which had threatened to turn off the flow of ‘affordable luxury’ at source, Fortune magazine’s walk down Fifth Avenue found decimated followers of fashion retrenching rather than retiring. ‘Italian high-​end clothier Brioni concedes that some American customers who used to purchase five suits a year are downsizing to three. Luxury is still faring better than general retailing’ (Gumbel 2008:  43). The scrutiny to which the leisure class is subjected in order to spread its consumption tips –​with long-​range lenses and tireless trawling of Twitter accounts exposing every infelicity of phrase or insufficiency of wisdom –​also helps ram home the message that round-​the-​clock consumption is a job like any other, subjecting its practitioners to all the stresses and unsocial hours of those whose work is actually work. In 1929, overexpanded financial wealth was allowed to be chopped down by the Wall Street Crash, even though many ordinary small-​time savers were among the victims, and free-​market economists could later celebrate such reversal of fortunes as part of capitalism’s ‘creative destruction’ (Schumpeter 1942:  ch. 7). Eighty years later, the prospect of a similar crash severing small businesses’ credit lines

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and shrinking ordinary households’ pension pots forced governments and central banks into unprecedented steps to avert the destruction. Even governments most committed to balanced budgets and ‘free’ markets launched into monetary and fiscal relaxation that further swelled the biggest assets in the process of shielding the smallest, and converted ‘troubled assets’ bought for speculative gain by some of the wealthiest into public debt incumbent on all. Forced to rescue capital from a crash that would previously have shrunk it, governments squeezed the wages and welfare supports they would have been expected to strengthen in an ordinary downturn. Frozen pay at the lower end of the scale meant that even before the 2008 crash, Americans below the top 20 per cent were on average spending more than their income and running up debt, not all of it secured against houses of stable value. After sharing the benefits of the economy’s post-​war growth, with wages up 91 per cent (not far behind labour productivity growth of 97 per cent) in 1948–​72, US employees gained only 9 per cent more in real terms from 1973–​2013, despite their productivity more than tripling (Mishel et al. 2015: Fig. 1). The inability of even ‘affluent’ working households to save and accumulate assets, and a collapse in 2007–​9 of the little housing wealth they had built up, meant that in the United States ‘the average real wealth of the bottom 90% of families was no higher in 2012 than in 1986’ (Saez & Zucman 2016: 555). While there were rising fortunes for the 10% above them, these were concentrated at the very top –​a skewing of the spoils mirrored in other large economies. In the United States, China and Europe (as typified by France, Spain and the United Kingdom) from 1987 to 2017 ‘the higher we go in the distribution, the faster the growth: the top 0.1% average wealth has increased by 4.4% per year, and the top 0.01% average wealth has increased by 5.6% per year… the top 1% captured 37% of per capita wealth growth, more than half of which went to the top 0.1%’ (Saez & Zucman 2018: 555). The plight of the 90 per cent was made worse by the previous withdrawal (during the prosperous Clinton era) of key welfare measures (including Aid to Families with Dependent Children), the simultaneous retransfer to middle-​and working-​class families of living costs and uninsurable risks with which the state had previously assisted (Hacker 2006), a sharp rise in unemployment and the extensive casualization of those jobs still available (after a multilaterally inspired drive for ‘flexible labour market’ reforms).

Squeezing the Lower Middle and the Base The squeeze on richer countries’ lower middle class is confirmed when income distribution is assessed for the whole world as a whole, abstracting from the division into countries. Between 1988 and 2008, there were strong real income gains for those already at the top (40 per cent for the top 1 per cent), and for those between the forty-​fifth and sixty-​ fifth percentiles (the middle class of the ‘emerging’ economies, many of them Chinese). But there was notable stagnation between the eightieth and ninety-​fifth percentiles as well as those who started out close to the base (Milanovic 2016). The middle class of the earlier industrialized countries was suffering, as well as those in the Western working class who had not achieved a move up to middle-​class skills and status. While the upper middle class (the eighty-​first to ninety-​ninth percentiles) continued to prosper, according

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to Figure 6.2, their satisfaction was blunted by their loss of ground compared to the faster ascending top 1 per cent. A large and prosperous middle class is often presented as the mainstay of civil society and functioning democracy, with a cultured and adequately rewarded working class equally essential for keeping it loyal to employers and acquiescent in the middle-​ class ascendancy. By implication, a rise in inequality that leaves both these classes more socially discontented and financially fragile can have consequences for political stability. While the top 20 per cent have enjoyed a steady rise in real household incomes since 1980 (Figure 6.2), the middle 40 per cent have suffered the same stagnation as the lowest 40 per cent. Since their median earnings are around twice those of the lower group, the middle 40 per cent superficially seems much better placed to absorb this setback, suffering at worst a sense of ‘relative deprivation’ as the top 20 per cent pulls away from them. But the middle can still be squeezed, or regard itself as being so –​lacking the soaraway earnings of those above, while still too affluent to qualify for the social favours and assistance on offer to those below. Even those still advancing, in the eightieth to ninety-​ ninth percentiles, might feel short-​changed through missing out on the bigger gains made by the topmost 1 per cent. The 20-​ 40-​ 40 society, with a middle section that has ceased to do well by its accustomed standards and a base not doing well by any standards, roughly corresponds to a division by sources of income. The top 20 per cent (in the United States, most European countries and much of the ‘emerging’ world) combines earned labour income with a substantial proportion of unearned capital or land income. For the portion that still works full-​time, much of the labour income can be ascribed to ‘human capital’, qualifications gained in academic or professional training and subsequent experience in high-​responsibility occupations. The capital income includes interest and dividends from financial investments which are received during working life, as well as pension investments to be collected after retirement. Diversified portfolios, and the tendency of some asset classes to rise in value when others fall, permit capital income to substitute labour income over time, enabling its recipients to give up work altogether, or to shorten their hours and assign more time to unpaid work, for family and other good causes. Whereas the top 1 per cent of income recipients are a small and exotic group, predictably detached from the rest of society by their palaces, motorcades, yachts and Gulfstream jets, the top 80 per cent–​99 per cent (whose fortunes are separately distinguished in Figure 6.2) are much closer to the mainstream. This ‘upper middle class’ still does recognizable professional things for a living –​running divisions of large companies or public institutions, conducting the most complex surgeries or criminal trials –​but is paid substantially more than the more junior or provincial practitioners in the same field (Reeves 2015). Socially, this group in an increasingly high but still visible orbit may be more damaging than the smaller cluster that has broken entirely from the gravitational field. The middle 40 per cent lives mainly on labour income, but derives most of this from steady jobs with predictably escalating salaries. This group was traditionally able to save enough to channel significant funds into personal retirement provision, and borrow enough to finance property purchases that store additional retirement wealth, yielding further capital gains when prices rise in a booming economy. Those lower down the middle

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group might have had to pay for their ‘human capital’ investment by taking student loans or accepting low starting salaries, but were normally assured of a significant return on this investment by mid-​career. However, conditions were easiest when large corporations were generating steady and durable management posts, and expanding public sectors were offering a protected space for comparably expanding professional appointments. They grew harder from the 1970s as international competition and technological change forced many larger companies to downsize, while governments reacted to pressure for lower taxes and public borrowing by spending less and shortening their payrolls. With public authorities generally less willing (and after the 2008 financial crash less able) to shield households against income and job loss, or offer insurance against its impacts, economic insecurity once confined to the worst-​off is now felt much further up the scale. ‘The story of the 1990s is the generalization of the income instability that once afflicted mostly the less educated and disadvantaged. Increasingly, more educated workers are riding the economic roller coaster once reserved for the working poor’ (Hacker 2006: 28). Division in the professional class, with its higher end catching the steadily improving pay and work conditions enjoyed by the top 20 per cent while the lower end finds its costs outpacing its income, has political as well as economic repercussions. When squeezed, the middle class has traditionally hit back swiftly, forcing political change that relieves its condition. But this requires united action by the class as a whole. Such action is stalled when an upper section of professionals and capital owners climb far above the ‘average’ middle-​class household in terms of income, wealth, status and next objectives. Rich enough to own properties without mortgages, the upper middle no longer feels the heat or rising borrowing costs. Sufficiently served by accountants and tax havens to avoid most capital and income taxation, they lose interest in the long-​running middle-​class battle to pay less tax. Rising school and university fees, private medical and public transport costs are similarly of diminishing concern to those now rich enough to absorb them out of income, or repay their loans quickly. Even the perpetual city centre and airport congestion cease to matter when all journeys are by taxi or private jet. The lowest 40 per cent depends predominantly on labour income and, increasingly, cannot rely on one ‘career’ job to meet all current expenses as well as set aside the necessary savings for retirement and more immediate contingencies. The better-​off in this group will hold one job at a time, but may have to change it several times in a career due to redundancy of the post or disappearance of the employer. The worse-​off will hold more than one job at busier times (to raise income by securing more hours and to spread risks), but may also go through periods when no job is available. Over time, more among the lowest 40 per cent have swapped employment for self-​employment. But at the higher end this reflects attempts to launch own businesses which are often ‘pushed’ by scarcity of employment as well as ‘pulled’ by entrepreneurial opportunity; and at the lower end it sometimes results from employers cutting their own risks by imposing self-​employment, rather than employees genuinely breaking away to be their own boss. The same income studies that show real increases at the top of the scale also show a spread of low pay and negative net worth lower down, associated with the emergence of a new underclass or precariat. The flexible labour markets and scaled-​down welfare arrangements designed to rekindle growth (in mature and emerging economies) since the

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1980s have led to ‘a multitude of insecure people, living bits-​and-​pieces lives, in and out of short-​term jobs, without a narrative of occupational development, including millions of frustrated educated youth’ (Standing 2011: 1). The precariat may be victims of a capitalism which has moved away from big corporations (with their long-​term contracts and employee insurance schemes) and big governments (with universal safety nets) in order to be more innovative and competitive. Its growth into an appreciably large group also generates problems for the new capitalism. Patchwork careers do not enable people to borrow for home purchase, repay student loans, engage in continuing professional development, insure their health (and their cars) against mishaps that cause wider injury or give to charities that tackle poverty and infirmity when public services do not. The banking crises 2007–​8 that presaged global recession and disabled the eurozone were ultimately triggered by mortgage lending to precariat households, whose erratic employment and incomes proved inadequate to keep their loans afloat. Whereas the age-​old ‘underclass’ of unemployed and indigent tended to resist organization, by oppositions as much as by governments, the ranks of ‘working poor’ had by the early 2000s become not only more numerous but also readier to contest their condition, and rally to unorthodox solutions. Political parties that appealed to the precariat, and persuaded them to vote, challenged countries’ entrenched leadership (and its ecosystem of established parties) much more dangerously than earlier rebels who tried to speak for an underclass that stayed in sullen silence. Marginalized working people’s preferences divided widely –​among nationalists, greens, socialists, religious and ethnic movements that reflected the diversity of those least served by market economies with flexible labour markets. This dispersion of their vote, and electoral systems that kept out smaller parties, still protected most governments against the new mobilization. But when a party managed to ally the votes of squeezed middle-​and struggling working-​class voters, there was potential for serious upset. Greece’s anti-​austerity landslide in 2015, the rise of France’s National Front and Venezuela’s embrace of Chavez in 1998 are among the recent tributes to the power of this alliance of dispossession, as (in a backhanded way) were the dictatorial reactions to ‘Arab Uprisings’ after 2011.

The Globalization Grievance ‘The causes of growing inequality within countries are well understood’, according to former IMF chief economist Kenneth Rogoff (2011), who then reduces them to three main factors. Globalization increases the demand for a small number of individuals at the top of their profession, while exposing the less talented to competition that drives their pay down. Governments’ need to attract and retain globally mobile companies and skilled people forces them to cut down redistributive taxes and welfare benefits. And privilege becomes easier to pass on, through education and networking opportunity, enabling ‘social’ and ‘cultural’ capital to keep accumulating across generations even if transmission of physical and financial capital is made more difficult by inheritance tax. Here, the retreat from redistribution is presented as forced on national governments by an equally unavoidable softening of national borders. Global footlooseness of capital and labour forces governments to retreat from taxation that falls mainly on the rich and welfare

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expenditures that go mainly to the poor, eroding fiscal relief for those whose livelihood is challenged by global flows of increasingly tradable goods and services. ‘Globalization’, the deliberate removal of barriers to international product and productive-​factor movement, sustained a high level of public support for 30 years from the late 1970s because it appeared to work in favour of elites and an expanding middle class. These were the groups that would gain, according to standard free trade theories, through greater demand for their product and more, cheaper consumer goods on which to spend the consequent higher income. The low skilled, and those unable to follow the geographical migration of their traditional industries, were always expected to suffer from the opening of borders. But these were a diminishing proportion of the ‘working class’, who –​ provided they acquired the education and training that protected them from low-​wage outsourced competition, could now join that trade-​expanded middle class. Transferable skills and professional qualifications, middle-​class accoutrements which ‘upwardly mobile’ Americans and Europeans could increasingly acquire in the post-​war period, offered the chance to take jobs that were substantially sheltered from international competition, or to find a new job of comparable pay and status if their existing one was lost to such competition. The growing ‘openness’ of national economies to trade, migration and capital movement offers some straightforward explanations for inequality rising within countries even as it diminishes between them, and for the richest getting richer while the poorest get still poorer. The past interspersal of internationalizations with retreats into national isolation can also explain why national income and wealth distributions have periodically been compressed and then restretched in ways that the more unilinear progress of technology is less likely to account for. To optimists, globalization will eventually narrow the economic gaps within countries just as surely as between them. If there is an initial rise in intra-​country inequality, the best response is patience until further economic and social change allows a slide down the upper end of the Kuznets curve. The removal of barriers to international trade and capital flow may initially widen inequality in richer and poorer countries by squeezing the rewards of labour while boosting the returns to capital and senior management skills. But it will subsequently narrow the gap again if allowed to run its full course. This seemed to be confirmed by empirical research conducted for the World Bank using income data on 90 countries between 1988 and 1993. When a country is relatively poor, increased openness raises the income share of the top, and reduces the income share of poorer groups as well as of the middle class. However, at some medium level of income ($5–​6,000 per capita based on Household survey data), income shares of the poor and middle class begin to be more positively affected by openness while the income share of the rich begins to decline. Finally, for the rich countries, openness is associated with increasing share of the bottom and middle deciles, and decreasing share of the top deciles. Openness thus helps income distribution chart an inverted U shape as income level increases. At low income levels, openness is bad for equality; at medium and high income level it promotes equality. (Milanovic 2002: 13)

Studies like these have concluded that conventional trade theory –​which predicts that international trade will narrow income inequality in poorer (‘labour intensive’) countries

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while widening it in richer (‘capital intensive’) countries –​is too pessimistic. The econometric evidence shows trade reducing inequality within all countries (as well as narrowing the income gap between them) above a certain, relatively low, level of per-​capita GDP. Li and Reuveny (2009), using data on 69 countries for 1960–​96, replicate the finding that increased openness to trade is associated with reduced income inequality in all countries, not just the lower-​income ones. They suggest that ‘trade is often associated with welfare programs that compensate the losers from trade’ (Li & Reuveny 2009:  76), while it is also possible that government-​led efforts to educate and reskill the workforce are stepped up in response to greater international competition, or that this reduces the price of imported food and other basic consumption goods so that disadvantaged households’ real incomes rise even if their wages are kept in check (Birdsall 1998). The expansion, and eventual globalization, of commerce and communication is central to many explanations of a growing elite distance from (and indifference to) society. An elite whose wealth is globally dispersed, whose income is drawn from many financial and production centres, which owns properties (and hotel accounts and yacht moorings) in many places and which endlessly migrates between them no longer associates with anyone locality, or feels any affinities to it. Moreover, economic globalization –​the increased cross-​border flow of goods, services, capital and labour –​may have unleashed several processes which amplify elite wealth and income, compared to those of the majority. Electoral support for globalization began to weaken when the benefits to the middle class as consumers began to dwindle, and were overtaken by the threat to middle-​class income and welfare entitlements as skills and technologies moved abroad, eroding the tax base. The employment security of professional, managerial and technical staff in high-​ income economies came under threat as counterpart ‘middle classes’ began to expand in middle-​and lower-​income countries. The opening of borders to migration enabled the more ambitious of the ‘emerging’ world to take up student opportunities in richer countries, or to travel there with their higher-​level skills, having first used them to meet any wealth requirement in their points-​based immigration systems. The opening of borders to trade, allied to new communication technologies which allowed goods and services to be competitively supplied from ever greater distances, opened rich-​world markets to competition from emerging-​world professionals even when these chose to stay at home. With their formerly captive clientele also increasingly able and willing to travel abroad for lower-​cost healthcare and higher education, as well as tourism, it was no longer obvious that middle-​class professionals’ gains from globalization outweighed the eventual loss. Early observers of globalization and digitization, the reassignment of graduate-​level work to machines or cheap foreign outsources, tended to suggest an intriguing inversion of class interests under which professionals became vulnerable, while conditions improved for those with lower-​level vocational skills (e.g. Blinder 2006a, 2006b). The casual observation was that vocational work required co-​presence with customers, in their own home (as with plumbing and electrics) or nearby (as with retailing and hairdressing), so that those with a ‘trade’ could not be displaced by rivals from a distance in the way that those in many professions now could be. In the United States and Europe, this inverted protection was generally prevented by the increase in openness to legal and illegal immigration,

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which left builders and gas fitters at just as much risk as better-​qualified pen-​pushers and data processors. But this heightened the resistance to the new, service-​based phase of globalization. When graduate as well as intermediate and lower-​level employees began to see its threats outweighing its opportunities, the elite’s scope for pushing further globalization (or even defending their present border opening) significantly shrank. Globalization also began to erode the benefits of a Western welfare state –​which, while initially created to avert destabilizing poverty among the least well-​off, had increasingly been adapted to supplement and subsidize middle-​class interests. The removal of border restrictions promoted international tax competition, forcing governments to lower their charges on the incomes of corporations and high-​skill employees who could move increasingly easily to lower-​tax jurisdictions. All of this left governments unable to expand tax revenue in line with national income, or with the increasing demand for education, healthcare, environmental improvement and infrastructure and other business support that accompany the rising income (and age) of Western populations. Budget restrictions caused in part by globalization forced governments to privatize (or subject to market forces) professional and service activities that had previously been sheltered in the public sector –​while at the same time enabling those activities to be outsourced abroad, or exposed to increasing competition at home. At the same time, cross-​border broadening of markets by trade liberalization and technical change eroded the security of those whose affluence and authority had traditionally come from private-​sector business. Family firms disappeared into national corporations which in turn became part of multinational firms, whose market power threatened the surviving ‘independents’. Companies that could previously thrive while staying relatively inefficient, shielded by a captive local market, could now be displaced by more distant competitors who did the job better. There was little option except to upgrade and adopt best practices (which often meant investing more in new techniques and spending less on directors’ remuneration) or sell out to a more successful rival. Either way, ownership or executive employment in a local company no longer guaranteed a middle-​class lifestyle and career: this now required recruitment to a diminishing number of large suppliers, whose greater efficiency meant many fewer top-​level appointments. Even the invention of new products and techniques, once linked to small firms’ greater agility, ceased to shield them from larger rivals now apt to snatch through fast imitation any profits they missed on first innovation. The free international flow of people, capital, goods and services can still create substantial new sources of power and wealth for those already in possession of top professional posts, investment portfolios and high-​powered qualifications. For smaller firms and less advantaged individuals they tend to open up fewer new opportunities and more competitive threats, with little assurance of long-​lasting gain. This promotes widening power and wealth differences between globally connected cosmopolitans, with town houses linked to the nearest airport, and those who live beneath their flight path with less long-​distance integration. It leads elites to experience ever more affinity with the elites of other countries, and ever greater distance from the less-​favoured majority in their own. Such horizontal linking and vertical distancing of elites was evident in pre-​industrial Europe and Asia, where rulers could speak among themselves much more easily than

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they could communicate to commoners. Europe’s crowned heads shared a vocabulary (Latin, giving way to French and eventually English) which at first was literally a different language from that of their subjects, and even today has not wholly converged with the vernacular. Centuries on from a time when French, German, British and Russian leaders could chat diplomatically while their armies clashed anonymously, sovereign governments have replaced crowned sovereigns but the divisions remain the same. Even when elected, governments stand accused of making the world ever easier for a privileged handful of political and business leaders and the commercial interest that surround them, and ever more hostile to the interests of the vast majority who serve that wealth and power. This division has been worsened by the centralization of each country’s elite, dispelling the split-​level nature of each national elite which used to restrain its conduct from within. A century ago, almost every town still had a ‘local’ elite which controlled political decision-​making, business and civic affairs in its immediate area. These submetropolitan elites exerted a degree of restraint over the national elite, forcing it to stay engaged with the country’s internal affairs and limiting its scope for forging links with other countries’ national elites. Advances in transport, telecommunication and organization have enabled national elites to centralize much of the local elites’ power, undermining their regional power bases. The division between internationally integrated elites and internally divided publics has also been worsened by changes in the design of global governance, removing external constraints on the conduct of national elites.

Betrayed by Free Trade In these conditions, further opening of economies to trade threatens to privilege multinational corporations over smaller home-​focused firms, globetrotting executives over workers stuck in local labour markets, and leisure-​class consumers over job-​dependent producers. At the 2016 US presidential election, a Republican party which had traditionally supported free trade as an extension of the free market fielded a candidate who flatly opposed the two deals negotiated by the outgoing Obama administration, as well as the earlier NAFTA concluded in 1994 by President Bill Clinton. Trump condemned the Transatlantic Trade and Investment Protocol (TTIP) with the EU, and the Trans-​Pacific Partnership (TPP) with a range of East Asian countries excluding China, as secret pacts that would drive down American wages. Blaming the country’s deindustrialization and persistent trade deficit on past free trade agreements, Trump promised to make global companies such as Apple bring production plants back to the United States, and to leave (if not scrap entirely) the WTO. The Democratic candidate made a similar stand against the new trade deals, despite being secretary of state in the previous administration when their groundwork was being laid. Hillary Clinton, under pressure from her nomination challenger, Bernie Sanders, echoed fears about the TPP and TTIP impact on pay and jobs, and added the concern that the costs of essential medicines and other public services could be forced up as private corporations asserted their right to profit from them. Joseph Stiglitz, a Nobel Prize-​winning economist and adviser to both Clintons, predicted ahead of the 2016 contest that ‘it’s a commitment of Hillary, the next Democratic administration, to renegotiate NAFTA and to renegotiate TPP’ (Democracy Now 2016). But it

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was too late for the Democrats to change their tune convincingly, and their modulation paved the way for an outright opponent of free trade to seize the White House instead. Opposition to trade liberalization was once a way of protecting elites. Trade barriers raise the profits and pay of those whose product is shielded from cheap imports, while raising the living costs of everyone else who has to keep buying the expensive domestic product. England’s ‘corn laws’ notoriously boosted the incomes of rich landowners by keeping working households’ food prices high, until being swept away in 1849 by an administration pushed towards the mercantile free-​trade interest by the widening of the electoral franchise in 1832. The first seven rounds of twentieth-​century tariff and non-​ tariff barrier reduction negotiated under GATT, between 1947 and 1993, were widely argued to have raised participating countries’ national incomes and evened out the spread of those incomes. Freer trade could mean lower inequality if it unleashed more competition on the corporations that had come to dominate national markets (and large trade unions whose ‘aristocracy of labour’ had garnered the best pay deals). The welfare states that richer GATT members were building at this time also countered any adverse redistributive effects, if there were obvious winners and losers from the lowering of tariffs and non-​tariff barriers. But the reasoning behind these results was always likely to be challenged, since growing exposure to international competition can also lead governments to scale down their welfare and education-​funding programmes, and may even erode the democracy which tends to promote these (Rodrik 2011). Gains from trade, as predicted by the mainstream (Heckscher-​Ohlin-​Samuelson) economic theory, arise at the whole-​country level, so translation into income gains for every inhabitant has always depended on governments being able and willing to set up the necessary income redistribution arrangements. The existence of a standard trade theory predicting that trade widens inequality in richer countries, and the fragility of any countervailing mechanisms, has encouraged much research which views globalization as more likely to widen inequality, within and between countries, than to reduce it. The consensus behind free trade broke down after GATT’s 1986–​93 Uruguay Round, whose conclusion (after talks among 123 countries) brought the WTO into being. The next (Doha) Round dragged on for more than a decade, largely because governments and their electorates were less convinced about the multibillion-​dollar ‘gains from trade’ which another cull of trade barriers would deliver, and the evenness with which these would be distributed among and between the signatory countries. ‘The gains from removing restrictions on trade run into diminishing returns as trade becomes freer and freer, with the consequence that the distributional effects begin to loom larger and larger’ (Rodrik 2011:  60). TTIP stalled even more spectacularly, even before anti-​elitists got round to condemning it, because the EU and US elites could not find a design that would ensure net benefits for the groups whose support they needed. None of the proposed 27 chapters had been agreed after 14 rounds of negotiation to mid-​2016, according to German vice chancellor Sigmar Gabriel (Sims & Stone 2016). Among the many obstacles was European governments’ refusal to approve a service-​trade liberalization that might force state-​protected health services to open up to private enterprise, or the imposition of tougher US-​style banking regulations.

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Anti-​globalization movements were initially driven by fear of the prospects for lower-​ skilled employees when their labour and product markets were deprived of national protection. Farm and factory hands in North America and Europe would suffer an inevitable loss of income, or be thrown out of work, when the same production could be sourced from ‘low-​cost countries’ (LCCs). The outsourcing of manufacturing and remotely deliverable services to LCCs might generate new work opportunities there, raising ordinary employees’ wages compared to those of the better paid, so freer trade could reduce income inequality within LCCs, and between LCCs and richer countries, according to standard economic theory (Milanovic 2002:  3). But LCC workers’ wage gains will be limited if there are even lower-​cost countries to which production can be transferred, once existing outsources’ labour costs start rising. And competition from (or ‘offshore’ outsourcing to) LCCs can widen inequality in the richer earlier industrializing countries  –​forcing their less skilled workers to accept wage cuts if they are to compete with their long-​distance substitutes, or to lose their jobs if they refuse the pay cut. Internal World Bank research leaked to the BBC in 2016 admitted that calculations of the benefits of global free trade had understated the costs of helping those who lost their jobs, with up to 20 per cent of job losses ascribable to the opening-​up to trade. China’s entry to the world trading system led some trade economists to reconsider their confidence in the all-​round gains from trade, because of the unprecedented size of the newly introduced LCC workforce and its ability to build export production in areas other than simple textile production and industrial assembly. Paul Krugman, a pioneer of the ‘new economic geography’, acknowledged that his earlier grounds for complacency over trade’s unequalizing effect might have receded as large newly industrializing countries moved up the value chain: ‘when developing countries can take over the unskilled labor-​intensive portions of vertically specialized industries, the consequences can closely resemble the textbook effect’ of lowering unskilled wages and widening rich-​ country inequality (Krugman 2008:  103). Paul Samuelson, the modern architect of today’s mainstream trade theory, expressed some valedictory doubts on whether even its central result –​all countries’ national incomes rising when they lowered trade barriers –​ would necessarily hold up after the arrival of a country as large as China or India. The gains from trade disappear if these large LCCs achieve strong productivity growth in the ‘high-​skill’ industries in which high-​income countries previously specialized. ‘High IQ secondary school graduates in South Dakota, who had been receiving from my New York bank wages one-​and-​a-​half times the US minimum wage for handling phone calls about my credit card, have been laid off since 1990; a Bombay outsourcing unit has come to handle my inquiries’ (Samuelson 2004: 137). The worsening of inequality through the driving down of basic pay need only be temporary, if lower-​skilled workers in higher-​income countries can quickly transfer into higher-​skilled employment which complements the work now done in LCCs. But those who lose jobs during the global relocation of industrial production are generally least able to afford the retraining and geographical mobility required to find new work, and least likely to have gained transferable skills in past employment. The organizations that take most advantage of globalization tend also to become larger and more hierarchical, enabling those who lead them to rise further above the rest in terms of status and pay.

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Conventional trade theory suggests that, while national incomes (GDPs) will increase for countries that reduce or remove their import barriers, the distribution of income within those countries can become more unequal. In countries with higher per-​capita GDP, which specialize in relatively high-​productivity and technologically advanced activities, high-​skilled employees can expect real pay to increase as additional foreign sales boost demand for their services. But low-​skilled employees, forced to compete against foreign counterparts who can do broadly the same for much less pay, will find their job opportunities more limited and real wages driven down. Stolper and Samuelson (1941) showed theoretically that, when a country exports ‘capital-​intensive’ products and competes against ‘labour-​intensive’ imports, greater exposure to international trade will reduce overall demand for labour and raise overall demand for capital. In high-​income countries, which are assumed to be more capital intensive, this implies a widening gap between those dependent on labour income and those blessed with income from capital. In lower-​income countries, assumed to produce and export labour-​ intensive products, removal of trade barriers raises demand for labour and so can narrow the gap between wage income and income from capital. Widening of the definition to include ‘human capital’ from knowledge and skills aligns Stolper-​Samuelson with the idea of richer countries specializing in higher-​skill products, whose makers widen their differential over lower-​skill workers when trade barriers fall. It reinforces the conclusion that freer trade will –​in higher-​income countries –​widen the gap between skilled and unskilled wages, and between those who own the major concentrations of capital and those who have to work for them. The adverse effect on labour incomes from more exposure to foreign competition need not be confined to low-​skilled industrial workers, once lower-​wage countries step up their education and training and services become more tradable. When ‘professional’ services are deskilled by making their knowledge content simpler and more transferable, or when digital communication makes them more internationally transmissible, middle-​ class and white-​collar occupations in richer countries may be the ones for which demand falls and pay is driven down. Whereas skill-​biased technical change suggests a widening distance between the computer-​enhanced labour aristocracy and the computer-​displaced unskilled workers, tradability of professional services suggests it is the ‘middle class’ of salaried office workers who stand to lose most. The work of radiologists and accountants becomes transferable to lower-​cost locations, while that of nurses and caretakers has to be kept on-​site. Alan Blinder (2006b), an early predictor of the disruption from combining automation with long-​distance communication, argues that higher levels of education and training –​the middle class’s traditional defence against outsourcing and deskilling –​ may cease to be what distinguishes those who keep their jobs in high-​income countries and those who lose them. The key distinction may now be between jobs that require a co-​presence with the customer, and those that do not, with the second (vulnerable) category often being higher skilled than the first. ‘A generation from now, civil engineers (who must be physically present) may be in greater demand in the United States than computer engineers (who don’t). Similarly, there might be more divorce lawyers (not offshorable) than tax lawyers (partly offshorable) […] all seems within the realm of

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the possible as technology continues to enhance the offshorability of even high skilled occupations’ (Blinder 2006). Removal of restrictions on global labour movement can have similar effects to the removal of trade restrictions on goods and services, and extends the impact to services that cannot be rendered from a distance. Migration to a richer region, if permitted, is usually a faster way to enrichment than awaiting the economic development of one’s own region. Numerous high-​level economic studies suggest that immigration can generate growth that delivers income gains in host as well as home countries (e.g. Dustmann & Preston 2011, Dustmann & Frattini 2014). But wage earners’ more direct experience is that new arrivals (whether economic migrants or refugees) represent more local labour market competition, and widen their disadvantage relative to recipients of capital income. Globalized communication enables people to increase their social and commercial exchange with like-​minded people in distant places; and globalized trade may give them an incentive to expand these distant exchanges at the expense of local interaction with non-​like-​minded people. In an economic version of this, Maskin (2014) suggests that freer international markets might induce higher-​skilled workers to break their ties with local lower-​skilled workers and build up their ties with complementary higher-​ skilled workers abroad. This can boost the incomes of the higher skilled all round, while depriving the lower skilled of a local complementarity which previously boosted their income. Cross-​border movements of capital (as direct investment by companies or portfolio investment by financial firms) were notably restrained in the early post-​war period, being proscribed by the ‘Bretton Woods’ rules so as to promote free trade (through fixed exchange rates) while leaving countries free to set their own interest rates. But the curbs were gradually removed after Bretton Woods broke down in 1971–​73, encouraged by a growing belief that free capital movement would accelerate development (and that making exchange rates ‘flexible’ was no worse for international trade than fixing them). There was widespread expectation that capital, when left to go where its expected returns were highest, would flow from the high-​income ‘global north’ which produced it in abundance to the low-​income ‘south’ that was desperately short of it. This could be expected to narrow the income gap between north and south, but the outlook for intra-​country income distribution was less rosy. The reduction of low-​skill wages in richer economies can be exacerbated if their employers choose to export their older technologies, investing in lower-​cost countries rather than their own. This deprives lower-​skill labour in the richer country of investment that might have raised their productivity, and may also confront them with new export competition (in the low-​skill product) from the country that receives the investment. The capital inflow may also widen inequality in the recipient country if it brings in technologies that require operators who are higher skill in the new context. In addition, companies’ ability to move across borders into lower-​tax jurisdictions can force national governments to push capital taxes down, or see their revenue bases eroded by decampment. Footloose capital’s disappearance (or the threat of it) erodes the redistributive tax and welfare arrangements that previously kept down inequality within countries. Empirical work suggested that, from the start, foreign direct investment (FDI) flows would

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tend to increase income inequality even if free trade among countries reduced it. FDI raises inequality both in high-​and low-​income countries, and portfolio capital flows do nothing to reduce it, according to analysis of 1960–​96 data (Li & Reuveny 2009: 73–​76). When the United States and various European states were unifying their internal markets by building up long-​distance transport and communication, elite theorists noted the centralizing impact on political and social networks. The local elites who dominated a town’s or region’s business (and politics, social scene, even gangland activity) were often swept aside as more powerful groups extended their reach from further afield. Globalization can have the same centralizing effect on an international scale. When spatial barriers are removed, people (and corporations) that previously enjoyed an economic advantage in a geographically bounded area can now exploit it worldwide, multiplying their profits. The advantage may arise from technological superiority (as with search engines and cola-​drink formulae), individual talent (as with sports and movie stars), network effects (as with operating systems and online social networks), or scale economies in making or marketing a product. Whereas there might previously have been scope for many local champions to rule a small section of the global market, one overall champion can now conquer them all. The conquest is assisted by technical and social changes that promote the winner’s ‘scalability’, enabling them to serve a much-​widened market without losing the quality that initially gave them the edge. Winner-​take-​all effects are consistent with the widening gulf between the top-​tier of professionals and the rest of the 80 per cent to 99 per cent, as well as the widening gulf between this group and the soaraway 1 per cent. While journalists began to highlight the ‘superclass’ about a decade into the new century (Rothkopf 2008, Freeland 2012), academics had noticed it in the data at least a decade earlier. ‘The thirty years since the mid-​1960s have seen the rise of the Super Class –​a new elite of top professionals and managers’, announced Adonis and Pollard (1997: 67), going on to show how the most senior barristers, top-​performing surgeons or City traders and chief executives of the largest companies had widened their pay differential over the more humdrum practitioners of the same craft. The privatization of state-​owned companies played an important role in this, giving a pretext to hike top managers’ pay to ‘market’ levels, while their peers in the public sector were pushed against an ever lower budgetary ceiling. Stock market flotation of formerly family-​or mutually owned firms played an important subsidiary role, replacing patrician or collective values with the valuation that ‘the market’ was deemed to award –​even if top salaries were set in practice by remuneration committees, the generous earthly representatives of the ‘invisible hand’. So a range of contemporary theories suggests that globalization can widen inequality, especially in relatively prosperous countries that built their key industries behind protective barriers –​as almost all have done, despite their keenness to be branded retrospectively as free traders (Chang 2004). Economic analyses have tended to concur on the scope for globalization to raise global income, while admitting that it may raise inequality in the distribution of that income, especially if it restricts governments’ scope to redistribute via tax and spending. Commercial globalization (freer cross-​border trade in goods and services) and financial globalization (cross-​border capital flows accompanied by integration of national capital markets) both entail some mechanisms that heighten inequality

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and some that reduce it. Even when empirical studies find that, on balance, free trade reduces income inequality within and among countries, they show that it is increased by free international capital movement (Li and Reuveny 2009: 74–​75), free trade’s inseparable twin since the Bretton Woods restrictions broke down in 1971–​73.

Nation States versus Global Corporations When nation states were still in formation, elites were the first group to travel around them, getting familiarized with all regions and cultural variations. This was partly for their own ends –​harnessing state-​of-​the-​art transport and communication to which no others had access, to form national networks of political control and commercial transaction. But it had consequences for the wider society that might be counted beneficial. Elites thereby became the agency that creates nation states, often far in advance of any nationalist or patriotic sense on the part of the wider society. Likewise, international organization begins with cross-​border contact between elites, leading to ‘architectures’ for which they then seek public acquiescence if not approval. Empires are usually sustained by the creation or co-​optation of local elites, in each acquired territory, which communicate with the imperial sponsors and control the local population on behalf of that central elite. From the perspective of the governed and the employed, newly added higher levels of administration appear to complement and reinforce those already in existence: national governments and courts improve the work of the local and the regional, and are strengthened in turn by supranational governments and courts. But from an elite perspective, this may be more of a succession: higher levels of government displacing and disempowering lower levels. European elites (east and west) and American elites (north and south) have been accused of first using the federal government to wrest power from constituent states, then eroding and ultimately bypassing all governmental authority by freeing their multinational networks from national political (and tax authority) control. The same upward transfer of power, by elites who can globalize while political machines remain nationally trapped, has more recently been observed in China and Central Asia (Cooley & Heathershaw 2017). Governments are constrained to pursue a ‘national interest’ that stops at national borders, crossing them only to protect nationals who hit trouble abroad. Businesses, in contrast, seek profit opportunities overseas and are not averse to transferring production to where wages are lower, and financing to where taxes are lower. Charitable foundations and other non-​profits tend towards the same global perspective as they grow, especially when prioritizing the relief of poverty, disease and other ‘global south’ problems. Keeping the ‘higher circles’ of commerce and philanthropy in the country, and loyal to it, becomes an increasing challenge, especially for smaller countries which large homespun companies can quickly outgrow. When the loyalty of private-​sector elites is lost, their transfer abroad of assets and wealth-​creating activity rebounds against the national government, draining it of talent and tax revenue. Public anger at the disloyalty rises when top public servants are drawn into it, and found to have channelled their own chunk of private or public money into bank accounts and real-​estate abroad.

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Elite individuals’ and corporations’ ‘escape velocity’ differs substantially among countries, and this has had profound effects on the ebb and flow of international political power. Where corporate elites stay relatively loyal, as in the United States and Germany, functioning government becomes easier to sustain; and the rewards of business to those who own and run it continue to correlate with the buoyancy of the national economy. Where corporate elites abandon loyalty, as in Russia and Japan, corporate profit becomes delinked from national prosperity; and the effectiveness of government can come under strain. Loyalty is measurable by the extent to which businesses continue to invest in the domestic economy –​in real terms (expanding or at least maintaining domestic production), and in financial terms (keeping their funds in domestic financial institutions rather than parking them in financial centres or tax havens abroad). A complementary measure is the extent to which their outward investment is an investment in foreign ‘host’ countries that brings income and employment to the home economy, and the extent to which they are an outward flow of financial and intellectual capital that has quit the home country never to return. Elite loyalty is eroded for a variety of reasons. For Japanese multinationals, it was largely the problematic scale of the domestic market –​relatively small once the global economy became more accessible, and liable to shrink due to a fast-​ageing, high-​ saving and diminishing population. Japanese enterprise invested abroad on a scale that hollowed out the domestic economy (Cowling & Tomlinson 2001), to the extent that businesses like Sony and Toyota focused most of their production and sales abroad and even began appointing foreigners to top management roles. In Russia, a similar domestic market shrinkage was one reason for the unrelenting capital flight of the post-​Soviet period, which persisted even when GDP was growing fast in 2000–​12. But the ‘push’ was compounded by a volatile political climate, in which business leaders who fell out of favour with the presidency could find their tax bills multiplied, their assets seized and resold, and their residence suddenly shifted from a dacha to a prison cell. The Russian government preferred its business elite to choose flight over fight, to avoid a challenge to presidential continuity. The major businesses were careful to keep their movable assets abroad even when their owners dared to stay in the country. Capital flight from Russia has been among the largest for any economy, running at an estimated $17 bn annually from 1994–​97 (Institute of Economics 1998) and picking up steadily to reach $59 billion in 2015, after a spike to $153 billion in 2014 (Moscow Times 2016). The government could afford the steady outflow of cash and entrepreneurial talent while it could command high oil and mineral revenues from firms it owned or directly controlled. The sacrifice of elite loyalty proved more problematic when oil and commodity prices plunged after 2013, stalling the economy’s previously vibrant growth. But once the oligarchs had salted their funds into Western financial hubs and football clubs for safekeeping, there was little the Moscow or St Petersburg political class could do to bring them back. Failure to retain the national loyalty of the elite, and persuade them to keep their major assets in the home country, can be fatal for governments that have left the main banks and businesses in private-​sector hands. The exclusion of many of the ‘oligarchs’ from politics in Russia, initially a source of stability under Putin (Kryshtanovskaya &

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White 2005), became an existential threat to the state and its solvency as business leaders left out of the elite syphoned resources out of the country. The earlier pact between oligarchs and top politicians (under Yeltsin), while not the most progressive of coalitions, permitted economic growth, which later ground to a halt when the cash inflow from oil exports wavered. Keeping economic elites loyal, and nationally rooted, is a vital task of the modern political elite –​ironically made more important when (as in Russia) that business elite is continually extracting value from the public sector. On top of all the adverse economic impacts reviewed in the previous chapter, widening inequalities and tying the political hands that might address them, international integration has opened up to elites rich territories beyond those they started in. Policymakers are then constrained to keep domestic conditions close to those the footloose economic interests like, unless they make sure that business travellers with one-​way tickets leave the bulk of their fortunes behind. In one important respect, a country’s political power can still extend across its borders. The waging of war remains a largely governmental undertaking, with private enterprise only joining in when there is weaponry to make or logistics to supply. In peacetime, a large defence budget may be a convenient way to channel expenditure and research funds to boost domestic business, especially when international trade rules block a more explicit subsidy. But when peace breaks down, the costs of war fighting rise quickly, even in purely financial terms. War may be the ultimate example of private gains made with socialized losses, keeping domestic markets open for business (and sometimes opening new foreign markets) while diverting public spending from the civilian economy and running up public debt. American and British political elites’ stumbling into Middle Eastern wars at the start of the twenty-​first century worsened the asymmetry of public/​ private impacts from globalization, in ways their treasuries are still coming to terms with. To the extent that advisers with private business backgrounds engineered the descent into war (Wedel 2009 Chapter 6), theirs may have been the infliction of a private agenda on public policy that imposed the greatest harm.

The Technological Imperative Income inequality can widen, with no exposure to international trade and capital flows, if new technology changes the pattern of demand for different types of labour. Particular concerns have therefore been raised about ‘skill-​biased technical change’, which (crudely) replaces lower-​skilled workers with machines which require more higher-​skilled workers to design, build and run them. The differential of high-​skilled over low-​skilled labour income will be widened further if new technologies require higher skills, or substitute lower skills. Those who can work with intelligent machines will raise their productivity and get paid more. Those displaced by machines (and software) will lose work altogether, or have to work longer for less in order (literally) to keep their hand in. New technology substituting low-​ skilled labour, and pushing down lower-​ skilled wages (or destroying lower-​skilled jobs if wages failed to fall), was a favoured explanation for rising inequality before globalization arose as a plausible alternative. Information and communication technologies seemed likely candidates for raising the productivity of those already blessed with higher skills and salaries, while reducing industry’s need for

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those who were not. ‘The well-​documented increase in wage inequality in the US and the UK in the 1980s and early 1990s is attributed to an increase in the demand for skills that has been faster than the increase in skills supply. Predominantly, the so-​called skill-​ biased technological change is blamed for the rapid increase in demand for skills’ (Weiss & Garloff 2011: 811). The idea of a skill bias in new technology –​increasing demand for higher-​skilled workers even when their relative pay starts to rise –​lived on when studies of rising inequality failed to demonstrate a firm connection to increased openness and trade flows. One-​third of jobs could be lost to new technology by 2035, as computers and robots once confined to routine tasks acquire the artificial intelligence to take over highly complex ones, according to research coordinated by consultancy Deloitte in late 2014. Almost half of US jobs could be at risk from the new technologies now arriving (Frey & Osborne 2013). The substitution of ‘capital’ for ‘labour’ implies a rechannelling of revenue from workers to capital owners, who are usually fewer in number and much more adept at shielding their incomes from redistributive taxation. The prospect of the income once spread across these displaced employees being diverted to the staffless workplaces’ already rich owners had led even such beneficiaries as Bill Gates to endorse a redistributive ‘robot tax’ (Delaney 2017). The widening gap between skilled and unskilled work is frequently mirrored within ‘high-​ tech’ companies, with a core of highly rewarded managers and technicians whose products are made in sweatshop conditions, and services spun out to contract workers on or below the minimum wage (Kessler 2017, Standing 2011). Surveying the United Kingdom, where manufacturing had relied on extensive automation for survival (and, even so, still shrunk to around 15 per cent of GDP), their survey suggested the same would now happen to large swathes of the service sector. Cheaper, faster and more mobile computing meant that much administrative, trading, servicing, educational and transport work would soon be done with less expense, and equal or greater efficiency, by ‘algorithms’ and machinery programmed with them. Routine office jobs (such as scanning and filing documents, preparing standard contracts, translating or summarizing text, setting up timetables and payrolls) could be taken over by machines which matched the human capacity for learning-​by-​doing, and exceeded the average capacity for concentration and working long hours. Perhaps more surprisingly, jobs requiring ‘soft’ skills and personal interaction –​including some aspects of marketing, retailing, advice and professional care –​could put the human user in perfect harmony with the job-​destroying digital interface. As with the challenge from cheap and well-​educated overseas workers, the challenge from clever technologies impacts differently according to skill. Those with higher-​level analytical and cognitive skills (or credentials which suggest them) will find themselves liberated from drudgery and able to turn their minds to higher things, commanding higher salaries. Those whose abilities are now matched by the machine will struggle to find a comparable role and a place on the payroll. In general, low pay carries the double bind of designating a basic and narrow skill set, and restricting the opportunity to upskill or retrain. High pay reflects an ability (or perhaps enables its recipients) to surf the wave of robotized redundancy. According to Deloitte’s 2014 survey, ‘people in jobs which

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offer annual wages of less than £30,000 are almost five times as likely to see their roles replaced [by new technology] as those in jobs which pay more than £100,000’ (2014). While the danger to jobs and incomes at the foot of the pay scale is of greatest social concern, more politically sensitive is the uncertain fate of those on the middle ground –​ paid between £30,000 and £100,000 on those 2014 surveys. The shift towards free markets has arrested the growth of professions. Instead of being progressively elevated to professional status as they become more technically and cognitively demanding, managerial jobs are increasingly in danger of being downgraded to routine administration, or lost altogether from rich-​country organizations as new software or low-​cost-​country outsources take over the work. A rise of professionalism built on the expansion of public-​ sector education, healthcare, welfare services and nationalization of key industries (Perkin 1989) was inevitably halted when budgetary pressures forced their shrinkage or privatization. Possession of the traditional middle-​class credentials –​a university degree or professional equivalent, proven literacy and articulacy (with a good accent), basic numeracy –​no longer guarantees lifetime employment in a post whose status and pay will move upwards over time. Globalization and technological change now open the way for a wide range of ‘skilled’ occupations to be outsourced overseas, performed by software or made redundant by administrative streamlining. The need to keep switching to new employers and jobs, or forgo pay increases and accept more flexible (casualized) terms to preserve the present one, undermines the clear career (and income) progression that once defined the middle-​class household. It also impedes the access to credit –​for purchasing homes, cars, holidays and other luxuries –​which once allowed middle-​class consumption to mimic that of people near the top of the income scale. During the long post-​war boom, a corollary of Parkinson’s Law held that bureaucracies relentlessly expand because bosses prefer the appointment of subordinates to that of rivals at the same rank –​and seek to recruit several where one would to, because this raises their prestige and span of control (Parkinson 1960). When the boom reverses, bureaucratic shrinkage inverts this logic. Bosses sack subordinates to stop the cull reaching the executive suite, and prepare the ground for pay cuts lower down the organization by stripping power from those they cannot sack. The possibility of new digital technologies eliminating jobs and redistributing income to a small clique of machine owners was foreseen long ago (e.g. Bellini 1982). It was usually assumed that the traditional ‘working class’ would be the main victims, the middle class escaping by virtue of knowledge and ‘soft’ skills that machinery and software could not replace. Mainstream economists (a large majority in the subject) have traditionally argued that neither internationalization of trade nor advance of technology can destroy jobs in the long term, any unemployment being the result of frictional difficulties while workers move geographically or retrain (or, if it lasts longer, the result of interventionist or inflationary governments that upset the workings of the free market). But these frictions can have damaging social effects when jobs are lost quickly on a large scale; and new technologies, permitting an increasingly skilled range of tasks to be performed by cheap foreign workers with Internet links as well as by artificially intelligent machines, now have potential to displace many middle-​class and professional as well as lower-​end

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jobs. Even if connection problems or protectionism obstructs the high-​skilled offshoring foreseen by Blinder (2006b), advances in computing and artificial intelligence will drive a ‘great restructuring’ (Brynjolfsson & McAfee 2011) that could see leave many once skill-​ intensive tasks suddenly performable via drop-​down menus that anyone can click. The blockage of upward mobility has been a problem for the ‘mass’ for many decades, without stirring revolt. Post-​war socialists even speculated that the unblocking of upward mobility would actually be the spark of upheaval, breaking up deprived communities and robbing their left-​behind members of the traditional justification for failing to rise (Young 1958). They need not have worried, however, since reforms designed to help able working-​class offspring work their way into the middle class were quickly commandeered as a means for the aspirational middle class to gatecrash the elite. The blockage of upward mobility for the middle class and the possibility of its encountering downward mobility for the first time are far more serious threats. They may lead a group of big business leaders, small entrepreneurs, professionals, managers and affluent workers who long supported elite policies (of free trade, free migration, deregulated labour markets and financial liberalization) to turn suddenly against them. An important symptom of such unease, as the early consumer promise of new digital technology began to project a gloomier threat on the producer side, is the recent inversion of attitudes to technical progress. Once welcomed by those who employed most labour, and resisted by those who supplied it, the role of machines has been hastily re-​evaluated as they move from ‘mechanical’ to ‘smart’.

Financialization and Borderless Money Technical change and globalization have combined to complete the abstraction of financial capital (entitlements to the profits from production) from fixed capital (means of production), enabling profit to be realized at different times, in different places, by different people from those involved in its creation. The concentration of wealth, and its conversion into power, is stepped up when wealth is extracted from the bricks and machine tools of a specific firm, and becomes a personal financial portfolio whose capital is spread across many financial assets (raising the return per unit of risk) and whose income can be directed according to personal and political preference. Identified as ‘capitalization’ (Nitzan & Bichler 2009) or ‘financialization’ (Epstein 2005), this reconversion of capital from productive solid to reallocative liquid blurs the once bold line between value-​ creating chemistry and value-​extracting alchemy (Mazzucato & Shipman 2014). Economies become ‘financialized’ when a significant proportion of their profit is generated without production of goods or non-​financial services. In a financialized transaction capital is used to make more money, without the need to engage in an intervening production process. This can involve lending the money or buying financial assets with it, generating income through interest or distributed profit and capital gain. It can also involve buying a ready-​made commodity and selling it for profit, without further modification or relocation. Profits are made on (for example) real estate, gold and coffee merely by buying (or short selling) it and reselling (or repurchasing) it after a time. Futures and options contracts permit the same time-​distanced buying and selling without the need to

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take ‘ownership’ of the commodity in the interval –​extending such trading to commodities that do not (yet) exist, and avoiding any storage costs. Financialization widens the availability and accessibility of quick rewards from asset revaluation, the jump in price of a real or financial capital instrument that suddenly gets favourably reappraised. Unless rates of interest (or of return on investment) are unusually high in real terms, it takes time to save or invest one’s way to a fortune. To acquire one overnight, except through inheritance, it is necessary to hold an asset which suddenly rises in value. Financialization can promote this route to rapid riches in a number of ways. It can raise the magnitude of such revaluations, and make them occur more frequently. It can reduce the cost of ‘holding’ an asset while awaiting its revaluation (for example by creating contracts which remove the need to ship and store a physical commodity). It can extend the range of assets that are subject to such revaluations and make revaluation gains easier to realize, by making more things saleable and tradable. It can reduce the cost of borrowing for ‘investment’ in revaluable assets, enabling ‘leverage’ which multiplies any gains (and losses) as a return on the investor’s initial equity. It can allow revaluation gains to serve as collateral for additional borrowing, as an alternative to selling the asset in order to raise capital. It can also enable revaluation gains to be realized in the form and location that attracts the least tax. In most of nineteenth-​century Europe, the only way that an individual of modest means could acquire a large fortune within his or her lifetime was to marry into, or inherit, a ready-​assembled estate (Piketty 2014:  ch. 7). Three twentieth-​century developments severely restricted this possibility. Politically, tax rates on investment income and inheritance tended to rise, often with the explicit aim of chopping bequests down to size so that opportunity to prosper (and obligation to work) became more equally spread. Socially, departures from primogeniture led to greater dispersal of family fortunes:  it became harder to consign younger sons to military or church careers that allayed their material needs, harder still to keep excluding daughters. Economically, the pursuit of national-​ income growth entailed lower rates of return for rentiers and creditors, limiting the scope to derive a personal income from land and capital even if large chunks of them had been kept together in one estate. While taxes could often be kept down by astute intra-​family transfers, the drop in ‘rentier’ investment returns was harder to escape. Essentially, real-​estate rents and real interest rates dropped to an extent that made it harder for the propertied class to finance its accustomed lifestyle solely through investment income. The problem was worsened by a rise in the cost of that lifestyle –​especially of the servants who traditionally relieved rentiers from working within the home, to complement their insulation from work outside the home. Increased difficulty living on investment income alone forced the propertied class to release extra funds by selling assets, so fortunes began to dwindle until the servants were sacked and jobs had to be taken up to supplement household income. Unless you inherit one, a large fortune cannot be accrued just through income, however large: the traditional route to tycoonery is capital gain. Earning a lot and spending as little as possible might lead to moderate wealth, after a few decades. With judicious reinvestment at high rates of return, an initial small fortune might turn to a large one within a few years. But owning something that multiplies in value can make someone

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a millionaire overnight. ‘Large instantaneous fortunes are created when the financial markets capitalise new above-​average rate of return investments […] Patient savings and reinvestment has little to do with them. To become very rich one must generate or select a situation in which an above-​average rate of return is about to be capitalised’ (Thurow 1975: 149). But when new companies deploying new technologies are rapidly forming and ‘going public’, a new route to sudden fortunes opens up. Those who did not inherit a large estate, or marry into one, could now acquire one within their lifetime if they ‘invested’ their comparatively small savings in a suitably lucrative venture. Capitalization is unleashed by financial markets, to which the owners of an uncapitalized asset can bring it when they want to cash in (or out). The asset (or shares in it) will sell, in theory, for the present value of all the profit it will generate in future. On this basis, firms that have never made a profit have changed hands for many millions (Pisano 2006), willingly subscribed by investors who believe the profits will flow in future (or that they can later resell to another investor who holds this belief). Capital markets can also ‘release’ equity that has built up –​sometimes over decades –​in a business that has not previously issued shares or put itself up for sale. So instant fortunes can accrue to those who float a previously privately held or family-​owned business. Directors of UK building societies who brought their companies to market in the 1980s and 1990s made seven-​ figure sums for themselves (helped by three-​figure ‘bonuses’ for consenting members) by cracking open vaults that had accumulated several generations of reinvested surpluses, taking the rewards of past investors without any of the risks. For those unable to access financial markets, or afford even the cheapest of the instruments traded on them, there has always been a down-​market form of asset revaluation in the form of gambling and lotteries. The lottery ticket bought for a dollar can suddenly be exchanged for thousands if the lucky number comes up. Winnings can enjoy the same tax advantages as the stock market player’s capital gains; and whereas stock traders can make losses as well as gains, a lotto player loses no more than the price of the ticket. But the lotto-​playing class still sees its pastime condescendingly viewed as gambling, on a zero-​sum game, while the market-​playing class can dignify its activity as ‘investment’, performed with skill, not luck, and (defying economic logic) class its gains as non-​zero-​sum. For good measure, those who gamble other people’s money on financial markets tend also to put some of their own into bets, with ‘contracts for difference’ a favoured channel after the 2008 financial crash. Whether attained by skill or luck, the asset revaluations promoted by financialization can shift financial fortunes with a rapidity rarely possible through patient accumulation. Their greater availability of such sudden wealth jumps to those who began with more-​ than-​average wealth have almost inevitably contributed to the rise in wealth inequality, as, on a smaller scale, has the tendency of lower income groups to spend more on their weekly flutter than it will ever return.

Retreating from Redistribution Widening inequalities of income and wealth, when not obviously related to individual merits and efforts, generate rising demand for redistributive taxes and welfare provision.

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But when the causes of unbalanced distribution are largely identified as structural (new technology) or external (globalization), policymakers can blame the same for ruling out any counteracting intervention. Political interventions that reduce inequality, by redistributing from rich to poor or reducing the freedom of movement into extreme wealth or poverty, have been steadily rolled back in most countries since the late 1970s. Commenting on his organization’s leaked admission of underestimated trade adjustment costs in September 2016, World Bank chief economist Jim Kim denied that any retreat from free trade would redress these and insisted ‘the answer is to have more robust social security programmes, so you have a safety net’ (Ahmed 2016). But this was opposite to the direction of travel of most northern hemisphere governments, still reacting to the global financial crisis and its legacy of raised public debt by trimming or withdrawing safety nets. Kim’s other recommendation, to step up training to ensure displaced workers ‘getting the skills you need for the jobs of the future’ (Ahmed 2016), also looked past the still-​pertinent observations of Blinder (2006) that higher skills might no longer be the route to new and more durable employment, the future lying in non-​offshorable skills which might well be low, affording security only by acceptance of lastingly lower pay. Perhaps most visibly, the once very high marginal tax rates on high incomes have been brought down, making direct tax systems much less progressive. These upper-​tier tax reductions have often been ‘financed’ by increases in indirect taxation, percentage levies on the price of goods and services which take proportionally more from those on lower incomes. The anti-​redistributive impact of these reductions is amplified by the use of tax breaks, which inevitably confer most benefit on those who pay most tax. Highlighting the success of the US upper middle class (the income distribution’s eight-​first to ninety-​ninth percentiles) in turning their territorially concentrated vote power into further economic gain, Reeves (2017) recounts the lobbying –​by congressional Democrats –​that rapidly scrapped President Obama’s plan to finance a tuition-​fee reduction by withdrawing tax benefits from top earners’ college saving plans. The top 20 per cent ‘proclaim the benefits of free markets but are largely insulated from the risks they can pose. Small wonder other folks can get angry’ (Reeves 2017: 4). Opportunities to avoid tax, and the scope for those on the highest income to make disproportionate use of them, have also tended to increase as the ultra-​rich create their own company structures, become more internationally mobile and find specialist wealth management increasingly affordable. Successive US and UK governments have softened every announcement of corporate and higher-​income tax cuts with promises to close the offshore centres and stop the various accounting tricks through which the richest chop their effective rate still further. But such a clampdown requires coordinated action which states have been unwilling or unable to take –​resulting in an estimated 8 per cent of the world’s wealth (rising to 30 per cent of Africa’s and over 50 per cent of the Middle East’s) being sheltered in tax havens by 2015, depriving treasuries of at least $200bn in annual tax revenue (Zucman 2015). And the progressive shift of tax from the corporate rich to smaller businesses and income earners has been accompanied by shrinkage of welfare from universal benefits towards strictly means-​tested top-​ups, alongside a substitution of big financiers for small savers as the main beneficiaries of public debt.

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These disproportionate gains have caused resentment and political instability because, as argued in the previous chapter, factors that once permitted a protest-​free widening of elite distance (from the rest of the society) have broken down. The middle and working class compare their situation with the elite’s, in ways they previously did not. This is because they no longer regard the elite as having created their own superior fortunes or as deserving the resources they capture at others’ expense. Grievance is exacerbated by the perception that, whereas the highest levels of power, money and status were once assigned to different people, and the ‘higher circles’ of politics and business relatively distinct, the tops of these distributions have now coalesced. The same people now tend to wield most power and hold most wealth, more of one helping them amass more of the other. Society is damaged by the existence of this exorbitant privilege and damaged again by its practical consequences, because the stretched upper tail neither reflects nor promotes an efficient assignment of power and wealth. While removing past restrictions on technical change and international competition, governments have tended to withdraw support from pay-​setting practices that once protected against their effects. The proportion of workforces enrolled in labour unions has steadily declined in the United States and Europe since the early post-​war period, with union densities (the proportion enrolled in a workplace) declining at most establishments, a growing number of companies offering without unions (or refusing to recognize those that form). Structural change (away from large industrial employers in centralized locations that were easy to unionize) has contributed to this decline, as has legislation that restricts unions’ pay bargaining rights, making them less attractive to join. The lapse from full employment when the post-​war boom ended in the 1970s limited the pool of unionizable workers; the risk of dismissal and lower-​cost replacement made it harder for unions to pursue pay claims, and the loss of jobs exposed them to the charge of ‘pricing members out of work’. The growth of self-​employment, casual labour and non-​standard contracts, all encouraged by political reform aimed at a ‘flexible labour market’, added to restrictions on unions’ size and freedom of action. A number of studies suggest that the decline in unionization and union power has widened income inequality. But this has mainly occurred at the lower end of the scale, with less-​skilled workers less able to resist real wage reduction even when not competitively challenged by new technologies or low-​cost country counterparts, and a number of states have used minimum wage laws to restrain the driving-​down of basic pay. More relevant to the escalation of top salaries is the evolution of top pay-​setting arrangements and the erosion of institutions that previously constrained these. The widespread adoption of executive incentive packages involving performance bonuses and share options has enabled those who preside over profit growth or share-​price appreciation to claim significant rewards on top of their regular salaries. These have risen in real terms (and as a multiple of their employees’ average pay) as top managers successfully make the case that they are part of a very small talent pool capable of running large organizations, which must be paid generously to resist the temptation to be poached by rival firms. The rising benchmark for private-​sector executive pay has enabled those running government departments and agencies, state-​owned industries, educational establishments, voluntary organizations and even trade unions to climb into a similar

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pay bracket on the basis that they could at any time jump to an even better salary with private industry. Small start-​up companies, needing to compete for the same managerial and technical ‘stars’ without the resources to pay them so well, have offered the ‘golden handcuffs’ of shares and share options which can convert into instant fortunes if the firm goers public or finds a large acquirer (for which deliverable products and visible profits are an often sufficient but rarely necessary condition when financial markets are buoyant). When it broke out, the global financial crisis appeared to offer an automatic correction for rising inequality, punishing those with the largest property and financial assets, and braking the world’s march onto globalization as well as slowing the investment that drove technical change. The three-​year gap between Wall Street’s darkest hour in f 2008  –​ when Lehman Brothers’ collapse left other banks and many financial market traders on life support –​and protesters’ announced intention to Occupy it in September 2011 is perhaps best explained by the belief that crisis would be the great leveller, without intervention. If bankers were losing their jobs and hedge funds seeing their once bumper profits evaporate, the runaway wealth of the top 1 per cent during the long 1990s and 2000s boom seemed destined to be reined in by the same market process that had earlier allowed it. Governments had stepped in to stop the wave of bank bankruptcies spreading and the speculators streaming shirtless onto Manhattan park benches. But they seemed unlikely to turn the crash mat into a featherbed. Yet that is exactly what the rescuers did, according to critics who view the post-​crash actions of governments and central banks as primarily an exercise in soaking the poor to restore the fortunes of the rich. The United States, Europe and China launched programmes of ‘quantitative easing’ (QE) that were deliberately designed to inflate the price of bonds, stocks, real-​estate and other assets held (by definition) predominantly by the already-​rich. Their stated aim was to lower the return on these investments so that committed capitalists could no longer afford to keep their money in low-​yielding financial assets and would have to take the plunge of investing in ‘real’ assets –​manufacturers, service providers, farms and infrastructure projects, and the shares they would issue to finance the restructuring and expansion needed to bring the economy back to life. But seven years into the programme, there was little sign of QE sparking new life into real investment, or bank loans to support it. The trillions of extra dollars seemed mostly to have stayed in the financial sector, giving select institutions and their partners a substantial survival bonus. Between 2010 and 2015 the wealth of the planet’s richest 62 people rose by 45 per cent (to $1.2 trillion), while that of the poorest 50 per cent dropped 38 per cent (to just over $1 trillion, or less than $300 each) (Oxfam 2016). In principle, driving down financial asset yields and sinking interest rates towards zero resembles the attack on non-​working capitalists once advocated by the economist once credited with saving them: ‘a low rate of interest […] would mean the euthanasia of the rentier, and, consequently, the euthanasia of the cumulative oppressive power of the capitalist to exploit the scarcity-​value of capital’ (Keynes 1936: 375–​76). But this is true only in a world of patient capital, which relies on flows of interest and dividend from portfolios held for the long term. Euthanasia turns to euphoria for the capitalist who buys low and sells high, and whose capital gains are amplified as central banks relax monetary

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policy ever further, by lopping interest rates to near zero and stoking demand for financial assets by purchasing them themselves. The effect of pushing interest rates to the ‘zero lower bound’ and repurchasing bonds under QE has been to squeeze the unearned interest income that the middle class relies on (in work and retirement), while inflating the unearned income of the corporate rich, whose unearned income flows mainly through capital gains. Chief executives gain because their pay consists extensively of share options, which when exercised confer an automatic enrichment if the share price has risen –​even if this is due more to monetary pump priming that lifts all shares than to inspired management that boosted their particular share. Entrepreneurs gain through a new model of enterprise creation –​not sticking with the start-​up company until it rolls out a useful product and starts making profit, but selling it (to portfolio investors or corporate acquirers) when the promise of its prototypes has pushed the founders’ share values through the garage roof. Portfolio investors gain because deregulation now allows most to profit on a rising or a falling market, going long on shares that boom while ‘shorting’ any they expect to fall in value. Banks gain by financing these escalating trades, assured that they will be bailed out of the escalator stops. Governments have turned against progressive taxation of the (large) middle-​income groups because it became electorally unpopular. More people who considered themselves too poor to pay tax were drawn into the basic income tax bracket, and more who regarded their incomes as ‘average’ were drawn into higher income tax brackets that they thought were only for the rich. Some element of this shift was an inevitable result of incomes rising, in real terms, during the long post-​war boom. But it continued after the boom fizzled out because inflation kept incomes rising in nominal terms, and were lifted into higher rates of tax even without much real increase. Revenue-​starved governments often connived in this ‘fiscal drag’, hoping that voters would not notice. When they did, it began a concerted campaign to raise tax-​free allowances and basic income-​tax brackets in real terms. Governments turned against progressive taxation of top incomes for more economic reasons, even though the numbers affected were usually too small to matter electorally. High marginal tax rates were judged to cost more than they raised in revenue, due to the difficulty of extracting payment from more global and mobile earners, and the risk of their relocating if this were done. Empirical evidence was assembled by economists who increasingly redefined their discipline as the study of incentives and argued that people would not rationally do good things (or desist from bad things) without the appropriate financial incentives, and that financial incentives were the only ones that mattered. Rates of tax on investment and real-​estate income, received mainly by the well-​off, have been brought down so that they are now generally lower than rates of tax on labour income. While those with higher incomes pay less, people whose incomes were once too low to be taxed have been drawn into paying it, by an intentional failure to raise tax brackets in line with inflation.

Double-​Edged Education Improved levels of general and technical education have long been presented as the cure for rising economic inequality, with complementary social benefits. Some have even

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advocated globalization and technical change as drivers for progressive social reform, forcing governments to generalize educational opportunities and upgrade vocational skills so that all can stay productive in a world of automation and low-​cost competition. But the expansion of education has brought a shift of its costs onto recipients, with no guarantee of proportionate benefits. This has contributed to falling trust in today’s elites, despite their being generally more accountable and knowledgeable and meritocratic than those that went before. Around the world, the takers of ‘decisions with major consequences’ have one common element. They went to elite schools and universities, usually in the country that they now rule or a country that used to rule it. In the United States it is the Ivy League (the eight best endowed and most expensive to attend, founded between 1636 and 1865); in England, Oxford or Cambridge; in France, the ‘Grandes Ecoles’ (the most highly selective, standing outside the public university system). Alternative routes to the top, such as the fee-​paying school or the inherited fortune, are no longer sufficient for high-​level employment unless they also run via a fiercely competed-​for higher education. To defeat the accusation that they no longer know more than the governed, so have lost the moral right to dictate policy to them, members of elites have sought to stay ahead in terms of education and expertise. Elite educational institutions (top universities, business schools and military academies) have become the required route to the top, even for those from social backgrounds that used to be a shortcut. Those institutions have overhauled their curriculum and reformed their selection to ensure that they recruit ‘the best’ and widen their advantage over the rest. Logic, theoretical coherence and empirical support must now underpin public policies that once relied on the assumed authority of those who announced them. The most fiercely selective universities now dominate the most powerful and best-​ remunerated jobs, especially in the public sector. In the United Kingdom almost three-​ quarters of top judges, over half of senior civil servants and journalists, 47 per cent of cabinet ministers, 40 per cent of senior doctors and over 30 per cent of top 100 company chief executives in 2015 were Oxbridge graduates (Kirby 2016). Any hope that this merely reflected the ancient universities recruiting the best talent, regardless of background, was undermined by the bias of their intake towards fee-​paying private or independent schools: attended by 7 per cent of the population, these captured 43 per cent of undergraduate places at Oxford and 38 per cent at Cambridge in 2014, despite years of effort to widen access (Sutton Trust 2016). Oxbridge colleges have raised the proportion of places given to state school pupils in recent years, responding to government pressures for fairer access as well as rising grades from those schools. But the UK government’s strategy for continuing that trend in 2016 was to start re-​expanding selective ‘grammar’ schools within the state sector –​despite evidence that these merely give a school fee waiver to the better-​off households, which can coax and coach their children to success in the 11+ entry tests, and leave the worse-​off further behind (Barnard 2015). In the United States, the Ivy League can use its larger endowments to provide more scholarships keeping its doors open to able students from deprived backgrounds, but still needs to finance these by maintaining ‘legacy preferences’ for less able students whose affluent parents attended or donated to them in the past (Dreier 2003).

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The power of the most prestigious colleges is such that Nigel Farage, the UK Independence Party leader who steered his country to vote its way out of the EU in 2016, could confirm his ‘anti-​establishment’ credentials and lack of class contamination by assuring followers that he had gone straight from school into work (omitting to mention that the school was fee-​paying Dulwich College, and the first job was as a metals trader in the City of London, a traditional destination for public schoolboys assuring them an immediate secure income with no introductory tea making). Conversely Trump, whose personal selling point in 2016 was that he had never engaged in politics or gone within stone-​throwing distance of Washington, DC, could reassure doubting Republicans that he was still presidential material by reminding them that he went to Pennsylvania’s Wharton School of Finance, a regular contender for the best US business school. It was no coincidence that, on taking political power after the Brexit vote, new UK prime minister May launched an unexpected drive to achieve greater working-​class opportunity in education by recreating grammar schools. Nor that Obama, trying to smooth the path for another Democratic president, identified runaway Ivy League student fees as a target for culling under the next administration. Experts –​or those with professorial and consultant roles who claim expertise  –​have come to be viewed as a ‘cognitive elite’, whose claims to superior knowledge had unclear justification and whose use of that knowledge was no longer obviously in the public interest. Entry into top universities  –​the predominant route into expert posts in academia, government and industry  –​was still (in most countries) biased towards private schools or those whose selection tests could more easily be passed after private tuition. When the world economy stalled in the 1970s, conservatives (especially in the United Kingdom, once of the severest stallers) placed much of the blame on the erosion of academic values by ‘liberal’ education reform. A series of well-​publicized ‘Black Papers’ (Cox & Dyson 1969a, 1969b, 1970) railed against the perceived levelling down when comprehensive schools absorbed those that used to segregate ‘academic’ pupils and deviated from curriculum attuned to the ancient universities. A generation later, democratically constrained to consider the two-​thirds of pupils who would be turned away from grammar schools rather than the minority that gained places there, conservatives’ blame for continued economic malaise had shifted to the erosion of ‘vocational’ opportunities. According to Michael Rosen (2014), (quoting an unnamed Conservative education minister), schools’ task was now ‘to equip all students with the ability to compete in “the global jobs market”.’ Reviewing America’s corporate, political and military top brass at the end of the century, the closest followers of Mills’s original (1956) dissection of the Power Elite were happy to recognize the revolutionary widening of educational access. ‘Jews, women, African Americans, Latinos and Asian Americans sit on the boards of the country’s largest corporations; presidential cabinets have become increasingly diverse’ (Zweigenhaft & Domhoff 1998). They traced the rapid progress to affirmative action programs, adopted by those in power in response to the civil rights movement, in a move explicitly designed to diversify the elite ‘and, in the process, shift its values to reflect greater social equity’. In the United States and elsewhere this was a change reflected in, and made possible by, comparable reconfiguration of the main feeder institutions. The selective schools that are still the greatest gateway to top universities have themselves become more meritocratic,

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widening their entrance doors in particular to admit the ablest female, working-​class and ethnic minority applicants. Elite schools (‘private’ in the United States and mainland Europe, ‘public’ in the United Kingdom) have long been regarded as the seedbed of elites –​promoting the early formation of strong ties between future power brokers, while delaying the development of weaker ties to social inferiors. High fees and limited scholarships ensured that their students were generally from affluent, professional backgrounds and would mix predominantly with others of similarly elevated backgrounds and interests. The few classmates from less advantaged circumstances would be hand-​picked for matching ability, so any levelling would be upwards not downwards. The implication was that elite-​school alumni would be acquainted with some of tomorrow’s career high-​flyers and well prepared for connecting with those from other elite schools, but less well versed in communicating with those who had taken more ordinary educational routes. The networking advantages might therefore be tempered by some disadvantages. Multiple strong ties could harbour redundancy, and could prevent some students from achieving career advantage if they were too long surrounded by others who persistently outshone them. Absence of weak ties to state-​school students –​the vast majority –​could limit success in the many professional roles which required conversation and cooperation with ‘ordinary’ people. This negative view does not accord with the continued success of elite-​school and elite-​college graduates in getting elected to high office on the basis of ‘ordinary’ votes, and of running businesses whose survival largely depends on managing and motivating ‘ordinary’ people. Beneficiaries of fee-​paying education remain disproportionately represented in top jobs across the public and private sectors in most high-​and middle-​ income countries –​sometimes even more consistently represented than before, because they now tend to feature highly in Democratic as well as Republican administrations, and ‘left’ parliamentary parties as well as ‘right’. Demonstrated merit makes some contribution to this success. Attendance of an elite school tends now to be the prelude to, rather than a substitute for, graduation from a top university, suggesting that intellect as well as connections have taken people to the top, even if superior schooling helped that intellect flourish. But in a world in which ‘soft’ interpersonal skills promote performance alongside ‘hard’ problem-​solving skills, another feature of elite-​school preparation has come to attention. In his exceptionally detailed observation of well-​heeled attendees at St Paul’s –​one of the highest-​regarded (and most expensive) US boarding schools, (founded in 1856) –​Shamus Rahman Khan (2011) finds that hierarchy is reproduced by learning to dissolve it. ‘The elites I observed […] are not moving to the Upper East Side and barricading themselves behind the armory. Instead, they are learning how to acknowledge these distinctions when necessary while also composing themselves as if such distinctions did not exist. The hierarchy is everywhere, on campus and off, but with the right skills the hierarchy seems to disappear. Students learn to comfortably interact with those above and below them’ (712). Across the Atlantic, alumni of British public schools appear just as adept at conjuring away social distinctions, transcending a much more historically rooted and socially entrenched class division. Walden (2001) identifies (with foreboding) the rise of ‘egalitarian elites’, who occupy traditional positions of power and often come from traditional

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privileged backgrounds but who seem to have risen by merit from the ‘masses’, and still mingle easily with them. ‘Inverted snobs merely irritate. Inverts of elitism are a more powerful and far more damaging breed, whose purpose goes far beyond a little social or gastronomic slumming. They are not idealists or romantics who immerse themselves in The People as something holy, like the faithful in the Ganges. For them the masses are a natural force which, suitably harnessed, can be made to generate money, power or position […] Consciously or otherwise, passively or energetically, by cynical calculation or by demotic drift, such people are “making a career in the masses” ’ (Walden 2001: 61–​64). Despite decades of work to widen access from state schools, a high proportion of private-​ school pupils move on to elite universities, where their early bought privilege is dissolved by the passing of a meritocratic selection test, and their links to other members of the elite’s next generation are strengthened and extended. Despite their plausible claims to be instilling ‘excellence’ in the best and the brightest, selected without prejudice, the Oxbridge and Ivy League ‘mafias’ and their counterparts in the rest of the world appear to be increasingly resented. To the extent that they have not yet adjusted admissions procedures to stop the richest and most powerful boosting their children’s chances of getting a place, the top universities can still be branded as finishing schools for the most privileged social groups. And to the extent that they do offer scholarships to the most advanced intellects from the most deprived origins, they can be accused of plucking the most able from the socially marginalized groups so that these lack the leadership to press for inclusion in the mainstream. On top of this insuperable twin objection, there is a deeper complaint. Top universities are viewed as homogenizing their now-​diverse intake by imposing uniform values, which are still those of the privileged white males who traditionally ruled, and which therefore split the academic stars among women, ethnic minorities and working-​class applicants from the communities they emerge from. And these uniform values are still out of line with those that would properly equip top university graduates to rule over the rest of us. ‘My education taught me to believe that people who didn’t go to an Ivy League or equivalent school were not worth talking to, regardless of their class. I was given the unmistakeable message that such people were beneath me […] I never learned that there are smart people who do not go to elite colleges, often precisely for reasons of class’ (Deresiewicz 2008).

Toleration for Rising Inequality Globalization and technical change are not the only causes of rising inequality; but they score consistently highly in econometric assessments of the contributors, and there are strong political reasons for singling them out. Both are easily presented as inevitabilities –​necessary for social and economic advance, or unavoidable by-​products of them. If accepted as such, a stable democracy must treat them as regrettable but inexorable, as any effort by government or business to obstruct them will derail economic progress to everyone’s cost. But all contributors to inequality have discretionary as well as deterministic elements. Income distribution is heavily shaped by institutional structures, social bargains and political decisions, as John Stuart Mill (1848) recognized in one of the earliest political-​economy textbooks, and as economists with Keynesian or Marxian

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roots have continued to assert (e.g. Rowthorn 1977, Schott 1984: ch. 9). But mainstream economists have spent the past century developing explanations that link income and wealth to recipients’ productive contribution, making inequality inherent to productive and allocative efficiency, and thus an inescapable consequence of economic progress and policies adapted to promote it. The need for income and wealth differentials –​to reward hard work and innovative effort, and compensate business owners for their risk-​taking enterprise –​has been noted by generations of economists and moved to the sociological mainstream ahead of the great post-​war boom (Davis & Moore 1945). However advanced (or underdeveloped) their present state, publics have been accustomed to the view that there is a trade-​off between equality and efficiency, and that equalizing the slices of society’s cake will prevent it from expanding, leaving everyone ultimately worse off (Okun 1975). Any widening of inequality can be accepted, from a liberal perspective, so long as it raises the condition of the materially worst-​off (Rawls 1971). ‘The pursuit of efficiency necessarily creates inequalities […] the institutions of a market economy promote such inequality, and they are as much a part of our social framework as the civil and political institutions that pursue egalitarian goals’ (Okun 1975: 1 and 5). Empirical results such as those of Richard Wilkinson and Kate Pickett (2009), who find wider inequality linked to adverse outcomes ranging from higher crime and depression rates to lower literacy and lifespan, are routinely rejected on the basis of mistaking the direction of causation (a more harmonious society may be the cause rather than the consequence of lower inequality, establishing the social solidarity that makes redistributive welfare arrangements more tolerable) and paradoxically neglecting the distribution of disadvantage within unequal societies (so that a vast majority of Americans may be better off by the (possibly unavoidable or voluntary) deprivation of the lowest percentiles, and a vast majority of Scandinavians may be having their living standards dragged down by the heroic effort to make those tail-​enders a little better off) (Runciman 2009). The rising inequality found by Thomas Piketty (2014) is challenged on the basis that his data showing a post-​war cross-​country rebound in wealth and income inequality is inconsistent with the self-​made, non-​inherited nature of today’s ultra-​high net worth. His explanations for this rise are attacked for their empirically questionable assumptions that the capital-​output ratio can be satisfactorily measured, keeps rising, and accounts for wealth-​owners’ rising income share (Galbraith 2014, Rowthorn 2014). Rising inequalities of income, wealth, power and status have been found empirically to cause rising levels of social resentment and political instability –​up to a point. Beyond that point, some well-​known studies have observed a decline in instability as inequality increases (e.g. Nagel 1974, Panning 1983). The inverted-​U-​shape relationship between inequality is usually explained by people’s resentment arising from the perception of relative deprivation, and the perception being limited to a peer group of plausible comparators. When inequality rises due to mid-​range advances, people notice that others with comparable origins and abilities are getting ahead of them, regard this as unfair and seek institutional or political redress. This can arise if wealth and power grow proportionally (by the same percentage for everyone) or disproportionally (bigger increases for the already better-​off) (Panning 1983: 327–​29). When inequality rises due to stretching at

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the top end of the distribution, there is no necessary rise in resentment or instability. The gains then accrue to an elite who are not in the middle-​class or working-​class peer group, and whose further advance is irrelevant or even unobservable to them. Orthodox economists have recently conceded that some inequality can be dysfunctional, resulting in a bonus from redistribution. The IMF, long an advocate of policies which critics viewed as stretching the income distribution at both ends, found after probing national economic performance data that ‘increasing the income share of the poor and the middle class actually increases growth [of national income] while a rising income share of the top 20 per cent results in lower growth –​that is, when the rich get richer, benefits do not trickle down’ (Dabla-​Norris et al. 2015: 1). Even if an association between greater inequality and rising general prosperity can be defended, it becomes harder to justify (economically or socially) the runaway top end of the income and wealth distribution. Making the already rich even richer does not have the same clear incentive effect as widening the gap between the middle and lower ends of the distribution, or even between the upper-​middle and lower-​middle. Its power is reduced even further when –​as suggested by Piketty’s data –​the mega-​wealthy gain their runaway riches when they have withdrawn their capital from a successful productive investment and sunk it into property or financial-​instrument portfolios whose superior rates of return appear to be extracting rather than creating economic value. Widening inequality may be economically damaging if it results from (relative or absolute) increases for the better-​off and decreases for the worse-​off which are not closely related to productivity or contribution to production. Such undeserved gains and losses might even discourage effort rather than providing the incentives that are the standard defence of inequality. Yet the runaway top end need not be socially damaging, or spark political protest, if the ultra-​rich are sufficiently elevated from the rest of society to be regarded as a curiosity, another species, or even a form of exotic entertainment. By moving the highest level into the stratosphere (and the lowest into distant dark doorways), a stretching of the income distribution might eventually reduce social tension and roll back adverse social outcomes even if these are initially increased. The case for this second-​order Kuznets curve (social disharmony initially rising but eventually falling as inequality increases) has been reinforced by studies of ‘relative deprivation’. Runciman (1966) documented and popularized the view that people feel disadvantaged only in relation to their immediate peers  –​being buoyed by outperforming their former classmates, colleagues and neighbours, and undeterred by the soaraway success of others with whom they never felt any rivalry. The restriction of personal comparison to ‘reference groups’, and its capacity to let two or more nations coexist peacefully, was familiar to the coffee house commentators of the Victorian era. ‘When I consider this great city in its several quarters, I look upon it as an aggregate of various nations distinguished from each other by their respective customs, manners, and interests […] the inhabitants of St James’s, notwithstanding they live under the same laws and speak the same language, are a distinct people from those of Cheapside’ (Addison 1892: 142). Drawing the same conclusion across the Atlantic and a century later, Joan Williams (2017) observed a white working class that envies and resents its immediate superiors –​the middle managers and professionals –​while admiring the

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immensely rich bosses and bankers who dwell and deal far above them –​and adhering to the new politics advanced by this elite. Inequality of income and wealth is greater than most people think it is, and greater than most think it should be (Norton & Ariely 2011), but the initial misperception defuses any anger that arises from the subsequent revelation. If a widening of inequality splits ‘reference groups’ apart, then people’s toleration for inequality will  –​after initially declining or staying flat  –​rise again as the two (or more) nations move further apart. As inequalities of income and wealth increase, public demand for redistribution will initially rise, as they anticipate (and fear) their community being split apart if interpersonal differences become too great. But once –​after a further widening of inequality  –​such splitting of communities does happen, public demand for redistribution can fall away. After international wars that had narrowed their economic differences and forced them to rub conscripted shoulders, the richer were generally favourable towards welfare states that made them subsidize the poorer, whom they viewed as deserving members of the same community. A generation later, with economic differences much wider, the rich were sufficiently distanced from the poor to view them as an alien group largely exiled by their own inadequacies, and not deserving of any redistributive help (Taylor-​Gooby 2013). Strong claims have been made of cultural differences in tolerance for inequality of economic and political power, which might allow lasting differences in the distances that different elites can sustain. A  remarkably durable and influential study by Geerd Hofstede (1980) introduced the concept of ‘power distance’, ‘the extent to which the less powerful members of organizations and institutions (like the family) accept and expect that power is distributed unequally’ (Hofstede & Bond 1988: 10). Hofstede interviewed employees in 40 subsidiaries of one then-​prominent multinational corporation (IBM) between 1967 and 1973, and concluded that Power Distance was one of four primary dimensions along which ‘national culture’ could be quantitatively distinguished. The other three were Individualism (versus collectivism), Uncertainty Avoidance and Masculinity (versus Femininity). (Two more dimensions, Indulgence (versus Restraint) and Long-​term Orientation, were added after later fieldwork). Hofstede was able to demonstrate that host-​country culture overpowered any attempt to stamp a uniform ‘corporate culture’ across all subsidiaries, and to remind the writers of bestselling management books that theories and approaches triumphant in one country might not work well in another. ‘People in societies exhibiting a large degree of Power Distance accept a hierarchical order in which everybody has a place and which needs no further justification. In societies with low Power Distance, people strive to equalise the distribution of power and demand justification for inequalities of power’ (Hofstede 2016). Lower levels of power distance are empirically associated with, among other things, a greater willingness to accept new technology (Zakoor 2004)  and fluid work groups (Harrison et al. 2000). Perhaps not coincidentally, the United States gets a relatively low score (40) on the ‘power distance index’, along with the United Kingdom and Germany (35), Sweden (31) and Austria (11) (Clearly Cultural 2016). In practical terms, power distance in a society determines the power difference between members at its different levels –​equating to ‘the difference in the ability within a hierarchy of a superior to influence the behavior of a subordinate and the ability of

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the subordinate to influence the behaviour of the superior’ (Ford et al. 1997: 60). But the sociological and historical robustness of these cultural classifications (now assembled into national rankings on Hofstede’s own website, https://​geert-​hofstede.com/​national-​ culture.html) depends heavily on their consistency and durability. Although Hofstede’s army of replicators have found his national distinctions to persist through time, there is evidence of national cultural characteristics changing over time (Kirkman et al. 2006) and as countries’ national income rises (Tang & Koveos 2008), as well as an enduring question over the soundness of his analysis (McSweeney 2002). Even cultural features that seem long-​lasting enough be ‘hardwired’ can prove malleable at times of social stress. South Africans’ experience since attaining majority rule has left some reflecting sceptically on whether the humanitarian, collectivist ubuntu outlook hailed as culturally embedded at the time of democratization has really survived the exposure to competitive international capitalism (Allison 2015) or can enable flourishing within it (HSRC 2011). Ubuntu had begun to many to look like an invented tradition, useful for maintaining cohesion in the transition to independence but quickly felled by other values once previous economic constraints and shared enemies began to disappear.

Worlds Apart A qualitative widening of inequalities, enabling the richest to inhabit different worlds from the ‘middle’ as well as ‘working’ classes, follows from the widening wealth gap. Those at the top can now afford (and have the incentive) to move into gated communities, travel in priority lanes, holiday on private islands and hire their own doctors, personal trainers, hairdressers and chefs rather than queuing for the ones in the street. Butlers and housekeepers have been reinvented (if they ever went away), and joined by ever more numerous ‘personal assistants’ and ‘security details’. These aides’ expanding task lists and proportionally rising salaries may offer a further indication of the widening gap between the rich and famous and the rest. But those in the next level down, while falling far enough behind the top 1 per cent to feel relatively deprived, have also pulled away, sowing resentment in the lower-​middle as well as classes further below them. ‘Americans in the top fifth of the income distribution –​broadly, households with incomes above the $112,000 mark  –​are separating from the rest. This separation is economic, visible in bank balances and salaries. But it can also be seen in education, family structure, health and longevity, even in civic and community life. The economic gap is just the most vivid sign of a deepening class divide’ (Reeves 2017: 3). Putting these findings in historical perspective, Piketty (2014) presents data that suggest the recent rise in wealth and income inequality to be a reversion to the nineteenth-​century norm. The twentieth century, particularly the two decades 1950–​70, turn out to have been an unusual interlude in which ‘two world wars, and the public policies that followed from them, played a central role in reducing inequalities’ (Piketty 2014: 237). In those two decades, Western countries largely adapted to democracy and to well-​funded welfare and public services that require a wide and willing tax base. The return to Victorian inequality levels, with those below the tax threshold increasing in number and those

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above it stepping up their avoidance skills, casts serious doubt on the sustainability of social and political arrangements forged in the unusually egalitarian interlude. Resentment of this return to inequality may result from the qualitative difference between just owning or controlling an unusually large amount of capital, which may have been acquired through laudable effort and ingenuity, and using this possession of capital to get still richer by making others poorer, which is the unacceptable extraction of private benefits from resources which they might previously have been deploying for the benefit of all. When everyone works for themselves and is paid the full value of what they produce, those with more capital get richer merely because they can produce more for each hour of work: the extra money or machinery makes their efforts more productive. It is when those with the most capital become ‘capitalists’, hiring others to do their work, that inequality widens due to exploitation that most find objectionable. People with little or no capital must now work partly for themselves and partly for the capitalist –​who can now ‘earn’ more than they did before, while working less or not at all. If these ‘workers’ need to work with capital, being unable to produce essential items without equipment and pre-​production finance however much they try to substitute extra work for capital input, capitalists can use their monopoly control over the means of production to push workers’ wages down even as they extract more effort from them and appropriate more of their output (Roemer 1988: 20–​25). These changes opened the political door to candidates and parties who could simultaneously champion two disgruntled constituencies  –​the relatively deprived upper middle class (falling behind its top 20 per cent reference group) and the lower working class, including the unskilled and casualized ‘precariat’. The gulf between these two groups proved unbridgeable for traditional centre-​left parties. Less-​advantaged workers held the upper middle class directly responsible for eroding (even erasing) its traditional trade union and welfare rights. The upper middle class felt equally held down by the redistributive needs of an unskilled working class they viewed as lacking in aspiration and qualification. For the political outsiders who managed to unite these incompatible groups  –​including Trump in the United States, François Hollande and Macron in France, the UK Conservatives and (slightly earlier) Chavez in Venezuela and Lula da Silva in Brazil  –​there were remarkable surges to victory in the post-​crisis period, followed, in many cases, by painful defeats as the always shaky alliance rediscovered its conflicting interests and fell apart. On taking office, President Trump promised the low-​income supporters who were crucial to his election win that his cabinet of billionaires were ‘working for you now’. Their business and management skills, supposedly confirmed by their vast wealth, would allow them to promote equality and mass prosperity in a way past professional politicians could not. By refusing to separate his political mandate from his business interests, or even give full details of what these were, the self-​styled expert dealmaker left open the possibility that his principal aim for the presidency was to boost the family firms. His early policy initiatives, to reduce higher earners’ taxes and healthcare costs (by breaking up the insurance pool) were reminiscent of the payback to rich campaign donors in which past new presidents had indulged. But political and legal attacks on Trump’s conflicts of interest, and the gaps between his policies’ stated aims and likely effects, seemed only to

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deepen the faith of his blue-​collar support base. It was not the first time that Americans had turned to their business elite for guidance in the wake of financial crisis. As the forty-​ fifth president was inaugurated, Broadway audiences were flocking to Hamilton, a musical based on the latest biography (Chernow 2004) of the founding father who questioned the wisdom of democracy and hailed the power of central banks. ‘Hamilton’s vision of America focused on a body of leaders from the big cities along the Eastern seaboard, marked by wealth and the power that wealth sustained’ (Bender 2015). Across the Atlantic, the UK government’s response to a referendum vote against the EU –​whose open borders had been the Brexiteers’ key target –​was to announce the launch of ‘Global Britain’. Its rhetorical vision was of Britain escaping its confinement within Europe to re-​engage with the wider world, notably through a series of free trade deals, including one with the United States that had eluded the EU’s own negotiators. Prime Minister May, a supporter of EU membership until a narrow majority of voters turned against it, also promised continued access to European markets, threatening further steps towards a low-​tax, deregulated economy if this were denied (BBC 2017). Even the pledge to reduce net immigration remained resolutely vague, with the home secretary insisting eight months after the vote for Brexit that it would bring ‘no dramatic fall’ in numbers arriving (Elgot 2017). The ‘Economists for Brexit’ group, from which the Leave campaign sought (expert) help when rallying opinion against European trade exposure, quickly transmuted into ‘Economists for Free Trade’, preaching the ‘benefits of global free trade’ (EFT 2017). Trump, and the wave of nationalist-​party leaders who sought to follow May out of the European exit door, were practising the most risky of the elite-​fraction tactics reviewed in Chapter 5. They recognized that commercial interests, especially of larger businesses, had gravitated towards parties with a more internationalist outlook (favouring free trade, capital movement and labour migration). This enabled them to gather support from businesses and employees that had been negatively affected by the regulation required to make international markets work effectively, and the competition set up by those markets. Democratic pressures had, it seemed, called a halt to globalization and technological change, at least until their adverse distributional (and security) impacts could be better addressed. Yet within a year, Trump  –​and others who gained power on the wave of popular revolt against elite projects –​was struggling to implement his agenda, largely through congressional allies’ fear that his proposed solutions would worsen the problem. The missing clue to contemporary societies’ peculiar toleration for inequality is in the incapacity of democratization to arrest elites’ advance.

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Chapter Seven ELITES AND DEMOCRACY It is not obvious why elites, given their initial concentration of political power, should ever give it away or open it to more democratic control. Power, over agencies of government or means of production, gives access to economic resources that can be used to defend its concentration. Democratizing political power invites the populace to seize economic power, stripping elites of their outside income and wealth –​thereby also gaining the margin above subsistence that allows them to defy elite political authority, if not the purchasing power to buy it. ‘Democratization has rarely occurred, and still occurs rarely, because under most political regimes in most social environments major political actors have strong incentives and means to block the very processes that promote democratization’ (Tilly 2000: 2). The transition from elite rule to full presidential or parliamentary democracy is rendered more puzzling by intermediate arrangements’ availability. ‘Managed’ democracy, in which parties compete and people vote while the same ruling group controls political strategy and major enterprise management, has been associated with sustained economic advance in emerging economic heavyweights such as China, Turkey, Vietnam, Ethiopia and Kazakhstan. Electoral management can often sustain elite rule by making it look credibly imperilled, and does not always need the blunt instruments of stuffed ballots, intimidated voters, jailed or exiled opposition leaders, and censored media. To stop electors tiring of a one-​party system, managed democracies have learnt to tolerate a range of opposition parties, some winning sizeable representation. These dissuade protest voters from moving their battle into the streets, and mobilize new ideas which rulers can co-​opt, blaming opponents if they fail. Far from depending on recent advances in behavioural psychology and propaganda, techniques for perpetual re-​election were well understood by (among many others) Mexico’s Institutional Revolution Party from 1929 and Malaysia’s Barisan Nasional (National Front) from 1973. Recently arrived social media may make news-​and voter-​management harder. Yet even in more malleable times many countries’ elites had moved straight from authoritarianism to genuine contestation, without serious attempts at a quasi-​pluralist halfway house.

Why Do Elites Concede Democratization? Elites’ champions maintain that their ascendancy benefits the countries they rule and the people below them –​cream rising to the top. Elites’ critics warn that they will fight to defend their unjust privilege, and have the monopoly on violence and finance to crush their opponents. So neither can readily answer the question, why did some past elites

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choose to weaken their power by conceding forms of democracy that led to wider allocation of decision-​making responsibilities and resources? A conservative explanation suggests that elites would prefer to keep a monopoly of power, but realize that the system beneath them will break down or rise up if they do. Non-​elite groups will inevitably wish to acquire more power  –​to secure and extend their economic gains if the system is working well, and to impose a fairer distribution of resources if it is working badly. If subordinate groups cannot obtain a greater share of power and wealth under the present elite rule, they may eventually rise against it and install a less hierarchical alternative. The elite must therefore give away a part of its power to avoid being dispossessed of all of it, and to ensure continued cohesion in the society (and growth of the economy) over which it has command. There are many practices –​from marrying foreigners to hunting foxes –​which an elite may have to give up in order to remove an avoidable provocation of non-​elites’ anger, and secure their acquiescence in privilege they are less able or willing to sacrifice. Democracy takes such calculated concession to a higher level by giving the non-​elite a degree of choice over which elite practices stand or fall –​although the choice is kept manageable by elite design of party programmes. The slowness of democratic processes’ wheels, and their generally limited reversibility, may also give the populace an assurance of durability that specific concessions rarely have (Acemoglu & Robinson 2006: xiii). A more radical explanation agrees that elites would prefer to keep a monopoly of power, but denies that they ever rationally part-​concede it. They only lose it through misrule or miscalculation, when the less-​advantaged rise up and forcibly reduce or remove their power  –​sometimes exploiting splits in elite organization. Whereas conservatives envisage elites extending power to the previously powerless and propertyless labouring classes in a paternalistic fashion, socialists regard workers (and sometimes peasants) as active agents in diffusing power downwards. The internal division which facilitates this overthrow arises, according to Marx, from structural forces that compel elite members to compete when survival requires them to cooperate. They go on accumulating when this drives down the return on capital, lowering wages to preserve profit despite this sapping the demand required to realize profit, and innovating when this further drains profit by destroying the rents on older vintages of capital equipment (Brenner 1998: ch. 1). Elites’ downfall may be hastened if they contain vestiges of the previous (aristocratic) ruling class, which can split off and rally their former feudal subjects against the emerging industrial class. The liberal version, rejecting workers’ revolt as either feasible or desirable, identifies an intermediate ‘middle’ class as the agent of change. The key division facilitating change is one that opens up between elites and the middle class, breaking up any distributional coalition that might previously have held them together. Division within the elite may hasten its downfall but can also avert this, if a sufficient number breaks away to align their interests with the people below, reforging the appropriate coalition. The liberal approach has in practice been able (in most countries) to encompass the socialist version, by showing that ‘proletarian’ rebellion only occurs with assistance from above or below –​workers being recruited by the elite to oppose the middle class or vice versa. The decisive ‘middle’ may comprise former elite members who find an incentive to reinvest

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their fortunes in new types of economic activity (and in political parties that support this), and former members of the ‘mass’ who find a way of acquiring economic and political resources for the first time. Renegades from the old elite tend to be the more decisive influence. They mainly comprise a downwardly mobile group reacting to likely ejection from the old elite (such as landowners whose rents are ebbing due to falling crop yields or dwindling labour supply, and younger sons of landowners denied their own acreage by primogeniture) and a more proactively profit-​minded group which foresees an escalating fortune from investing in new industries.

Democracy as Elite Protection Strategy Elites were traditionally assumed to resist democratization, because an empowered majority would inevitably vote to destroy or disperse their concentrations of property and power. Yet the arrival (or closer approach) of democracy has rarely swept elites away, nor even eroded their political influence or narrowed their social and economic advantage. The general widening of inequality since the 1980s has occurred within countries that were generally becoming more democratic, as gauged by such measures as the freedom and fairness of elections, accountability of politicians and public agencies, local and regional autonomy, and flow of information to (and education levels of) the general public. This has allowed traditional accounts of democratization to be skilfully inverted. It is not a capitulation by autocratic rulers hastening their disempowerment but a strategic concession ensuring their survival. The relatively limited impact of democracy in most countries that adopt it  –​narrowing rather than eliminating wealth and income differences, lessening social gradients so that no one seeks to level them –​has encouraged the view that it is typically the work of an active elite, pre-​empting an activated mass even if initially prompted by it. Although often functionalist, ahistorical and eminently wise after the event, the top-​down account has now assembled much historical support as well as analytical endorsement from theories of coalitions and games. Barrington Moore (1966) laid the foundation for a top-​down democratization theory by characterizing political change in England as a process of commercially minded landowners stripping political power from the monarchy, opening the way for proto-​ industrialists to seize control. Even when the process of change turned violent, in the Civil War (1642–​51), it involved one elite faction clashing with another, the peasant masses featuring only as foot soldiers forced to battle for their feudal lord. The War led to a compromise in which prolonged wrangling (mostly about tax revenue and its uses) between monarchy and nobility could be moved indoors, to a debating chamber well shielded from the babble of popular voices. The fact that Parliament existed meant that there was a flexible institution which constituted both an arena into which new social elements could be drawn as their demands rose and an institutional mechanism for settling peacefully conflicts of interest among these groups. The strong commercial tone in the life of the landed upper classes, both gentry and titles nobility, also meant that there was no very solid phalanx of aristocratic opposition to the advance of industry itself. (Moore 1966: 29–​30)

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A new class of merchants and large corporate owners, able to buy the land and titles that gave access to Parliament, then peacefully supplanted the traditional aristocracy. The nobility held on just long enough to curb some of the excesses of the new bourgeois legislators –​notably by limiting working hours, permitting trade unions, requiring ‘poor relief ’ and bringing sanitation to the new industrial cities  –​helping ensure that there was no significant working-​class mobilization even in the Long Depression of 1873–​79. Despite the outrage of bosses who warned that a maximum ten-​hour working day (for women and children, in 1847)  would ruin them, these measures did little to damage the new industrialism, more likely strengthening it by defusing workers’ discontent and raising their buying power. This relatively harmonious transition in the top tier was recognized as exceptional in the historical comparisons developed by Moore (1966), for whom ‘the contribution of violence to gradualism’ was a recurring theme. In Germany and Japan elites stayed dangerously united. Landowners conspired with monarchs to suppress the peasantry, and industrialists supported them in return for help in suppressing employees –​resulting in the fascist route to modernity, according to Moore (1966: ch. 8). In Russia and China the elite became too divided, the landowners fighting the emperor and failing to create conditions for the growth of industry –​opening the way for peasants’ revolts and the descent into communism (Moore 1966: ch. 9). But with fascism and communism officially extinguished and their legacies receding by the early 1990s, the instances of peaceful progress brought by intra-​elite contest were much easier to recall than those of tyranny or stagnation. Top-​down theory recognizes the threat of violence as a necessary condition for the concession of democracy, but views its subsequent rapid diminution as confirming the centrality of democratization to elites’ self-​preservation plans. The idea of countries’ social cohesion, political direction and economic orientation being decisively determined by the behaviour of their elites reaches its logical heights in the generation of macro-​ historians that followed on from Moore. Updating Moore’s thesis, and substituting elite economic calculation for mass political aspiration, Daron Acemoglu and James Robinson (AR) (2006) argue that elites must make concessions (including democracy) to avoid extremes of inequality that would trigger their overthrow. Those who control most of society’s economic resources, political power, knowledge and means of coercion must give away a part to avoid being forcibly deprived of the whole. The rich elite would still prefer to stay fully in control of the distribution process, by merely conceding a degree of redistribution (in cash through income transfers, or in kind through public services) until demand for democracy subsides. According to AR, democracy is needed to make such redistributive commitments credible. By giving the majority a clear degree of control over redistribution, it ensures they can enforce it through taxation and public spending, even if the elite reneges on past pledges to deliver it voluntarily. Democracy is a uniquely effective concession because it enables redistribution of resources from the elite to the mass and cannot be easily rescinded by the elite if it finds the results unpleasant. ‘A transition to democracy […] shifts future political power way from the elite to the citizens, thereby creating a credible commitment to future pro-​majority policies’ (AR 2005:  25–​26). Without democratic arrangements that include regularly contested elections, ‘it will be relatively easy for the elite to renege

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on any promises [such as income redistribution] they make. Anticipating this, the citizens may be unsatisfied with the offer of policy concessions under unchanged political institutions […] the elite must democratize  –​create a credible commitment to future majoritarian policies  –​if they wish to avoid more radical outcomes’ (AR 2005:  vii). Democracy is associated with a ‘durability of institutions’ that ‘regulate the future allocation of political power’ (AR 2005: 23). Although democratic elections can sometimes be taken away just as rapidly as any other concession to majority preference (for example when the Egyptian military reimposed its rule in 2014 after ejecting the Muslim Brotherhood government voted into office a year earlier, or the Burmese military simply banned the National League for Democracy after its electoral landslide in 1990), AR assume that democracy and its associated institutions once embedded are very hard to rescind. Democratization, traditionally viewed as a change of institutions and procedures forced from below, is recast as an innovation from above –​a form of self-​restraint that elites impose on themselves to avoid their overthrow, by giving majorities enough control over resource allocation to feel that their interests are being served. AR concede that, in some instances, disgruntled majorities suspect that elites will manipulate democracy to preserve their privileges, and so hold out for full revolution. But they characterize such revolution as easily derailed by opportunism and collective action problems, so that publics’ settling for democratic concessions is ‘the typical case’ (AR 2005: 26). In this general historical view, dictatorships will try as far as possible to defuse revolutionary grievances with extra rights and welfare in a non-​voting framework; they will yield to democracy when no other equalizing gesture gets the mobs off the streets. The gradual fashion in which democratic rights are extended, usually in the aftermath of extra-​parliamentary unrest, is offered as evidence that elites concede the minimum necessary to stave off revolt. AR interpret ‘the state’ solely as government, ignoring its complementary meaning as the political entity or community that lives within the realm of government, and chooses to obey it. The political and social integrity of the state, defined this way, can be eroded by excessive distancing between the elite and the mass. A potential objection to AR’s approach is that democracy may be an unnecessary concession for avoiding elite expropriation, even if it is sufficient. Those in control could offer the masses something else which ensures they stay loyal to the present political and social order, and which represents a smaller sacrifice for the elite. Alternative, less expensive sops could include a prototypical welfare state (the solution of Otto von Bismarck’s Germany in the 1890s), or consistent growth of income and employment along with gradually increasing respect for human rights (the approach of China’s communist party in the first 40 years after Mao, and Singapore under Lee Kuan Yew), a chaotically free press (which characterized Cambodia for more than three decades of Hun Sen’s rule) or perennial defence against external intrusions (successfully deployed by many long-​serving dictators in troubled neighbourhoods, such as Belarus’s Alexander Lukashenko). Such concessions have often been effective in legitimizing elites and their autocracies for long periods, without the granting of a wider electoral franchise, with its attendant risk of the masses voting for large fiscal transfers or impossible combinations of high public spending and low tax. But they lack some key advantages of democracy which AR

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draw attention to. They are outcome dependent, so elites might still lose support if they fail to deliver GDP growth or prevent invasion. They involve passive delivery of benefits to the people, whereas a meaningful parliamentary or presidential vote actively involves them. They could suddenly be abandoned as objectives, whereas democratic institutions might be absorbed into the social structure until hard to remove. AR’s thesis remains a plausible one in a society where a small elite rules a largely powerless, propertyless mass. But it deprives itself of detail by not looking more deeply at the level in between.

Democracy via Distributional Struggle: The Middle Clash Although they accept that there are ‘various shades of democracy’ and an equally diverse array of actual and possible dictatorships, AR ‘work with a dichotomous distinction between democracy and nondemocracy’ (2005: 17) to achieve workable results. They impose an equally neat dichotomy between the distributional results of elite and majority rule by assuming that ‘democracies generally approximate a situation of political equality’ while nondemocracies ‘represent the preferences of a much smaller subset of society’ (2005: 17). The assumption of a unified elite confronting a unified mass, with no significant grouping in between them, sharpens the theory but blunts its application to historical records. The division of society into two distinct and distant groups –​ rich and poor, ruling and ruled, have and have-​not –​is rarely observed, and even more rarely sustained for any length of time. Theories of mass society that view the ‘mass’ as representing everyone not contained in the elite, and implacably at odds with it, ‘are notably shallow, and their message oscillates from the alarmist warning of doomsday to the unexplained promise of a nascent arcadia’ (Giner 1976: 258). The shallowness arises from the seemingly inexorable emergence of a social layer between the elite (1–​5 per cent) and the lower 95 per cent –​people whose actual situation (and self-​appraisal) lies between the elite and the mass, and who tend to expand in number from a slender buffer zone to a sizeable, politically decisive middle group. Individualist approaches to politics distil the decisive middle layer into the time-​ saving concept of the ‘median voter’, who stands in the middle of the distribution of voter preferences, and whose own preference therefore determines the way majority opinion will go. The main assumptions behind the median voter ‘rule’  –​all choices boiled down into a single policy platform, and all views represented so that platforms are symmetrically distributed around the centre –​can appear plausible once a variety of independent political parties with distinct manifestos has been established. Its main prediction, a constant courting of swing voters which drives ‘left’ and ‘right’ parties towards the centre ground  –​chimes with much recent electoral experience in Europe, North America and Asia. Another median-​voter prediction –​that certain political choices will not produce ‘single peaked’ preferences, leading to incompatible verdicts if issues are voted separately –​may explain the aversion of most democracies (outside Switzerland) to supplementing general elections with specific-​issue referendums. More historically based and less individualistically bound approaches allow those in the middle to remain a loose coalition of like-​minded individuals, heading households or businesses, which can form shifting coalitions with socially distinguishable groups above

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or below them. Social and economic historians have frequently identified such coalitions, and middle classes’ centrality to them, as explanations of major political change. Moore (1966) traces the rise of democracy in the United States to the alliance of an industrial middle class in the Northeast and organized labour in the South, which achieved the proximate aim of dethroning the pre-​industrial slave-​owning southern landowners but had the wider effect of enfranchising the workers. Apprehensive at first, the industrial owners later realized that they could retain working-​class loyalty provided they continued to furnish enough jobs, incomes and public services, and retreated from their instinctive union bashing. For Gaetano Mosca (1939), moving closer to Marx and Engels (1848) than Pareto ever dared, the death knell of feudal elites was rung by the erosion of landed wealth, and its acquisition by the expanding middle class. Political change in Central and Eastern Europe (CEE) after 1989 and the Former Soviet Union (FSU) from 1991 provides a recent test of long-​held beliefs –​built on earlier Western European and American history –​about the role of coalitions between elites and the middle class in steering countries towards or away from liberal democracy. In CEE, ‘reformist’ fractions of embattled socialist or communist parties sought an alliance with the middle class. This included professionals whose pay had enabled them to amass some private wealth and make extra income through informal trading; and intellectuals whose long ideological struggle against the political elite had often drawn support from this repressed professional group. Their alliance sidelined the working class (including Poland’s iconic Solidarity trade union), who soon found themselves subject to market-​ building ‘shock therapy’ that often sank their already precarious living standards. It also sidelined the ruling party’s conservative fractions (who still professed belief in a centrally planned economy and classless society) and commercialized fractions (who had built private fortunes by abstracting state-​owned assets and collecting bribes). The outcome was a relatively smooth transition to democracy which, across most of the region, quickly re-​ elected the reformed ex-​communist parties that had engineered the coalition. In contrast, most FSU countries (including Russia and the new Central Asian republics) witnessed a coalition between the communist parties’ conservative and commercialized fractions and the upper middle class immediately below them. This largely consisted of individuals who had grown rich before the 1989–​91 Soviet crisis, by exploiting the black market and evading official exchange controls to amass hard currency. The alliance of elite fractions and enriched non-​elite, both of which had profited from the state-​ controlled economy (to the brink of bankrupting it), sidelined both the professional/​ intellectual middle class and the long-​repressed working class. It enabled ‘oligarchs’  –​ some from within the former ruling party, some who had fought it but now made peace with it –​rapidly to seize state-​owned assets or buy them at a knock-​down price. Elections were held, but the new coalition’s control of most employment, industrial and mineral wealth, communication media and (when needed) security forces made it easy for the new coalitions to retain power. This pattern ostensibly supports the long-​standing argument (going back at least to Moore 1966) that liberal democracy evolves when integrated elites form broad coalitions with classes in the middle of the social scale, while illiberal democracy or new autocracy emerges when divided elites form narrow coalitions with excluded groups immediately

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below them (Higley et al. 1998, Higley & Pakulski 2007). But it shows that elite division is always a precondition for extensive change, the ‘integrated’ elite invariably sliding into stasis and decay. Its more important affirmation is, once again, of the key role of alliances between elite fractions and the middle class in promoting economic growth and the shift to stable democracy. The small initial size of the middle class, far from undermining this process, actually strengthens it, when symptomatic of professional aspirations (to make money, get educated, speak freely, travel abroad) being crushed by the political and commercial elite.

Less Revolution, More Redistribution The ‘middle class’ comprises people who have acquired some control over the economic resources that are needed to run a government, usually without playing a direct role in government themselves. In some historical instances, this intermediate group’s political power and influence precedes its economic power –​for example, when nobles or merchants ingratiate themselves with a monarch who voluntarily grants them land or trading monopolies, which then gives them control over production and revenue from key commodities, enabling them to bargain for ‘representation’ in return for the taxation that the monarch must impose. More commonly (and of more interest to economic and political historians), a major political event or structural change in the economy reduces the proportion of government expense that rulers can finance from resources they directly control, and increases the proportion that must be transferred from people previously excluded from political decision-​making. The instances that have gained most attention are •• a rise in the cost of defending the realm or delivering other public services, which rulers cannot meet from their own estate and which forces them to tax the higher earners among the people they rule; •• loss of control over land or other resources, or a drop in the income they yield, which forces rulers to tap into the income of other resource holders even if their governmental expenses have not increased; and •• a rise in the costs of government, at a time when most new income is being generated by activity and resources that rulers do not directly control, so that additional taxation must be raised from a new group of wealth holders. In each of these cases, rulers confront a gap between core expenditure (needed to maintain their law enforcement and policy-​making capacity, and social cohesion) and their core revenue (the money they can regularly raise from their estate of directly controlled resources). This forces them to secure a regular stream of income from resources held by other people, who become the ‘middle class’ standing between the ruler and the propertyless majority. Taxation is difficult to impose without granting a degree of representation, so the middle class converts its economic power into political power. If rulers try to finance their ‘fiscal deficit’ through borrowing rather than taxation, they must still turn to the same group of private-​sector wealth holders, who then exercise their new-​found power as creditors rather than taxpayers.

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The middle class subsequently uses its newly gained political power to expand its economic power, for example by forcing the rulers to reinforce private property rights and persuading them to assign new profit-​making opportunities, such as trading monopolies. In some cases the middle class starts with a degree of political power (as a legacy of past political events) and uses this to carve out its initial economic power; but with industrialization, interest became focused on traders and industrialists who rose in economic importance and were then able to gain access to a political machine from which they were initially excluded. In contrast to some industrial countries in Europe, the United States was not long enough immersed in either World War (or damaged enough by them) for the conflict to break the grip of the Sixty, or allow other families to fight their way in. But what war could not accomplish in the way of social shake-​up, the subsequent peace seems to have delivered. Rapid economic growth brought structural and geographical shifts of commercial advantage which tended to erode the old wealth, and build up the new. In the United States, a corporatist conservatism built up under which managers, shielded from shareholders’ demands by comfortable profit margins, used improved pay and conditions to buy peace from well-​unionized workforces, and acquiesced in higher taxation to fund a social safety net. Then, as global competition (initially from Europe and Japan) squeezed profits, and technological change left the corporates playing catch-​up in new markets, the floor was opened to a corporate (neo-​)liberalism favouring a maximization of shareholder profit and scaling-​down of tax-​financed welfare. In the United States, the contrast has been characterized as one between managerial ‘Yankees’ in the East and entrepreneurial ‘cowboys’ in the West and South, with advantage shifting westwards as smokestack industries on the Atlantic side gave way to more knowledge-​based ‘sunrise’ industries nearer the Pacific. ‘In contrast to the Yankees, who were rooted in the inherited wealth of the large eastern banks and manufacturing firms, the cowboys were nouveau riche who derived their wealth from the new growth industries of the post-​1945 period’ (Jenkins & Shumate 1985: 132). Models of the AR type tend to assume that the transfer of voting power by the elite to those below them is a separable process from the transfer of economic resources. Rulers can choose to redistribute some wealth to the ruled, and can also give them a degree of political control –​with this democratization designed to stop them demanding too much redistribution. But these neat results are made possible by largely abstracting from any middle class, whose existence makes the transfers of political power and economic resources much harder to separate (practically or analytically). They complement the more historical accounts, such as those of Moore (1966) and Lachmann (2003), by enabling assessment in terms of the likelihoods and pay-​offs of different actions by the two sides, analysable through theories of games and bargaining. But much is also lost in the simplification –​the significant subdivisions that can occur within ‘elite’ and ‘mass’ and, more importantly, the wedge that is driven between them by an expanding ‘middle class’. Middle classes have long been characterized as defusing social polarization, by lessening the distance between mass and elite. The actual distance is reduced if those previously without property start to acquire it, capturing existing resources formerly held by the elite or new resources that build up their estate in relation to the elite’s. The

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Table 7.1  Redistributive options among three classes and the state Redistribution from:

Redistribution to:

State

Upper class

Middle class

Lower class

State

–​

Chinese-​style communism

Russian-​style communism

Fascism

Upper class

Rent-​seeking, sale of offices/​ commissions Privatization, ‘tunnelling’ Rent-​seeking

–​

Late feudalism

Early feudalism

Bourgeois revolution Peasant revolution

–​

Modern welfare state –​

Middle class Lower class

Proletarian revolution/​ Old welfare state

perceived distance is reduced if the least well-​off now view themselves in relation to the group of small property holders immediately above them, rather than the much richer group at the top of the property distribution. If the typical middle-​class ‘estate’  –​an owner-​occupied house and garden, a modest stock of savings, a car  –​appears to be attainable by the majority, it can deflect acquisitive attention from the upper classes’ rather larger estates. Once a middle class enters the analysis, it becomes less realistic to simplify history into battles or bargaining between an ‘elite’ and a ‘mass’, or to characterize government (the state) as an instrument that one side tries to capture in order to attack (or defend itself against) the other. The picture broadens into one in which •• lower, middle and upper classes can seek to advance their condition by expropriating one of the other classes, perhaps in alliance with the third class;  and the state can be co-​opted by one class, for defence or offence against another; or can act for itself, appropriating resources from one or more classes. The range of possibilities when each group (and the state) acts independently, with some historical examples, is set out in Table 7.1. Classifying forms of government solely by their main directions of redistribution is a hazardous historical simplification. But the exercise helps clarify why democracy rarely leads to major redistributions between classes, and more often follows an upheaval in which such redistributions have already happened through conquest, war or natural disaster. ‘Wars, revolutions, and other wholesale political house-​cleanings break up existing coalitions, thus providing unusual opportunities for political and economic reconstruction’ (Tilly 2000:  11). The two types of communism tried in the twentieth century attempted to redistribute from the aristocratic landowning class (China) or the factory-​ owning middle class (Russia). The intended direction of redistribution may have been the lower class, but it ended up being the state. Fascism may have been an attempt to

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redistribute regressively from the lower class to the middle class, but it ended up with resources being taken mainly by the state, partly for fighting foreign wars and partly to keep working people supportive with a measure of welfare which also bound them firmly to the ruling party. Feudalism began with an institutionalized redistribution of resources from peasants who produced them to upper-​class landowners who consumed them. Its end is sometimes traced to a growing scarcity of land that punished those owners who had farmed it out, and could not easily restore it to their demesnes (Postan 1993); and to unexpected inflation, eroding the value of money rents. But large landowners generally gained from the price rise, with urban workers and their employers the main losers as their food bills rose (Ramsey 1971:  13–​16). Where the relatively unusual drains on manorial income were avoided, landowners preserved their flow of rents and (via tax exemption and rising food prices) deflected the rising costs of state provision onto the emerging middle classes. Bourgeois resentment at footing this bill was then the principal reason for feudalism’s demise, as industrial capitalists sought political power in return for their rising tax bills (and used it to scrap the import tariffs that denied their employees cheap food). An echo of feudal upward redistribution may still persist in the rent-​seeking activity of the residual upper class, now achieved through entitlements to state provision or through engagement in financial markets where those who manage money extract a premium from those who try investing it productively (Kay 2012, Turner 2016: 38–​48). Industrialization can be unleashed when a bourgeois ‘revolution’ redistributes land and other resources from the upper to the middle class, which makes more productive use of them and thereby begins to invest in new industries, while also acquiring the aristocrats’ former political control. If successful, industrialization ends with a welfare state, which is usually intended to redistribute from middle to lower (incomes and classes), but through the forces behind ‘Director’s Law’ tends to tax the poor and inordinately benefit the middle class. Industrialization stalls prematurely in countries like post-​war Argentina and contemporary Russia because the middle class grabs assets from the state, bypassing the need to set their own businesses up and preventing diversification into industries and services the state did not previously provide. Redistribution from the upper and middle to the lower classes is the route that various socialisms anticipate and have occasionally tried to take. The results have generally not been encouraging, any genuine downward redistribution quickly giving way to redistributive arrangements that favour the already more privileged classes. Table 7.1 oversimplifies by not distinguishing one-​off redistributions of capital from continuing flows of income. Its bleak basic message gives a clue to why, when enough of their members want a change, classes tend to form alliances with one another, or co-​opt the state for attack or defence. An emerging middle class may enrol the lower class in relieving the old upper class of its privileges, as when (briefly) Cromwell’s parliamentarian forces allowed the Diggers to lay claim to St George’s Hill. Confronted with this threat, the upper class may deploy the working class (or at least its perceived interest) to foil the middle class’s pursuit of power and wealth –​as when nineteenth-​century aristocrats in Britain voted through restrictions on the use of factory labour and the keeping or trading of slaves. But while the redistributive directions in Table 7.1 help account for the ‘distributional

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coalitions’ examined in Chapter 4, which have been observed historically, it only provides a description of the failed consequences of attempting democratic power redistribution. Explanation is still needed.

Why Doesn’t a Universal Franchise Cause Elite Expropriation? Perhaps the most cynical explanation for elites feeling safe with democracy is that it has ceased to hold any dangers by the time they concede it. If less-​advantaged citizens lack the social capital required to negotiate an increasingly complex registration process, or the economic resources to get to a polling station, they will not be able to vote for any measure of redistribution. Registration and turnout rates generally decline with income and social status (Bonica et al. 2013). Even if they get to cast a vote, the disadvantaged may find that policies which would help them are not on offer. This can happen if plutocratic sponsors of the main parties have kept inimical measures out of their programmes. It also occurs if policies (monetary, fiscal, social) that could effect redistribution have been depoliticized and assigned to unelected committees, on the grounds that politicians cannot manage them reliably. This transfer of policy from political agency to administrative structure can be reinforced by self-​censorship on the part of disadvantaged voters, who may be persuaded that they lack the knowledge with which to choose a radical alternative. Under a meritocratic argument, elites are left in place because inequalities of power have become more acceptable, due to widening of opportunities for entering the elite. Under a technocratic argument, elites are left in place because a set of policy decisions, including those that shape the allocation of power and wealth, are moved beyond the reach of democratic choice. This makes it impossible for voters to choose policies that equalize the power and wealth distribution, even if they want to. The entrustment of (among others) science and environmental policies to specialist agencies, monetary policies to central banks, schooling to state-​approved churches and energy supply to privatized utilities can place enormous power beyond democratic reach, on the grounds that expert choices would be distorted if a less-​informed public (or its elected representatives) had too much say. If rising inequality can be shown to result from impersonal forces of globalization or technical change, voters might be persuadable that income distribution cannot be effectively changed by political choice, and that measures to do so (redistributive taxation, stronger trade unions, tighter financial market regulation) could be damaging all round. But recent evidence that rising inequality results from political choices has not caused a perceptible swing towards more egalitarian parties or policies. A standard explanation is that voters believe (rightly, from a neo-​liberal viewpoint) that soaking the rich will damage the economy, so leaving the rest no better off. People vote to improve their own situation, not especially caring if a small minority is disproportionately advantaged in the process. If the small boats can catch a rising tide, their crews do not mind the luxury yachts racing ahead in the flotilla. The credibility of this explanation is stretched, but not broken, by the evidence in Chapter 6 that recent income gains have been focused on the already best-​off, with little real rise in average income and wealth. Dispossessing the rich could still be dangerous if they hold the key to most people’s income and employment.

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Concentrations of wealth go with the responsibility of managing and maintaining large enterprises, and are also credited with sustaining the enterprise economy’s dynamism, creating new jobs to replace those lost to automation or trade. The economically most vulnerable may still have to defend the current system, voting for governments that uphold it, if their economic interests are inextricably linked to the survival of the elite. And even if there would be long-​term benefits from fundamentally changing social arrangements, the proletariat and precariat may lack the resources to withstand the chaos and income loss that the transition would inevitably involve. So it is left to better-​off intellectuals and aristocrats to fight for radical change, on behalf of a ‘working class’ that invariably seems disinclined to support it. Intellectual critics of the elite rule often cite its control of ‘the media’ as a cause of acquiescence in its rule. Broadcast and print journalism is accused of preventing people from understanding, or believing in, radical alternatives, including extended forms of democratic self-​government in which elites would disappear. Under guise of merely reporting, media are accused of filtering and spinning news in support of commercial interests which support the elite or some of its fractions, never questioning its ascendancy. A century ago, even the ‘progressive’ US Democrats and social democratic counterparts elsewhere believed (as firmly as Republicans) that democracy relied on a few good leaders who could tame the wild majority, keeping it loyal to elite commercial and political interests. ‘By [Woodrow] Wilson’s day it was widely recognized by elite sectors in the US and Britain that within their societies, coercion was a tool of diminishing utility, and that it would be necessary to devise new means to tame the beast, primarily through control of opinion and attitude. Huge industries have since developed devoted to these ends’ (Chomsky 2003: 5–​6). The Progressive Democrats had sought to eliminate the more obvious ways of manipulating voters’ behaviour, such as the meat rations and glasses of rum that used to await them at polling stations. But that left them in need, according to critics like Chomsky, of less obvious alternative routes to such manipulation. ‘Control’ can be exerted in several ways: by distorting information (to make the elite’s actions appear successful and benign, those of its opponents malign or mistaken); leaving negative items unreported; deflecting public discussion onto politically unthreatening issues (theatrical congressional or parliamentary exchanges, or the more directly theatrical entertainment world); or simply disengaging the public, through the cultivation of political apathy. For those viewing democracies as well as dictatorships as ‘manufacturing consent’, these industries can include print, broadcast and online media and education systems as well as the more obviously propagandist marketing, advertising and public relations realms. Their clients can include governments, state agencies and charities as well as private companies, but these are generally presented as pushing opinion in the same (neo-​ liberal) direction –​governments promoting the commercial profit on which their tax base depends, and charities shielding the natural and human worlds from free enterprise’s worst excesses. Whereas authoritarian governments often engage in fairly obvious and clumsy propaganda, because of their easy access to more coercive forms of control, governments that style themselves as publicly accountable and democratic are credited with far more subtle and sugar-​coated deception. ‘It is only natural that the modern

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institutions of thought control  –​frankly called propaganda before the word became unfashionable because of totalitarian associations –​should have originated in the most free societies’ (Chomsky 2003: 7–​8). In practice, it is less media than ‘mediation’ that enables elite rule to persist, substituting battles among its fractions for any wider war that might overturn the whole social hierarchy. As economies, populations and communication channels grow, there is scope for widening divergence between individuals’ assessment of what is directly around them (their ‘immediate’ view) and their beliefs about the surrounding society, which are necessarily intermediated. Those who are contented with their own situation may still rally for radical change, if they believe that there are horrors elsewhere in the system that will disturb their peace if left unchecked. Conversely, those who despair of their immediate lot may remain opposed to radical change if persuaded that the system as a whole is delivering good results, which will eventually come their way. Trump’s successful 2016 election campaign appealed particularly to unemployed and low-​paid employees who felt neglected by the outgoing administration, despite data that showed the general health of the economy in terms of job creation, pay and productivity growth. Trump was also able to portray the United States (and especially its inner cities) as crime ridden and under imported terrorist threat, despite a sustained decline in these risks which meant that large percentage increases in 2016 were fluctuations from a low base (Hughes 2017). If statistics contradicted his assertions, they could be dismissed as a manipulation or misrepresentation of reality. An unusually bleak outlook can be propagated by persuading people to generalize any immediate bad experiences to the world at large, while overriding any positive experiences with more dismal reports about that wider world. Leaders who win power on this basis can then make instant gains, before any policies have time to take effect, by merely reversing the cues:  generalizing the more positive immediate experiences, and overriding the negative with a top-​down view that looks suddenly more positive. Exploitation of the gap between immediate perceptions and wider-​world reports is made easier by ‘social’ media, through which people can transmit their own thoughts and receive news from others in a like-​minded network. There is no need to use ‘old’ media to administer propaganda to the people if they are happy to use ‘new’ media to administer it themselves. Trump and the anti-​EU nationalists in continental Europe were noticeably successful at portraying the traditional press and broadcasting media as sources of distortion and ‘fake news’, and recasting the new online media as more reliable sources of alternative facts. The social and natural scientists who complain loudest about intermediation bias have inadvertently promoted it, by pursuing empirical and theoretical enquiry that further mediate the social and natural worlds. Whereas medieval science and theology were largely intuitive, appealing to direct experience, their modern equivalents rely on abstract models and continually tell their lay audience that things are not as they seem. Once the social and political events around us are not explicable without reference to expertly calibrated models of networks, voting processes and open macroeconomies, it is easy for propagandists to step in with alternative ways to override direct experience. It becomes even easier for ‘alternative’ activists to stoke a public revolt against

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all mediation  –​appealing to ‘social’ media as conveying truth as directly reported by ordinary people, as a corrective to traditional media that may reflect the prejudices of their state or commercial sponsors. Scientists who created and promoted ‘open’ online media as a source of democratic and bias-​free communication have witnessed their rapid co-​optation as a new source of bias, as other experts exploit people’s trust in unmediated messages to propagate partisan interpretation of events, and even ‘fake news’. Elections since 2000, fought increasingly through new media, appear no less vulnerable to biased reporting and more exposed to opinion-​shifting ‘surprises’ than those conducted in previous centuries through traditional media. The layer of editorial intervention condemned by old media critics such as Neil Postman (1987) and Edward Herman and Noam Chomsky (1988), for biasing fact selection and slanting interpretation to suit the interests of business and its political representatives, turns out to have broadened most readers’ and listeners’ perspective. In the nineteenth century, US newspapers’ need for a larger and more diverse readership forced them to retreat from stentorian editorials and report events more objectively (Hamilton 2004: 37–​70). And in the twenty-​first, resistance to the ‘fake news’ and imaginative spin of the Trump administration was led by such corporate-​ owned, advertising-​dependent channels as Bloomberg, the New York Times and CNN.

National Politics and International Business One explanation for democracy’s ineffectiveness (in reducing concentrations of power and wealth) can subsume most of the others. Government continues to be practised at national level, its geographical span often shrinking as regions gain autonomy or independence, while private-​sector business is increasingly global. Because governments ultimately depend on business –​to generate employment and tax revenue, and to obey their laws –​this gives business leaders an ever widening veto on what political leaders can do. Internationalization of the economy is incompatible with national-​level government and democracy, according to the highly influential ‘trilemma’ advanced by Dani Rodrik (2012). If (as assessed in previous chapters) globalization also widens inequalities of income and wealth, it drains the power of governments to tackle this inequality even as it raises public pressure to do so. Established parties’ inability to tackle globalization’s fallout might allow populists to score surprise election wins against them. But those who do so run up against the same structural wall, and are reduced to building walls. Globalization empowers businesses relative to governments principally because large corporations can move. Their ability to shift production and accounting operations to the lowest-​tax jurisdiction forces governments to keep taxes down. Their ability to stall the growth of national output, productivity and wages by withholding investment forces governments to offer deregulation, subsidies and other investment incentives. Governments can only resist these tactics by reaching international agreements to avert a race to the bottom on tax and regulation, which are extremely difficult to agree and enforce. Even if such international pacts take shape, they are negotiated beyond the reach of national electorates, and restrict the range of issues on which voters still have choice.

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Concern about business exerting too much power over government has not always grown in step with economies. Most countries have seen it alternate with the opposite fear, of government exerting too much power over business. Commercial and financial elites have chafed under governments’ regulation and taxation at some times, but have also relied at other times on their bailouts and ability to borrow to revive the wider economy. Even as the larger firms globalize, they have become increasingly reliant on public provision or subsidy of essential goods and services including healthcare, pensions, education, transport, communication, security and crime control. Government is an increasingly important customer for private-​sector service providers, as well as the eternal defender of stable business conditions through private property and intellectual property protection, national defence, relief of poverty and regulation of demand using fiscal and monetary policy. State-​imposed standards can help private businesses build the market for new products, and state regulation can also rescue them from corner-​cutting competition, and the customer backlash that may follow. However, an awareness of this ultimate need for services and protections from government is not enough to stop private business starving it of cash, or blocking its more downwardly redistributive policies. Before industrialization, large landowners could usually exert substantial control over a monarch by withholding their tax payments, or making them conditional on rights and privileges which eventually extended to control over lawmaking and policy. The economic changes that weakened feudalism initially strengthened absolute rulers. Merchants and industrialists found it harder to stage any tax ‘strike’ in a coordinated way; and if they did, rulers’ underfunding led to the loss of state support in crucial areas, notably the protection of cargoes and factories from foreign or domestic attack. With the development of a financial system, holders of commercial wealth could re-​exert their power over political rulers in the role of creditors. Money advanced as loans carried a direct entitlement to enhanced repayment (of principal and interest), in contrast to money given in tax, which carried no such entitlement. Creditors had the sanction of lending no more if their earlier advances were not repaid, and could also coordinate more easily than taxpayers to keep their royal or mercantile borrowers under control. This was classically illustrated in England in 1694 when landowners and businessmen led by William Paterson subscribed £1.2 million to bail out the cash-​strapped monarchs, William and Mary, in return for a charter to run the Bank of England, managing all future public debt issues and closely watching the use to which all sovereign money was put. Unless they can assemble and retain a large ‘estate’ of their own, rulers and their governments become dependent on outside sources of finance. Securing unelected legitimacy, whether by good wars abroad or good works at home, becomes more expensive as populations grow and become more aware of how their quality of life could be improved. But monarchs’ or emperors’ revenues tend not to grow as fast as their essential expenditures. This can happen for a time, if new lands can be conquered, or a monopoly exerted over natural resources that yield more profit as economies expand. But the rise in the cost of running an empire eventually exceeds its rate of expansion, while resource monopolies tend to be broken by privateers (the original privatizers) or drained of value by technological change.

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Despite the firm resolve of business to control it, the ability to borrow strengthened the government’s hand, as did its ability to declare what money was legal tender, and keep some control of its supply even as privately owned banks’ lending started to determine this. The ascendancy of government over business was a central theme of later industrialization, running from roughly 1850–​1950 in Europe and the Americas. Until the mid-​twentieth century, governments assumed a steadily larger role in ‘managing’ the economy, and private companies’ management gained ever closer resemblance to that of the public sector –​as well as their revenue and profit relying more heavily on the state as customer, creditor and sponsor. Governments took over responsibility for basic employee provision –​including pensions, education, healthcare and housing –​as well as provision of the ‘hard’ and ‘soft’ infrastructures free enterprise required. The substantial growth of US government regulation between 1887 and 1917 took place at a time when monopoly-​and cartel-​empowered ‘robber barons’ were in an unusually strong position to influence government. They fully approved the growth of government at this time, as a way both to reduce their costs and stabilize their markets. Big corporations became increasingly able to defeat legal challenges, even as they stepped up their exploitation of workers and customers through monopoly power, because of their ability to hire superior legal teams or otherwise sway judgements in their favour. This led to the growth of government and state-​appointed regulators as ‘a response to the dissatisfaction with litigation as a mechanism of social control of business’ (Glaeser & Shleifer 2003: 402). But this transition is only effective if big corporations cannot exert an equally powerful influence over governments and bureaucracies. As soon as they do, neither courts nor public agencies give ordinary citizens and small businesses adequate protection against the arbitrary acts of large corporations. Through the twentieth century, the private sector needed a stronger and better financed central administration to keep order amid the chaos of competitive enterprise, supporting its activities at home and defending its interests abroad. But it had to be eternally vigilant against the potential for public authority to set rules that lowered its profits, or even tax them away and seize the capital that provided them. In retrospect, commercial interests were perhaps paradoxically strengthened by the growth of government (as provider of services, customer, redistributor of income and spender of national income). But they still resent having to pay for the work of government, or give it powers that could conceivably be turned against the private corporation. As taxpayers and creditors, private businesses have an interest in keeping governments financially constrained, provided enough is spent on the ‘public’ goods and services that the private sector cannot fully finance or deliver to itself. Businesses’ power to restrict and reshape government policy has been amplified by globalization. The suggestion is celebrated by advocates of free-​market economics, who view it as a further welfare-​enhancing release of entrepreneurial energy, after the removal of obstacles to trade and capital movement with which globalization begins. It is lamented by capitalism’s critics, for whom the transcending of national barriers becomes a suppression of beneficial difference and an erosion of essential welfare supports when corporations are allowed to take the lead.

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The removal of national barriers shifts power from the political to the commercial realm because businesses are generally strengthened by the integration of national cultures and markets, whereas governments are generally weakened. With trade barriers lowered and national regulations converged or removed, a corporation can rearrange its operations so that sales, supplies, labour force and finance are drawn from wherever in the world they make most money. Some multinational companies entirely abandon their home market, finding others more profitable. The possibility of their moving operations abroad increases their leverage over governments ‘at home’. Their ability to shift revenues and profits into low-​tax jurisdictions further weakens the scope for governments to recover costs from business income. Governments’ inherent problem is that their authority at home  –​based on currency sovereignty, tax-​raising powers and the ability to enforce laws coercively if necessary –​cannot be replicated abroad, where at best there is a weak regime of ‘governance’ dependent on cooperation among national governments. The weakness of international regulation and law enforcement gives businesses a freer rein when they trade internationally, especially when they can make full use of ‘tax havens’ that lie beyond any large-​country jurisdiction (Shaxson 2012). Governments may have promoted ‘globalization’ hoping it would help them better contain corporations’ domestic market power, by exposing them to stiffer international competition. Instead, the opening of borders left businesses freer to roam the globe while weakening the power of national governments to follow them, with large employers also benefiting from the weakening of domestic trade unions under low-​cost country competition. Elite observers of the 1950s were already viewing the long-​term impact of an earlier crossing of borders. The building of interstate railroads and highways, and quickening of traffic along them, was turning the United States for the first time into a truly unified economic and political space. Producers and distributors once confined to a single state or regional market could now extend across all regions, knocking out those that were serving other states less competently or competitively and had survived only so long as they had local monopoly. This resulted in the progressive relegation and dissolution of local business elites, as more powerful central elites took up residence in the commercial and financial capitals (a status initially contested between Chicago and New York). At the same time, prompted by the growth of business as it spanned the national market, government underwent a similar centralization, with state and regional administrations ceding power to the federal institutions clustered in Washington. Central government grew because expanding corporate businesses required it to be there –​to offer macroeconomic stabilization, infrastructure building, regulation and welfare services on the same national scale that private commerce had now reached. The economy –​once a great scatter of small productive units in autonomous balance –​has become dominated by two or three hundred giant corporations, administratively and politically interrelated, which together hold the keys to economic decisions. The political order, once a decentralised set of several dozen states with a weak spinal cord […] has taken up into itself many powers previously scattered, and now enters into each and every crany [sic] of the social structure. The military order, once a slim establishment in a context of distrust

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fed by state militia, has become the largest and most expensive feature of government. (Mills 1956: 7)

The ‘super-​rich’ are usually portrayed as citizens of the world, their vast wealth enabling them to obtain several passports and giving them incentive to do so. The ability to travel around the world and establish homes in all its favoured locations may follow from commercial success, but it also contributes to it, opening up profit-​making opportunities that are rarely available to those with fewer means. Globalization raises income and income volatility for most of those in receipt of capital income, an improvement in the risk/​ return balance being one of the basic results of broader portfolio diversification (Malkiel 2007: 190–​95). In contrast, it reduces income and raises income volatility for most of those reliant on labour income. They are confronted by competition from people and places whose wages are lower, and cannot easily move to any places where wages are higher. Large corporations, likewise, tend to benefit from globalization, while it threatens smaller firms that cannot move beyond their regional or national market. The consequence for most countries has been a ‘two-​speed economy’, in which large businesses enjoy a rising level and share of profits (delivering a rising level and share of real income to their owners and top managers), while households and smaller businesses experience at best no change in real income and a falling income share. The divergence of fortunes between those able to exploit globalization and those merely exposed to it was evident from at least 2000, and speeded up after the financial crisis of 2008.

Democracy as Consequence of Elite Ascendancy The longstanding compatibility between formal democracy and elites suggests a reversal of the causation proposed by AR and other political economists. Rather than elites conceding democracy to sustain themselves, democracy creates elites and can even allow them to expand their power. So when elites agree to submit to democratic ‘constraints’, they do so voluntarily rather than under duress, expecting to emerge with their ascendancy strengthened and legitimated rather than curtailed. Elites can afford to concede democracy once they have reinforced their rule through a particular arrangement of constitutional rules and economic incentives; and that they prefer to democratize at this point, rather than continuing autocratic or plutocratic rule, because democracy makes the system more stable and efficient. Democracy thus emerges as a consolidation that strengthens the ascendancy of elites, rather than a concession that erodes their power in order to avoid its total loss. This approach gains strength from some sometimes surprising discoveries regarding the behaviour of voters in a democracy with a large middle class. Instead of engaging in top-​down redistribution from the elite to the mass, these (typical) electoral systems redistribute economic and political resources from the elite and the mass to the people in the middle. The middle class becomes the main recipient of public services, publicly financed infrastructures, household and business subsidies and (due to its better longevity) state-​ financed pensions, while keeping its tax bills low (especially by shifting tax from income

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to expenditure). Director’s Law, which states that ‘public expenditures are made for the primary benefit of the middle classes, and financed with taxes which are borne in considerable part by the poor and the rich’ (Stigler 1970: 1), prevails, gaining strength as the middle class co-​opts the welfare state as a means to redistribute its own resources through time rather than redistribute them to less well-​off classes at a point in time (Barr 2001). In a society whose income and wealth are skewed towards the top end  –​towards which most have been heading since 1950, according to Piketty (2014)  –​ democracy should slant this middle-​class redistribution so that more comes from above than below. This is the implication of ‘median voter’ models, since rising elite privilege lifts mean income and wealth further above the median and raises the incentive to tax the very rich. But this is not what is generally found empirically:  electoral incentives to redistribute from rich to poor often decline as inequality increases (Wong 2013: 6). It seems that the greater their superiority of resources the greater is the incentive of society’s better-​off members to protect these. They are helped by higher-​income voters being more likely to turn out for elections, which raises the income of the median voter. Median voters may be further deterred from taking too much income and wealth from those above them if they are enmeshed politically in a ‘distributional coalition’ with fractions of the elite, as economic history implies. Richer stratas’ retention of their fortunes also seems to be assisted by a perception, even among lower-​income voters, that these fortunes are necessary for the working of the economy and must be kept reasonably intact. Republicans increased their representation in the House of Representatives and became more conservative after the 1980s, while Democrats also grew less enthusiastic for redistributive policies, and there was an increase in polarization between the two big parties which also correlates with rising inequality (Bonica et al. 2013: 106–​7). The rich have not relied exclusively on these in-​built voter preference safeguards, however, to protect themselves from measures that might erode their pay and profits. They have also presided over legal and structural changes which weaken mechanisms for income redistribution that lie outside the political process, notably the rights of trade unions to recruit members and stage strikes. But this has largely been achieved through legislative action, or structural changes in the economy promoted by explicit policy change, so can still be viewed as an erosion of redistribution that arose through the electoral system. Whether through clever ideological manipulation, obstacles to participation by poorer voters, or a genuine alignment of lower-​and middle-​class with elite interests, those who originally held almost all the wealth and political power have found a way to give votes to the majority, and still keep the political process working in their interests, protecting or expanding their commercial fortunes. The ‘checks and balances’ built into any democratic system offer two lines of defence against bad government. They raise the chances of a governmental decision appearing effective, because it is extensively questioned and scrutinized before implementation. The more interrogations and reviews a policy goes through (it is assumed), the more likely it is that bad decisions are avoided because mistaken premises and unintended consequences will be exposed before implementation. Even if it turns out to be counterproductive or ineffective, the chances of a governmental decision appearing legitimate are improved by running it through a range of critical reviewers and committees. It is harder to blame

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the leader or ruling party for mistakes when many opponents and public servants vetted and endorsed the plan before it went ahead. Enhanced legitimacy can endure enhanced effectiveness, because people are usually more motivated to implement a policy well when they have been given a chance to debate it and exposed to persuasion over it. The prolonged review and refinement of policies by numerous committees, comprising or representing different interests, is also a feature of the ‘decision-​making theory’ of democracy advanced by Giovanni Sartori (1987). This views extensive bargaining and reworking of policy as essential for rallying numerous power-​wielding groups behind a coherent set of policies, so that they cooperate with implementation. Influential groups whose interests are harmed by one policy must be ensured a compensating gain from other policies, to ensure they stay loyal to the political strategy as a whole. Decisions are thereby reached faster than if consensus broke down, and dissenting groups waged wars of attrition, but much time is still needed to complete the horse-​trading and log-​rolling that keep everyone on board. These built-​in safeguards against ill-​thought-​through, illegitimate or un-​implementable decisions have a significant cost, however, in moderating the policy-​making process. They restrict both the extent to which the government’s next move can be a change of course from it past moves, and the speed with which the next steps are taken. An autocratic or dictatorial regime, choosing and implementing policies immediately, can sometimes seize opportunities that the slower, more cautious democratic process misses  –​and thereby wrong-​foot the more accountable governments with which it is competing. This is especially the case regarding military decisions, when a national dictator can strike while enemies’ response is still being debated in Congress, and commercial decisions, where a corporate chief executive can do the deal while public servants are still awaiting the necessary parliamentary authorizations and treasury sign-​offs. Democracies have attempted to avert this disadvantage by legislating for ‘emergency powers’ which, when invoked, enable elected officials to act more swiftly with less accountability on vital national issues.

Political Institutions, Property and Elites Governments have, from their earliest appearance, played a key role in assigning and defending private property. When land was divided among the estates of baronial lords or warlords, a central government was often the least destructive way to settle disputes and coordinate action against common problems (such as rebellion by the landless inhabitants, or invasion by warlords from further afield). Government is in this view necessarily authoritarian, and primarily defends the rights of the holders of property from its otherwise inevitable seizure by other property holders or the propertyless. The central political authority engages in ‘downward-​diagonal’ exertions of power, intervening when one fraction of the elite is threatened with attack or expropriation by another (sometimes to repel the attack, sometimes to ensure and legitimize its success). States of the Hobbesian variety also facilitate ‘downward-​vertical’ exertions of power, by which members of the elite repel attacks from social levels below them. To finance the administrative, judicial and policing apparatus required for this, the state exerts another downward-​diagonal power, the collection of taxes from the elite (which may, in turn,

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use its downward-​vertical power to transfer the tax levy to the workers and rent-​payers beneath them). Hobbes’s (1651) Leviathan, although in principle a solution to ‘war of all against all’ involving people as individuals, is more realistically read as a case for using dictatorial government to stop destructive property disputes among a ruling-​class elite. Hobbes is clearly referring to the small group of titled and educated nobles, not the general population, when he defines ‘natural power’ as ‘the eminence of the faculties of body, or mind:  as extraordinary strength, form, prudence, arts, eloquence, liberality, nobility’ (1968: 150), and identifies this as a primary source of the ‘instrumental power’ by which people secure and augment their riches and reputation. Once established, a central government (whether personified in a monarch or emperor, or institutionalized in church-​ backed or secularized councils) has strong incentives to acquire land and other property of its own. State-​owned property gives direct control over feudal subjects and, more importantly in the long term, a direct source of revenue that does not depend on other property owners’ consent to pay tax. But the acquisition of property by a lawmaking state fundamentally complicates its role in relation to the elite from which it first emerged. As before, the state gains legitimacy by defending private property holders’ rights, to acquire and expand their estates and receive the income these generated (from rent, interest or profit). But it now asserts another form of downward-​diagonal power –​defending crown or state property against overmighty subjects’ efforts to capture or control it. To maintain the political and financial support of the elite, government must now give a credible assurance that it will not overstep its powers by overtaxing private property holders, or seizing their estates for financial or political gain. This assurance is achieved by creating laws and institutions allowing ‘upward-​ diagonal’ exertion of power, through which private property holders can resist unreasonable governmental demands. Excessive requirements of tax (or of property in lieu of tax) are usually resisted through an independent judiciary, and excessive policy requirements through an independent council or parliament. Locke is usually credited with the first clear English-​language assertion of the case for limited government. ‘For I  have truly no property in that which another can by right take from me when he pleases against my consent. Hence it is a mistake to think that the supreme or legislative power of any commonwealth can do what it will, and dispose of the estates of the subject arbitrarily’ (Locke 1924: 188). Once central governments have indemnified the wider property-​holding elite against arbitrary expropriation, by providing them with political and judicial defences, they confront the problem of this elite gradually eroding the state’s political and economic power. This problem is worsened by difficulty in maintaining the state’s direct control over economic resources, as more land and property slips (de facto or de iure) into private ownership, and as new sources of wealth (especially from commerce and manufacturing) spring up in the private sector. It is further exacerbated if the cost of government rises –​due to increased expense in defending the realm (and any colonies) from invasion, and in settling disputes among elite property holders at home. State financial problems can rapidly deepen when an acute need for funds forces the sale of state property, which

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further empowers its private-​sector acquirers and reduces the government’s direct flow of revenue. Having yielded to the need for (Lockean) constitutional limitation, monarchical and imperial governments invariably seek to promote new exertions of power designed to keep the elite in check. These include ‘horizontal’ power exerted by one large property holder against another, maintaining a balance between the large estate holders so that the elite remains divided and more easily ruled. As feudal landholdings become more dispersed, they extend to ‘upward-​diagonal’ exertions of power, through which holders of smaller estates may defend and extend their property rights against those with larger estates. Most radically, central governments begin to deploy ‘upward-​vertical’ power, allowing those without property to claim basic rights which limit the property holders’ power to control and exploit them.

Democracy and the Circulation of Elites If revolutions from below always end in chaos and stagnation, sudden and decisive social change must rely on revolutions from above. This was the conclusion of twentieth-​ century radicals who viewed the leading role of Bolshevik and Maoist elites as essential to success of the Russian and Chinese revolutions –​and the absence (through timely execution) of such a ‘vanguard’ as having blocked a comparable revolution in post–​Great War Germany (as well as dooming any anarchist insurrections). Although launched with the opposite intention, this view of progress dovetailed with that of the keenest conservatives, for whom no society could move forward without guidance from a few empowered figures at the top. Those who formed the large base of the social ‘pyramid’ might occasionally jump around, but they would never constructively disturb its narrow upper tier. Traditional elitists could point to one vital missing ingredient in the Leninist and Maoist approaches to ‘giving history a push.’ When top-​down revolutionaries believed they were propelling society to its last and highest stage, they would install themselves as a permanent bureaucracy. Economy and culture would then stagnate beneath them, causing the still-​evolving unrevolutionary states to forge ahead. By resisting further change, administrations set up by a ‘vanguard’ elite might ironically become the first to kindle (and be overturned by) a genuine mass movement from the levels below. The one-​party states that afflicted Germany before 1945 and Eastern Europe for the 40 years after it were hobbled by having one self-​preserving elite, instead of a circulation of elites. Elite circulation was essential to ensure adaptation and change, keeping the masses quiescent by outwitting their resistance movements if not by delivering the progress that made these subside. The circulation of elites requires more than generational turnover, even if this goes beyond father-​son (or occasional father-​daughter) succession, whose venality outside of royalty tends to fuel public discontent. New generations will bring a necessarily different perspective on the nature and use of power, having not experienced the shared events which shaped the previous generation. But it is often a perspective which thereby lacks the unifying and purpose-​building clarity which kept the parents’ generation together. That generation’s ‘closure’ (Edmunds & Turner 2004)  of key positions in the power

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elite contributes to the characteristic passivity of the generation that follows a significant shift in the power balance –​making generational change alone an insufficient means of sustaining an elite, as Eastern Europe’s communists (among many others) discovered as they entered their fifth decade. For effective circulation, there must be rival fractions within an elite which compete for control of the governing apparatus. Competition prevents the currently ascendant elite from overexploiting and thereby inflaming the subordinate groups. It disciplines those in power to use it with reasonable efficiency, lest the initiative be seized by others with a better plan. And it ensures that, if one elite’s underperformance leads to instability, another fraction of the elite can step in before the discontented non-​elite starts to rebel without a clear cause. While underpinning the survival of elites, however, circulation is demonstrably a knife-​edge process. If one elite fraction attains too strong a hold on power, the system will decay due to constriction of circulation, non-​renewal eventually inviting overthrow. But if elites clash and displace one another too frequently, the system becomes vulnerable to attack, from outside or from the restless lower orders within. ‘Elites protect themselves from other elites either by defeating their rivals in conflict or by establishing institutions that prevent rivals from upsetting the existing and beneficial allocation of resources and powers. The defeat of other elites is rare […] any elite defeats are the causes of sudden changes in a policy’s geopolitical and economic strategies. Establishing institutions is the norm  –​and it leads to stagnation, to the elites’ diminished capacity to compete with other polities’ (Lachmann 2003:  352). Lachmann (2003) traces the development of Europe’s political structures since the late fifteenth century, and the shifts of economic power between them (from Italian city states to the Netherlands to Britain), entirely to the actions of their competing elite fractions. He then turns the historical record against alternative explanations that cite inadequate defences, dysfunctional culture or ‘imperial overstretch’ as reasons for loss of economic dynamism and imperial hegemony. The historic repercussions of a breakdown in the ‘circulation’ of elites had been highlighted before, notably by James Burnham writing in 1941. ‘Lundberg shows that since the end of the first world war there has been only a single change in the listing of this first Sixty Families in this country; only a single newcomer has penetrated that stratum (and this closing of the doors to the top rank occurred much later in the Unites States than in the other great capitalist nations). The inability of a ruling class to assimilate fresh and vigorous new blood into its ranks is correctly recognized by many sociologists as an important symptom of the decadence of that class and its approaching downfall’ (Burnham 1941: 98–​99). Excessive order, when one elite fraction has pacified or allied with the others, erodes the legitimacy and efficiency of elite rule. Its particular vulnerability is that keeping the support of all elites fractions entails giving all a share of the production generated by the non-​elite producers. This leads to an excess of rent-​seeking (the draining of society’s surplus for elite consumption), and a lack of productive reinvestment for economic growth. Demand for shares of national output keeps rising while the output stagnates, until the non-​elite joins in the distributional conflict. This was the fate of excessively settled elites from the court of Louis XIV to the ‘communism’ of Leonid Brezhnev and Mao.

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Excessive rivalry, when elite fractions continually upstage and oust one another, does little to improve efficiency or legitimacy and opens the door to the subversion of all elites. Venezuela in the 2000s represented an internal subversion. Dissension within the elite that had traditionally divided up the oil wealth opened the door to Chavez, whose ‘Bolivarian Revolution’ redistributed the wealth to the wider population  –​securing a genuinely large electoral mandate (Gibbs 2006) until Chavez’s own elite following became too settled, extracting excessive rent from an economy that was further undermined by a fall in world oil prices. The sixteenth-​century Aztecs experienced an external subversion, with Hernando Cortes and his conquistadors exploiting the recent overthrow of one leadership by another to insert a more stable colonial rule, reinforced by the divinity ascribed to the outsider. Democracy and a ‘market economy’ are important underpinnings for elite circulation, at least in the European and North American historical accounts. Democracy provides a framework in which elite groups can peacefully exchange or share power, without battles that interrupt the supply of government services and invite overthrow by non-​elite forces from within or outside. With an extended franchise, democracy also enables elite fractions to reinforce themselves through alliances with groups from the non-​elite. During industrialization, both the ‘conservative’ fractions composed of long-​established landowners and the ‘liberal’ fractions representing manufacturing and modernized agriculture tend to seek alliances with the non-​elite. Such alliances may be ‘vertical’, with paternalistic landlords rallying their tenants and factory owners buying the loyalty of their employees; or they can sometimes be ‘diagonal’, with landlords promising to legislate protection for the urban workforce and industrial employers offering liberation to the peasants trapped on the land. Whatever their form, these co-​optations of fractions of the non-​elite by fractions of the elite have tended to stabilize societies, despite early fears that they would hasten the destructive overthrow of one elite by another. The circulation of its fractions distinguishes elite rule from the less benign occurrence of oligarchy, a concentration of wealth and political power which can otherwise look structurally identical. Oligarchs can dominate the lives of the majority in the same way as elites: setting the laws and policies they must live by, running the businesses they must work for, limiting access to their ranks through exclusive social and commercial networks. They are as apt as elites to claim legitimacy through their educational and entrepreneurial achievement, and ability to deliver progress and prosperity through their management of society’s resources. They can be just as successful as elites (and the mafia gangs to which critics sometimes compare them) in securing loyalty and even affection from the non-​elites in the communities they dominate. But oligarchs once established tend to block the entry of new people with new ideas, trying instead to install their own offspring and associates with an ultimately constraining interest in the present distributional arrangements.

Inequality and Democracy: An Unresolved Tension By definition, democratization brings a reduction in the inequality of political resources because it extends (to a majority) direct involvement in making and scrutinizing policy,

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or direct election of representatives who do this. By implication, democracy also brings a reduction in social and economic inequality, since governments now driven by the interests of the majority will adopt policies that redistribute wealth and income, eroding the advantages of the elite. However, it has been widely argued that high levels of inequality create conditions that are hostile to democracy, so that in some societies inequality must start to narrow before sustainable democratization can occur. ‘Increasing categorical inequality within the subject population decreases breadth, equality, bindingness and protection of agent-​subject relations and thereby de-​democratizes regimes’ (Tilly 2003: 41). This leaves an unclarity over the causal relation between democratization and inequality reduction, and a possibility that some third factor (like urbanization or the growth of knowledge) drives both the reduction of inequality and the spread of democracy. Elite-​based democratization theories (typified by Acemoglu & Robinson 2005) predict that elites in highly unequal (e.g. feudal) societies will be more likely to resist democracy, as they have more to lose by letting the masses reshape distribution (and more to gain by keeping their fortunes intact). Once democracy is conceded, wealth and income differentials will tend to narrow as redistributive arrangements are put in place. So the differences in inequality between democracies and non-​democracies will tend to widen over time. Non-​democracies are vulnerable to sudden elimination of inequality, as the mass despairs of getting small concessions and agrees to complete dispossession of the elite. But the high inequality that begets such revolutions has a tendency to reappear soon afterwards, as the vanguards who have led the revolution on behalf of the people find it convenient to keep the seized palaces and gold vaults for their own use rather than handing them out to those they acted for. Great inequality can stifle the emergence of democracy, according to top-​down theories, because it gives the wealth-​holding elite a strong incentive to resist any voting that would lead to redistribution. Inequality that persists under democracy can cause its overthrow, according to top-​down theories, because it shows that the ‘mass’ has not been sufficiently empowered to prevent the elite from excessively exploiting them. Dissatisfied voters will then start to elect populists (such as Chavez in Venezuela or Robert Mugabe in Zimbabwe) who expropriate the wealthiest and use a state-​dominated wealth transfer to empower their own clientele, undermining the freedom and fairness of subsequent elections. Or the impoverished and disempowered majority will bypass the democratic process altogether, directly seizing property and disobeying the laws that protect private property. Extreme inequality can destabilize a democratic polity even if people never rebel, and never support Robin Hood-​style redistribution outside the law. From a traditional liberal perspective, people need at least a modicum of protected private property to be full participants in society, and to exercise any democratic rights responsibly. A basic level of income and wealth also tends to be necessary to acquire the literacy, education and access to information that are needed to understand and exercise a citizen’s democratic rights. If they own nothing and earn very little, people are vulnerable to two types of non-​ democratic leader acting ‘on their behalf ’: the demagogue who advocates violent seizure of property from (or overthrow of) the present rulers and their wealthier followers, or the delegate of those rulers who persuades them that the inegalitarian status quo is really the best that they can get.

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The social democratic ‘welfare state’ becomes unworkable, according to its founders, if many constituents have no property and depend entirely on work income, with no property or liquid wealth on which to fall back when paid work is not available. The state in such conditions must either ‘manage’ the economy to ensure full employment at all times, or tax the economy heavily to achieve continual redistribution to those who would otherwise starve in the absence of income and savings. So giving everyone a small holding (even a smallholding) of their own, now renamed ‘asset-​based welfare’, rescued society from an infeasibly large amount of central budget-​based welfare. This raises the possibility of economic and political changes suddenly triggering a polarization, under which the income and wealth distribution suddenly shifts from relative equality to extreme inequality. Greater democracy is empirically associated with lower inequality, because it enables people to vote for redistributive arrangements that lessen the otherwise unbalancing impacts of free trade and capital flows (Li & Reuveny 2009: 78). Reduced inequality may, in turn, strengthen the foundations for democracy, ensuring that everyone has the economic and educational resources to participate in the political process, and reassuring the propertied class that votes will not be used to expropriate or penally tax them. Too large or swift a rise in inequality can undermine the foundations of democracy, removing a political process that previously kept the inequality in check. This polarizing mechanism may explain Dani Rodrik’s (2011) ‘globalization paradox’, under which globalization is not compatible with both democracy and national self-​ determination. If nation states are to survive in a globalized world, they must adopt a set of policies dictated by external market forces. Policy thus ceases to be open to democratic choice, unless this can somehow be raised from the national to the global level, so that market forces can be reshaped in ways that national electorates want. ‘If we want to keep the nation state and self-​determination, we have to choose between deepening democracy and deepening globalization. Even though it is possible to advance both democracy and globalization, the trilemma suggests this requires the creation of a global political community that is vastly more ambitious than anything we have seen to date or are likely to experience soon’ (Rodrik 2011: xix). The extent to which globalization limits national choices on social and economic policy makes it incompatible with democracy and national sovereignty, according to a pessimistic analysis advanced (with plentiful empirical examples) by Rodrik in 2009 (184–​ 208). If globalization is to remain compatible with sovereignty, this must be at the international level so that policies can be coordinated and redistributions engineered across countries as well as across regions and people within each country. If national sovereignty is retained against a backdrop of globalization, democracy will be eroded. Rodrik’s own recommendation is to create new global governance rules which can ‘replicate many of constitutional democracy’s essential functions at the global level’ (2009: 208). But lacking any clear design for these, and with a heightened belief that both democracy and national sovereignty needed restoring after the technocrats’ bubble burst in 2008, electorates have chafed against globalization. As well as compounding the inequality of resources within countries, globalization may have amplified the power and wealth inequalities between them, arising from

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countries’ differences in population, natural endowment, history (especially of war and conquest) and, according to some commentators, national ‘cultures’ that differentially affect people’s motivation to work and innovate (and reinvest the proceeds). Some countries enjoy advantages that make their internal inequalities more acceptable because everyone is better off than if their country did not enjoy certain contextual or historical advantages. These advantages include the power to print the world’s reserve currency (currently held by the United States, whose central bank receives and redistributes the ‘seignorage’ gains); a head start in the industrialization process (the advantage on which Britain long relied, and based its expansion of empire in the eighteenth and nineteenth centuries); control over copious natural resources (a factor in the contemporary fortunes of those resident in such countries as Saudi Arabia and Russia, despite numerous instances of ‘resource curse’); and geographical location on a confluence of major trading routes (which usually exploit natural features, but depend on addition of the right infrastructures and business environments, as in Panama, Georgia and Dubai). Elections across Europe and the United States in the 2008–​16 period saw politicians –​ even in parties that traditionally supported free international trade and financial liberalization –​swing surprisingly far towards adopting the rhetoric of ‘taking back’ the country from international forces and ‘controlling’ borders that had been made deliberately porous. The malign international forces to be pushed away included economic migrants and refugees, with the traumas they fled from (poverty and war) now to be solved by their own governments without making demands on others. If it continues, the move towards renationalizing politics is likely to clash with commercial pressure to keep internationalizing governance arrangements. Elements of this clash were already evident in 2016 with the UK vote to leave the EU (for which many United Kingdom-​based multinationals condemned a government which had derailed its own internationalist outlook by entrusting the decision to a more insular electorate); and with Trump’s US campaign to break up the North American Free Trade Area so as to ‘protect American jobs’. While some supporters of ‘Brexit’ viewed the EU as too small, and an obstacle to their (or their multinational businesses) engaging with the wider world, most appeared to be swayed that departure would help strengthen borders, restore sovereignty and escape the ‘red tape’ associated with approving products for a Europe-​wide market that many smaller businesses had no need to qualify for. It seems that most people in most countries want to keep the nation state (or attain it if still denied one), make it or keep it democratic, and still get the benefits of international economic engagement. The discoverer of globalization’s ‘trilemma’ bluntly dismisses one theoretical solution, internationalized political accountability, as a viable way to make it politically and environmentally sustainable. Notions of democratized ‘global governance’ collide with results of sucessive World Values Surveys, which ‘uncover an important divide between elites and the rest of society. A strong sense of global citizenship tends to be confined, where it exists, to wealthy individuals and those with the highest levels of educational attainment. Conversely, attachment to the nation state is generally much stronger (and global identies correspondingly weaker) among individuals from lower social classes’ (Rodrik 2011: 231). People want to retain their sovereign parliaments and independent executives, freed from external forces that dictate their agendas or limit

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their freedom to manage the economy. They express dissatisfaction with those sovereign political arrangements, not least for unleashing adverse external forces and succumbing to them. But their inclination to rally behind radical political agendas to shake up the polities and tackle the inequalities remains muted, even when the case is made that these arise not from structural necessity but from domestic political choice. The ‘higher circles’ of government, commerce and civil society organization appear more powerful than ever, and no more accountable. They may not have found answers to the very big problems now emerging from the world they have governed; but they remain adept at showing that no one has a better idea.

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Chapter Eight GIVEAWAYS AND GREED Elites were once synonymous with the leisure class, using their spare money and time to cultivate virtuous reasons for consuming without producing. Supporting the arts, by sponsoring and sampling the artists’ products, was an early self-​justification, with the sciences added once these started yielding useful technologies, like fast cars and flavour-​ retaining wine. The dawn of industrialization brought another vital role as saviour of the economy –​from the more industrious classes, who threatened to sink it by producing without consuming. By spending surplus cash, the non-​working rich would rescue industry from a profit collapse due to too much saving and thus shield the working class from ruination by recession. ‘Virtue, who from Politicks /​Had learn’d a Thousand Cunning Tricks /​Was, by their happy Influence /​Made Friends with Vice: And ever since /​The worst of all the Multitude /​Did something for the Common Good’ (Mandeville 1988: 9). But today’s elites work for their high-​status living. Higher political circles trot the globe and scan official briefings into the small hours on behalf of their electorates, and higher commercial circles work all hours, even in the student years when their forbears only partied. The youthful rich are hardly new, and were always numerous. But they were usually the heirs to a parental or grand-​parental empire, beneficiaries of trust funds that were not of their own making. According to leading wealth managers, 65 per cent of ultra-​high-​net-​worth individuals now count as self-​made, and only a minority bask in inherited estates (Wealth-​X 2013). Today’s youthful and working rich are a previously undiscovered species, products of the digital age and essential to its meritocratic gloss. Contemporary elites’ character change is perhaps best charted by the recent evolution of its traditional choice of wheels. ‘When Rolls Royce re-​launched in 2003 with their ultra-​luxury Phantom, the manufacturer’s most expensive and most extravagant car, the owner base was on average about 60  years, according to [Head of Communications Gerry] Spahn. The launch of the Ghost in 2009 and the Wraith in 2013 each brought the average customer age down, to about 45 years old overall. The Dawn [launched in 2015] is set to bring that down even further’ (Turchi 2015). To emphasize that its younger demographic subtracted nothing from its status, the convertible Dawn was designed to ensure that stepping out of its rear seats required the same anatomical flourish as disembarking from a Riva motor launch onto a Monaco private jetty.

The Working Rich: Adding Capital and Labour Income Magnates who have worked for their millions, and continue to work after acquiring them, dampen the anger traditionally aimed at those who inherited or married into wealth, and

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confine their work to the beautician and the gymnasium. Public respect, if not admiration, for the modern crop of working billionaires is understandable given their apparent tirelessness –​even above retirement age –​and willingness to keep reinvesting time and money in established businesses and good causes beyond them. Their glow helps rekindle enthusiasm for the timeless crop of non-​working billion-​heirs (and heiresses) who now moor their yachts and buy spare islands alongside the working rich. Just as years of computer gaming can now be turned into a professional sport, which audiences pay to watch, exotic consumption and leisure activity is now a marketable spectacle (Arthur & Stuart 2014), sold by tabloid media and reality television, turning avoidance of work into a lucrative new form of work. The twenty-​something tycoons have made a second major break from leisure-​class tradition. Having acquired their fortunes meritocratically –​at an age when compound interest can mint more billions within their lifetime –​they have chosen to spend them on humanity as well as their own households. In the heyday of inherited wealth, there was usually an inverse relation between capital income and labour income. Those with wealth lived off its income, eschewing work (Piketty 2014: 243), and those who had to work for a living could not expect much ‘unearned’ income to supplement their wage. Even if they managed to amass some capital during their lifetime, it usually took the form of precautionary savings (which had to be kept liquid in case needed in an emergency), pension savings (not accessible before retirement) or a home (which, if bought with a mortgage, meant a deduction from monthly income and no supplementation). Those whose capital is structured as a business enjoy enhanced options for minimizing or avoiding tax on their income –​by classifying it as dividend, capital gain or whatever else attracts the lowest tax rate in their domicile. Where the business is multinational, routing of the income through tax havens can eliminate tax liability altogether (Shaxson 2012). When houses and other personal assets are assigned to a business, the costs of buying them (and of interest on loans to buy them) can be treated as business expense, becoming exempt from tax and even attracting subsidy (Kiyosaki 2011). To be rated as legitimate, elites must meet certain standards in the way they deploy their disproportionate resources. Those with power must use it to promote the public good, and those with money must spend at least some of it on people other than themselves. Previous economic booms, once they crashed to a halt, have generally forced former champions of elites to admit that they were failing on both counts. Their presumption was that earlier elites had done good work, while showing a strictly limited appetite for money and power. Once they had accumulated enough money for a comfortable life, they stepped away from further enrichment to apply some resources and time to ‘good causes’, often addressing the downsides of the income inequality that had furnished their own fortunes. If they had also acquired significant power, at a local or national level, they were careful that its use did not harm those around them, and sought to expand it only if this could upgrade lack of harm into active promotion of some good. Such conservative complaints were noticeably absent after the latest crash, because today’s elites can claim to have escaped the errors and excesses of yesterday’s. Signs of

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privileged people realizing their social obligation and ‘giving something back’ are everywhere evident, sometimes donating on a massive scale. Some critics had always suspected that post-​war affluence had corrupted the upper crust, making them acquisitive and tempting them to believe that with incomes rising the less well-​off required no help. By the same token, a post-​boom slowdown would bring out the best in people and prompt the best-​off to rediscover their wider obligations. Many did, but they had another motive for rediscovering a charitable side. The governments they’d relied on to make society safe for profit pursuit had fallen down on the job.

Joining an All-​Star Cast The civil society ‘third sector’ has long been a source of social power –​boldly reaching where governments are weak, and countervailing them when they show excessive strength. The non-​profit and charitable foundations that speckle the street fronts of European and especially American cities ‘are monuments to what in the Old World was familiar neither as private charity nor as government munificence. They are monuments to community […] and rise and fall with the community’ (Boorstin 1989: 194). But the ascent of the biggest civil society institutions into the ‘higher circles’ is more recent, driven by structural changes in the commercial and political circles. Their recent reinvention as ‘Philanthrocapitalism’ (Bishop & Green 2008) is appropriate in a fundamental sense: it represents the absorption of a social or communal sphere with a very long history into a capitalism of very recent origin. Non-​profit activities that once achieved equidistance between public and private are now predominantly led by private initiative, their chief executives drawing corporate-​level salaries and pursuing the scale and efficiency of operations conventionally ascribed to private-​sector management techniques. At the same time, the capitalism in Philanthrocapitalism is very much the derisked twenty-​first-​ century version, receiving a substantial proportion of funds from government (via grants or tax concessions) and sponsored by corporations whose largesse is kept alive by corporate welfare, which it helps to legitimize. The sustained growth of giving by the private sector would not have been possible without governments letting it acquire formerly public-​sector activities in search of profit, relieving it of taxes and social charges that erode that profit and taking over any debts, service obligations, pay or pension bills that prove too onerous for private sectore management. While the philanthropic ‘third sector’ has been important for a long time, its scale was obscured by economists’ tendency to seek sharp binary divisions in ‘public’ and ‘private’, and the consequent blurring of intermediate categories in national accounts. When finally given its own measurement in satellite accounts to those for GDP, NPIs turned out to make 3–​8 times the economic contribution ascribed to them in the conventional measure (‘non-​profit institutions serving households’) (Salamon et al. 2007: 5). Non-​profits contributed 5–​6 per cent of GDP in North America, or over 7 per cent if the work of volunteers was factored in, when their activities were first disentangled from those of private and public enterprise in the early 2000s. The proportions were lower in Europe and Japan, but still averaged around 5 per cent of GDP with volunteers and 4 per cent without (Salamon et al. 2007: 4).

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In an age that salutes big company founder-​managers as heroic entrepreneurs, inventing (or making affordable) goods and services that might otherwise have been impossible or decades delayed, putting the biggest ‘wealth creators’ in charge of ‘good causes’ has other obvious appeals. It implies an efficient choice and implementation of initiatives, overseen by business minds rather than bureaucrats. It invokes funding that might not otherwise exist, generously handed over by magnates who might otherwise have spent it all on themselves or sunk it into private airstrips and palaces. It suggests a beneficial bias towards self-​help schemes that teach the disadvantaged how to fish (or to grow their own businesses), overturning a perceived tendency of state-​administered largesse to give handouts that stifle initiative and keep recipients dependent on the giver. The rise of big individual donors evokes a past golden age in which non-​profit institutions ran schools, hospitals and charities that supposedly matched the modern ‘welfare state’, until killed off by the misguided expansion of public-​sector alternatives (Green 1995). It also romantically personalizes this non-​state, non-​corporate alternative, pitting the smiling face of the buttoned-​down benefactor against the closed glass doors of Washington and Wall Street. Together, the ‘A-​list’ celebrities and the non-​profit sector’s philanthrocapitalists constitute a higher circle with a variant form of power, best characterized as the ‘power to make a difference’. The difference is made to the way people think –​inviting them to adopt an opinion, share a concern or just admire –​and to the circumstances of particular (usually vulnerable) individuals, by mobilizing resources for their welfare amid publicity that also changes the way other people think. Holders of this power include •• the heads of NGOs, charities and research-​funding organizations, especially the subgroup who came to prominence making commercial fortunes before giving part of them away; •• ‘social entrepreneurs’, the founders or heads of the largest non-​profit companies; •• academic experts and researchers who inform policy, especially natural scientists whose discoveries provide new engineering or bioengineering solutions and social scientists who measure social policy problems and/​or propose affordable solutions; •• ‘policy entrepreneurs’ who popularize the work of technical experts and steer policymakers towards it, as advisers, expert witnesses or journalists; •• entertainers, artists and sportspeople with high public profiles, especially those who take up ‘goodwill ambassador’ roles or communicate with mass followings via social media; and •• ‘consciousness raisers’ who use accidental fame or notoriety to promote a policy or charitable cause. The best-​recognized figures from beyond the commercial and political spheres interact with the top power and wealth holders, and wield a power of their own –​over public opinion  –​which can serve or occasionally sway the interests of those elites. Leading Philanthrocapitalists in 2016 included former entrepreneurs who have turned to full-​time promotion of humanitarian causes (exemplified in the United States by Bill Gates), and former political leaders who have done the same (such as Jimmy Carter, and Bill Clinton

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before he prepared to return to the White House). This circle also includes people who entered business always with the intention of reinvesting all profit for social purposes (such as Muhammad Yunus, the Nobel Prize-​winning founder of the microcredit pioneering Grameen Bank); and those who have made charitable use of prominence due to personal heroism (such as Nobel Prize-​winning education campaigner Malala Yousafzai) or artistic fame (such as musicians Fela Kuti and Bono). Lined up alongside public figures who have never sought to profit from their humanitarianism, big corporate donors can cast a glowing new light on the wealth distribution’s upper tail.

Cult of the Giver The genuine magnanimity of the best-​known philanthropists is hard to dispute. Bill and Melinda Gates channelled their earnings from Microsoft into the world’s biggest charitable foundation, giving grants worldwide focused on health improvement, development and access to education. It proved an initiative other self-​made billionaires were keen to copy. The Giving Pledge, which the Gates’ launched in 2010  ‘inviting the world’s wealthiest individuals and families to commit to giving more than half their wealth to philanthropy or charitable causes’ and ‘specifically focused on billionaires’ (GivingPledge 2016a), had by 2016 gained over 150 signatories including Facebook’s Mark Zuckerberg and Priscilla Chan, Gates’s Microsoft co-​founder Paul Allen, Saudi Prince Alwaleed Bin Talal Bin Abdulaziz al Saud, Oracle’s Larry Ellison, Tesla’s Elon Musk, Russian oligarch Vladimir Potanin, Ukrainian oligarch Viktor Pinchuk, UK businesspeople-​ turned-​politicians Lord (David) Sainsbury and Lord (Michael) Ashcroft, and US investment giants Warren Buffett, T. Boone Pickens and Carl Icahn. Buffett began in 2006 to give away his one-​third shareholding in investment vehicle Berkshire Hathaway, then worth an estimated $68.4bn, his donations reaching over $24.3bn by 2016, much of it channelled through the Gates Foundation (Stempel 2016). Facebook founder Zuckerberg announced in 2016 he would give away 99 per cent of his shares in the world-​encircling social network, a holding then worth $45bn. The few who hold out against such public largesse tend to fall under a cloud that further shines the others’ haloes, unless seen to be still growing a commercial fortune that will eventually fund causes that money cannot buy. Mexican telecoms billionaire Carlos Slim, who through the early 2000s vied with Gates for the tag of ‘world’s richest man’, declared in 2015 that ‘foundations do not solve poverty’ and that he would not be signing over his family’s fortune to good causes (Leswing 2015). Trump, while asserting a pre-​presidential net worth of over $10bn (and vehemently disputing Fortune’s $3.7bn estimate), made his eponymous foundation a fundraising vehicle rather than one into which his own cash would be channelled. But these continued to seem like iron-​willed exceptions, stoically denying themselves the ineluctable pleasure of parting with their hard-​won millions. In their individual Giving Pledges, Lord Sainsbury averred, ‘We do not believe spending any more money on ourselves or our family would add anything to our happiness. However, using it to support social progress we have found deeply fulfilling.’ Ashcroft professed ‘enormous pleasure from giving back to society and to making a positive difference to other people’s lives’. Bloomberg expressed the hope that

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‘by giving, we inspire others to give of themselves, whether their money or their time,’ noting that one of his company Bloomberg LP’s new hires had been drawn to the company by its owner’s pledge to give almost all the profits to charity. Pinchuk’s ‘goal in my social investments is to empower the next generation to change their country and the world’. For David Rockefeller, representing the fifth generation of his family to make sizeable donations, such generosity brought ‘real satisfaction and pleasure’, but the main motivation was that ‘philanthropists, at their best, try to address serious societal problems and occasionally come up with innovations that lead to enduring change’ (Giving Pledge 2016b). Hedge fund investor George Soros, although not yet on the list of signatories, had put his copious financial-​market killings to similarly life-​enhancing use via his Open Society Foundations, supporting ‘democracy and human rights in more than 100 countries’ (GeorgeSoros.com 2016). These and the many others now charitably dismantling their family business and financial empires for charity are upholding a tradition that can be traced back to such late nineteenth-​and twentieth-​century benefactors as Andrew Carnegie, Ford and John D. Rockefeller, whose foundations still rival any public agencies as grant givers to research, education and anti-​poverty initiatives. By better researching their donations and taking outside advice, they have largely avoided the dubious provenance of America’s original industrial fortunes (built on ‘robber baron’ monopoly profits, and low pay sustained by breaking organized labour), and such questionable applications as Ford’s ‘Peace Ship’ and anti-​Semitic consciousness-​raising. The worst that can be said of these mega-​givers is that they may twist the focus of giving towards their autocratic choice of good cause rather than the more democratic choice of the public sector; that their foundations may be less financially accountable than government agencies; and that they may sometimes parachute in to ‘solve’ a long-​running problem without understanding (so with a risk of repeating) the pitfalls that have denied full success to previous efforts (McGoey 2015). Some high-​profile corporate philanthropy is similarly sincere. In contrast to giveaways designed to drive immediate follow-​up sales, the decision by GlaxoSmithKline (GSK) and other drugmakers to put proprietary compounds into a Medicines Patent Pool on which low-​income countries can freely draw, and by Tesla and other carmakers to give away their battery patents, look like genuine donations of intellectual property so that others can use them without paying to meet important needs. Clear financial benefits are restricted to reputational boosts, and the extra sales that might eventually come from making other regions or industries more prosperous. Such gestures go at least some way to offsetting the more questionable acts of some industry rivals –​such as Pfizer’s decision to abandon dementia drug research, and continue returning funds to shareholders through a $10bn buyback programme, days after the US Congress approved a deep corporate tax cut on the basis of boosting incentives to invest in new production and research (Goodkind 2018), and Volkswagen’s ‘calculated offense’ of installing software that could cheat diesel emissions tests rather than better technology that could actually pass them (Associated Press 2017). For individual mega-​donors such as Gates and Bloomberg who have left the business that made their money, the separation of causes supported from any reflow of private profit is even easier to prove. Compared to the business decisions that made their fortunes,

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it is also much lower risk. Rising corporate accountability –​to accounting and financial regulators if not to shareholders, pressure groups or the media –​have tended to increase the cost of top management misjudgement. The damage to finances and reputation from losing a large bet on radical changes in technology or strategy makes it more dangerous for chief executives or directors of research to go out on a limb, and channel large funds in unconventional directions. They tend to ‘bet the company’ only when very clear benefits flow from the gamble or disaster is imminent without it, preferring to advance in incremental steps that are not too far from those of rivals (Fralich 2016). This cautionary calculus is escaped when a founder or high-​paid boss withdraws their fortune from the firm and deploys it to their charitable operation. Bold ambitions or personal whims can now be indulged in relative safety, with the promise of kudos if humanity is enriched by the visionary investment and no litigable loss if it is not.

Righteous in Donation Entrepreneurs who get rich through genuine, socially useful innovation are hard to attack like the big capitalists of old. The creators of Facebook, Google and Amazon commanded just as much monopoly power (and extracted just as much personal profit) as the creators of Exxon, Du Pont and other behemoths of the ‘analogue’ economy. But they could not be slated as part of a rich and privileged establishment, for two main reasons. Their commercial breakthrough came from displacing the old establishment, by superseding its technologies and subverting its business models. And they got rich not by commanding a monopoly price but by imposing no price at all. Digital enterprise adopted a revolutionary rhetoric as effectively as any political movement –​‘disrupting’ established industries, ‘seizing power’ for garage-​based and front-​room entrepreneurs, even ‘burning’ investors’ cash in the sometimes interminable wait for revenue to move above expenses. Although Google’s ‘Don’t be evil’ was eventually eclipsed by other corporate slogans, it remained the watchword for the giants of the digital era. In a secularizing world, giving back to society in the corporate afterlife was not enough: the making of the money had to benefit society, so that its later re-​dispensing could count as more than mere atonement. Amazon’s Jeff Bezos, Tesla’s Elon Musk and Virgin’s Richard Branson vied to bring affordable space travel to the public, with Musk also pursuing electric cars and batteries to green the plant from which to blast off. Steve Jobs, not content with offering an ‘insanely great’ computer, had electronically captured his customers’ eyes and ears and acquired near-​godlike status from the expanding Apple classes before his death in 2011. As benefactors, these entrepreneurs had an advantage that made the previous century’s philanthropists look one-​sided by comparison. People liked their products  –​ the ‘insanely great’ Apple computer, the emission-​free car, the network that gave a second life online –​as well as admired the worthy causes funded with the profits. Past mega-​donations and bequests had looked like acts of penitence because they came from tobacco, oil, monopolized steel and other commodities of questionable social value. The new breed of donor made consumers’ lives brighter by day, then at night gave succour to people too ill or deprived to consume.

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Other high-​tech entrepreneurs gained cult-​giver status by inventing or reinventing a new service for which people discovered profound need –​and might have paid handsomely for if they had to –​and consciously forgoing any profit, by making it freely available. Their usually vast personal fortunes could then be tolerated, even if nothing was given away, because users had not directly paid anything towards them. Indirect payment took the form of ‘user-​generated content’, which users willingly supplied and did not regard as any kind of imposition. Users uploaded words, pictures, sounds, advertisements and audiovisual material which other users found useful, drawing in the crowds on a scale that brought advertisers on board. In so doing, users also offered information about themselves which could be used to target the marketing, multiplying its effectiveness. When they bought space offline, advertisers knew that half their expenditure was wasted, and did not know which half. Online, the half that bounced back could be instantly detected and discontinued, while the half that worked could be pared down and made to work harder. Today’s highest-​profile donors also transcend the hidden agendas that, in retrospect, cloud the record of their predecessors. Their donations seem free of any favouritism and bias, other than being directed at the greatest remediable injustice. They carry no preachy religious or moral messages; their funds are not channelled preferentially towards those of the same nationality or ethnicity as the giver; they do not make receipt conditional on any vows or value changes, only unmet need. Charity a century ago was largely confined within cities or regions. So philanthropists tended to look no further than the needs within their neighbourhood (ignoring greater calamity beyond the boundary), and could not avoid deriving some payback from the causes they supported. Their streets were safer because they had helped the homeless get off them, their concerts more enjoyable because they had financed the opera hall refurbishment. In today’s global charity the philanthropist may never even visit all the people and places they assist, is unlikely to need the antidotes or disability gadgets they fund and gains nothing from the hospitals they build on another continent, and so becomes more selfless than any who gave in any previous age. Just as their businesses have often counter-​intuitively thrived by giving services away, or undercutting their own past money-​spinner with a cheaper and better product, today’s entrepreneurs are unafraid to allow some bruising clashes between the hand that made the money and the hand that gives it out again. Business-​and landowner-​generated fortunes have done much to promote socialist and environmental causes which challenge the system that created them. This ‘blowback’ can occur through the individual efforts of self-​funded activists like Tom Steyer and Tony Benn, and the willingness of millionaires’ charitable foundations to champion redistributive programmes. Such straying into social causes famously triggered Henry Ford II’s resignation as a trustee of the Ford Foundation in 1977. ‘The foundation exists and thrives on the fruits of our economic system. The dividends of competitive enterprise make it all possible […] In effect, the foundation is a creature of capitalism […] It is hard to discern recognition of this fact in anything the foundation does. It is even more difficult to find an understanding of this in many of the institutions, particularly the universities, that are the beneficiaries of the foundation’s grant programs’ (Ford 1977). But even as Ford wrote, some rival executives were starting to realize that the ‘creature of capitalism’ could

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become a monster if its impacts on the social and natural environment were not critically assessed, and that challenges from a non-​capitalist perspective  –​even if self-​funded  –​ could make corporations emerge stronger. The narrowly profit-​focused ‘shareholder value movement’ was soon to go into battle with a broader approach to corporate governance that acknowledged the need to keep some social activities free of profit maximization, and to factor ‘social cost’ into those the business still pursued. It was a long battle which at first went the profit maximizers’ way. But after a series of end-​century corporate scandals, led by Enron, business gurus were forced to concede that the ‘dividends of competitive enterprise’ ran wider than profit. ‘Every four years, according to Bain, the average company loses more than half its customers. Aggressive pricing […] has increased as the profit pressure on companies has mounted […] fewer than half of all Americans have a favourable opinion of business today’, lamented Fortune magazine in 2006, announcing ‘new rules’ to replace those of maximizing shareholder value (Morris 2006). The point was hammered home in 2015 by Martin Shkreli, chief executive of Turing Pharmaceuticals, whose playing by the ‘old rules’ led him to acquire rights to the widely used anti-​infection drug Daraprim and raise its unit price to $750 from $13.50 (Langreth 2015). The business wilted, and Shkreli was later charged with securities fraud through his hedge fund Elea Capital Management (Smythe & Geiger 2015). ‘Doing well by doing good’ was once the domain of televangelists, whose collection box fortunes seemed a small price to pay for the salvation delivered to their mega-​ congregations, and who could always insist that the Rolls Royce fleet was for missionary purposes. The dominant online businesses of the early twenty-​first century were synonymous with giving their best products away, and delivering other people’s goods and services more conveniently and cheaply than had ever been possible before. Internet service providers offered access to the online world without charge, throwing in a free email service (with apparently infinite capacity) for everyone who could find an address not already taken by the million other users. From 1998 Google had made the Internet instantly searchable with an ‘engine’ that could be used any number of times without charge, and offered a free aggregation of all the news that had not been sheltered behind paywalls, along with an equally charge-​free video-​sharing service. Wikipedia, launched in 2001, offered the world’s largest encyclopedia for free, forcing earlier paid-​for versions to permit similar open access or retreat into a little-​read niche. Amazon had grown from a glorified mail-​order bookseller to an online store that challenged almost every aspect of the traditional department store, made popular by consistently lower prices –​achieved at first by avoiding the cost of physical outlets, and later by using concentrated buying power to knock down the asking price of producers, who were also forced to compete with second-​hand and discount sellers displayed on the same screen. Facebook led the ‘social media’ world with an online network which, by demanding no subscription, had acquired 1.5 billion active users by end-​2015 (with over half a million connecting via phone as well as computer). Zuckerberg’s empire was the ultimate beneficiary of ‘network economies of scale’, attracting more users because it had attracted so many users. For an increasing proportion of those users it had replaced email as the main means of online communication; and a new front in its

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conquest of the Internet seemed set to open as it developed its own search facility, challenging Google, whose online advertising dominance it had already eroded.

Commercial Philanthropy: When Public Influence Fails ‘Philanthrocapitalism’ is sometimes dismissed as a window-​dressed capitalism, enabling business to enter (with tax advantages) areas previously reserved for volunteers and charities. While this is overly cynical, the charitable disposal of business fortunes is never entirely detachable from the profit drive that led to them. The difficulty of getting governments to do what they want, at an affordable price, is a major motive for the ‘corporate rich’ to do more of it themselves. As heads of large businesses, they cannot force their agenda on governments without inviting charges of corruption, undue influence and distortion of the policymaking process. Once they push the business to arm’s length, and act as representatives of its charitable wing, agendas can be forced on government in full view of the public, and win their applause. The contrast in reaction reflects an assumption that the philanthrocapitalist agenda is disconnected from the capitalist agenda, and fundamentally more decent. If it carries over capitalist methods, this gives grounds for greater optimism, allying business-​generated resources to the business’s superior power to get things done Philanthrocapitalists’ giveaway gestures are also an admission that profit-​ driven business has failed to achieve some of its major missions, either by the direct route of selling the necessary products and services or by the indirect route of getting governments to act. Because there is explicitly no financial return on charitable ‘investment’, it cannot be viewed as an extension of the opening-​up for private profit that was previously achieved by privatizing or outsourcing public-​sector activity. It is instead an alternative way to fill in the gaps in a capitalist economy left by ‘public goods’ –​the products and services that businesses need but cannot profitably produce, or that every individual needs but not all can afford. Private business has traditionally looked to governments to provide these; and it is when the public sector fails to do so, because it is too inefficient or underfunded, that private enterprise must step in to provide them itself. While critics of big business are sceptical of the motives for giving away corporate millions, some of its defenders express alarm about the effects. Unless clearly aimed at winning custom and amplifying profit, giveaways may drain capital that could be reinvested for more direct financial gain or returned to shareholders for assignment to another part of their portfolio. Philanthropy can distract the boardroom from necessary efforts to keep up with new technologies and markets, and fend off the competition. In appearing more generous towards ‘good causes’, corporate leaders may have deflected their attention from a widespread abandonment of past corporate responsibility. They finance schools, hospitals and disease cures in distant ‘deprived’ regions while eroding employees’ real wages and pension rights, and exploiting weakened labour laws to toughen the workplace environment. The growth of ostentatious giving by founders who cashed out of their companies has coincided with a retreat, by those who took them over, from traditional responsibilities to workforce and locality, and concerns about wider social impact (Mizruchi 2013).

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Many large employers deny there has been such a shift –​pointing to the elimination of ‘dirty’ work, the shortening of hours, and some employees’ liking for more ‘flexible’ arrangements. Others acknowledge it and insist they had no alternative, as increasingly competitive national and international marketplaces turn yesterday’s duty of care to the workforce into today’s unaffordable featherbedding. But such rising competitive pressures, if they exist, might not have arisen without businesses’ previous acquiescence in the removal of trade barriers, and of regulations that raised the cost of new entry. If firms are driven to squeeze workers’ pay and protections (and swell the need for charitable help), it may in part reflect a retreat from earlier willingness to support intervention that softens market forces. Globalization (whether foisted on firms or invited by their betrayal of ‘organized capitalism’) has brought a new dimension to corporate philanthropy, sharpening its edge over the public spending that it seeks to replace. Charitable foundations set up by rich individuals or companies have little difficulty spreading their good works abroad. If poverty reduction models based on self-​help, microcredit, primary healthcare and education have been shown to work in one country, it would seem churlish (if not chauvinist) to deny that they are worth trying out in others. So the biggest philanthropic foundations are now multinational operations. Western corporations and their charitable wings have also sponsored developing countries’ ‘third-​sector’ organizations to stage similar international expansions so that techniques developed in some parts of the ‘global south’ can be efficiently transplanted to others. For example, Bangladesh’s BRAC has moved beyond the home country to work in half a dozen of the poorest countries including Burma, Haiti and South Sudan. Humanitarian charities like Oxfam and Médecins sans Frontières have operated internationally from the start, and now run global logistics and management networks so sophisticated that private companies pay to learn their supply-​ chain management secrets. Border-​crossing by charitable foundations and the companies that back them can be easier than comparable border-​crossing by governments, whose aid agencies have always been suspected of political agendas. ‘Foreign aid’ has been charged with more hidden agendas than any private foundation’s, and recipients’ host governments sometimes reject it because they dislike the motives, connotations or strings attached. To this extent, corporate charity can bring some relief where state agencies fear to tread, or are prevented from doing so. But the mega-​donors and their foundations are also tackling problems, and problem areas, where governments have long engaged with hosts’ approval. There, they are driven by a belief that the private administration of life-​ changing resources is as important for effect as their private donation. The most flamboyant of the Philanthrocapitalists sincerely believe they can eradicate poverty where past public aid has only softened it, cure diseases that are currently just palliated and make aid to the ‘third world’ unnecessary by raising it quickly to the standards of the first. Philanthrocapitalism also brings professionalization. Out go the volunteers with enthusiasm but no skill at the helpful task, and the charity bosses who take no expenses while struggling to devise an effective aid delivery plan. In come trained professionals who are paid a salary but deliver state-​of-​the-​art assistance, and charity chief executives paid like their corporate counterparts for running things with equal strategic brilliance.

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The arrival of the paid, professional charity worker was already causing controversy a century ago (McCarthy 1982). But when the pay is matched by performance, salaried rescue teams are lauded more than vanished volunteers are mourned.

Charities of Fire? When mega-​donors such as Zuckerberg and Slim retain a hand in both their profit-​ making business and their charitable enterprise, there will always be a suspicion that the fund flows and good publicity set up by the charity are designed in part to boost the core business. This might be acceptable ‘blowback’ if additional profit is handed straight over to supplement the non-​profit’s activities. But it still feeds the suspicion that acts of corporate kindness are as much an investment as spending on advertising or R&D. Scepticism grows when a corporation’s for-​profit activity appears to be worsening the problem its non-​profit arm is set up to tackle, as when betting-​shop chains fund therapy for gambling addiction and brewers channel funds to alcohol awareness campaigns. Linsey McGoey (2015) and other quizzical assessors of Philanthrocapitalism have deepened the critique by pointing out the way in which large-​scale giving presented as the benign result of private profitmaking can actually be used to justify and reinforce those private fortunes. The clearest of these feedbacks arise when charitable work is used to advertise ‘corporate social responsibility’ that boosts a corporation’s image and attracts more custom for its purely commercial activities. Rich individuals, including oligarchs from the Former Soviet Union (such as Ukraine’s Dmitry Firtash and Russia’s Pinchuk) have similarly used their record of past gifts to worthy Western institutions as a form of character reference when the legitimacy of their past commercial transactions is legally challenged. There are also instances of ‘feed-​forward’ in which large companies have used a philanthropic purpose to attract government subsidy to a commercial scheme from which they later profit. McGoey gives the example of M-​Pesa, the highly successful East African mobile banking project, launched with donations from the Gates Foundation and the UK Department for International Development to the telecoms multinational Vodafone, which thereby also avoided large tax payments (2015). The generous tax treatment on charitable donations given by many governments can also, on occasion, make a generous gift look more like a diversion from the public treasury than a genuine donation from a private account. As many philanthropists describe their own generosity as ‘giving back’ to the community from which they gained their wealth, the more radical critics ask why they were able to ‘take’ in the first place. Excess fortunes could not be given away if they were not first accumulated. So charitable acts by rich individuals or corporations can be viewed as a corollary –​and an incomplete corrective –​for the lopsided distribution of income and wealth that made them tycoons in the first place. It may just be their insurance premium against the public taking issue with their wealth, which remains substantial even after their giant giveaways. The Chan-​Zuckerberg Foundation may have set a record for proportional generosity, but their share giveaway –​to be staged across their lifetime, not all at once –​was still set to leave a fortune worth half a billion dollars in 2016 for a family of (at that time) just three.

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Another danger is that commercial philanthropy will prove more cyclically unstable than the public funding it replaces, with money drying up if there is a profit squeeze on the donating corporation or a stock price crash that shrinks the individual benefactor’s portfolio. The opposite charge has been levelled at some governments –​that they offer emergency help in the bad times, but retreat when they get better, failing to seek long-​ term solutions to complex problems that need several terms in office to get on top of. But creditworthy governments can at least smooth their expenditure by borrowing in recessions, to an extent and at a low cost still denied to most private firms. The Giving Pledge and other high-​profile acts of selflessness by the super-​rich undoubtedly show that many of the world’s richest did not intend to amass such vast sums of money, cannot and do not wish to spend most of it on themselves, worry about the corrupting effects if they pass everything on to their children, and are determined that their fortunes should instead be used to assist the less fortunate around them, as well as ensuring that any ongoing businesses fulfil worthwhile missions and are ethically run. It does, however, create a glow that extends beyond the still relatively small proportion of the world’s billionaires who have made such empire-​dispersing commitments. In the shadow beyond that glow, most billionaires are still using their money to make more money, or presiding over a ‘family office’ designed to keep the funds growing for private uses, in perpetuity and with maximum tax efficiency. In charitable giving, as in the industries that generate the money to be given, a relatively small number labouring hard over the process are doing the work for many more who still prefer to receive. The political influence and public approval that high-​profile philanthrocapitalists can now attain cements their role as a higher circle that intersects those of political and corporate leaders. Charitable millions, even if amassed entirely for charitable purposes, can be ‘monetized’ into private profit or ‘politically capitalized’ into high public office. And the charitable millions mobilized by those with political pasts or connections are often inseparable from their donors’ (and their own) desire for future financial or political reward. Facebook founder and CEO Zuckerberg spent the last days of 2016 fending off suggestions that he would become the first new media magnate to run for US president, even as his dominant social media channel was accused of spreading the ‘fake news’ that aided the election of old-​style property magnate Donald Trump. Hillary and Bill Clinton spent the long 2016 presidential campaign studiously denying that their Clinton Global Initiative (CGI) was anything more than a global humanitarian concern, entirely detached from their political activity. But when Hillary’s election bid failed, donations to the CGI from various foreign governments promptly dried up:  supporting the suspicion that givers’ main motive had been not to help the world but to get a hotline to the next commander-​in-​chief (Sainato 2017). There was a corresponding post-​election spike in corporate and foreign government spending at Trump’s Washington hotel, now an anteroom to the White House, prompting the president to pledge its sudden profit surge to the treasury to avoid an early showdown with the Constitution’s Article 1 Section 9 ‘emoluments clause’ (Pramuk 2018).

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Public Handouts’ Hidden Role: Restoring Elite Cohesion To its enthusiasts, philanthrocapitalism represents the constructive despair of the corporate rich at getting government to do what they would like. It is also the attempt by some well-​ meaning members of the elite to redress an imbalance left by others. If a few possessors of great wealth now feel obliged to be absurdly generous, it is in part because many others have renounced the tradition of being generous in a small way. Whereas voluntary or charitable engagement in the community was once incumbent on everyone of more-​than-​modest means, some now feel obliged to do much more under the banner of philanthrocapitalism because many of their counterparts appear to be doing nothing at all. Christopher Lasch (1996) tersely sums up the sense of betrayal, by elites whose rising economic power had expanded their scope to fulfil broad social obligations but grievously eroded their commitment to do so. In the nineteenth century, ‘wealth was understood to carry civic obligations. Libraries, museums, parks, orchestras, universities, hospitals and other civic amenities stood as so many monuments to upper-​class munificence’ (2004: 4). The price of fortunes becoming more self-​made, and owing less to inheritance, is that the selves who made them feel less obligation to part with them. Worse, what is not given away surreptitiously is often splashed out on luxuries ostentatiously, waving a mockingly jewelled hand in the faces of the hungry passers-​by. Those with money to spare in the Victorian age were also influenced by ‘popular nineteenth-​century ideas that society was like an organism, each part of which interacted harmoniously with the others’ (Gettleman 1963: 314). But their greater willingness to redistribute income voluntarily is likely to have owed just as much to their close encounters with the grinding poverty and inequality with which the century ended, especially in the United States, an exposure that became more distant as suburbs grew and state-​funded welfare cleared the destitute from the doorways. The rich sense of giving (perhaps returning) favours to the wider society has declined, according to these critics, enabling the elite to get further elevated (and isolated) from the rest of society without any sense that this is wrong, or any inclination to bridge the divide. Two factors are identified (by Lasch and others) as especially important for delinking elites from their locality, and lessening their loyalty to it. Greater geographical mobility, enabled by new technology and perhaps encouraged by new taxes on anything that does not move, limits exposure to any one locality, or even one country; and new sources of elite wealth, coming more from assets they create than those they inherit, erodes their sense of obligation to ‘give back’ any part of their fortune. Implicitly, elites find it easier to distance themselves from the ‘mass’ as their numbers shrink, through the increased centralization of wealth and power. Even when they still spend time in their ‘home’ towns and ‘native’ countries, elite members do so at an ever increasing distance from other residents, acting not dissimilarly from colonists in alien territory. ‘They gladly pay for private and suburban schools, private police, and private systems of garbage collection’ (Lasch 1995: 47). Their escape from reliance on publicly provided services further erodes the sense of civic obligation, and strengthens elite preferences for low and avoidable tax. Conservatives who once acquiesced and even revelled in elites’ existence have turned against them on this basis. Noblesse no longer does enough to oblige, having become too

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absorbed in its own interests to do so. This may be due to incompetence: newly arrived elites, in particular, are accused of simply not understanding the public-​spirited ways in which great power ought to be exercised, or the wider benefits that ought to flow from the display of great wealth. But the more serious accusation is of a deliberate, calculated indifference to a common good which earlier elites respected and promoted. Whether their privilege is self-​made or inherited, elite members are accused of staying fixated on the accumulation and exercise of their own power and wealth. They omit to pay attention to the wider social impact of how they acquire it and what they do with it. And they resist the implicit duty, observed by previous elites, to match privilege with public duty, or to switch attention (once endowed with as much as they need) from the acquisition of privilege to its disposition for the greater good. Conservative recollections of more socially conscious elites are not purely nostalgic, because past elites’ community engagements did more than just clean up the streets they wanted to walk down, or salve their guilt about the ill-​gottenness of their gains. Elites’ provision of money, time, employment and administrative help for good causes in their communities helped ensure their continued rule in at least three ways. It motivated them to draw a line under all-​out profit pursuit, symbolically switching from the accumulative to the redistributive phase of their civic career. This ceded the strictly commercial ground to a younger, still ‘hungry’ group of industrialists and traders, shielding the business world from too much internal competition. Philanthropy also constructed a vital bridge between different factions within the elite. In particular, it enabled ‘new’ wealth to make friends and overcome tensions with ‘old’ wealth, by committing funds to highbrow cultural forms (notably theatre, opera, symphony orchestras, ballet and fine art) which those with fortunes from the aristocratic era were accustomed to consuming but could no longer easily sponsor themselves (or afford if tickets were not subsidized). And by committing funds to feeding, educating, nursing and housing the society’s more deprived members, philanthropy kept the low-​regulation, small-​government economy socially viable. Those who derived high incomes from land or the ‘refined’ pursuits of financial trading or professional administering often blamed the growing need for social provision on the damage done to workers and the environment by new industries –​whose donations were thus often viewed as necessary compensation for the darker side of their enterprise. The midlife switch from accumulation to altruism was made easier by historically high returns on savings and stock-​market investments, which enabled people of ultra-​ high net worth to live largely off their interest and dividend income, and to set up philanthropic foundations which did the same. Most were created when a ‘rentier’ life was still possible, and an ideal model for such foundations, which could finance meaningful annual expenditures through investment income and still retain (and grow) the original capital donated. The collapse in rich-​country interest rates since the early 2000s, arising initially from low inflation but intensified by depression tendencies after 2008, has at least temporarily weakened the link between income and wealth by subduing the income derivable from wealth. The original arbitrary and hereditary elites had to dispel the subversive idea that they had amassed wealth and power merely for themselves. From first ascent, they ensured

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those around them not only viewed them as the best but also believed there were all-​ round benefits from letting the cream rise to the top. The political elite of kings and emperors held power on behalf of the wider population, giving them law, justice, defence and social stability that would otherwise not be possible. The economic elite of bankers and business owners commanded wealth in the service of the whole community, giving them jobs and incomes (and products to spend them on) that would otherwise not be made. The military elite of admirals and generals went into battle for the sole purpose of extending and defending the political elite’s benign rule, and the economic elite’s collectively enriching commerce.

A Generous Conclusion Elites’ loss of middle-​class support, a key reason for (and amplifier of) the current generalized attack on them, is closely tied to loss of their within-​ group solidarity. Previously stable coalitions have given way to divisions within the top rank, as well as between its occupants and those below who aspire to join it. It has long been argued by historians on the left, and accepted by commentators on the right, that solidarity is characteristic of the ‘mass’ and inimical to those who rule over it. Working people seek unity in adversity through trade unions, mutual aid and savings societies, congregations and mass-​membership political parties. The world of bosses and executives is, in contrast, one of rugged individualism, the (nuclear) family unit being the largest that is compatible with competitive markets and commercial incentive schemes. In reality, divisions among individual workers (and peasants) have usually been as deep as those anywhere else in society, overcome only in the flares of conscription or nationalism unleashed by world war. Solidarity has been much more the province of professionals and well-​networked managers  –​and reached its highest development in the commonly cultured, shared-​ interested ranks of the elite. Countries that have achieved recent and rapid economic growth owe this, in part, to a close intersection of corporate and governmental ‘higher circles’. Corporate bosses, public bureau chiefs and military leaders share interests because they frequently swap roles. Governors and generals quit their public post to run a private firm, handing the state house keys to entrepreneurs who have already made their millions. Or they combine the two roles in one office, where constitutions permit. This fusing of public and private spheres, most evident in China and the Middle East, contrasts with the formal public-​private separation with which Europe and North America began their economic reconstruction 70 years ago. It avoids the social division and economic self-​harm that can occur when political and economic elite fractions push in different directions, as in Brexit Britain from 2016 and parts of Latin America for much of the past century. But it is instantly disruptive in countries accustomed to a separation of powers, as the Trump administration quickly discovered in 2017. And it comes to a sticky end when the merged political and economic elites take decisions that stop the flow of wider economic benefits –​as discovered by Japan’s higher circles when their economic boom became a bubble in 1990, and those of the eurozone when their signing-​away of monetary and fiscal sovereignty was exposed in 2008.

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The impact of the corporate ‘soft power’ assessed in this chapter, no less than the hard political and economic power examined earlier, highlights the extent to which societies’ fate depends on the coherence of their elites, and is derailed when these exhibit either too much solidity or too much fragmentation. Much contemporary turbulence can be traced to the membership and internal dynamics of elites, and the way they manage their connections to the rest of society. The composition and conduct of decision-​making ‘higher circles’ remains central to explaining how national and multilateral political arrangements remain stable for long periods, and why these are interspersed with bursts of sudden change. A principal complaint among conservative critics of today’s elites is that they have abandoned solidarity –​within themselves, and with the communities they preside over. Rivalries within elites have always been blamed for making them vulnerable, weakening their response to attacks from outside and encouraging the errors (of commission and omission) that invite those attacks. Yet elite division is hard to avoid if fortunes are largely derived from ceaseless competition for individual profit, especially if it is zero-​sum competition for a fixed amount of ‘rent’ rather than a battle to invest in new activities from which all can profit. Rent-​seeking was originally identified as a problem predominantly of low-​income countries, obstructing their development (Krueger 1974). Since the 1990s it appears to have spread to North America and much of Europe, as corporations cease to invest in innovation and expansion, and channel their cashflow into financial market investments, or remit their profits to the wealthiest by buying back shares (Lazonick 2014). In one of the most ambitious and optimistic contemporary defences of today’s invasive individualism, Thomas Franck (1999) argues that people across the world are now emerging (escaping) from the ‘imposed identity’ of groups into which social or political pressures previously forced them. Nationalism is the most ancient and powerful of these imposed identities. But its ultimate lack of foundation is exposed by nationalists’ need to define the group by what it is against (the alien other) rather than what it is for. Nationalism creates an inexorable ‘logic of fragmentation’ which could eventually reduce it to absurdity, breaking the world into 2,000 or 10,000 sovereign states (1999: 25–​29). For today’s individualists, society gets stronger when collective constraints and obligations are removed, equipping people better to work for their own advancement. To traditional conservatives, what has emerged is not an individualism that breaks out of traditional and repressive nationalist trappings, but a tribalism that amplifies the aggressive defensiveness of the small group and overthrows what was progressive about national identities. Elites have from this nostalgic perspective, in terms that gained currency in the 1990s, abandoned the outward-​looking values that build on humanity’s interdependence to seek common purpose within and across societies, and turned inwards to create their own small empires by breaking up that interdependence. A tribal ‘Jihad’ has triumphed over the multilateral ‘McWorld’, in the simplified but evocative terms of Benjamin Barber (1995). This shared interest in top-​rank unity means that elitism adapts badly to an age of increasing individualism and commercialization. The elite cannot afford such divisions because they turn majority opinion against it, undermining its ability to impose just laws and effective policies. A second, far more damaging consequence of division occurs when one elite fraction deliberately stirs

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up majority opinion in its battle with other fractions. For centuries, pretenders to the English throne added menace to their march on Westminster by recruiting the ‘London Mob’ to riot in their chariot tracks. Successful businesspeople who remit their profits into campaigns against the mainstream political parties –​such as Anthony Fisher at the Institute of Economic Affairs in the 1950s, Perot running for the US presidency in 1992, Arron Banks bankrolling anti-​EU movements through the UK Independence Party and Leave.EU, and Trump’s 2016 presidential run –​represent modern equivalents, in a less muscular age but no less authority-​weary age. In the end, elites close ranks and rediscover the need for solidarity, not least because their appeal for support from groups below then tends to set off a much wider protest movement, threatening their own personal fortunes and the political bedrock they intended to leave intact. But if the battle among elite fractions has been long, with too much mutual respect lost and too many fans flamed on the level below, restoring order and regaining elite cohesion can be a costly and lengthy process. An elite afflicted by greed, for money beyond what it needs or power beyond what it can handle, often struggles to suppress its appetite and regain the support of those beneath the banqueting table. This book has applied what we now know, of recent history and the forces that shaped it, to explain the unexpected political developments since the economic upheavals of 2008. It stops short of predicting what will follow. Elites invariably settle the conflicts that break out below through their coalition-​building battles. Right now, they have unleashed too many to be sure where the cards will fall.

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AFTERWORD: THE BEST AND THE REST A final way to summarize the preceding arguments is to contrast them with leading claims (and counterclaims) previously made about the Power Elite.

Pluralist Counter-​Case Past Claim As economies, populations and demand for ‘public services’ grow, making government a more complex and multilevel process, a Power Elite becomes impossible –​the ‘chiefs’ are forced to delegate and cede big decisions to a ‘Power Plurality’ of bureaucrats, regional and local administrators, and corporations running privatized services. Present Reality Elites’ span of control (the number whose lives their decisions and non-​decisions can materially affect) is not diminished by economic or population growth, and is increased by the concentration (via urbanization) of population, as well as by new techniques of communication and administration. ‘Higher circles’ can heighten their impact without increasing in size, by better routing and filtering the information flow they receive while lengthening and strengthening the channels of command that radiate from them.

Democratic Dilution Past Claim Power Elites are forced (in ‘modernity’) to yield to democratic control, sacrificing some of their power to avoid losing all of it. Present Reality Democratization strengthens the Power Elite’s legitimacy without reducing the impact of its actions, and power to deflect the actions of the governed rather than strictly reflect their preferences.

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Plutocratic Implosion Past Claim The Power Elite loses legitimacy when it ceases to discipline and defy the Wealth Elite, and succumbs to corruption or co-​optation by it. Present Reality Separation of Power and Wealth Elites was only artificially and momentarily imposed in the post-​war North Atlantic Treaty area, and has rarely arisen elsewhere at any time. The higher circles of the two usually overlap, a condition made sustainable while they maintain a creative tension between common and contrasting priority –​priorities that delivers wider-​population benefits –​and undermined if circles’ interests either converge or diverge too far.

‘Elite-​Distance’ Calibration Past Claim Public discontent with elites is proportional to the social and economic distance of the elite above the mass. Present Reality Elite distance is no obstacle to acquiescence of the mass and often helps to maintain it. Power and Wealth elites that stay a sufficient distance above the non-​elite can be shielded by their unworldliness and the impossibility of accountability, whereas elites may be shot down or burnt up when they fly too close to those below.

Middle-​Ground Moderation Past Claim Public discontent with elites reaches greater heights, and puts them under graver threat, when there is little or no ‘middle class’ to form a buffer between elite and mass. Present Reality Middle classes add stability when enough of their numbers form a coalition with the Elite, motivated by the promise of protection or of promotion into its ranks. They are comparably de-​stabilizing when they contain fractions that seek forced entry to (or ejection of) the elite, and pursue this with a switch from defusing to fomenting working-​ class discontent.

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Results Defuse Revolts Past Claim Power Elites can survive without democracy or accountability and defuse social pressures to concede these, if they deliver rising levels of prosperity and security. Present Reality Aware that increased prosperity and security –​as well as being hard to achieve –​have more often laid the ground for their overthrow, by combined middle-​and working-​ class action, Power Elites now survive by subduing public expectation of what they can deliver –​and deflecting discontent onto Wealth or Military Elites, the need to curb whose excesses justifies a more powerful political executive.

Gilt by Association Past Claim Power Elites are strengthened by close association with ‘cognitive elites’ that provide them with expert advice and cultural (celebrity) elites which confer and confirm their charismatic leadership. Present Reality The close association still exists, but is now one of opposition not mutual admiration. Power Elites rebuild their perceived effectiveness and legitimacy by renouncing false technocratic expertise as democracy’s true enemy, and parading superficial celebrity as a reason for respecting dour underlying power.

Media-​Manufactured Consent Past Claim Power Elites depend on restricted or biased (print, broadcast and social) media to maintain public support and defuse pressure to diffuse their power Present Reality A constantly shifting blur of mediated messages, forcing selective and superficial reading, is far more effective than one state-​directed narrative in concealing excess or misuse of elite power.

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Restorative Circulation Past Claim Elites are kept in power by a ‘circulation’ which gradually renews the membership through upward and downward mobility (in and out of the higher circles), or which suddenly replaces it by one powerful group overthrowing and replacing another. Present Reality Elites are now more easily renewed by creating powerful posts with frequent changes of holder. This enables clear-​out of effete or discredited elements without the instability that attends wholesale replacement of one fraction with another. As a result, slowdowns of circulation and cessation of mobility have become symptoms of the Power Elite’s resurgence, not its vulnerability. The lower incidence of major factional rivalries within the higher circles during these phases leaves them less well equipped to resolve them internally when they arise again and more vulnerable to episodes of instability when a disaffected elite fraction causes an existing redistributive coalition to break up or forms an alliance with middle-​or working-​ class elements aimed at changing distributional arrangements.

Elision with Establishment Past Claim Elites are most at risk when they fossilize into “Establishments,” which lose effectiveness and legitimacy as their membership becomes shielded from upward and downward social mobility, losing its capacity to renew. Present Reality Establishments are the Power Elite’s protective belt, charged with keeping it in check (through patrician values, regulatory disciplines and judicial reviews), whose peripheral members can be publicly dismissed when the Elite needs a scapegoat to atone for miscalculation.

Plutocracy-​Philanthropy Tradeoff Past Claim Elites lose legitimacy when they resist downward mobility –​clinging to power or wealth they no longer seem to merit  –​and when they become excessively greedy, failing to use privileged power and wealth to serve the wider social interest in a sufficiently obvious way.

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Present Reality The contemporary decline of downward mobility (blocking upward mobility as elites are not numerically expanding) is accompanied and assisted by an unprecedented show of individual and corporate elite philanthropy, as private donors and sponsors supplant public or state-​funded agencies on missions ranging from curing disease to firing rockets into space.

Redistributive Coalitions Past Claim Elites’ capacity to preserve their own interests while adequately serving those of the non-​elite often relies on coalitions with middle-​or working-​class elements. These promote conditions for economic growth, and diffusion of its benefits through progressive taxation. Present Reality Prolonged economic growth shifts the size and political alignment of different classes in ways that ultimately undermine the distributional coalitions which promoted them. Heightened aspirations among middle-​and working-​class groups (demanding access to the level above), and elite members’ resistance to redistributive taxation, are particularly corrosive for such coalitions. Phases of calm are usually causal of the storms that follow. The lower incidence of major rivalries within the higher circles, when containment of their tensions allows them to manage the classes below, erodes elites’ ability to resolve internal disputes when these next arise. They grow steadily more open to renewed fragmentation, more neglectful of the negotiation needed to maintain class coalitions, and more likely to spawn fractions that fan inter-​class friction in pursuit of their own gains. After first entrenching a Power Elite and allowing it to slip from public view, quiet times seed vocal moments when disaffected fractions deliberately subvert an existing alliance, and side with middle-​or working-​class elements that wish to redirect power and wealth. Despite its recovery from the financial crises, regional conflicts and public safety scares in the first decade of the twenty-​first century, the new Power Elite remains vulnerable –​to renewed clashes with a commercial elite that demands its subsidies while withholding its taxes, and renewed subordination by a military/​security elite that can now cite external threats online as well as on disputed borders. But recent economic instabilities are forcing a retreat from globalization and financialization that strengthens the role of national states, heightened fears of terrorism and ‘social harm’ prompt calls for closer monitoring of populations by their governments, and climate change may now require limits on individual actions that add up to bad collective results. All are developments that enable a small, socially remote and closely integrated group of to take far-​reaching decisions with scant accountability to those they profoundly affect. The New Power Elite emerges strengthened from the time-​embellished history of the old, and has learnt much from its mistakes.

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INDEX accountability viii, 4, 12, 14, 15, 16, 17, 34, 45, 197, 213 Acemoglu D. 180, 181, 182, 185, 195 advertising 27, 102, 189 of corporate social responsibility 218 Google dominance 216 spending on 218 advisers 8, 18, 19, 37, 42, 129 expert advisers 19, 55 special advisers 15, 17, 36, 55 affluent workers 64, 68, 86, 87, 88, 93, 94, 102, 160 Affordable Care Act 58 agencies 31, 58 and power 29 public agencies 20, 58, 118, 179, 212 state agencies 17, 52, 127, 189, 217 agenda-​setting power 16, 17, 27, 53, 113, 125 aggregative democracy 13 Allen, Paul 211 Amazon 213, 215 American Dream 130 American Statistical Association 21 anti-​capitalism 57, 132, 136 anti-​elitism x, xiii, 2, 3, 4, 59, 93, 106 anti-​establishment 104, 168 anti-​globalization movements xii, 57, 60, 151 Apple 213 Arab Spring xii Arab Uprisings 145 Argentina 98–​99 armed-​force planners and commanders 7 artificial intelligence 158, 159, 160 Ashcroft, Lord (Michael) 211 asset revaluation, financialization 161, 162 asset-​based welfare 203 Ataturk, Kemal 28, 37 authority 6, 13, 26, 29, 30, 32, 40, 66, 110 autocracy xii, 101, 126, 179, 183 and concessions 181 policymaking 197 automation 4, 17, 93, 152, 158, 167, 189 Aztecs 201

Bank of England 192 bankers vii, xi, 48, 49, 58, 78, 96, 110, 165, 173, 222 Banks, Arron 224 banks/​banking networks 48–​49, 51, 119, 122, 127, 155, 165, 166, 174, 192 central banks 14, 62, 142, 165, 176, 188, 204 central-​bank committees 28 global financial crisis. See global financial crisis regulaitons 150 regulation of 48 World Bank 146 Bannon, Stephen 49 bargaining 39, 42, 78, 94, 118, 120, 127, 164, 170, 184, 185, 186, 197 Barisan Nasional (National Front) Malaysia 177 Barroso, Juan Manuel 49 Bell, D. 93 Bellini, J. 93 Benn, Tony 214 Beppe Grillo 4 Berkshire Hathaway 211 Berlusconi, Silvio 119 Best, H. 62 Bezos, Jeff 213 big businesses 50, 51, 79, 104, 107, 114, 117, 121, 129, 133, 216 coalitions 97, 135 lobbying 116 subsidies 131 big government 58, 107, 145 Bismarck, Otto von 181 black-​market trading 36, 37, 98, 183 Blair, Tony 90 Blinder, Alan 152, 160 Bloomberg LP 212 Bloomberg, Michael 135, 211, 212 Bolivarian Revolution 201 Bolshevik elites 199 Bolten, Joshua 49

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Bonacich, P. 41 Bono 211 borderless money 160–​62 Bourdieu, Pierre 30 bourgeoises 67, 68, 180, 187. See also middle class BRAC, Bangladesh 217 Branson, Richard 213 Brazil 119 Bretton Woods (BW) agreement 2, 62, 111–​12, 114–​15, 117–​18, 134, 153, 155 Brexit, xiii, 1, 5, 19, 49, 57, 103, 104, 135, 168, 176, 204 Brezhnev, Leonid 200 Buffett, Warren 211 bullying 27 bureaucracies 15–​19, 42 bureaucratization 34 Burnham, James 18, 200 Bush, George H. W. 140 Bush, George W. 37, 140 Bush, Jeb 136 business leaders 27, 28, 32, 62, 95, 103, 109, 112, 113, 124, 131, 134, 135, 149, 156, 157, 160, 191 business owners 32, 59, 68, 96, 99, 101, 108, 118, 171, 222 businesspeople 36, 57, 78, 112, 124, 224 Cambridge University 167, 170 campaign funding 58, 101, 103, 125, 132, 135, 175 capital. See also cultural capital; economic capital; footloose capital; human capital; intellectual capital; social capital; symbolic capital -​based class 85 cross-​border movements of 153 post-​tax income from 139 capital income 207–​09 capital-​intensive products 152 capitalization 160, 162 capitalism 5, 29, 30, 64, 72, 77, 80, 113, 122, 131, 141, 165, 175. See also philanthrocapitalism disorganized capitalism 134 friction free 45 organized capitalism 134, 217 Carnegieism 32 cars, choice of 207 Carter, Jimmy 210 casual jobs 86

casualized labour 73, 93 celebrities 54–​55 Central and Eastern Europe (CEE), 183 central banks 14, 62, 142, 165, 176, 188, 204 central government 76, 79, 134, 194, 197, 198, 199 central-​bank committees 28 centralization 149, 194, 220 centrality networks 41 centrism 67 Chan, Priscilla 211 Chan-​Zuckerberg Foundation 218 charisma 32, 36 charitable third sector 112, 209, 217 charities/​charitable foundations 51, 155, 209, 210, 214, 217 Chavez, Hugo 36, 201, 202 chief executive officers (CEOs) 8, 10, 121, 166 Chilcot Report 7 China 2, 7, 98, 151, 165 communism in 180 Chomsky N. 189, 191 churches 55, 69, 111 circulation, of elites xiii, 6, 8, 61, 105 and democracy 199–​201 city-​states 67 civil institutions 171 civil society vii, 13, 51, 52–​53, 60, 109, 143, 205, 209 class analysis vs elite analysis 99 class coalitions 63–​65, 84, 183 agreements 65, 73 and democracy 183–​84 distributional coalitions 65, 67–​70, 72, 83, 85, 95, 97, 98, 101, 103, 117, 178, 187, 196 elites as creators and destroyers 65–​67 fragility of 95–​99 middle class and new service class 94 obsolescent coalitions 102–​03 class consciousness 65, 66 class divisions 83. See also specific classes dynamics 86–​88 in practice 84–​86 classes, as agents of change 63 Clinton Global Initiative (CGI), 219 Clinton, Bill 90, 140, 149, 211, 219 Clinton, Hillary 49, 90, 129, 149, 219 cliques 50 Cockett, Richard 117 coercion 8, 26, 27, 29–​31, 66, 180, 189 cognitive elites 55, 168 cohesion, elite 178, 220–​24

249

Index Cohn, Gary 49 collective action problems 117, 181 Colombia 4 colonies 2 commercial circle 51, 96, 207, 209 commercial elites 11, 114, 184 commercial globalization 154 commercial networking 35 commercial organizations 30, 127 commercial philanthropy 216–​18 stability of 219 commercial power 46, 49, 74, 107, 109, 114 commercial pressures 22 commercialization 223 communism 13, 64, 71, 76, 98, 180 and circulation of elites 200 and redistribution 186 competition, and circulation of elites 200 concessions, and democracy 7, 178, 179, 180, 181 conditioned power 26 Confederation of British Industry (CBI), 104 confirmation bias 21 confrontation 93–​95 consciousness raisers 210 conservatism 3, 4, 70–​75, 104, 199, 223 and democracy 178 and philanthropy 220–​21 corporatist 185 contemporary discontent 79–​81 contracts 10, 13, 27, 35, 54, 59, 72, 86, 88, 127, 158, 160, 164 cooperation 93–​95 co-​optation 93–​95 core members 4, 48, 62, 95, 96 core-​periphery divisions 95 corporate community 46 corporate culture 173 corporate directorships 37 corporate elites 65, 117, 156 corporate foundation (CF), 53 corporate governance 215 corporate philanthropy 212 corporate rich 50, 51 corporate social responsibility 51, 218 corporate welfare 209 corporations 17, 52, 120, 121 accountability 213 large corporations 12, 34, 47, 51, 52, 89, 120, 121, 130, 134, 144, 191, 193, 195 regulation of 193 subsidies 122

249

corruption viii, xii, 2, 4, 6, 7, 9–​11, 125 Cortes, Hernando 201 cost-​benefit analysis, from elite rule 3 counterparties 35 creative credentials 6 creditors 161, 184, 192, 193 Cromwell, Oliver 187 cross-​boundary linking 40 C-​suite cluster 46 cult status, and donation 214 cultural capital 84, 85, 86, 89, 91, 92, 101 Cultural Revolution, China 98 da Silva, Luiz Inacio ‘Lula’, 119, 175 Dahl, Robert 26, 74 de Benedetti, Carlo 135 decentralization 76 decision-​making theory vii, 28, 40, 42, 74, 87, 113, 125, 133, 178, 197 decolonization 2 deep state distress 36–​38 demand management 51, 76, 77, 108, 112 de-​materialized forms of capital 38 democracy 1, 34, 40, 60, 64, 65, 74, 126, 129, 177, 203 and circulation of elites 199–​201 and inequality 201–​05 and retention of fortunes 196 as consequence of elite ascendancy 195–​97 as elite protection strategy 179–​82 conservative explanation of 178 decision-​making theory 197 deliberative democracy 13 industrialized democracies 73 liberal explanation of 178–​79 managed democracy 177 national politics and international business 191–​95 political institutions and property 197–​99 radical explanation of, 178 reasons for conceding democratisation 177–​79 representative democracy 13, 123 and structural shiedling 28 universal franchise and elite expropriation 188–​91 via distributional struggle 182–​84 democratization 12, 92, 109 Democrats (US) 4, 72, 124, 134, 140, 141, 150, 163, 189, 196 Deng Xiaoping 98 de-​personalization 29, 33, 34, 35, 44, 71

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de-​politicization of economic policy 28 deregulation 62, 79, 95, 121 de-​skilling 93, 152 development of countries, role of power elites 68 dictatorships xi, 2, 4, 8, 181, 182, 189 and democracy 181 policymaking 197 and property disputes 198 digital enterprise 213 digitization 147 Dimon, Jamie 33 direct taxation 163. See also taxation Director’s Law 187, 196 discourse 30, 31 disorganized capitalism 134 disproportionate power 32, 54 Disraeli Benjamin 69 distributional coalitions 65, 67–​70, 72, 83, 85, 95, 97, 98, 101, 103, 117, 178, 187, 196 Djilas, Milovan 18 Dodd-​Frank rules 58 Domhoff, William 37 dominant ideology 131 donations 53, 125, 132, 212 righteous in 213–​16 Donovan, James 49 double-​edged education 166–​70 downward-​diagonal exertion of power 197, 198 downward-​vertical exertion of power 197 Draghi, Mario 49 Du Pont 117, 213 Duterte, Rodrigo 4 Ear Cardigan 6 Eastern Europe 18, 37, 41 circulation of elites in 200 one-​party system in 199 economic capital 84, 85, 88, 89, 90, 92 economic elites 5, 67, 98, 123, 125, 126, 157, 222 economic globalization 147 economic growth x, 4, 7, 19, 26, 72, 87, 91, 95, 98, 100, 117, 136, 157, 184, 185, 200 economic immigration 104 economic liberalism xii, 79 economic power vii, 60, 67, 69, 78, 117, 177, 184, 200 of middle class 185 economic stagnation 61, 101 educational inequalities 110, 166–​70 egalitarianism 61, 75, 138, 169, 175, 188 Egypt xi, 54 Elea Capital Management 215

electoral majority 72 electoral systems 72, 123, 145, 195, 196 electorates 14, 34, 52, 118, 203, 207 electronic networks 45 elite divisions 60–​63 elite fractions. See intra-​elite disputes/​fractions elite rule viii, ix, x, 2, 3, 6, 59, 63, 67, 71, 73, 76, 96, 97, 100, 177, 178, 182, 189, 190, 200, 201 elite schools and universities 92, 169 elite sports stars 1 elite-​class interaction. See class coalitions elite-​preserving institutions 61 Ellison, Larry 211 el-​Sisi, Abdel Fattah 54 elusive elite 88–​93 embourgeoisement process 93 emergency powers 197 emergent service workers 86 emerging countries 7 Emerging Service group 87 employers viii, 49, 70, 78, 79, 84, 86, 87, 90, 98, 101, 104, 118, 130, 143, 144, 153, 164, 187, 194, 201, 217 employment status 83 endogenous logic 62 Engels, Friedrich 76, 183 England 69 Civil War 69, 179 democracy in 179 power of landowners over monarch in 192 Enron 215 entrepreneurs 90, 98, 100, 108, 122, 127, 133, 134, 160, 166, 210, 213, 214 entrepreneurship 12, 105, 108, 118, 144, 193, 201 established middle class 85, 86, 87, 88 establishment 3, 14–​19, 36, 44 ethnic minority 92 Eurelitism 62 Euro currency 62 Eurocratic elite 62 Europe 51, 64, 67, 76, 80, 93, 165 European elites 4, 155 European Union (EU) 4, 115, 122 Brexit. See Brexit single currency experiment 4 Eurozone 145 exchange hierarchies 39 exchange networks 41 executive power 36, 87 exercise of power 25, 89, 111, 112

251

Index exertion of power 27, 30, 197, 198, 199 expert advisers 19, 55 experts xi 11, 20, 23, 28, 40, 55, 70, 74, 76, 191, 210 Exxon 213 Facebook 213, 215 fake news 190, 191, 219 Fama, E. 113 family offices 52, 219 Farage, Nigel 168 fascism 64, 97, 98, 180 and redistribution 186 federal authority 30 feed-​forward, and philanthrocapitalism 218 Fela Kuti 211 feudalism, 9, 68, 108, 192 and redistribution 187 financial capital 156 financial deregulation 49, 115 financial globalization 154 financial inducements 26 financial institutions 20, 48, 119, 156 financial sector 77, 119, 121, 122, 165 financialization 134, 160, 161, 162 and inequality 160–​62 financiers 2, 16, 57, 64, 117, 163 Firtash, Dmitry 218 Fisher, Anthony 117, 224 Five Star party 4 fixers 42 flex nets 41 flexians 41 footloose capital 145, 153 Ford Foundation 214–​15 Ford, Henry 113 Ford, Henry, II 214 foreign aid 217 foreign direct investment (FDI) 153 formalization 36 Former Soviet Union (FSU) xii, 127 coalitions between elites and middle class in 183 Foucault, Michel 31 France 58, 97, 101, 114, 145 franchises x, 2, 16, 18, 69, 78, 110, 150, 181, 188–​91 Franck, T. 223 free economy 104 free markets 17, 65, 74, 79, 103, 105, 108, 117, 123, 127, 142, 149, 159, 163, 193 free movement of labour 104

251

free trade 35, 62, 65, 79, 104, 114, 127, 146, 163, 176 and inequality 149–​55 Freeland, C. 124, 136 friction free capitalism 45 Friedman, Milton 73, 76 Front National 58 fund managers vii Gabriel, Sigmar 150 game theory 4, 65 Gates Foundation 211, 218 Gates, Bill 210, 211, 212 Gates, Melinda 211 Gazprom 119 General Agreement on Tariffs and Trade (GATT) 150 geographical mobility 31, 151 and de-​linking of elites from society 220 German Social Democratic Party 77 Germany 97 fascism in 180 one-​party system in 199 Gilens, Martin 123, 130 Giving Pledge 211, 219 GlaxoSmithkline (GSK) 212 global business 51–​52 global corporations vs nation states 155–​57. See also corporations global finance 33 global financial crisis 3, 48, 57, 73, 141, 145, 165 global political community 203, 204 global South 2, 155 global warming 4 globalization 4, 47, 93, 154, 159, 165, 167, 176 commercial globalization 154 economic globalization 147 electoral support for 147 financial globalization 154 and governments 191, 193 grievance 145–​49 and income inequality 191 and income volatility 195 and inequality 203 international agreements 191 paradox 203 and philanthropy 217 and power of national governments 194 and sovereignty 203 weakness of international regulation and law enforcement 194

25

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THE NEW POWER ELITE

Goldman Sachs Group 48, 49, 57 Goldsmith, James 127 Gonzales, Felipe 28 goodwill ambassadors 210 Goodwin, Fred 10 Google 213, 215, 216 Gove, Michael 19 government(s) 19, 40, 41, 52, 77, 78, 109, 117, 131, 165, 166 and business 109, 116, 193 central. See central government decision 196–​97 expansion of 109 forms, and redistribution 186–​87 and globalization 111, 191 limited 198 national interest 155 and non-​profits 53 ongoing rule-​setting power 116 and philanthrocapitalism 216 power of corporations over 191, 192, 193, 194 private property 197, 198 reinventing government 118 and robber barons 193 subsidize to private businesses 122 gradualism 180 Grandes Ecoles 167 grass roots protest 1 Great Leap Forward, China 98 Great Society reforms 51, 114, 134 Greece 62, 145 gross domestic product (GDP) 119, 125, 147, 152, 156, 182, 209 hard power 26, 27 monetary rewards 26 hard skills 169 Harris, Ralph 79 Hayek, Friedrich 26, 71, 73, 74, 76 hegemony 65 Herman E. 191 hierarchies 110 highbrow culture 85, 91, 92, 221 higher circles vii, ix, x, 50–​51, 55, 59, 62, 95, 96, 109, 114, 117, 126, 155, 164 Hobbes, Thomas 197, 198 Hofstede, Geerd 173–​74 Hollande, Francois 175 horizontal power 199 households xii, 7, 27, 62, 77, 78, 85, 86, 87, 96, 102, 103, 107, 122, 125, 139, 140,

141, 142, 144, 145, 147, 150, 159, 167, 174, 182, 195, 208 Howard, John 58 human capital 3, 91, 143, 144, 152 humanitarianism 208, 210, 211 Hun Sen 181 Hungary 57 Hutton W. 94 Icahn, Carl 211 Iceland 4 ideas merchants 55 idea-​swapping social exchanges 89 illegitimacy 14 illiteracy 2 immigration 57, 73, 103, 104, 147, 153, 176 imposed identity 223 income distribution 69, 109, 138, 142, 153, 163, 170, 172, 174, 188 income inequalities 139, 141, 146, 147, 151, 154, 155, 164, 171, 174, 208 and globalization 191 income redistribution xii incompetence 6–​9 Indian elite 7 indirect taxation 163. See also taxation individualism 182, 222, 223 individuals, network and power 31–​36 Industrial Revolution 69 industrialization 6, 27, 67, 68, 69, 71, 76, 77, 84, 110, 113, 120, 207 and circulation of elites 201 and political power of middle class 185 and power of government over business 193 and redistribution 187 democracies 73 industrialism and democracy 179–​80 and power 192 inequality 3, 109, 126, 127, 129, 136, 137, 139, 220 and concessions 180 and democracy 179, 201–​05 educational inequalities 110, 166–​70 and financialization 160–​62 and free trade 149–​55 and globalization 145–​49 income inequalities 139, 141, 146, 147, 151, 154, 155, 164, 171, 174, 208 and industrialization 70 qualitative widening 174–​76 and redistribution 162–​66

253

Index squeeze on lower middle class 142–​45 and technology 157–​60 toleration for 170–​74 and voting 188 widening of 137–​42 inflation xii, 28, 35, 115, 118, 120, 134, 166, 187, 221 influence, and money 130–​33 informants 8, 42 information and communication technology 157 information, access to 8, 202 inheritance taxes 35 insider group viii, 73, 93, 94 Institute of Economic Affairs (IEA) 104, 117, 224 institutional power/​money separation 111–​15 institutional pressures 22 Institutional Revolutionary Party (Mexico) 177 institutions and circulation of elites 200 and democracy 181, 182 networks 34, 46–​50 instrumental power 198 insurance 11, 76, 77, 122, 144, 145, 218 intellectual capital 90, 156 intellectual property 89, 132, 192, 212 intellectuals 7, 55, 71 inter-​corporate and inter-​personal network links 49 interest groups 123, 126 general 126 organized 123, 126 interest rates 9, 111, 114, 115, 128, 134, 139, 153, 161, 165, 166, 221 interlocking directorships 46–​47 international banking network 48–​49 international business, and democracy 191–​95 International Monetary Fund (IMF) 10, 115, 172 internationalization 114, 146 internet service providers 45, 215 intra-​elite disputes/​fractions viii, 59, 60, 83, 94, 96, 201 investment 10, 19, 53, 64, 71, 91, 92, 98, 102, 104, 119, 126, 143, 144, 156, 161, 162, 165, 191, 211, 218, 221, 223 banks 49 portfolios conrollers 51 public investment 117 re-​investment 98, 161, 200 returns on 89, 137, 161, 216 tax on 166 investment strike 73, 100, 101

253

invisibility of elites 1, 25 Italy 4, 58, 67, 97 Ivy League 167, 168, 170 Japan 156 Jensen M. 113 Jobs, Steve 213 John Doe files 132 Jones, Owen 16 journalists 55 justification, of elites as top of society 14 Kampfner, J. 133 Keynes, John Maynard 120 Khan, Shamus Rahman 92, 169 Kim, Jim 163 kitchen cabinets 17, 36 knowledge economy 90 Koch, Charles and David 59, 132, 135 Krugman, Paul 151 Kushner, Jared 58 labor unions 48 labour income 207–​09 and globalization 195 labour market deregulated 79 flexible 88, 93, 142, 144, 145, 164 international 104 labour movement 65, 73, 153 labour protections xii, 80, 95 labour unions 112, 128, 164 labour-​intensive products 152 Lachmann R. 61, 70, 185, 200 Lagarde, Christine 11, 33 laissez-​faire system 93 laissez-​nous faire 108 landowners 35, 66, 69, 78, 95, 99, 128, 150, 179, 183, 187 and merchants 67 and monarchs 180, 184, 192 and peasants viii large corporations 12, 34, 47, 51, 52, 89, 120, 121, 130, 134, 144, 191, 193, 195. See also corporations Lasch C. 220 latent class structure 85 elite 85 emergent service workers 86 established middle class 85, 86, 87, 88 new affluent workers 86, 87, 88, 93, 94, 102 precariat 86, 87, 88, 90, 94, 102

254

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THE NEW POWER ELITE

latent class structure (cont.) technical middle class 86, 87, 88 traditional workers 86, 87, 88, 93, 94 Lee Kuan Yew 181 left parties xii, 3, 5, 63, 75–​79, 80, 87, 130, 169, 182. See also specific political philosophy Lega Nord 58 leisure class 89, 208 Lenin, Vladimir 76 Leninism 199 Lewis, Michael 124 Li Q. 147 liberal democracy 57, 78, 183 liberal education reform 168 liberal elites. See metropolitan elites liberalism 31, 66, 67, 72, 73, 104, 127, 134. See also neo-​liberalism economic liberalism xii, 79 Libya xi loans 48, 123, 131, 144, 145, 165, 192 loans for shares 128 lobbying 16, 89, 115, 116, 117, 118, 125, 126, 129, 134, 163 Locke J. 198 Louis XIV, 200 low-​cost countries (LCCs), 151 lower middle class 59, 96, 97, 142–​45, 172, 174 low-​paid service class 86, 88 low-​wage labour 93 loyalty 129, 156 Lukashenko, Alexander 181 Lukoil 119 luxury 141 Lynd, H. M. 84 Lynd R. 84 Mackay, C. 71 Macron, Emmanuel 36, 175 majority opinion 182 and elite divisions 223, 224 managed democracy 177 managers 46, 53, 68, 76, 124, 134, 160, 164 shareholders’ authority over 121 top-​rated 8 manipulation 26, 133, 137, 181, 189, 196 Mao Zedong 98, 181, 200 Maoism 199 marginal labour 95, 145 market economy 74 and circulation of elites 201

market interventionism 93 market liberalization 93 market power 108, 112, 121 market society 44 markets 19, 44–​45, 74. See also free markets decentralized 76 globalized xi, 26 mass market 68 unfettered 79 unregulated 26, 134 Marx, Karl 76, 178, 183 mass viii, 59, 69, 70–​75, 77, 78, 79, 80, 92, 97, 98, 105, 160, 170, 179, 181 mass audiences 9 mass market 68 mass mobilization 69, 97, 101 mass protest 60, 70, 97 mass society 182 master-​servant relationship 94 Matthew Effect 10 Maxwell, Robert 135 May, Theresa 104, 168, 176 McGoey, L. 218 McNamara, Robert S. 112 Medecins sans Frontieres 217 media 72. See also social media control 189 and democracy 189, 190 and gap between immediate perceptions and wider-​world reports 190 old 190, 191 media bias 130, 191 median voter 182, 196 mediation 190 intermediation bias 190 meritocracy x, 1, 3, 7, 15, 34, 37, 38, 44, 63, 110, 167, 168, 170, 188, 208 metropolitan elites 1, 3, 47 Michels R. 77 micro-​credit 217 middle class 19, 68, 72, 73, 78, 79, 80, 87, 92, 93, 94, 97, 103, 142, 144, 146, 147, 148, 152, 184, 222 as business owners 68 and civil society 143 coalitions 63–​65, 72, 73, 94, 183–​84 as consumers 147 and democracy 178–​79, 182–​83, 185 economic power of 185 emerging 63, 98, 109 employers 78 established middle class 85, 86, 87

25

Index expansion of viii, 67 households 96, 144, 159 income and wages 140, 166 and industrialization 187 industrial-​owning 98 as land and factory owners 63 and mass 103 and working class 67 militancy 96, 100–​02 new 18 political power of 184, 185 professionals 78, 80, 97, 147 progressive distributional coalitions 67–​70 and redistribution 195–​96 revolution 187 and social stability 68 social polarization 185 tax base 68, 184 technical middle class 86, 87, 88 as a third force viii uprisings 100 voters 72, 73, 80, 104, 145 and workers’ movement 67 and working class 65, 70, 72, 95, 97, 160, 164, 172 militant middle classes 100–​02 military circle 52, 53–​54 military elites 222 military-​industrial complex 125 Mill, John Stuart 74, 170 Mills, C. Wright vii, 25, 26, 37, 50, 51, 52, 53, 54, 55, 125, 168 minerals-​rich countries 119 ministers, 8, 16 mixed economy 76, 79, 93 Mnuchin, Steven 49 mobs, mobilized 101, 181 modern elites 6 modern societies 10, 26, 30, 31 modernization 6, 18 monarchy 67, 69, 74, 179, 180, 184, 192 monetary rewards 26 Monetary Union project 62 money and influence 130–​33 oligarchy 126–​30 plutocracy 123–​26 and policy 109–​11 and power. See money/​power separation private money 3, 109, 155 public money 3, 10, 155 raw deals 133–​36

255

money/​power separation 107–​9, 110 21st century breakdown of 118–​23 institutional 111–​15 symbiotic separation 115–​18 monopolies 45, 117, 121 Moore, Barrington 64, 179, 180, 183, 185 Mosca, G. 183 M-​Pesa 218 Mugabe, Robert 202 multinational companies (MNCs) power over government 194 multinational corporations 2 multiple directorships 47, 131 Musk, Elon 47, 211, 213 Muslim Brotherhood 181 mutually assured destruction 51 Napoleonic wars 69 National League for Democracy (Myanmar), 181 national politics, and democracy 191–​95 national self-​determination, and globalisation 203 national sovereignty 57, 62, 203 nationalism 80, 96, 105, 130, 222, 223 nation-​states 61, 67, 79, 96, 111, 203, 204 and globalization 203 vs global corporations 155–​57 natural power 198 natural sciences 12, 20 natural scientists 210 Navidi, S. 33, 37 negotiations 40, 42, 111 neoclassical economics 73 neoliberal plutocracy 125 neoliberalism 58, 64, 79, 80, 93, 115, 185, 188, 189 nepotistic ruling 7 net neutrality 45 network economies of scale 43, 215 network society 43 networks/​networking 91 centrality 39, 48 commercial networking 35 electronic networks 45 and government 40 institutional networks 34, 46–​50 power in 31–​36, 38–​42 social networks 27, 35, 41, 43–​46, 91, 154 new class 18, 136, 180 New Deal 134 New World 84 non-​citizen labour 93

256

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THE NEW POWER ELITE

non-​coercive compulsion 30 non-​democracy 182, 202 non-​financial businesses 119 non-​financial corporations 122 non-​governmental organizations (NGOs), 210 non-​profit institutions (NPI) 30, 52, 118, 209, 210 non-​profit sector ix, 10, 18, 19, 52, 53, 115, 155, 209 North America 64 North American Free Trade Agreement (NAFTA), 149 North American Free Trade Area 204 Nye J. S. 26 Obama, Barack 135, 140, 168 Obamacare 58 obsolescent coalitions 102–​03 oil companies 116 oil-​rich countries 119, 128 oligarchy 126–​30, 156, 183, 201 Omaha Convention, 1892 2 one nation ideals 70, 94 one-​party system xii, 13, 177, 199 online businesses 215–​16 online channels 102 Open Society Foundations 212 opportunism 181 oppression 6, 165 optimism bias 21 order and circulation of elites 200 restoration of 103–​06 Organization for Economic Cooperation and Development (OECD), 139 organizational networks 34 organizations 30, 46–​50 growth of 34 and networks 32 organized capitalism 134, 217 organized crime 36 organized labour 78, 117 organized religion 111 outsider group viii, 3, 36, 57, 58, 73, 93, 94, 175 outsourcing 7, 116, 118, 146, 147, 148, 151, 152, 159, 216 Owen, Robert 113 Oxbridge. See Cambridge University; Oxford University Oxfam 217 Oxford University 167, 170

Page, Benjamin 123, 125, 130 Pakistan 8 Pareto V. 107, 183 Parkinson’s Law 159 past elites 2, 8, 11, 178, 221 Paterson, William 192 Paulson, Henry 49 pay scale xii, 10, 17, 18, 48, 64, 69, 70, 93, 112, 117, 121, 123, 142, 144, 146, 149, 150, 151, 152, 154, 158, 159, 163, 164–​65, 183, 193 peasants 64, 68, 97, 98, 101, 201 and landowners viii peers networks 40 People’s Party in the United States 2 performance-​related problems 6 corruption 9–​11 incompetence 6–​9 unfulfilled expectation 11–​14 unrepresentativeness and illegitimacy 14 performative elite 54–​55 peripheral members 95, 96 Perkin, H. 19 Peron, Juan 98 Peronism 70, 99 Perot, H. Ross 112, 130 person/​position distinction 31–​36 personalization, of protest politics 102–​03 Petrobras 119 Pfizer 212 pharmaceutical companies 116 philanthrocapitalism x, 51, 209, 210, 216, 217 and politics 219 restoring elite cohesion 220–​24 philanthropy commercial 216–​18 link between income and wealth 221 new and wealth 221 righteous in donation 213–​16 Philippines 4 Pickens, T. Boone 211 Pickett, K. 171 Piketty, T. 171, 172, 174, 196 Pinchuk, Viktor 211, 212, 218 pluralism 26, 29, 31, 44, 74, 77, 123, 133 plutocracy 58, 110, 117, 123–​26, 128, 130, 131, 134, 136 and policies 188 policy entrepreneurs 55, 210 political circle 51, 54, 207, 209 political directorate 50, 52 political economy viii, x, 84, 107

257

Index political elites x, 11, 13, 52, 61, 66, 67, 68, 97, 98, 108, 109, 114, 125, 136, 157, 183, 184, 222 political institutions 11, 68, 171 and democracy 197–​99 political leaders xiii, 27, 28, 32, 55, 95, 113, 121, 128, 131, 134, 191 political networks 154 political power vii, 30, 35, 41, 45, 57, 64, 65, 68, 74, 79, 89, 107, 108, 109, 111, 112, 114, 117, 124, 134, 137, 156, 157, 168, 173, 180, 196, 201 and democracy 177, 179, 180, 181 of middle class 184, 185 political professionals 9 politics, and philanthrocapitalism 219 populism xii, xiii, 1, 2, 5, 15, 191, 202 Poroshenko, Petro 120 portfolio investment 153, 166 Portugal 97 position 8, 31–​36, 38 Postman, N. 191 Potanin, Vladimir 211 poverty 2, 68, 69, 98, 111, 118, 129, 145, 148, 155, 163, 217, 220 Powell, Dina 49 power viii, 3, 9, 13, 39, 41, 57, 107, 125, 148, 149, 188 balance, and circulation of elites 200 and democracy 178 diffusion of 26, 30 disproportionate power 32, 54 downward-​diagonal exertion of 197, 198 downward-​vertical exertion of 197 effectiveness 26 hierarchies 39 horizontal 42, 199 inequalities 44, 127 and money. See money/​power separation of corporations over government 191, 192, 193, 194 of governments over business 193 and physical violence 27 without the powerful 29–​31 and removal of national barriers 194 softening of 26 upward-​diagonal exertion of 198, 199 upward-​vertical exertion of 199 vertical command links 42–​43 power distance 173–​74 power elites 5, 25, 66, 88, 91 higher circles 50–​51

257

invisible activities 26 social networks 43–​46 power, in networks positions over people 31–​36 strong, weak and old-​school ties 38–​42 powerless people 30 precariat x, 86, 87, 88, 90, 94, 102, 144, 145 preferential tariffs 127 presidencies 36–​38 primary healthcare 217 private business/​companies 14, 19, 40, 52, 90, 110, 112, 115, 118, 132, 157, 189, 217 and government 192, 193, 216 property rights 108 subsidize 122 tax base 9 private enterprise 19, 77, 102, 108, 110, 120, 123, 128, 150, 157, 216 regulation of 77, 113 restoration of 79 unfettered 105 private money 3, 109, 155 private property 67, 73, 77, 108, 192, 198, 202 and democracy 202 and governments 197, 198 of middle class 185 rights 108, 134 private sector 17, 53, 77, 99, 108, 111, 112, 115, 118, 119, 122, 123, 128, 156, 164, 169, 193, 198 competition 116 and government 52, 131, 192 investments 100 privatization 10, 11, 13, 18, 19, 53, 62, 79, 108, 112, 113, 118, 120, 123, 126, 127, 148, 154, 216 professional credentials 6 professional elites 19 professionalization 18, 88 and philanthrocapitalism 217–​18 professionalism 159 professionals viii, 13, 19, 25, 87, 100, 144, 147, 154, 160 medical professionals 116 middle class 64, 78, 80, 97, 147 networks 40 pay 183, 217 state-​employed 69 profit, and policy 109–​11 Progressive Democrats (US) 189 progressive taxation 166

258

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THE NEW POWER ELITE

proletariats 68, 75, 98, 178, 189. See also working class propaganda model 130, 131, 189, 190 and alternative activism 190 property and democracy 197–​99, 202, 203 disputes 198 intellectual property 89, 132, 212 market 16 private property 67, 73, 77, 108, 185, 192, 197, 198, 202 state-​owned 198 taxation 197, 198 property rights 35, 65, 108, 120, 129, 132, 134, 199 protectionism 59, 62, 69, 99, 160 protest politics, personalisation of 102–​03 provenance 3 public anger ix, 60, 155 public budget 108, 113, 123 public debt 28, 115, 118, 119, 120, 122, 123, 128, 142, 157, 163, 192 public goods 63, 76–​77, 109, 120, 208, 216 public mobilization 102 public money 3, 10, 155 public sector 18, 19, 52, 99, 110, 111, 112, 115, 120, 122, 123, 127, 144, 154, 157, 167, 169, 193, 212 public servants 36, 37, 112, 155, 197 public service xi, 9, 10, 12, 13, 14, 18, 49, 58, 59, 63, 65, 68, 69, 76–​77, 79, 90, 108, 110, 112, 118, 149, 174, 195 publication bias 21 Putin, Vladimir 7, 36 quantitative easing (QE) 165, 166 rationality project 11 Rato, Rodrigo 10 raw deals 133–​36 Reagan, Ronald 58, 140 real-​estate sector xi, 9, 16, 58, 65, 166 redistribution 69, 77, 95, 96 and democracy 180, 184–​88, 202, 203 and middle class 195–​96 coalitions 95 options, among three classes and the state 186 and voting 188 Reeves R. 163 reformers 1, 4, 18, 28, 71 reformism 78, 183

regulatory state 58, 59 reinventing government 118 re-​investment 98, 161, 200. See also investment rentiers 84, 139, 161 rent-​seeking 108, 121, 125, 187, 200, 223 replicability crisis 20 representative democracy 13, 123 re-​privatization 93. See also privatization Republican National Convention 129 Republicans (US) xii, 4, 58, 103, 124, 132, 133, 134, 135, 168, 189, 196 research-​funding organizations 210 retirement 112, 143, 144 Reuveny R. 147 revolution 59, 60, 80 and democracy 181 bourgeois 187 from above 199 right parties ix, xii, 63, 104, 169, 182. See also specific political philosophy righteousness, in donation 213–​16 robber barons 119, 193 Robinson J. 180, 181, 182, 185, 195 Rockefeller, David 212 Rodrik, Dani 191, 203 Rogoff, Kenneth 145 Rolls Royce 207 Romney, Mitt 130, 135 Roosevelt, Franklin D. 117, 134 Rosen, M. 168 Ross, H. 224 Rothkopf, D. 32, 37, 124–​25 Rousseff, Dilma 119 Royal Bank of Scotland 10 Rubin, Robert 49 Rueda, D. 73 rule of law 65, 127, 136 ruling class 44, 47, 60, 87, 178, 200 ruling elite 1, 26, 59, 74 Runciman, D. 172 Russia 2, 7, 101, 119, 156 communism in 180 Sainsbury, Lord (David) 211 Samuelson, Paul 151 Sandel, Michael 1 Sanders, Bernie 149 Santos, Juan Manuel 4 al Saud, Prince Alwaleed Bin Talal Bin Abdulaziz 211 Savage, M. 85, 87, 88, 89, 91, 94 Schwab, Klaus 33

259

Index science 19–​23 scientific principles 28 scientific research, mistakes 3 selective-​school environments 92 self-​censorship 188 self-​employment 79, 86, 144 self-​financing 68 self-​help schemes 74, 88, 210, 217 self-​made leaders 89 separation of powers 30, 112 shadow elites 37 shareholder value 113, 121, 215 shareholders 34, 113, 121, 122, 134, 212 authority over managers 121 powerlessness of 113 Shkreli, Martin 215 six degrees of separation 45 skill-​biased technical change 152, 157, 158 skilled workers 73 Slim, Carlos 211, 218 small and medium enterprises 52, 121, 135 small-​company bosses 64 smaller businesses 119, 127, 135, 163, 195, 204 Smith, Adam 16, 66, 120, 121 social capital 3, 38, 72, 84, 85, 86, 89, 90, 91, 92 social closure 38 social contact 85 social cost 88, 119, 215 social democracy 3, 26, 44, 67, 72, 73, 79, 80, 93, 95, 189, 203 social entrepreneurs 210 social inequality 38, 94 social interest 3, 5 social media xi, 177, 191, 215 and gap between immediate perceptions and wider-​world reports 190 fake news 219 social mobility 1, 37, 78, 85, 92, 94, 100 social networks 27, 35, 41, 43–​46, 91, 154 social polarization, and middle class 185 social responsibility 51, 53, 218 social stability 63, 68, 222 social stratification 66, 84 socialism 3, 64, 66, 67, 70, 72, 74, 77, 80, 95, 115 and redistribution 187 socio-​economic status 85, 92, 102 soft power 26, 27 soft skills 159, 169 solidarity 222, 223, 224

259

Soros, George 33, 212 South Africa 174 Spain 97 special advisers 15, 17, 36, 55 sponsors 19, 21, 57, 59, 73, 101, 115, 116, 117, 122, 125, 129, 132, 155, 188, 191, 193, 207, 217, 221 sports stadium winners 8 stagflation 2, 79, 118 Stalin, Jospeh 76 Standing, G. 94 state. See also public sector and democracy 181, 186 -​owned property 198 research funded by 109 status 6, 13, 42, 44, 46, 54, 55, 85, 91, 92, 96, 100, 102, 107, 110, 111, 144, 146, 151, 159, 188, 213 Steyer, Tom 214 Stiglitz, Joseph 149 stock-​market 162 flotations 109, 154 investment 221 Stolper–​Samuelson theorem 152 Stone, D. 11 strategic analysis 4 Strauss-​Kahn, Dominique 10 structural power 28, 36, 38–​42, 48, 131 without coercion 29–​31 stylized class 93 subordinates 29, 30, 34, 42, 159 subscription-​free internet access 45 subsidies xii, 18, 19, 65, 79, 108, 116, 122, 127, 131, 157, 191, 192, 195, 218 sugar industry 22 superclass 32, 33, 124, 154 superhubs 33 superior betweenness 39 superior closeness 39 superiority of degree 39 super-​rich 132, 136, 141, 195, 219 symbolic capital 38 symbolic power 30–​31, 92 Tapie, Bernard 135 tax havens 136, 139, 144, 156, 163, 194, 208 taxation 163, 184, 203 profressive 166 property 197, 198 withholding taxes 73 taxpayers 9, 18, 58, 111, 122, 184, 192, 193 technical middle class 86, 87, 88

260

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THE NEW POWER ELITE

technocracy 188 technocrats 25, 39, 55 technology 167, 176 disruptive 16 and inequality 157–​60, 165 technostructures 31 Tesla 47, 212, 213 Thatcher, Margaret 28, 58, 76 Tilly, C. 40, 41 Tocqueville, Alexis de 74, 75 too big to fail (TBTF) 57, 116, 122, 127 top-​down democratization theory 179, 180, 190, 202 top-​down transformation 60–​63 trade liberalization 73, 117, 148, 150 trade union leaders 8 trade unions 78, 79, 117, 118, 132, 134, 164, 180, 188, 194, 196, 222 traditional working class x, 86, 87, 88, 93, 94, 102 Transatlantic Trade and Investment Protocol (TTIP) 149, 150 transnational corporations (TNCs), 47 Trans-​Pacific Partnership (TPP), 149 tribalism 223 Trump, Donald 1, 5, 9, 12, 15, 20, 28, 36, 37, 49, 57, 58, 59, 60, 75, 97, 103, 104, 120, 127, 129–​30, 136, 149, 168, 175, 176, 191, 204, 211, 219, 224 and online media 190 election campaign (2016) 190 Trumpcare 58 trust network 41 Turing Pharmaceuticals 215 Turnbull, Malcolm 49 20-​40-​40 society 143 two-​speed economy 195 ubuntu 174 Ukraine 101 ultra-​high-​net-​worth individuals 59, 90, 133, 171, 207, 221 ultra-​rich 57, 137, 163, 172 underclass 64, 95, 144, 145 unemployment 73, 142, 159 unfulfilled expectation 11–​14 unique personal networks, global financial system 33 United Kingdom (UK) 19, 30, 78, 88, 97, 103, 114, 119, 129, 167, 176 Brexit 1, 5, 49, 57, 103, 135, 176

Department for International Development 218 Iraq invasion 7 latent class structure. See latent class structure new technologies and labour skills 158 19th century, redistribution in 187 public schools 169 “Team GB” sports men and women 9 and US, coalitions in 70 United Kingdom Independence Party (UKIP) 58, 104, 168 United Nations 2 United States (US) 25, 48, 80, 88, 114, 115, 119, 122, 125, 126, 128, 129, 165, 168 circulation of elites in 200 corporatist conservatism in 185 crossing of borders for business in 194 democracy in 183 economic growth in 185 federalistm 30 fixed exchange rate system 115 as global banker 48 media 191 robber barons in 193 and UK, coalitions in 70 widening of income differentials 138 unrepresentativeness 14 upper middle class 96, 142, 143, 163, 175 upward mobility 72 blockage of 87, 160 upward-​diagonal exertion of power 198, 199 upward-​vertical exertion of power 199 user-​generated content 214 vanguard elites 199, 202 Venezuela 145 circulation of elites in 201 venture capital 35, 90, 122 Virgin 213 vocational work 147 Volkswagen 212 Voslensky, M. 76 Vote Leave campaign 103, 104, 176. See also Brexit voters xi, xii, 1, 4, 13, 17, 18, 49, 58, 72, 80, 97, 103, 104, 124, 125, 129, 130, 132, 166, 176, 177, 188, 189, 191, 195, 196, 202 voting 67, 101, 130, 189 and redistribution 185 and democracy 188, 195, 196 and inequality 202, 203

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Index Wall Street 119, 165 Wall Street Crash 48, 141 warfare 62, 157 warlords 50, 51, 53, 197 Washington Consensus 115 wealth viii, 3, 9, 13, 32, 39, 41, 54, 57, 85, 86, 89, 107, 110, 111, 112, 124, 125, 128, 133, 137, 147, 148, 149, 160, 162, 188, 189, 198, 201, 220, 221. See also money creation 135, 155, 210 distribution of 124, 137, 139, 172, 188, 203 inequalities xii, 44, 127, 139, 171, 173, 174, 191 new and old 68, 221 and political power 68 redistribution 57, 123, 136, 162–​66, 202 Weberianism 32, 36 Wedel, J. 37, 41 welfare states 93, 173, 181, 187, 196, 203, 210 and globalization 148 Wellesley, Arthur 6 West, D. 135 Westcott, Chart 132 white collar profession 78 Wikipedia 215 Wilkinson, R. 171 Williams, J. C. 64, 172 Wilson, Woodrow 189

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Winters, J. 125, 130 work aversion 208 working class 64, 67, 70, 73, 77, 87, 93, 94, 95, 98, 100, 101, 140, 143, 146, 159, 183, 189. See also affluent workers coalitions 64 households 125 insider group viii, 73, 93, 94 and middle class 65, 67, 70, 72, 95, 97, 160, 164, 172 mobilization 180 outsider group viii, 3, 36, 57, 58, 73, 93, 94, 175 quiescence 70, 99, 101 re-​expansion of viii, 93, 94 shrinking of viii, 93 traditional x, 86, 87, 88, 93, 94, 102 uprising 100 voters 72, 73, 80, 97, 104, 145 World Bank 146 World Economic Forum, Davos 32 World Trade Organization (WTO) 149, 150 Yousafzai, Malala 211 Yunus, Muhammad 211 Zuckerberg, Mark 211, 215, 218, 219

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