What should we call our socio-economic system?
What should we call our socio-economic system? Liberal democracy? Democratic capitalism? Capitalist democracy? Market economy? Something else? Before answering, let’s consider some empirical facts.
1) Financial wealth, i.e. ownership of productive resources, is extraordinarily concentrated throughout the world. The top 5% in the United States controls 72% versus just 7% for the bottom 80% and it’s more or less the same elsewhere. It’s about where it was during feudal times.
2) Ownership is further concentrated into vast corporate conglomerations that dominate oligopolistically every major industry on the globe.
3) Ownership of these firms is spread so widely it’s become completely divorced from control. The owners lack a basic knowledge of “their” firms and, due to “portfolio” diversification, they really don’t even care how a particular “investment” performs versus another. It’s the broader sector or the “market portfolio” that counts. We find then an ownership that doesn’t control, doesn’t understand, and really doesn’t even care.
4) Control of mankind’s productive capacity is in reality exercised by a vanishingly small number of elites sitting at the pinnacle of the major institutions.
In a comprehensive survey of corporate control, Stefania Vitali, James B. Glattfelder, and Stefano Battiston have found that just 737 actors, directly or through affiliates, exercise control over 80% of the total value of global trans-national corporations. The authors identify a core of 147 TNC’s, a “super-entity”, that, “via a complicated web of ownership relations”, has “almost full control over itself”. 75% of the core are financial institutions.
David Rothkopf, a former managing director for Kissinger Associates, is a well connected insider. His book, Superclass: The Global Power Elite and the World They are Making, offers some useful facts about this point and I think it’s worth extracting a few quotes. “The combined net worth of the world’s richest thousand or so people… is almost twice that of the poorest 2.5 billion”. “A global elite has emerged over the past several decades that has vastly more power than any other group on the planet” and it can realistically be reduced to “6,000” in number. “The world’s pretty small. It’s just twenty, thirty, or fifty people worldwide who ultimately drive (an) industry or sector” (quoting Stephen Schwarzman, chief executive of the Blackstone Group). “There is a group of a few thousand people among the corporate elite who effectively control perhaps $100 trillion, two-thirds of the world’s assets”. “Bill McDonough, vice chairman of Merrill Lynch and former president of the New York Federal Reserve Bank, agreed that a few hundred people are the real ‘movers and shakers’ in global finance”.
Rothkopf notes that the business and political elite form a basic unity. “The board of Morgan Stanley includes former White House chief of staff Erskine Bowles, former National Economic Council chair Laura Tyson, and former SEC chief accountant Donald Nicolaisen. The board of Citibank: former CIA director John Deutch and former treasury secretary Robert Rubin.” And the list of course continues outside the US. “Former British prime minister John Major joined the Carlyle Group after his term in office and former Peruvian prime minister Pedro-Pablo Kuczynski joined Credit Suisse First Boston.” It’s not “simply because one group influences another. It is because there is only one group”.
5) Looking beyond the tight circle of elites, we find that, despite the incredible productive potential of TNC’s, majorities everywhere live in insecurity or poverty. Go to any major city in the world and you’ll find it dominated by poverty, crime, and police. And you’ll discover that virtually all in the middle class constantly fear the loss of their jobs and the depravity it would bring.
To sum up then, ownership of mankind’s productive resources is massively concentrated and the actual control of them rests with just a few thousand individuals. The fruits of human knowledge, productive capacity, and technology aren’t being shared with the vast majority on earth despite an overwhelming need and demand. These aren’t value statements, they’re empirical facts.
What should we call this system?