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Capitalism as Oligarchy

September 2, 2016

Time passes and it’s hard to believe it has been three years since my last post. I hope all former readers and commenters are doing well.

I’ve devoted this hiatus to writing a book centered on some of the basic themes that have been brought out in this blog and I’m happy to announce it has finally been released. Capitalism as Oligarchy seeks to build on the works of Jeffrey Winters (Oligarchy) and Michal Kalecki and offers a somewhat different and I believe important approach to understanding our social world. Since it will provide the grounding perspective for future posts, I’d like to outline the basic idea here.

Throughout the entire 5,000 year history of recorded civilization, and for thousands of years before that, every socioeconomy of any size was a hierarchy in which a tiny minority possessed virtually all material power and thereby ruled over the vast majority. It’s no different today as conservative estimates report that the bottom 90 percent of the global population possesses just 12 percent of wealth. Similar asymmetries exist within all countries.

Despite the deep historical continuity of inequality, our system over the last couple hundred years is almost universally defined and analyzed as ‘capitalism’. This is a significant problem for a number of reasons. It imposes unneeded complexity onto a power structure that’s inherently simple, it presents the system as relatively new and we therefore lose sight of its tight link with the past, and it hides the core hostility that’s the essence of power.

As capitalism, the system is presented as one of ‘private’ ownership in which the primary motive, the “Moses and the Prophets”, is the unending accumulation of monetary profit. Inequality is a mere by-product as is the massive poverty and insecurity that reigns everywhere. But if we think of the system as ancient inequality, i.e. oligarchy, things appear completely different. It’s no longer one of ‘private’ ownership but ‘concentrated minority’ ownership. The systemic logic becomes straightforward. The motives of the propertied minority are self-evidently the aggressive defense of wealth and luxury consumption. Its prime risks arise from others competing for power and, existentially, the propertyless population. And from these, we can deduce two fundamental dynamics that must apply wherever inequality exists—I call them diversion and suppression.

Diversion is the process by which the oligarchic minority costlessly diverts human effort into satisfying its motives. Some ways this has been historically handled is through slavery, serfdom, and indentured servitude. It’s managed today through what I term the diversion-profit loop by which whatever is monetarily expended by the oligarchy is subsequently returned via profit. This is the essential meaning of the Kalecki profit equation (Profit = Capitalist Spending) and from it we can see that profit isn’t the systemic motive but is rather a mere operational detail that permits the oligarchy as a class to costlessly achieve its motives in a monetary based socioeconomy. Through Kalecki, we also discover that the population can never be profitable for, excluding ever-expanding debt, workers can’t spend more than they’re paid in wages.

The other dynamic is suppression, the means by which inequality is enforced over the population. It’s the ongoing imposition of suboptimal living standards, dependence, insecurity, and poverty in service to the vital wealth defense need of sustaining the structural hierarchy. It’s evident in every nook and cranny of the system but is easily overlooked because so many of us accept the ideologies of finance. Examples include corporate pricing power achieved through consolidation, the suppression of unions, the ideology of worker competition, and a host of mythologies on cost, taxation, public debt, international trade, inefficiencies of collective action, individualism, and so on. Suppression is a crucial dynamic of oligarchy as inequality can’t exist without a subservient population. It unambiguously explains why it is that despite our immense productive capacity, the conditions across the planet are what they are. Poverty and insecurity flow directly from the fundamental logic of the system.

I’ll stop here. For those interested, a more detailed summary of my argument can be found under the Capitalism as Oligarchy tab where I’ve posted the book’s Table of Contents, Preface, and Introduction.

  1. peterc permalink

    Hi Jim,

    Just wanted to say that your book makes for an impressive, fascinating and sobering read. I am finding the bold, macro-level thinking highly insightful and refreshing, and fitting considering Kalecki is one of the influences in your work. I am still digesting it all, so will refrain from commenting further for now, but you definitely have provided plenty of food for thought.

  2. Greatly appreciated Peter, especially coming from someone with such a strong background!

  3. Hi Jim

    I am the Magpie (a regular at Peter Cooper’s blog and, like Pete, I also write from Oz). I wrote the post you commented on recently (thanks for your comment, btw).

    Although I haven’t read the rest of the book itself, I read with great interest the Preface and Introduction to your book (thanks for the link). Having said that, judging by what I’ve read, I find myself in substantial agreement with much of what you write (perhaps I should mention here that I consider myself a fairly orthodox Marxist).

    In the About page, you wrote:
    ”My political philosophy is egalitarian and I consider the massive poverty and insecurity that’s endemic in both ‘developing’ and ‘developed’ countries to be a gross affront to any just moral code.”
    That, however, caught my attention. There are places in the Preface/Introduction where you express roughly similar ideas (Tolstoy’s quote, for example: “Property is the root of all evil”, p. xi).

    Like yourself, I too, find poverty and insecurity to be a gross affront to my moral code. But it’s not the immorality of the situation that drives me. Much more importantly, the realisation of that immorality does not drive the people that benefits the most from it, as you wrote:

    “I portray the system as deeply hostile to the majority and therefore illegitimate. While this may generate disagreement in some quarters, I don’t think the essential facts are disputable. In the private posh confines of the country club, no oligarch would deny that great inequality has spanned all of civilization or that it’s a form of rule. Nor would he refute the proposition that his core motives are the defense of his high position and luxury consumption. He would instead be proud he’s part of a grand aristocratic tradition and that his cunning, skill, intelligence, good looks, or family inheritance has put him in the ranks of a nobility going back millennia. His greatest enemy? This he also wouldn’t deny—the democratic spirit that rejects his claim to power.” (p. 9)

    That’s a very good point. I can offer two examples of people who admitted pretty much the same: John C. Calhoun and Friedrich Nietzsche (although Nietzsche wasn’t himself an oligarch, properly). In fact, one finds similar views as early as in Plato (which, I’m sure, will not surprise you and fits in well with other part of your thesis).

    In their more honest moments, all of them would have agreed with everything you wrote in that passage; they would have added, however, that it’s the existence of an oligarchy (or ruling class, or elite, or aristocracy), thriving costlessly on the efforts of others, that allowed civilisation to flourish and to create science, philosophy, art, culture.

    My point is that morality is a pretty plastic concept. It’s a bit like beauty: it’s in one’s eyes. A lot has been written about it and there is no final agreement. I am sure you find it strong and compelling, but as an argument, it is less than decisive for many.


  4. Magpie, Thanks for posting such a thoughtful comment.

    I completely agree that ‘morality’ is in the eye of the beholder and that the typical oligarch would defend his claim to power by pointing to the beauties of civilization, etc. I actually offer a quote of Nietzsche in a later chapter to the effect that society should only be the “scaffolding” for a “healthy aristocracy”.

    Despite the normative comments you quoted, I’ve tried throughout most of the book to concentrate on presenting what I see as the facts of our situation rather than argue about their morality. The great advantage in thinking about our system in terms of oligarchy is that it makes the moral issues far clearer. The facts are damning in any culture that values democracy and I think ‘capitalism’ would face a significant legitimacy crisis if a majority ever came to view it in this way.

  5. Jim, Just read your note in the New York Times, October 31, 2016. My comment says about the same. Looks like we are of similar minds… Readers of Wallerstein, Soddy, Randall Wray, Bill the Australian, Warren Mosler, etc. But we’re micturating directly into a wind tunnel, I’m afraid. Insanity is the norm. I’ve never read Kalecki, but his name comes up a lot at meetings of the Levy Institute.

  6. Hi Kerry, Glad to hear we’re of like minds! To understand capitalism (oligarchy), we definitely need to know Kalecki. The Levy Institute is a valuable resource.

  7. Magpie,

    I’d like to follow up on what you said about substantially agreeing with what I wrote in the preface and introduction from the perspective of a fairly orthodox Marxist. My argument is materialistic and class based and therefore I think it holds to the spirit of Marx. But a major part of the argument is targeted against the approach of orthodox Marxism.

    This is because I believe OM makes what is inherently simple obscure and confusing. It focuses unduly on monetary profit and ‘accumulation’ and brings in unhelpful esoterica like surplus value and the labor theory. Its insistence on focusing on the ‘capitalist mode of production’ severs what I take to be the most important element of our system – its indelible link with all of recorded history. By making things obscure, OM plays directly into the status quo ideology that ‘economics’ is complex and difficult.

    To understand and explain our system today I believe we need to drop much of OM and focus on the simple basics. Our system is and has been for 5,000 years the minority control of material power – inequality. The basic motives seem self-evident and unchanging as long as inequality exists – wealth defense and luxury consumption. The entire systemic structure must always be hostile to the majority population, not because wages somehow reduce profit – they clearly don’t given they are both a cost and a source of income – but because the ‘masses’ are always the prime threat to minority power.


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