In this blog and two future ones, I want to examine in detail the theory of the political elites, or what is also called "Elite theory". This is done to provide an overarching perspective on how our modern, unbalanced economy and finances came to be and provide substantive support and arguments for those participating in the Occupy Wall Street movement. It will also show the peril we are all in, at the hands of an entrenched elite who will stop at nothing to either see us all extinguished, or - more likely - become their vassals and serfs.
Economics Professor Herman Daly of the University of Maryland once noted that the most formidable problem in our society is the judicious sharing of its resources. This sharing is an ethical problem, that demands solution. In this context of judicious sharing, Daly's view (and my own) is that - while people are not created equally- the Earth's resources exist to be shared equally. Indeed, the Utilitarian economist Jeremy Bentham once noted that the happiness of a given society is maximized when its utilities are maximized. That means ALL of its people, not just a few at the top, able to exercise their talents to their maximum potential. In the words of Bentham:
"The more nearly the actual proportion approaches to equality, the greater will be the mass of happiness'
Because resources, i.e. money, ensure one's talents can acquire the choices to be used in the most able ways then, Bentham argued, the greatest happiness is assured when the distribution of the resources to support the development of talents are nearly equal. If 10 million men or women wish to become fulfilled artists or poets, then they can, or if they wish to be writers, or builders.
No one "owns" the Earth's resources (nor do a few have claim to most of its capital), since they're all temporarily on loan to us. This carries over to whatever wealth is acquired by humans in extracted resources. If that wealth is disproportionately in a few hands, then it follows that the effect is inimical to the welfare of the human community - be it city, state, nation or globe. So long as some have resources, while others lack, this discrepancy undermines long term human welfare.
If resources are squeezed so only a tiny fraction can benefit, then the mass of people suffer, and the society as a whole becomes woefully inefficient, and even pathological. Communities are then paired off against communities, and people against other people as each becomes a threat to the other in an economy governed by a diminishing resource pie.
Unfortunately, as fate would have it (or the planning of cynical elites!) this model of efficiency was supplanted by another, a much more virulent mutation which I blogged about earlier and which I suggest readers re-read to prepare for the subject matter of what is to follow:
Thus was born the perverted basis for modern economics under the authorship of Vilfredo Pareto whose most famous quotation to support it is:
"Assume a collectivity made up of a wolf and a sheep. The happiness of the wolf consists in eating the sheep, that of the sheep in not being eaten. How is this collectivity to be made happy?"
Pareto's conclusion is that the only happy ending was for the wolf to eat the sheep. If the collective had ten wolves and 200 sheep, the only happy ending was for ALL the sheep to be devoured. In this way utility was maximized and its efficiency. The sheep would get their fill of the grass while the wolves held out for a time, but in the end all that sheep meat would be consumed by the wolves. The smaller set of the more powerful faction of the collective owned and merited the killing and eating of the larger ("mass") set. They owned them and merited their meat because they were (evolutionarily) more powerful than the sheep, and could destroy them whenever they wished anyway. But.....they realized.....better a fattened sheep than a skinny one!
This template translates directly to the basis for Elite theory. That is, only a very select few - an extreme minority - in any given society - often belonging to the most elite classes, are fit to govern that society and moreover, partake of the bulk of its resources and wealth. In a word, the elite are also the "elect" - predestined by the process of alleged "social Darwinism" to attain the pinnacle and be served by the masses in the society. These masses, in addition, to be kept docile must be forced to adhere to an economic efficiency model that redistributes their resources to the elites.
Thus, it is no surprise that Elite theory was developed in the 19th and early 20th centuries by none other than Vilfredo Pareto along with his Italian elitist compadre Gaetano Mosca. Their theory arose directly in response to the most dangerous threat to the elites and their power: classic redistributive Marxism as embodied in Karl Marx' work Kapital.
By way of overview, Marx postulated a theory of labor expropriation by which all those who labored in whatever form were made poorer and expendable at the hands of owners and their capital. If the labor value sold as a product was L, and V is the labor value embodied in the production of the item, then the surplus value S is:
S = L - V
Let us say, as an illustration, that a craftsman working for a company is paid $10 an hour to make beautiful mahogany chairs by hand. He takes 10 hours to make one chair, thereby imparting a discrete labor value of 10hr x $10/ hr = $100 into the chair, invested in his blood, sweat and maybe tears. The chair is then sold at retail for $1,000 by the company. Then the surplus value S is:
S = $1,000 - $100 = $900
Hence, in this light, V is the paid labor and S is the unpaid labor. The amount of labor expropriated is therefore equal to $900.
Meanwhile, the rate of surplus value, or the rate of exploitation is:
In this case: S/V = $900/ $100 = 9
Pareto and Mosca saw this postulated unpaid labor as a direct threat to the elites at the time, a supreme motivation of some of the masses to instigate for redistribution by allocating more S to the worker's V via higher hourly wages. They reasoned that something had to be done to quash this idea in its infancy, and so they developed their Elite theory. The risk they saw was that Marxism as defined would deliver too much proportion of resources to the masses by way of compensating what was originally unpaid labor. After all, according to Elite theory and the Pareto Distribution basis, the mass of people had to be kept poor if the few elites were to maximize their own efficiencies of wealth and resources. It was a zero sum game, after all, though later Elite theory propaganda would try to say zero sum didn't apply if the little sheep just got off his duff and worked harder! Then, he might get more money or resources. (But which extras could be confiscated by an uneven tax code.)
Therefore, if the company or managerial hierarchy had to part with a fraction more of its surplus value S, they might not have that extra capital to re-invest in ways that undermined the workers' labor. Perhaps, to invest in machinery to manufacture the chairs and get rid of the workers altogether. Or, more likely today - to use an investment bank that would leverage the workers out of existence via a massive merger with a larger company. The idea thus had to be NOT to make the masses richer, but to make them poorer. Poor masses couldn't make trouble, since they would have to work longer and harder to even get the bare necessities. And they'd likely have precious little time to stick their noses into politics.
Pareto and Mosca also saw the need at the time to develop a massive economic propaganda industry to sow memes that would destroy Marxism. They suggested use of the term "evil", or "inhuman" and this was improved and enhanced as other elites took up the message. For example, Friederich von Hayek later waxed on about the "road to serfdom" as being deprived of the freedom to spend. Hayek, like other capitalists and purveyors of Elite theory, saw that if rampant consumerism could be incited and promoted, Marxism's tenets would become redundant. A person enmeshed in whatever his consumerist fancy desired, whether a fresh bottle of rum or a new ipad, wouldn't give two mites about some long-haired radical commie and his theories of labor!
The sheep would be made happy if it could graze on whatever grasses it fancied to it's heart's content, never mind it was en route to the wolves' mouths. Give the consumer whatever baubles capital could support in its multifaceted production, whether ipads, HDTVs, cell phones, or x-boxes and he'd happily stay planted on the work-spend treadmill and tune out all the blabber on how he was really a slave. Nor could he be made aware (being kept in false consciousness) that as the world's population increased it would become essential to: 1) dilute his food via expanded quantity (hence less quality) and 2) increase the rate of exploitation so that he'd have to work longer hours or go into more debt to afford those baubles of the tech age.
Next: The Malthusian element and the Elites Adjustment