Nearly all men can stand adversity, but if you want to test a man’s character, give him power.
When Bear Stearns went into its tailspin in March 2008, it was made clear not only that today’s global markets operated far beyond the reach and understanding of national regulators but also that those same regulators were no longer in the position that they once were to manage crises on their own. Only with the voluntary cooperation of the private sector’s most important leaders could the financial bloodletting be stopped. When, at the time of that crisis, Jamie Dimon stepped in to lead the acquisition of the remaining assets of Bear Stearns and facilitate a “soft landing” for the dying firm, it echoed an intervention more than a century earlier when J.P. Morgan himself procured over $65M in gold for the US federal government to help stem on a run on financial markets.
Some have asked if such volatility means that the group is not really a class. But I have relied on the definition of class that means a group that shares common characteristics. Their interests do not always align. In fact, great differences can come between members of the group. But they are in fact linked by their great power and the fact that members of this group, or important subsets of this group — like members of any economic class — often have aligned interests. The transient nature of the group does not in any way diminish the reality or the significance of its existence, particularly if you consider that, for example, when power is linked to position or an institutional affiliation, different individuals play roughly identical roles, acting as they do in the interests of the institution and shaped as they have been by their roles within that institution. That does not diminish their power, but it does mean that it is appropriate when considering the world’s most powerful people to include whoever is the CEO of ExxonMobil or Deutsche Bank, regardless of who that individual may be.
On the one hand, the leaders of the financial world, despite their history of booms and busts, of greed-driven bubbles that burst and crushed the lives and hopes of countless innocent bystanders, were able to use their influence to ensure that new financial instruments and many evolving global markets could be, in their words, “self-regulating.” They said ignore history and trust us. When an argument is so indefensible on its face and it succeeds, it is testimony to the power of those making the case. That alone would be impressive. However, the stark power of the group is even better illustrated by the fact that when markets did come up on the shoals of greed, mismanagement, and minimization and misunderstanding of complex new risks, the same financial titans who told government to stay out were able to persuade government in many cases to step in and pull their fat out of the fire. The same people who gave you Too Global to Regulate gave you Too Big to Fail.
And while changes are likely afoot and 25 years of a default impulse to “leave it to the markets” (market fundamentalism) are coming to an end, any study of the history of elites show that while overreach regularly dogs those in power, efforts to rein them in usually amount to invitations to a new group to assume, and often later abuse, that power.
God is on everyone’s side… and in the last analysis, he is on the side with plenty of money and large armies.
Power is, of course, hard to quantify. Wealth is often a source of power. Position regularly translates into power. Perhaps the most ancient source of power is the ability to project violent force. But sometimes power is grounded in subtler things, like access or ideas. There is no single or universally accepted metric for power, so a certain amount of subjective judgment is inevitable. Determining who has it and who does not is made more difficult because some of the most influential among us commonly mask their power or use it infrequently. What is more, only a very few people have the sort of international power that is the subject of this book. Many of those we are accustomed to thinking of as powerful actually have very limited impact in a global sense. Formidable as they may be, they are figures of only local or national importance.
The age of inherited lifelong power is largely behind us, and for most members of the group influence is transitory; to truly be a member of this superclass one has to hold on to power for at least long enough to make an impact — to enter or affect the world of other members of this superclass — a period of a couple of years or more.
Both were superclass aspirants, but because the financier was content with merely being rich and the congressman was a better policy maker than he was a politician, neither ascended to the first tiers of global influence.
Kissinger’s office, and indeed his life, was like a revolving door for the superclass. Kissinger was an extraordinary education, brilliant and charming and a magnet for fascinating people and discussions. Whether he was relaxing at the vacation home of the CEO of Asea Brown Boveri, or hosing a private dinner for the CEO of Gazprom, Kissinger was the master of every occasion. (And always knew just how many courses to serve at each meal.)
To have reached the top of the pyramid, it stands to reason that many of the members of the superclass are exceptional. They are often brilliant, full of energy, and creative. They are also lucky and most of them know it. Many are rather happy. Money, which nearly all these elites have in abundance, doesn’t make you happy. But, as Woody Allen once said, “Money is better than poverty, if only for financial reasons.” It is hard not to prefer the vision and energy of the best among them to the hidebound narrowness of many of the national political opportunists who sometimes seek to score points by attacking them.
Any city, however small, is in fact divided into two; one the city of the poor, the other of the rich; these are at war with one another.
There are at least two Swiss soldiers and policemen in Davos for every delegate who attends the meetings.
The concept of what the political scientist Samuel Huntington called “Davos man” — the global citizen, the leader for whom borders were increasingly irrelevant — described a new leadership class for our era.
When founded in 1971, the organization that would become known as the World Economic Forum had a narrower mission. It was focused on convening European business leaders for a discussion of that continent’s rather uncertain economic fortunes.
In 1971, Europe was still more the self-anointed seat of civilization than the “modern” Europe of more modest, less imperial, more multilateralist inclinations.
My education was absolutely colored with the Western worldview of those times, with classical education built on the presumed superiority of European ideas and the history and cultural contributions of other regions seen as exotic and secondary.
In Contemporary Civilization, we read the writings of everyone (male and white) from Plato to Descartes to Darwin. Somewhere around Max Weber and other analysts and critics of modernity, the curriculum got more varied, with different professors assigning different texts, as it was harder to agree on what qualified as essential reading.
They often crossed sectors; from top roles in government to top roles in business, from the White House cabinet to the boardroom, from military commands to politics, from one position of great responsibility to another. Thus, they created a kind of interlocking directorate for the USA.
Since Eisenhower spoke in 1961, technological innovation has not only fueled America’s unprecedented growth but it has empowered people in new ways; it perhaps even helped to bring down the US’s cold war adversary, as the rise of the information age made it impossible for a close society to compete.
At the time of his speech the US military budget exceeded the total net income of all US companies. Today, the defense budget exceeds $425B.
What happened to us, that we walked through the Davos party and know more people than when we were walking across the village green in the town we live in?
Despite differences in their places of origin, the Davos crowd now had more in common with one another than with those who did not live at such a rarefied altitude.
Something powerful is happening among the powerful. There have always been national elites. There have always been connections between the elites of different countries, but they were typically “foreign relations” — connection between distant power centers, discrete alliances between sovereigns. For several decades now, though, a new community has been forming, at the same time that economies are spilling across borders, global entities are proliferating, and the world is, well, flattening.
The issue of elites is a historic issue. It is not particular to these times. I think ever since the creation of mankind, whether you believe in Darwin or in the revealed religion, there has always been an elite that seemed to be in charge of things in one way or another.
It poses a threat to culture and tradition and national sovereignty. For these people, Davos is much more than a business conference; it is an enemy camp: the place where the generals of globalization plot their conquests. Because each culture has so diligently knit together the concepts of country and of God, over thousands of years, those who look beyond country or see a community of interests that transcend those of their nation are suspected of being very nearly blasphemous, or are associated with dark forces.
In Mills’ era, at the height of a global struggle between capitalism and communism, when Socialist views were considered intellectually fashionable in American academia because they represented the most direct way to assault the establishment, the study of elites was not just an imperative of social science, essential to understanding how societies functioned. It was also an examination of the relevance of a core idea of Marxism, that of class.
In short, Mills’ study of elites in America at midcentury was tacitly an exploration of the dynamics that lay at the heart of the world’s great dilemma of the moment: the choice between capitalism and communism — between a system that subordinated everything to the will of the state, which was asserted to be a steward for the greater good, and one that identified the will of the individual as the central driver for good within a society.
It is also irresistibly interesting merely to discover who among us are the most successful and powerful, and how their lives are different from our own. It wasn’t only the despair of Shakespeare’s beset Richard II that led him to say, “For God’s sake let us sit upon the ground and tell sad stories of the death of kings.” We have always had a particular fondness for stories of kings. History itself is the story of those with the most — the most to lose, the most to gain, the most power, and the most glamour.
Elites are masters of their eras, but they are also metaphors for them. They illustrated what is valued, how success is earned, and how power is garnered and wielded. They also reflect what flaws we tolerate in those at the top and what flows we find unacceptable. Indeed, elites reveal how we see our own societies, and throughout history we have created elaborate mythologies to justify and preserve the systems they built or ran.
I think there are two levels in Davos, today more than ever, because I have been coming here for years. The one is the business level. I don’t fully understand it. But they have real money. They have power. It is part of their reason for coming. But there is another level, a second level, that is the human level. And it is a bigger and bigger part of the meeting. It creates a kind of constructive self-conscious. Who are you? What about your identity? Are you your company? Are you your country? Are you something else? Are you yourself? And how do you integrate being yourself and being what you do? It enables us, at the end of the day, to get past the political discussions, the business discussions to what we really believe as human beings. It lets people get acquainted more and more with the human side. So we have an elite meeting, yes. But not to regulate the world but to see each other.”
The people were, in fact, so important that the system should have kept him, just a writer from Brazil, out of such a gathering altogether. He felt humiliated at being so ignored and out of place.
Morgan ponders the request and then says, “Let me offer you something equally valuable,” and het puts his arm around the fellow and walks him around the exchange floor chatting with him, thereby sending the message that the young man was well connected. The point being that the very fact of the existence of status creates a system whereby those who have status can transfer it to those around them and determine who is elevated and who is not. Power can be meted out by choice.
The officer replied, “Is there a God? What happens after we die? Is there life outside the planet earth? Why do people hate each other? Things like this. Philosophical questions that you have as children and that we still have as adults.”
Coelho’s point, he explained, was this: We want to believe in a system. We want to believe in higher powers. Chaos and randomness make life too threatening, too hard to understand, too easy to see as meaningless. So as human being, we seek order in the universe. As he spoke, I heard more resonances with what Mills wrote as he pondered why people viewed the question of the existence of elites in different ways:
The view that all is blind drift is largely a fatalist projection of one’s own feeling of impotence and perhaps, if one has ever been active politically in a principled way, a salve of one’s guilt.
The view that all of history is due to the conspiracy of an easily located set of villains, or of heroes, is also a hurried projection from the difficult effort to understand how shifts in the structure of society open opportunities to various elites and how various elites take advantage or fail to take advantage of them.
To accept either view — of all history as conspiracy or of all history as drift — is to relax the effort to understand the facts of power and the ways of the powerful.
For many, like Coelho, order comes from a belief in God and a divine plan. Others, because they are uncertain about supernatural higher powers or because they seek to supplement them, find some comfort in the idea that someone is in charge here on this earth. Indeed, we accept power in others because it brings order with it, suggests that we are not random clouds of subatomic particles appearing and bouncing off of one another and disappearing without rhyme or reason. In times of great change and uncertainty, such as the epochal transformation we are now experiencing as we enter the global era, there is an even greater need to seek out such order. This fundamental need has benefited ambitious individuals throughout human history, as they have translated it into acceptance of their power in the name of providing order and leadership.
But in a world where commercial aviation is fraught with stress and delays and a host of security risks, more and more of those who can afford the private aircraft option are seeing it not as a self-indulgent luxury but as a risk-management tool — a necessity of the global era.
When these select few — those who consider first class a downgrade — arrive at the airport terminal, they do not wait in lines. They are not buffeted by rude airline personnel or security staff, or delayed by an unending stream of circumstances beyond their control. Bags are whisked to aircraft. Arrival arrangements are made by concierges. And in moments, without passing through security, with less fuss than it takes to enter a typical office building today, they are airborne on flights whose routes they determine, whose menus are catered to their needs and wants. If they don’t like turbulence, they direct the pilots to fly around it. If they need to conduct business, most of these aircraft have high-speed Internet connections and satellite phone service. They need never leave the “office” — or their comfort zones — as they circle the globe.
As uncommon as — by definition — they are, we are all familiar with the extraordinary among us.
In almost every human pursuit, levels of talent and accomplishment seldom ascend in smooth, small increments. In sports, for example, the levels of proficiency are more like the quantum levels of an atom, representing substantial, geometrical leaps in capability. The gap between the average amateur and the top amateurs — between the weekend tennis hacker and the ranked college player, for example — is enormous. The gap between top amateurs and average professionals is typically very great as well. The gap between average professionals and those who can play at the top level of their sport year in and year out is yet again exponentially greater. And finally, most strikingly, there is the chasm that separates the top ten or twenty in any sport, and the once-in-a-generation best of the best who appear in ones and twos sprinkled through history. The pattern persists from sport to other human pursuits, from art to literature to politics to business. These are the few who define the direction for their professions and their eras. They are emulated, become beacons, and very often serve as drivers or catalysts for change. In every era, in every pursuit, there are clusters of such individuals atop their fields — some well-known, some invisible — who dominate the worlds around them.
Each one is one in a million. Of six billion people on the planet, there are approximately six thousand of them. You can name them in every field of human endeavor.
There are, according to conservative estimates, more than 1,500 with annual sales or assets in excess of $5B.
Although imperfect, direct corporation-to-country comparisons of sales vs. GDP provide some striking illustrations in terms of economic clout: ExxonMobil is bigger than Saudi Arabia (the world’s 25th largest economy), Wal-Mart ranks between Indonesia and Poland, and GM tops Thailand.
For purely illustrative purposes, take all entities with sales or GDP in excess of $50B. One would be hard-pressed to argue that these are not among the most powerful economic units in the world. Remarkably, of this group — 166 in total at the time of writing this — only 60 are countries, and 106, a substantial majority, are companies.
In 1983, the top 500 companies had revenues equal to 15% of global GDP; today that has more than doubled to over 40%.
To give you a further sense of how similar concentrations of control carry over into the realm of individual investors, the richest 10% of Americans owned nearly 85% of all stock in 2001, with the richest 1% of Americans controlling 1/3 of America’s total wealth.
So a picture begins to emerge that suggests that power on the planet is not only concentrated, it is extraordinarily concentrated. There are people who are on top and people who are not — and, among those who are on top, the few at the very top have hugely disproportionate influence.
While making direct comparisons among multiple studies poses some difficulties, a pattern clearly emerges. Within most elites there are higher tiers of elites; within most concentrations of wealth or power, there are those who represent an even greater concentration. Or to put it another way: When seeking to understand elites, always look for the elite within the elite.
Among the world’s roughly 200 armies, there are only between 30 and 40 with weapons of mass destruction. There are fewer than 20 with any kind of missile capability, only 9 with nuclear weapons capability, only 6 with roughly 500K or more troops, only 3 air forces with more than 1,000 planes, and arguably, among these, only one that is truly capable today of waging modern global warfare. Despite its recent tactical debacle in Iraq, the US military remains a quantum level above all others.
There are perhaps 4,300 religions in the world today, but fewer than 20 have more than 1M adherents each, and only two have more than 1B each.
For the members of the superclass, there is a commodity more precious than gold, silver, gems, or oil. It is access. The importance of access flows from the fact that the one thing neither money nor power can buy is time.
Given those frustrations with the shackles of time, it is only natural that schedules are meted out carefully and that time is shared only with those who can offer the greatest returns. Sometimes such returns are business or financial deals or political inside information. Other times, they are status or prestige. In any event, it very often means choosing meetings with others who are highly empowered, who can make decisions directly for themselves, who can mobilize significant resources — and whose status is a validator, a demonstration in itself that the meeting is worth having. There is a broad perception that meetings among elite peers are more useful also because few others can understand the position the leaders are in. Aides close to Bill Clinton reported that over time he became very close to other leaders like Tony Blair and Boris Yeltsin because they were the only people who truly understood the issues he was facing. Unlike his staff and those around him, who for the most part depended on his approval for their jobs, these few men and women emerged as valued peers and sometimes, as in Blair’s case, confidants.
Access and exclusivity go hand in hand, and many aspects of the superclass lifestyle speak to both. Flying in private aircraft, for example, saves precious time and enables small, private meetings to take place in an exclusive setting.
“The world is pretty small. In almost every one of the areas in which I am dealing or in which we at Blackstone are looking at deals, you find it is just 20, 30, or 50 people worldwide who ultimately drive the industry or the sector.” He noted that his business networks are augmented by the networks he makes serving on the boards of artistic institutions. They afford many opportunities to meet with other similar inclined members of the elite and to open new relationships, because, just as in business, the world of top artists is interconnected.
As with any such complex world-scape, cartographers or census takers can tell only part of the story.
Summers had suggested that the reason the most economically successful members of society are getting so much more might be that the world is actually becoming more efficient. Unfettered markets are doing their job. Isn’t it possible, he was positing, that overachievers are now finally able to capture their fair share of returns given their relative talents, productivity, and contribution of value to economic outcomes?
In fact, for all its progress, Chile is much like a number of other countries in the developing world, in that it has a handful of elite families and individuals who dominate. It is true of the oligarchs of Russia, the men and women who run Korea’s chaebol, the leading family-owned companies of the Philippines and elsewhere in Southeast Asia, and here in successful Chile. A close Chilean friend who rose up from a privileged corner of that small society once describe Chile to me as being “not so much a country as a country club.” The clubs includes a few key families. “That’s the inner circle, and to get anything meaningful done you need some of them on your side.”
He, like the others, is as comfortable on Wall Street or in global markets as any business leader you would meet anywhere in the world. There is nothing the least bit provincial or disconnected about this group, as there might have been about most Latin business giants, say, 20 or 30 years ago.
Clearly, this is a central problem for us, and a vitally important one for our future. There is much work that remains to be done on this front just in terms of framing the problem, even before we begin to tackle it. What are the causes? What are our real options? What are the cures that will not make the disease worse? We need to come to grips with problems within our education system, with infrastructure, with job creation, with really opening our economy.
The group that has the most power within the Chilean business community is just too comfortable in this 21st century, and the ones who are uncomfortable, the SMEs, don’t have that much influence. Many of the charter members of the “country club” see no need to change the membership rules.
Markets are marvels in many respects, and the growth produced by free-market policies has benefited billions. But markets don’t have consciences and would sooner leave behind the sick, the untrained, and the aging. Markets seek efficiency, and this often means consolidation of resources and power, economies of scale, and considerable human costs. Market-marketism does not deal sufficiently with the inefficiencies, weakness, and failings of markets at producing the kind of just society that is at least as important as a goal as fostering prosperity. The genius of the approach is that it suggests good will ultimately come to all in much like the promise of heavenly rewards that enabled clerical elites to collaborate with political elites throughout history as a way of promoting stability in the face of widespread suffering among the poor. There has to be a better way.
We have come a long way, here in Chile. We stabilize the economy. Controlled inflation. And we then opened up. We embraced privatization and trade liberalization. But the secret is that we did those things because they were, comparatively speaking, the easy things for us to do politically. Fixing the core problems within our society — like the inequality issue and finding new ways to stimulate growth — those are much harder. The necessary reforms, in other words, may not be politically possible, let alone popular.
The elites embraced privatization because they had the assets that allowed them to borrow and to invest and to own the newly privatized entities. They promoted deregulation because it gave more latitude to the business leadership and diminished the role of government leaders. They welcomed market opening because, as owners of large entities, they were the most likely to benefit from new capital flows and the increased trade opportunities.
But when it came time to address ownership structures that favored majority shareholders and diminished the rights of minority shareholders, or that produced more competition, those in power dragged their feet. And as trade liberalization connected them to the world, they began to recognize that keeping labor costs down in their countries would help them attract investment capital. Their interests actually grew less and less aligned with those of their workers and more tied to those of the investment bankers and others who could offer them big paydays or accelerated growth (read: wealth creation) for their companies.
This was possible largely because the term “free market” — a bumper sticker description of the complex ideas described among those of Williamson’s Washington consensus — is typically a misnomer. There are always rules: those set by governments, like tax structures and incentives, often tuned to promote the development interests successfully promoted by segments of the business community.
Among these were issues of a culture that maintained many elements of class structure even in the face of reform. It is an awkward subject to raise because culture is tied up in national identity and religion and even race, and thus is kind of radioactive subject in development circles, seldom spoken of in polite wonk society.
Introducing market structures and approaches without fostering a culture of entrepreneurship, or one that promotes genuine equality of opportunity and rights, will produce “illiberal markets” — systems that will appear to be free markets but will be rife with inefficiencies and injustices. The result will most likely foster destabilizing forces, political and otherwise, and will in any case constrain societies from achieving their full potential. Any such system requires effective legal frameworks that are actively and fairly enforced and, to date, often missing. In the global sphere, in the transnational or supranational realm, oftentimes they have never existed.
Globalization’s soft underbelly is the imbalance between the national scope of governments and the global nature of markets. A healthy economic system necessitates a delicate compromise between these two. Go too much in one direction and you have protectionism and autarky. Go too much in the other and you have an unstable world economy, with little social and political support for those it is supposed to help.
If you toss the term “inequality” into a room full of international economists or policy wonks, it can have the same effects as tossing a rattlesnake into a room full of normal people. All sorts of mayhem ensue. Fierce arguments break out along fine academic divisions. Inadequacies of statistics are cited. Accusations about motives fly. High horses are mounted. Epithets are thrown.
As far as I can tell, there are schools of very distinguished, prize-winning economists who assert via extremely well-substantiated academic papers that global inequality is (1) increasing, (2) decreasing, (3) stabilizing, after increasing for some 200 years, (4) the inevitable result of well-functioning markets distributing rewards to the deserving, and / or (5) a threat to society that will undermine and invalidate our assertions about the progress of civilization.
Throughout history, the best path to becoming a member of any era’s dominant elite was to be the offspring of a member of the preceding generation’s dominant elites. One of the central reasons for this stems from the two most important allies of the elites of every era: ambition (or as it is referred to in some pursuits, greed) and inertia. The drive that brings people to the top is typically matched by a desire to hold on to the position, power, and possessions that they have acquired, and to pass them on to chosen successors — typically family members. With this in mind, elites have most often tried to accumulate the tools of maintaining power that they feel will be most valuable. These could be armies, titles, or laws to secure their position and keep others from seizing it - everything from rules of inheritance and concepts like primogeniture (passing assets to the oldest male child, perceived as the offspring with the best chance of defending the inheritance) to rules limiting the rights of minority shareholders.
Children raised in an atmosphere of power are educated in its uses in ways that those who are distant from it cannot be. They are taught tricks and given catchphrases to use to help maintain the public’s goodwill or cooperation (“noblesse oblige” comes to mind), and they inherit networks of contacts and often a support system of staff and / or institutional affiliates who can assist them and who, as part of the existing establishment, share their desire to maintain the status quo. It is a natural system and one that has helped produce and maintain the class structures that have dominated social hierarchies since the dawn of time.
In fact, as we shall see, the structure of the global superclass is much less stable, much less formal, and much less formalized than that of national or other elites with deeper historical roots. This is as much a result of enhanced mobility and democratization of societies as it is due to the fact that this new elite has had less time to set up mechanisms to ensure its status.
Among the mechanisms by which people have attempted to make permanent their acquisition of power and property is the development of institutions that can outlive individuals. It is unlikely that those who helped develop the idea of the first corporations could imagine a time when they would be somehow uprooted from the geographical stakes that connected them not only to countries but also to the laws of those countries. Even just a few decades ago, the vast majority of companies primarily did business in one nation because establishing and maintaining connections to more distant locations was so costly and complex.
It has been said that an institution is just the lengthened shadow of a single individual. This may certainly be true in cases where institutions are new and the product of one individual’s special efforts or in which governance process place a substantial portion of decision-making authority in the hands of a single individual. But one of the great strengths of modern institutions is that often they represent a core network that extends out beyond the legal limits of the institutions’ formal structure to include other organizations and individuals with which it deals, buys, sells, collaborates, and otherwise interacts.
This has lad some to suggest that the great power of institutions is impersonal and that individuals who run such institutions do not have special power in their own right.
Perhaps the most important of these have to do with asset allocation, the central decision-making responsibility of any leader, and agenda-setting, the often underestimated tool that as we will see is perhaps the single greatest unifying perquisite of the superclass.
Historically, the definition of being rich was having the resources that enabled one not to have to work for a living. Certainly, in a practical, day-to-day sense, that definition still passes muster. But there is rich and then there is oh-my-God-there-are-countries-with-smaller-bank-accounts rich.
Big companies and national governments have the ability to exert this kind of influence as well: BP has directed hundreds of millions to American universities to help develop the next-generation biofuels, while political officials in China have committed more than $180B to “clean energy” projects. In a similar way, Gates and Buffet use their foundation money to direct resources to NGOs and academic institutions, and thus have a profound impact on the direction of public health research and program development worldwide.
Or get the leadership in major companies or Wall Street firms to encourage donations from employees. Those firms then become the top sources of funding, increasing the leverage of their leadership among candidates and eventual officeholders.
Clearly, the richest would not be drawn to politics if politics did not offer them additional power above and beyond that which they had already acquired through financial or other professional success. Winning (or seizing) political office, or having the ability to influence political decisions, or having a base of political support directly empowers individuals. The source of the power is multifold. It is the power of the institutions that one has leadership within. It is the power of allocating the resources and setting the agenda for those institutions. It is the power to influence the creation of new laws and regulations, which offer the ability actually to institutionalize key ideas. It is the power of the history and national identity associated with those institutions. It is the power that comes from having quantifiable support among the people of a country or region. Government service is seen as legitimizing, as service to the community, with high posts also seen as the capstone of a career (although they often provide additional access and networks that can offer further opportunities for profit postgovernment). This leads directly to many top business leaders taking massive pay cuts to work in government.
The most primal of all sources of power, the power of force, has fallen on comparatively hard times. To some extent it is a victim of its own success — or excess. The 20th century saw the marriage of science and warcraft produce devastation on an unimaginable scale.
Having the ability to user force, while a source of some leverage, is nothing like having the will to use that force. Will is the greatest of all force multipliers, as suicide terrorists regularly demonstrate. In today’s world, the threat of force remains a potent source of power, but only when the threat is credible. Given that this is rarely the case among the world’s most empowered nations, where the economic disruptions caused by war are often too great and where the toll of modern warfare is too high, those who are most likely to use force become those who have the least to lose.
Paradoxically, in most circumstances in today’s world, force is reverted to more often than not by the weakest (although this does not preclude a return to great power confrontation at some point in the future).
Fuerth and the others recognized that Milosevic was hardly a leader who worried about the plight of his people. Rather, he ruled the country with and for the benefit of a small cadre of his closet associates — his network. Instead of bombing the standard targets, therefore, Fuerth and the group advocating a new approach recommended destroying the factories and assets of those closest to the ruler so that they would feel the pain and transmit their dissatisfaction to the barbarous head of state the US was trying to depose.
This is not simply because wars are fought to change the ruling order. More often than not the changes produced by such upheavals are wholly unexpected and unintended. For example, in ancient Greece, military innovations unexpectedly empowered a new class of farmer warrior (known as hoplites), who began to demand greater powers and, when their agitation failed, backed tyrants who upended the old order. In China, the failure of the late Ming emperors to protect their citizens from peasant unrest or raids from the north led directly to the end of the dynasty.
Henry Kissinger once admired as having “the strength to contemplate chaos, there to find material for fresh creation.”
In each fo these cases, it was common for those who championed reform to be members of elite groups themselves.
“Discontented nobles came forward to be leaders of the discontented masses.” Some of these “tyrants” were benign, as in the case of Cypselus of Corinth, described as “courageous, prudent and helpful to the people, unlike the oligarchs in power, who were insolent and violent.” However, as Aristotle wrote, “History shows that almost all tyrants have been demagogues who gained the favor of the people by the accusation of the notables.”
Solon also created a Council of Four Hundred to balance the aristocratic Council of Elders (a precursor of bicameral systems such as those employed in many democracies today).
Again the lessons resonate. Complacency is fatal for elites. Neglect of power is as corrosive as abuse of power. By even the 15th century, disconnecting from the world at large carried a high price. And again and again popular unrest has paved the way for one elite to unseat another. Nothing succeeds like good governance.
The war effort had produced an industrial bonanza in the North that resulted in a remaking of the rosters of the country’s richest. The term “millionaire” — although in use since late 18th century — was popularized in the US in the 1840s, when the richest Americans boasted fortunes in the range of $10M to $20M. By the 1880s and ’90s, the wealthiest had built fortunes in the hundreds of millions. Commenting on the opportunities offered by the war economy, railroad and banking mogul Daniel Drew observed, “It’s good fishing in troubled waters.”
Drawing on the century’s most radical “big idea,” it also produced the notion of social Darwinism, which suggested that growing inequality was inevitable; it implied that successful businesspeople were somehow more highly evolved than the less successful.
While a champion of a just society and unfettered individual initiative and a noted philanthropist, he also embraced a social Darwinist view that justified his wealth and the struggles of those who worked for him. He fancied himself a hero of the working man but tacitly approved one of the most violent attacks on strikers in American history. He gave away hundreds of millions but slashed workers’ salaries, offering to many just the barest necessities of life.
Carnegie embraced the most modern steel-production techniques, focusing on scientific innovation and readying the industry for the kind of mass production that could meet the demands of a rapidly growing US economy. He began to integrate his company vertically along the entire supply chain, buying coke, coal, ore producers, railroads, shipping lines, and a variety of mills. Through such a strategy he was able to manage costs much more effectively and compete in ways that less integrated competitors could not. He sought to dominate and crush competitors.
Is it a contradiction that the brutally competitive — like Carnegie or Bill Gates, who crushed competitors like bugs — might then become so intently and productively philanthropic? Or is their embrace of charity just another way of exercising power and ensuring their legacy with a clear conscience?
Rockefeller and a group of partners started an oil-refining enterprise when he was only 24. From the beginning he wanted to expand the company, but his partners were more cautious, and in order to pursue his vision Rockefeller bought them out. The early days of the oil business were full of start-ups and small operations, the costs of entry were low, and Rockefeller saw an opportunity to step in and dominate. Within four years, with his like-minded partner Henry Flagler, he began to build a company that could subdue any competition. In 1870, the two established Standard Oil, a joint-stock company that would enable them to raise the kind of capital they needed to expand, increase efficiency, and thus enhance profits. The company got its name from the commitment that Rockefeller made to produce a standardized and consistent product, an important development in a day and age when inconsistent production of kerosene resulted in five to six thousand fatal accidents a year.
The approach — focusing both on massive scale and on the smallest detail — produced extraordinary results. By 1879, nine years after Standard was organized, the company controlled 90% of America’s refining capacity.
Roosevelt was afraid that the growing clout of the trusts and other large corporations might overwhelm that of the elected government. He did not want to do away with large companies, which he saw as inevitable by-products of national growth. Rather, he felt the government should play a more effective regulatory role. In his first inaugural address he said, “Great corporations exist only because they are created and safeguarded by our institutions; and it is therefore our right and duty to see that they work in harmony with these institutions.”
To turn $100 into $110 is work. To turn $100M to $110M is inevitable.
Many of the Russians I met were still somewhat ill at ease with newfound freedoms, however. It was difficult to completely set aside their suspicions, their intuitions about invisible conspiracies, and their enduring certitudes about the value of the right connections. In that sense it was a perfectly Russian moment, both deeply romantic and laced with something darker. Depending on your taste, Gogol, Dostoevsky, Tolstoy, or Pasternak could have captured the mood perfectly — and indeed, each had done so in his own way in different eras.
Khodorkovsky had that look that I have seen before in the eyes of the intensely ambitious, a look that marks them long before they achieved the high visibility associated with their greatest triumphs. It is a look of special intensity, discipline, and obsessive attention to detail associated with the monomaniacal focus often required to achieve great success.
This cycle — innovation, followed by exceptional expansion and accumulation of power, followed by difficulties with the state — was as common among Russia’s oligarchs as it was among America’s robber barons. Oligarch after oligarch followed it, each taking advantage of the opportunities created by a great moment of historical upheaval. Oligarchs were then co-opted or constrained or intimidated into exile or a reduced role by another elite seeking to establish the itself in the name of the masses.
The Blackstone CEO spoke of how America was losing its competitiveness because of regulations like the Sarbanes-Oxley provisions that required more detailed disclosure and oversight of corporate finance. He observed that some corporate boards were now spending a third of their time on compliance issues and that as a consequence US business leaders were not able to focus on the right issues, the ones associated with building value for shareholders. He also noted that such regulations had resulted in 90% drop in US IPOs because companies that wanted to go public were listing overseas in markets where regulations were looser. He characterized the rise of private equity companies as a “capitalist response” to the problems created by a Washington that did not realize the damage their laws were doing to the competitiveness of US-based firms.
Candidates for high political office and current occupants of those offices frequently stop to meet with senior financial officials whenever they are in New York or other financial capitals. The rationale is straightforward. Political leaders recognized that they now report to two constituencies — the voters who elected them and the financial markets that daily conduct a referendum on their policies. This is the market at work. The system offers a check to political power. It results in major infusions of needed capital and it helps produce transparency, fuel job creation, and enforce rules that are proven to lead to economic growth.
For example, daily trading in the government bonds market is influenced by traders’ views on whether or not government programs are likely to succeed at promoting growth or stability, as well as other factors they feel impact the ability of governments to repay their debts.
Then he explained another dimension of influence that such firms have: “Every once in a while, though, something goes off the rails and you need help from people you don’t know personally. That is one of the wonderful things about finance. You can get to anybody in the world with one phone call.”
That does not mean that you will always get your point of view adopted, but all you want is an open hearing to put forward what is on your mind. If people choose not to respond to it, then you cannot do anything about it. But the key is the network. In the end, the world is pretty small. In almost every one of the areas I am looking at, it is 20, 30, 50 people worldwide who ultimately drive the decisions. It amazes me when I was younger. When I was more junior, it was two degrees or three degrees of separation. As you get older and a little more senior, that number of degrees of separation sort of goes down. It is part of what makes business life so interesting and exciting. You fundamentally can transport yourself with the same alphabet to different geographic places and be able to understand an enormous amount of what is going on because they are using the same language.
A few hundred people are the real movers and shakers in global finance. Each of them does everything possible for the success of his or her firm, but they are fully aware of the need to safeguard the system by not having their elbows too sharp in times of market difficulties. In my experience both at the Fed and in my various positions in the private sector, the leaders of the world financial community are quite endowed with realism about how much power they have and when and how to use it.
Private equity firms, like most financial institutions and big corporations, have the ability to buy high-profile, well-connected individuals who can help expand their networks and influence. So it is in their interest to do so. They also, of course, have another advantage: the ability to buy the best and the brightest when they are still young. One top hedge fund executive said to me, “There are only every year a few hundred people coming out of the best schools in the US — maybe a few thousand worldwide — who are the cream of the crop. Where do they start? Once it might have been the foreign service or law or some other field. But today, we have such a huge advantage in terms of the compensation we can offer that we get first crack.”
Trends in the financial community aside, for the past several decades one of the surest answers to that question has been Goldman Sachs. Since its founding in 1889, Goldman has grown to be the most respected name on Wall Street. The firm’s annual revenues are now heading toward the $70B level, primarily as a result of its incredibly profitable proprietary trading business and its leadership in investment banking. The average employee make $622K a year. (Next highest paid on Wall Street in 2006: Lehman Brothers at $334K). The top 25 executives in the firm in 2006 were estimated to make $25M each, with CEO Lloyd Blankfein in the top earner on Wall Street with $54M.
Blankfein’s office in Goldman’s tower in on the top floor. Entering through a large, serene lobby, visitors are escorted into a curved suite, the office of the chairman. Blond paneling, glass, tasteful art, and a bank of assistants constantly in motion create much of the ambience, but most affecting is the sense that this is truly the center of the business universe.
Why do rich men undertake low-paying government jobs that are accompanied by press scrutiny and the annoyance of dealing with bureaucracies? It is much the same as it was for Khodorkovsky: There is legitimacy and prestige associated with those jobs, and there is also a chance to go from indirect influence of policies to hands-on management.
Hormats’s observation resonates with McDonough’s comment about senior financial executives knowing enough not to play too rough with one another. The good of all depends on the successful functioning of the system. Within the system, rules do not have to be broken (although they often are) to do well and exert enormous influence. One of the primary achievements of the leaders of the global financial community over the past several decades has been its ability to globalize markets while promoting the concept of self-regulation, or very light supervision. Having senior representatives of that community in the government helps ensure that this remains the case and that any regulatory initiatives that are put forth are crafted with them at the table in influential roles. Especially since these individuals ultimately usually return to the financial sector after their time in government, there are often more than just ideological rewards in store for keeping the system strong.
One of the things I’ve been struck by is how many times over the past couple of years when the Iranians say something about their nuclear program or regional politics, that they can drive up the price of their oil… and everyone else’s. They make a statement or two and the price climbs $5 a barrel and, like that, they’ve made an extra $85M that week.
Like Naimi in Saudi Arabia, Fu was not assisted by political connections in the Communist Party but rather succeeded by being “a non-smoking, non-drinking workaholic with an international outlook.” During his time at the head of CNOOC, he has gained the trust of the party and will likely remain as long as it is appeased.
Today there are more than 3000 such presidential appointees, a number that has swelled from roughly 600 just 30 years ago. In this way, the president’s greatest power may in fact be his ability to mete out authority to those around him, granting and withholding power. As Colin Powell said to me, “In our system it is hard to overstate the centrality of the president. Others advise. The Congress can block. But he is the initiator and the key decision maker. I’ve seen presidents who didn’t fully realize this even as they were entering office.”
When a US president is joined in office by a Congress controlled by his party, exceptional power is made more extraordinary and in some cases virtually unchallengeable. International disapproval of his actions, or even as majority of Americans opposing his policies, cannot stop the occupant of this office in those circumstances. There is no truer measure of real power than the ability to impose one’s will on resistant constituents or, as Bush has done, on a resistant world.
There is danger from all men. The only maxim of a free government ought to be trust no man living with power to endanger the public liberty.
The top job in the US political structure is actually not the president. It is the voter. But voters cede power when they fail to meet their responsibility as citizens to understand and deliberate on the choices before them. About 40% of Americans eligible to vote did not bother to do so in the 2004 presidential elections, and nearly 60% did not vote in the midterm elections two years later. It is clear that they do not take their broader civic responsibilities very seriously either.
In many respects this is not simply because one group influences another. It is because there is only one group, with its individual members moving form one set of jobs to another. Given that this group is globally sophisticated, well educated, intelligent, and successful by any measure, it is not surprising that much of what they advocate is also smart and worth implementing. But where is the counterweight in the system? Where is the oversight that is democracy’s due to the many who are affected by these decisions — such as the taxpayers who must foot the bill for bailouts or pick up the slack created by corporate tax breaks for rich investors in private equity firms? It is hard to imagine the role of supervisor being played by a Congress that for the most part understands neither finance nor the global scene, and it will clearly not go to an executive branch that draws on this closed community for most of its top decision makers.
Here, now, the asymmetry in knowledge about how the global economy works between legislators and businesspeople and technologists is as wide as the Atlantic ocean; that is, how many legislators have you met who you think have anywhere near the grasp that you or the average multinational CEO does today about how the world works? So these national governments have a problem — how can you regulate something you do not understand, and what is more complex than the inner working of the global economy? And if government can’t do it… it’s only natural that the business community steps in. Whether that is what was originally intended or whether that is everyone’s best interests is a matter open for debate.
I spent 33 years in active service in the country’s most agile military force, the Marines. I served in all ranks from second lieutenant to major general. And during that period I spent most of my time being a high-class muscle man for Big Business, for Wall Street and the bankers. I was a racketeer, a gangster for capitalism.
Thus I helped make Mexico, and especially Tampico, safe for American oil interest in 1914. I helped make Haiti and Cuba a decent place for the National City Bank boys to collect revenue in. I helped in the raping of half-a-dozen Central American republics for the benefit of Wall Street. I helped make Honduras “right” for American fruit companies in 1903. In China, in 1927, I helped see to it that Standard Oil went its way unmolested.
America’s system of campaign finance has what can only be described as a corrupting effect, making politicians dependent first on donors and only secondarily on voters at large. This in turn gives a special advantage to those who run large institutions and can use those positions, resources, and networks to play leading roles as fund-raisers. The financial hurdles to the highest office in the US are so high that it is inconceivable that one could surmount them without rich and powerful allies from both the private and the public sectors.
One reason money was too intertwined with politics was the result of “a failure to understand that democracy and capitalism are separate parts of the American dream and that keeping that dream alive depends on keeping one from corrupting the other.” The two ideas are often seen as one and the same. Yet there are countless example today of countries in which markets are getting freer but democracy is suffering — China comes to mind, as does Russia, as does most of the Middle East. In each of these places, business interests are happy to ignore the political plight of locals provided that returns can be earned.
On the verge of his election, The Guardian called his control of these media assets “the biggest conflict of interest in western democracy.” Given his holdings and the state’s ownership of the other three main TV networks, Berlusconi would effectively have control of virtually all the significant broadcast assets in the 6th largest of the world’s economies.
Berlusconi brushed off the concerns about his wealth with panache, arguing that not only did the country need his entrepreneurial skills but that his decision to serve as PM was in fact a sacrifice. “No, look, excuse me, but I have worked my entire life. I am doing the country a favor. I don’t need to go into office for the power. I have houses all over the world, stupendous boats, including Murdoch’s yacht, which I just bought. I have beautiful airplanes, a beautiful wife, a beautiful family.”
He also, due to an undistinguished early academic career, was unable to gain admittance to France’s school for future political leaders, the Ecole Nationale d’ Administration (ENA). Working his way around that obstacle was formidable. As one French CEO told me, “We have a tradition of celebrating egalite, but in France, everybody is equal only up until high school. Then, when you get into high school, you start getting diverted into programs that lead you into the specialized universities which, as with ENA, are usually the only way to the top. But Sarkozy did it the only other available way: He worked his way into the hearts of the elites who did go to those schools, by being loyal and tough and hardworking. He has a great way with people he wants help from.”
Sarkozy skillfully did what political elites must do in a party system: gain favor with the controlling business and political elites, work those relationships hard, and improvise where necessary. It is a pattern seen in virtually all members of the political superclass, and indeed, in most members of the superclass who seek to rise up in the context of established institutional hierarchies — whether parties, companies, religious organizations, or crime families. Performance is key too. On his path from mayor to member of parliament, to gaining Chirac’s patronage and becoming budget minister, to being appointed spokesman for the party, the wiry and intense Sarkozy did what needed to be done to get ahead. Truly, he tried almost everything, including dating Chirac’s daughter. When his advancement was going too slowly and he took another path, backing a rival of Chirac, he stumbled, but in stumbling was forced to reinvent himself and reshape the modern French right wing.
This tension between internationalism and nationalism has become a defining issue for the global political superclass during its emergence over the past several decades. Evolving international structures, such as the official mechanisms of multilateralism (the UN, the international financial institutions, alliances and “working groups” from NATO to the G8 to the G20) and the informal ones, and long-established national institutions are all struggling to define their roles in the global era.
Achieving domestic results will require working outside the domestic system. Those who recognize the merits of international collaboration become the globalists. Those who resist it, often in order to be perceived as champions of global interests, are the nationalists.
The consequence is a group that complements in influence those with money: one that offers the words and the techniques that resonate with voters worldwide, that transfers lessons from one country to another, and is collectively responsible for either the dumbing-down of global political discourse, the enhanced “sophistication” of global political campaigning, or, as it seems likely, both.
As early as the 1930s, American pollsters George Gallup traveled to Britain to promote his polling abilities, and throughout the 2nd half of the 20th century British politicians were visiting the US to observe political campaigns and discuss strategy with their counterparts.
The IMF is viewed with skepticism by many on Capitol Hill as a money sink that provides funding to countries that end up hating the US no matter what we do to help. It is viewed as a threat to sovereignty, a mechanism of much feared “world government,” and as hopelessly inefficient.
Abroad, the World Bank and IMF are viewed with hostility because their programs are seen as insensitive, draconian, or supportive of the interests of the US, Europe, Wall Street, or big business.
We have this sovereign problem. Some governments don’t like participating in international institutions because they can’t control them. But in a democracy, no one can control everything. The only person who can ever be assured of getting his own way in a government setting is a dictator. As hard as it may be to swallow giving up sovereignty in order to empower these institutions properly, it is important to see that our conduct in international economic policy is often, in some ways, undemocratic. For example, we delegate the writing of IP rules to a small group of trade ministers — who often know little about matters of either IP or science. The ministers often do this in collaboration with the special interest groups they work with most closely. Now, are these the right people to be setting these rules? Or consider another case: letting the IMF be in charge of sovereign debt restructuring is akin to letting private creditors run our bankruptcy system. In America, would we ever even contemplate such an institutional arrangement?
Elites in the financial community have resisted suggestions that they be regulated by some new supranational entity or entities analogous to those found in domestic markets. They have pleaded for self-regulation and liberalized markets from the national leaders whose campaigns they financed and who depend on their collective judgment in the daily “market referendum” to which I referred earlier. And thus far, more or less, they have gotten precisely what they sought.
In the same vein, Geithner observed that this community of actors has become very interconnected and that he in fact probably speaks more often to them than to all but one or two key players in the US Fed system. “I spend a lot of time with these central bankers and they have world-class educations and experience. They share similar training and perspectives; we speak a similar language.”
By the 1990s, private capital flows had come to dominate so much that central bankers were borderline irrelevancies in terms of what they could do through intervention. Their regulatory powers gave them some control, but there were ways to get around much of their reach.
In 1997, Russia was invited to join the G7 — creating the G8 — although it does not participate in economic and financial meetings because of its comparatively small GDP. It does, however, participate in regular G8 ministerial meetings on energy, education, environment, development, labor, and health policy. Within the G7 and G8 there are also regular meetings of heads of state. In fact, from a global policy perspective, this group has become one of the most influential mechanisms of informal coordination on the planet.
For example, while the majority of world leaders who get face time with the American president see him infrequently and only a few may do so as often as once a year, leaders of other G8 countries have much more regular contact.
The ASEAN countries are meeting within themselves regularly. The golf games that they have create the same kind of role that you have mentioned. Oh, yes. In fact, I say the reason why the countries of Southeast Asia have not gone to war is because of a four-letter Scottish word: golf.
Each has fought or been trained to fight for his country: Ahmadinejad was a soldier in Iran’s war against Iraq; Chavez is a military man by training; Putin was a career KGB operative. In their view, globalization is old Western imperialism dressed up in new clothes, and they are reacting to it much as they were trained to react to such incursions.
The phenomenon can be seen as comparable to the rich who have come to despise the excesses of the superrich in the US. The backlash against US-led globalization comes from a number of countries close to the phenomenon that are tapping into it — countries that have or had legitimate reasons to think they could be at the forefront of it all had things gone slightly differently. Their failure to achieve what others have stems from a range of missteps, including overreliance on natural resources, lack of emphasis on education, endemic corruption, and preservation of the prerogatives of local elites. And, sensing that they have been left behind, they are increasingly lashing out.
Almost one-third of Russians live below the World Bank poverty line and almost two-thirds describe themselves as unhappy. The great inequalities between the oligarchs and the masses feed their discontent. For Putin, the choice is to accept responsibility or to identify scapegoats beyond Russia’s borders — most often Chechen rebels or the US.
The country’s leadership has specifically formulated its foreign policy as a response to “global arrogance” — code language for US foreign policy. Its effort to develop its nuclear program unimpeded resonates with dozens of other countries that they feel they have been made second-class citizens by exclusion from the “nuclear club,” a particular potent subset of the power elite.
Many of these leaders are easy to condemn as thugs and racists and crooks. But to dismiss them without assessing why they enjoy popularity at home and abroad, without understanding the traction they have gained, without understanding the needs they speak to, is a mistake. It is a mistake being made every day by many among the world’s political superclass.
Colombia had not only become America’s number three recipient of foreign aid, it had forged what could only be seen as a kind of “special relationship” with the US — one that Venezuela and Argentina once had.
Uribe is a tightly wound guy, and halfway through the meeting, having listened to a stark assessment of why the Democratic Party — the party of his friend Clinton, after all — was assailing him as a violator of human rights and generally making his life difficult, he leaped to his feet. He felt he was doing everything right. Indeed, he had hired a string of Washington consultants including Mark Penn and Joe Lockhart, former press secretary for Bill Clinton. Wasn’t that the way the game was played? Shouldn’t things be going better? He paced the room. He was angry and frustrated.
Every gun that is made, every warship launched, every rocket fired, signifies in the final sense a theft from those who are hungry and are not fed, those who are cold and not clothed.
In a spasm of national overreaction, the US embarked on its “war on terror,” the first-ever military campaign against a feeling. This new war was undertaken in an emotionally wrought, post-trauma environment and without much in the way of a reasoned debate. (Indeed, at the time, debate itself was considered unreasonable and, to many, unpatriotic.)
So the total number of Americans killed by terrorists outside Iraq in 2006 was about a dozen.
One former PACOM commander told me that these connections were “increasingly part of the job. We have more direct ties with the people and leadership of the region than most other branches of the US government. We have become diplomats in many cases. We are tied to defense cooperation, which has a big business component. We may be powerful in many ways, but we also know security is increasingly a partnership deal. Through better cooperation comes strength. And at the heart of a lot of this are the historical and carefully developed networks of ties between me, my top guys, and the military leaders of the region.” It is a comment I heard echoed by US and foreign military leaders in every part of the world. War fighters find that, increasingly, they too are global networkers.
I would make a personal observation: relationships in the international political world don’t appear to have the same personal bonding quality that is developed in the international military community. It also seems to me that personnel rotations, at the very senior levels, occur with greater frequency on the political-diplomatic side of things than they do in the military. It is probably unrealistic to think that the cohesion of the two groups can really ever be expected to be the same.”
From the perspective of the corporations, why not seek advice from the people who know the area best and who have the most hands-on experience? “Who better go get to tell us the needs of troops on the ground, to work with us, than a guy like Tony Zinni?” On the other hand, a senior defense contractor observed, “Look, there’s a lot of talk about a shadow government, and I am here to tell you it’s real. On every level the connections between our company and the government are amazingly deep.”
If a uniform guy gets out of the service and he has a lot of friends, two years later when he is in business he is going to be able to call upon them. And so what is new? I mean business is like that, too. Human being are like that. I do not see anything criminal about that necessarily. It is natural for it to happen that someone may say, “I play tennis with a guy and I don’t only play with him because he is a flag officer but, maybe once or twice during the course of our friendship, I’m able to say, Hey, you want to look at this, or maybe this is something you ought to buy, or we have an interest in this.” But I think that is human behavior. It is hard to legislate human behavior. I’m suggesting that something would be lost if we did somehow prevent individuals from investing something in the people that they trust and work with.
After Richer retired, sources say, he helped Blackwater land a lucrative deal with the Jordanian government to provide the same sort of training offered by the CIA. Millions of dollars that the CIA “invested” in Jordan walked out the door with Richer.
The army needed state-of-the-art communications capabilities, and to the extent that senior military officials also profited financially from the growth of his this firm, all the better. Ren, who spent a decade in the army, reportedly runs the company along military lines and keeps a low profile, but he is having a harder time staying below the radar now that the company’s revenues exceed $11B. Other PLA holdings in the 1990s ranged from the plush Place Hotel in Beijing to securities firms like the failed J&A Securities, and included other prominent enterprises such as Great Wall Telecom, China Poly Group, China Carrie Enterprises, and China Xingxing group.
Even in the face of China’s rise and its recent increases in defense spending, and despite the hue and cry in the West about the threat this represents, the PRC still has a long way to go to catch up with the undisputed leader in global defense spending: the US. On the basis of dollars invested alone, more than 50 years of “permanent war” have confirmed America’s status as the world’s one true military superpower.
Global arms sales have since trailed off and are now about half of what they were 23 years ago, yet 5 countries still dominate: the US, Russia, France, Germany, and the Netherlands. Among these, Russia leads the packs, due to its price advantages and the fact that many arms purchasers are emerging nations for which price rather than technological sophistication is key.
Alliances drive arms sales and arms sales drive alliances. If Japan, as seems likely, adopts a more traditional military stance going forward, and others in Asia seek to counterbalance China’s massive recent spending increase in arms, the market for US sales in Asia would be expected to grow even further. A more forward-learning Japanese military, as an example, is much more likely to buy the kind of American aircraft they are used to from Boeing and Lockheed.
You know what these people have that the Davos crowd does not have? Guns. So all these financiers from New York and London, the big hedge-fund guys, they probably have very big, big pockets, but they do not have guns and thugs and they are the currency in many parts of the world today.
Further, it is estimated that the vast majority, perhaps 9 out of every 10 weapons traded, originated with a state-sanctioned deal. In short, the networks tying the legal arms trade to the black-market trade are producing mayhem and death on a mind-boggling scale.
Men will never be free until the last king is strangled with the entrails of the last priest.
Distribution used to be the barrier to entry in the media world, whether in movies, on television, on radio, or in newspapers. Building a distribution network, from theater chains to delivery vans, required a significant capital investment. Today, though, the means of distribution are available to all at no charge, making it possible for small, resource-poor groups to reach out and affect millions around the world.
We watched the rise of the geeks and thought that this was something different — but was it really? How do these new technology elites compare to their superclass brethren? Educational background provides little distinction. Among the information revolution pioneers who attended Stanford as graduate or undergraduate students are the founders of Yahoo!, the CEO of Microsoft, the creators of Google, the founder of Intel, the founder of Netflix, the founders of HP, the cofounder of Youtube, the cofounder of Sun, Cisco and WebEx.
This elite did not spring up a long way from the origins of other elites. The apple, as it were, did not fall far from the elite tree.
The people who found me the most offensive are mid-managers with a stake in the old system — those in their 40s and 50s. Those people have invested decades in their companies. They don’t want the world they believed in and guarded until now to break apart, not after they’ve toiled for 20, 30 years without enjoying its benefits. They’re going to let this punk smash it all?
Qatar’s emir saw the station as a chance to elicit support from the West so as to dissuade a possible invasion from its larger neighbors.
While other media conglomerates may be larger and more profitable, few are as powerful as Murdoch’s News Corp, in part because Murdoch actively seeks to use his power to advance his political views. The analogy with military elites is clear: Having the ability to project force is one thing; having the will to use it is another. Murdoch has the will to use his influence and regularly does.
Of course, there was something else in the supposed question, a classically American implication that everyone else must be wrong.
More Roman Catholics attended church in the Philippines than in any single country in Europe. In China, where in 1970 there were no legally functioning churches at all, more believers probably gathered for worship than in all of so-called “Christian Europe.” And in Europe, the church with the largest attendance last Sunday was in Kiev.
Nothing comes close to the size of churches. They have the broadest distribution network, the most volunteers, local credibility — all these things that make the church poised to deal with these issues of spiritual emptiness and corrupt leadership and poverty and disease and illiteracy, which are problems that affect billions of people, not just millions.
The renewal of Islamic values, he believes, is the only way to counter the appeal of violent fundamentalism, which draws Muslims disaffected by rising poverty, joblessness, illiteracy, and political oppression.
He openly supports a more confrontational approach to the West, and has publicly condemned “the bitter and venomous taste of Western liberal democracy.” He believes Iran has the right to pursue nuclear power but wants to avoid international reprisals that would threaten the stability of the regime.
The only way I can get to sleep at night is by imagining a secret cabal of highly competent puppetmasters who are handling the important decisions while our elected politicians debate flag burning and the definition of marriage.
Conspiracy theory is the comfort food of politics. Actually, it is more than that. According to psychologists, it fills a fundamental desire to balance perceived causes with perceived consequences and thus satisfies our sense that big outcomes are not the product of happenstance.
It is natural for those who feel powerless to speculate about where the power lies.
My view of secret societies is they’re like the first-class cabin in airplanes. They’re really impressive until you get into them, and then once you’re there they’re a little dull. So you hear all these conspiracy theories about Skull and Bones.
And to me, to be in one of these organizations, you have to have an incredibly high tolerance for tedium cause you’re sitting around talking, talking, and talking. You’re not running the world, you’re just gassing.
In a way, I don’t mind the swirl of rumors. Most of them are ludicrous. Most of the people who they suggest have the most sway around here — the big names — are largely window dressing at this point. But it gives us a little mystique, and that doesn’t hurt in our business. We are often presumed to know more than we do. What we are really is very mundane, very disciplined business guys, bean counters. It has made a lot of money for a lot of people and that does translate into power — though not the dime store novel stuff suggests.
Davos is the most visible symbol of the virtual political network that governs the global market in the absence of a world government. It is more like a political convention, where elites get to sniff one another out, identify which ideas and people are “sound” and come away with increased chances that their phone calls will be returned by those one notch above them in the global pecking order.
AOL founder Steve Case said, “You always feel like you are in the wrong place in Davos, like there is some better meeting going on somewhere in one of the hotels that you really ought to be at it. Like the real Davos is happening in secret somewhere.”
Old Davos hand Moises Naim suggests that a few informal events at Davos have become the real power centers. “The main reason why people go to meetings is because of the activity in the corridors outside the meetings. Many participants don’t much care about what goes on in the sessions. They care more about what — or more precisely, who — they can get in the corridors. These are very often where the most of the relevant action takes place.”
I think in order to belong to an elite you have to fulfill two requirements. You have to be a powerful person, whatever that may mean, because elite means to me to have influence on others. You also have to command a powerful institution or organization.
There is much ego in these crowds and sometimes a small snub or a failure to remain at the center of the Davos limelight from year to year is cause for unhappiness among the elites who attend.
The Trilateral Commission is a joke. It’s a bunch of has-beens who do not have power except to convene themselves — and to feel a little bit more important because they convened themselves. The meetings consisted of useless presentations and levels of abstractions that are unconnected with reality.
Everyone liked Eisenhower, but the feeling was that he had a long way to go before he would have the experience, the depth, and the understanding to be President.
The country and its top officials understand that the only way to stave off social chaos and instability is to continue to attract foreign capital and grow. Capitalism is for them the only way to salvage and preserve what is left of communism.
One close acquaintance of Slim’s describes him as “unusual for a Latin business leader. He actually reads books He is an intellectual and he has very broad interests.”
Only 6.3% of the superclass is women.
But, still, they regularly argued that few women are willing to make the necessary sacrifices to enter the ranks of the powerful; they also seemed to relish their special status as female leaders and did not seem particularly eager to share the honor.
As a rule, the superclass is much better educated than the population at large. Whereas only 9% of Americans have a postgraduate degree, 47% of the superclass does.
The best obsessives set high standards and communicate very effectively. They make sure that instructions are followed and costs are kept within budget. The most productive are great mentors and team players. The unproductive and the uncooperative become narrow experts and rule-bound bureaucrats.
But Freud recognized that there is a darker side to narcissism. Narcissists, he pointed out, are emotionally isolated and highly distrustful. Perceived threats can trigger rage. Achievements can feed feelings of grandiosity.
They literally become addicted to the endorphins their brains produce as a consequence of their high-stress, high-return jobs. Running a country, a company, an army, or a church is kind of an extreme sport, and when you face high-stakes situations daily, you produce endorphins daily — and you grow dependent on them. Thus, the psychiatrist noted, when politicians leave office they often go into periods of depression that she asserted not only look like withdrawal but actually are withdrawal.
You have to be very narrowly focused on the task of becoming president for much of your life. You therefore have to be blindingly ambitious. More often than not, you have to discard traditional notions of balance in your day-to-day existence.
I could even, on some level, understand why. Isn’t a stable bad guy better than an unstable, terrorist-supporting one? Maybe it’s just that America is desperate for alternatives to the Middle East. And if you are Exxon or Chevron and trying to earn returns for your shareholders, aren’t you obliged to do deals with lizards like Obiang?
You don’t need to have a conspiracy once you have set the rules.
To begin with, we must resist the temptation to reflexively attack elites. “Elite” sounds pejorative. You have to be careful there. Of course, “elite” does not sound pejorative if you are attending an “elite” school or are accepted into an “elite” company. “Elite” sounds bad only when it is a code word for referring to the other guy who has what you want and what you may even feel is out of reach. This is, in some ways, the critical issue. Elites are tolerable if we feel that what they have is within everyone’s reach — intolerable and a reminder of systemic failures or injustices otherwise.
But elites are much more than tolerable. They are natural, having existed in every society, in every era, and in every area of human pursuit. And they are desirable. They are leaders, innovators, risk takers. They are the ones among us who excel, possess vital experience, and serve as essential connections among centers of power.
The overwhelmingly negative global reaction was completely reasonable, much as it would be were a bully to impose his will on the weak in any community. The US argued that given the threat posed, it could not wait for the broken, lethargic UN to work — a fair complaint about a lousy system. That said, when the most powerful act without the consent of the community or, possibly, against the interest of the community, it is inevitable that discontent and tension result.
But when a handful of private equity players price a market, or a handful of financial institutions and the central banks of a few governments determine how a new market is going to be managed (by them), or even when public needs are left to be met by a few rich companies and people, there are incomparably fewer complaints, although the phenomenon is much the same and the consequences of these actions touch arguably more people.
The existence of the two events underscores the fact that influence does not come from organizing seminars. It does not even come from numbers. It comes through access to the levers of power.
The WSF participants come from unions and left-wing political parties, environmental groups and indigenous rights activist organizations. They argue that they speak for the masses — but most of the masses have little idea who they are or what they are doing.
In considerable contrast to the US and Europe, as of this writing almost half of the 25 riches people in China are under 45. Only are over 60.
The selective enforcement of the law and the selective protection of the basic rights of individuals are among the most dangerous recurring impulses of unprincipled leaders throughout history. This concept has been used to justify holding certain people or certain institutions above the law and others beneath and unprotected by it, or to claim that national laws and values no longer need to be adhered to beyond national borders or along the divides that separate civilizations. The result is the collapse of moral order and the potential for great horror.
Freer trade, which benefit everyone, has been threatened by the fact that those who advocated it were not sensitive enough to the dislocations it causes. The view effectively was, “Let’s focus today on what helps the big guys, and the little guy will be helped over time.”
It has happened throughout history. While it seems impossible now to imagine a real divergence from the popularly perceived course of progress over the past 50 years, we should remember that it was also impossible to foresee the fall of the Soviet Union or the reversals that have threatened democracy in America in the first years of this century. (It was likewise difficult to imagine how America’s reaction to 9/11 could produce a global backlash against America.)
Nor does the answer lie in a world without global elites. For all their deficiencies or for all the deficiencies of the system they have helped create, many in this group have made enormous contributions to the well-being of the planet. We will always want and need leaders. The measure of our success in redistributing resources within our global system will be the degree to which we can balance our need for such leadership and for the incentives that help the best among us rise to greatness. We must recognize that society, including those elites, has to make the needs of those least able to help themselves its number one priority.