Few control business, government

Bill Knight column for Thursday, Friday or Saturday, Jan. 19, 20 or 21, 2017

President-Elect Donald Trump’s nominees for his Cabinet are so rich that they require a reassessment of research on interlocking ties between business and government. Meanwhile, the mainstream media may be missing the forest for the trees by focusing on a few potential conflicts of interests, or nominees’ histories and qualifications instead of the troubling trend of the consolidating connections between business and government, which resemble the 1930s style of governance called “corporatism” that sought to legitimize “oligarchy” and “plutocracy.”

Oligarchy is defined as “government by the few.” Deriving from Greek words – oligos meaning “few” and arch for “rule,” and ploutos meaning “wealth” and kratos for “govern” – the terms are related to hierarchy, monarchy, etc. U.S. Sen. Bernie Sanders has said “oligarchs” are “a small number of very wealthy families who spend huge amounts of money supporting right-wing candidates who protect their interests.” Sanders differentiates this “small number” from the larger world of the rich and superrich – the plutocrats, who have long exercised considerable influence on U.S. politics.

Today’s U.S. plutocrats include the Walton family, the Koch brothers and Sheldon Adelson, who together reportedly make up seven of the top 11 wealthiest Americans: Charles Koch ($36 billion), David Koch ($36 billion), Christy Walton ($35.4 billion), Jim Walton ($33.8 billion), Alice Walton ($33.5 billion), Samuel Robson Walton ($33.3 billion) and Adelson ($28.5 billion).

But this isn’t just an American situation. The Non-Governmental Organization Oxfam on Monday reported that eight men, including Facebook’s Mark Zuckerberg, Microsoft’s Bill Gates, Grupo Carso’s Carlos Slim and Inditex’s Amancio Ortega, have as much wealth as the world’s poorest 3.6 billion people. Further, three scholars from the Swiss Federal Institute of Technology in Zurich five years ago wrote “The Network of Global Corporate Control” after examining 37 million companies and investors worldwide and analyzing all 43,060 transnational corporations and share-ownerships linking them. Stefania Vitali, James Glattfelder and Stefano Battiston reported that 147 firms own interlocking stakes of each other, together controlling 40 percent of the wealth in the whole system. (Also, 737 control 80 percent.) This, the first mapping of the structure of global corporate control, includes not just Walton Enterprises (the Waltons’ holding company), but Deutsche Bank (one of Trump’s main lenders) and the Goldman Sachs Group (with ties to several Cabinet nominees).

New Scientist magazine talked to one systems theorist who is “disconcerted” but unsurprised at the level of interconnectedness, according to Bruce Upbin, writing in Forbes magazine. Economists say the danger comes when you combine hyper-connections with the concentration of power. The Swiss scientists warn that this can lead to instability.

Some scoffed, noting that most of these companies are investment firms, which technically are owned by shareholders through pensions, mutual funds, etc. Further, while thorough, the 36-page study, published in the peer-reviewed journal PLOS ONE, is not precisely complete. It excludes Government Sponsored Enterprises that were publicly created but privately held, such as the Federal Home Loan Mortgage Corp. (Freddie Mac). However, though the research results do show an overwhelming number of banks, institutional investors and funds, those entities don't exactly offer individuals control over such assets, much less policies and practices supposedly undertaken on their behalf.

And the situation may be even worse. First, the report was from 2011, so presumably the concentration has increased, and, second, most investments in vehicles like mutual funds are “managed” by indexes such as Standard & Poor’s (owned by McGraw-Hill), one of just four indexes that exert considerable influence over trading and, therefore, control. The others are Barclay’s (which took over Lehman Brothers after 2007’s financial collapse), the Chicago Mercantile Exchange, and Russell Investments (owned by Northwestern Mutual).

Of course, that may be nothing new. During the 1930s’ Great Depression, U.S. journalist Ferdinand Lundberg, who studied American wealth and power, published “America’s 60 Families” showing the financial and political power of the elite.

“The United States is owned and dominated today by a hierarchy of its 60 richest families, buttressed by no more than 90 families of lesser wealth,” Lundberg wrote decades ago. “These families are the living center of the modern industrial oligarchy which dominates the United States, functioning discreetly under a de jure democratic form of government behind which a de facto government, absolutist and plutocratic in its lineaments …. It is the government of money in a Dollar Democracy.”

Two years ago, journalist David Rosen cited Lundberg when he cautioned, “If both the Presidency and the Congress fell under Republican control, life in the U.S. for middle-income, working-class and poor would get really worse.”

The interlocking interests may be close to locking out everyone else.