Arab Spring. Tea Party. Occupy Wall Street. Lybian “rebels”. The list of ostensibly populist movements active at the moment is very large and impressive. The narrative from the established media and from populist commentators generally is that these movements all - to one degree or another - represent popular uprisings against imbalances within the political system or even outright oppression. To the extent that they result in a “response” from the system - the casting out of old leaders and the installation of new, elected leaders - they are taken as a sign that the political order is actually healthy because, after all, vigorous dissent is permitted.
The picture sold in this two-dimensional view of politics is that the Lloyd Blankfeins of the world are hiding out in their mansions, wringing their hands, pacing up and down the hall saying “oh my god, oh my god, oh my god, oh my god” while the masses throng the streets in protest of the power system they have created or, at least, taken over.
Praxeology gives us a powerful tool with which to analyze the expected behavior of the Elites, even though we (at least I) will never meet them nor do we know any concrete details about them beyond that they have a lot of wealth and influence and know a lot of others who do. Humans act. The Elites are humans (however much they might like to give an impression otherwise if they could pull it off). Hence, Elites act. This is a very important point because the picture of the ultra-wealthy super-capitalist tycoon pacing his mansion pulling his hair and chewing his fingernails is a picture that exists only in the minds of those who will not go to the effort to ask himself “what would I do if I were that ultra-wealthy super-capitalist” in part because they are lazy thinkers and in part because they fear that looking at things through the eyes of someone who is widely regarded to be immoral might elicit a perverse sympathy for him (people are also bad at reasoning about the behavior of criminals for the same reasons).
But come with me while I put on the imaginary “character transformation hat” and become Lloyd Blankfein for a few minutes. I have a lot of money. I am powerful. I know many other powerful people. Many of them owe me favors. I owe a few of them favors. By virtue of my fabulous wealth, I can’t afford to blindly trust people, including - or especially - the other powerful people I know.
I don’t hate my fellow man - most of whom have far less money and power than I have - but I understand more acutely than the man on the street that - despite my fabulous wealth and despite feel-good movies like It’s a Wonderful Life - what I (as an individual) do will make very little difference in the status quo because the amount of wealth and power outside my control vastly exceeds the large amount of wealth and power inside my control. Instead, my first concern is protecting and enlarging my estate. In this, I am a lot like the other wealthy, powerful people I know.
I even understand that a lot of what I am doing while protecting and enlarging my estate is only possible because of a great deal of immoral and reprehensible things in the status quo. I must understand that the vast power and wealth of the company I run is in large part possible because of its intimate connection to the Federal Reserve and the power of the US government to tax. I understand the role that the Pentagon plays in projecting US power into the world and maintaining widespread use of the US dollar which is the basis of my wealth and the wealth of the company I run. In a private conversation, I would probably would agree with any libertarian that it’s all really disgusting and evil and things should not be done this way but they are and there’s not much I can do to change it without putting my family and estate at risk to the other wealthy and powerful people I know. In fact, I think about the topic as little as possible and keep my focus on the day-to-day.
And it’s not all impersonal. I may have passed on hints regarding the bank account details of a major drug lord who happens to be one of our clients to a shadowy government agency in exchange for having an individual from a rival overseas corporation that had been caught engaged in espionage within my company “taken care of.” He may have even had a wife and kids but he knew the risks when he chose to play the game.
A few years back, before the collapse went public, I was talking regularly with leaders in the banking industry - Fed board members, and so on, and we realized that - not only was housing in a bubble, when it burst major banks were going to go bankrupt. Then we realized that the banks would have to be bailed out because failing to bail out the banks would unwind credit, contracting the money supply and this would precipitate a real, deflationary depression the likes of which has never been seen. We realized that this would be a good time to buy up banks on the cheap and position the company to invest the bailout funds it would receive.
But then we also realized that this would precipitate foreclosures, price inflation in energy, food and other goods and services and popular unrest. The durability and extent of the unrest has been surprising but we knew there would be unrest. So, we realized that it was in our best interests to think about how to defuse popular unrest. After all, part of protecting and enlarging my estate is protecting and enlarging the estates of my clients and my company and cooperating with my wealthy and powerful friends - wherever our interests align - to protect what is ours from “tail risks”… popular uprisings, revolutions, nationalization, etc. The French nationalized SLN in the 1980’s, a company owned by Guy de Roshchild, much to his chagrin. So it happens and you can’t be too careful. Because the public sees all wealthy people as part of a single class, we are “neighbors” whether we want to be or not and sometimes we have to act like a neighborhood watch for each other, which only reinforces the popular perception.
Somebody suggested that it might be a good idea to organize our own protests. Of course, it couldn’t be anything so crass as Mubarak’s plainclothes police officers riding camels and horses and whipping the opposition protesters. And, besides, it’s not like we’re trying to maintain a complex of secret police and torture cells, we just want to keep things stable, maintain the status quo. What the people need is an orderly outlet to vent their understandable frustrations without the risk of New York, Chicago and LA descending into Grecian riots. Washington apparently was sympathetic to the idea and put together a team of CIA “art students” to suggest a protest of Wall Street.
Of course, this is dangerous because Washington isn’t going to take the blame for the economy, they’re going to pin it straight onto me, my company and the rest of us here in Wall Street. But Washington also sees that riots are bad for Washington even if Wall Street gets it first. And, besides, that’s why I keep the A/C running in my penthouse in Dubai… I never know when I might need to take a one-way flight to a non-extraditing country.
</channeling Lloyd Blankfein>
I made this all up, of course, but you get the idea. The fact is that Blankfein has 24 hours in his day just like the rest of us and he has to think about the same problems of securing what is his and staying out of harm’s way that you and I do, except that being a high-profile person, he has a large bullseye painted on his chest. His large estate would be a juicy piece of loot if he were ever taken down legally and imprisoned or perhaps had an “airplane accident.” He spends his time thinking about how to protect himself not only from his peers but also from us little ants. And there are many such Blankfeins, all thinking of the same problems.
The fairy-tale version of rich Elites who run and hide away in their mansions, pacing up and down, chawing their fingernails awaiting their inevitable fate is ridiculous and absurd. The Elites act every bit as much as any of us and they act to protect themselves individually and - to the extent that they are a collective target of the general public - collectively. Not only is it not unthinkable that apparently populist movements like Occupy Wall Street would be cultivated and steered by the Elites, it’s unthinkable that the Elites would not think about how to imitate and thereby steer populist movements which are agitating against the status quo.
Fortunately, the tools of praxeology gives us a method by which we can construct a more three-dimensional view of even the Elites.
Clayton -