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Wednesday, March 20, 2013

Cyprus: a Crisis of the not-so-Elites and the Dystopian Future

The ongoing financial meltdown in Cyprus has a lot of people asking the same question: 
“What do the people that run Europe think they are doing?”

Many of the current elites are narrowly educated technocrats who may be brilliant in their own fields of expertise, but they are incapable of integrating knowledge or ideas across institutional boundaries.  They are not broadly educated nor have they had earlier experience running large enterprises. They are careerist technocrats.

In short, they are not all that elite and it is starting to show. (Hello to the European Commission and the IMF!)

In the recent past it was argued that the varying elites who held the reins of power at the local and national levels easily recognized each other’s interests.  The famous sociologist Max Faber observed that the elites did not even have to meet to consult – they could simply look out over their areas of influence and recognize the needs and capabilities of the other members of the elite class.

Put another way, the varying elites could collectively understand the needs of the industrialists, the bankers, the ship owners, the politicians, the diplomats and the military generals.  To be sure, they were often cursed by having a few upper class twits in their circles, but the twits were a minority.

While competition may have occurred between the elites, they were usually able to maintain stability within any given system until the pressures became too great or they failed to adapt to new advances. (Think Europe from the 1951 European Steel and Coal Community up to the creation of the Eurozone as a good example).

Even though this system benefited primarily the elites, the resulting social, political and economic stability also benefited European society as a whole.  Previously and on the other side of the Atlantic, the 19th Century robber barons of the United States may have been robbers, but they built industry and infrastructure and did it in such as way that prosperity spread – however unevenly.

A current popular belief is that a ‘crisis of the elites’ exists and that they are no longer able to recognize each other’s interests or connect with the society as a whole. (Hello IMF)  Following this logic, it is also argued that those who believe in “the superiority of government in the management of the economy – are in a crisis.   Their visions of a more just society and economic security are being shredded by the stark reality that the governments they run are running out of money.” 

The ability to react to these issues is driven by the fact that the financial elites have become the new aristocracy and they have seized control of the financial system and the political system. Lacking a broad education or world view, they shape the financial system to meet their own needs and wants at the cost of everyone else.  There is no collective elite - simply a financial elite which everyone else must serve.

Eventually this will lead to a collapse, as a system that only meets the needs of one set of financial elites will fail when it simply inverts due to too much wealth at the top and not enough at the bottom. The financial elites will be shocked when this happens as they will not see it coming.

The Davos Foundation – (of all groups!!!)  has recognized that a problem exists and warned the world’s elites of a dystopian future that awaits if changes are not made.  The following is an extract from their 2012 risk report. When those who advise the super elites make these kinds of comments, maybe we should all take note.

Case 1: Seeds of Dystopia

Dystopia, the opposite of a utopia, describes a place where life is full of hardship and devoid of hope. Analysis of linkages across various global risks reveals a constellation of fiscal, demographic and societal risks signalling a dystopian future for much of humanity. The interplay among these risks could result in a world where a large youth population contends with chronic, high levels of unemployment, while concurrently, the largest population of retirees in history becomes dependent upon already heavily indebted governments. Both young and old could face an income gap, as well as a skills gap so wide as to threaten social and political stability. 

This case underscores the danger that could arise if declining economic conditions jeopardize the social contracts between states and citizens. In the absence of viable alternatives, this could precipitate a downward spiral of the global economy fuelled by protectionism, nationalism and populism. 

See also Christopher L. Hayes Twilight of the Elites: The Crisis of Authority in American Life, 2012, Random House, Inc and the Forbes Magazine article Greece And The Crisis Of The Governing Elite, 9/19/2011.

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