Contemporary Oligarchies in Developed Democracies

Shelly Gottfried

• Publisher: Palgrave Macmillan
• Year: 2019
• Print ISBN:
  9783030141042
• eBook ISBN:
  9783030141059
• Topic: Politics & International Relations
• Subtopic: Comparative Politics
• Index: Politics & International Relations

The book analyzes concentrations of wealth and power in developed democracies. It shows that economic measures, which states adopted during the 1980s and 1990s, had evolved first into liberal oligarchy, and later, after the 2007-2008 global financial crisis, into illiberal and populist oligarchy. The shape and content of these two kinds of oligarchy have been determined largely because of practices and political strategies that powerful state and market actors employed. This project will appeal to a wide audience including academics, researchers, students, and anyone who is interested in oligarchy political power, IR, political economy, and sociology.

Part I

© The Author(s) 2019

Shelly GottfriedContemporary Oligarchies in Developed Democracieshttps://doi.org/10.1007/978-3-030-14105-9_1

Begin Abstract

1. Introduction

Shelly Gottfried^{1, 2}

(1)

City Political Economy Research Centre (CITYPERC), City, University of London, London, UK

(2)

Beit Berl College, Beit Berl, Israel

Shelly Gottfried

Email: [email protected]

End Abstract

A decade after the collapse of Lehman Brothers Holdings Inc., life expectancy for a man in Britain, the oldest liberal society in the world, has declined from an anticipated 83 years to 82, and for a woman from 90.1 years to 89. At the same time, life expectancy in the US, considered as the first representative democracy in history, is also falling. At the same time, the median hourly income is about the same as it was in 1971. While this book does not intend to deal directly with the causes of these gloomy facts, the story it tells about how the very wealthy few use authoritative power to manipulate the economy for their own good might give a clue about the declining quality of life for the rest.

In the aftermath of the 2008 global financial crisis , an increasing number of people in Israel began to realize that its political economy is built around an important power structure: an oligarchy , not analyzed in the conventional literature on the region and the country’s political economy, and, at the time, scarcely present in public discourse. Nevertheless, the focus on oligarchy was short-lived. Instead, we currently witness a ‘consensus’ in the Israeli public discourse, that the rise of nationalism and populism has become the most important and urgent problem in contemporary Israel. Similarly, the social and economic discourse that the Israeli social protest of summer 2011 led is now replaced with a discourse that is focused on identity politics, on the one hand, and xenophobia, on the other hand. Oligarchy , it is worth mentioning, did not disappear, it is simply not an issue anymore.

In this book, I use the Israeli case in order to show how oligarchy emerges, grows and consolidates, pertaining as well to other developed democracies around the world. I show how the state has played an important and pro-active role in the development of the oligarchy , and analyze the way in which oligarchies have changed their nature—but not their importance—in the past decade. I also show that oligarchy not only triggered the rise of populism , but that these phenomena are actually compatible. That is, in Israel as elsewhere in developed democracies, populism and oligarchy go hand in hand.

The use of the Israeli case does not suggest that Israel is fully representative of other western democracies; however, the reality of oligarchy, the processes of oligarchization and the transformation of the character of oligarchy , which I argue is almost universal in contemporary politics, is more easily discerned in the Israeli example, due to the structure and size of the political economy. Moreover, ‘the remarkable magnitude’ of the transformation of the Israeli political economy, as Maman and Rosenhek (2012: 343) put it, makes Israel a good case for studying the dynamics of the contemporary democracy –capitalism nexus.

Indeed, there is a substantial strand of literature considering Israel not as a liberal democracy , but rather as an ethnic democracy (Smooha 1990), ethnocracy (Yiftachel 1999) or a sort of majoritarian regime (Peled and Navot 2005). Nevertheless, the criticism against Israel’s illiberality is in the context of the Arab–Israeli relations, while it is beyond dispute that in Israel there are free and fair elections, independent judicial system, relatively free press, and a strong regime of property rights. Put differently, Israel is a developed democracy, whether or not we classify it as a liberal democracy . I thus focus on the Israeli case, and complement the analysis examining other developed democracies.

My main purpose in this book is to disclose the mechanisms through which oligarchy arises and accumulates power in a democratic political economy. A central point of the book is the extent to which the transformation of political economies in the 1980s and 1990s has indeed reduced constraints to advance the free market; however, following these processes, liberal economies have become increasingly oligarchic. Biased credit allocation, privileged provision of state resources, concentrated sectorial control and regulatory failures have eroded some of the most important mechanisms of a free and competitive market. The oligarchies in economically developed democracies control substantial shares of the market economy and the public financial assets, managing tight relationships with state agents. Their power has been one of the root causes of the market entrenchment, lack of competition, and rising inequality. The distinct role of the state in this process has also shaped the nature of the oligarchy . The oligarchy and the state , as I shall argue, are distinct yet cooperative entities.

The time frame of the book is the past two decades, which allows me to delineate the key processes in the development of oligarchies, and the evolution from liberal oligarchy to populist oligarchy. In order to better understand why the development of oligarchies was accelerated during the mid-1990s and the 2000s, my research focuses on privatization and financialization . Then, in the aftermath of the 2008 global financial crisis , I show how oligarchies have changed their strategies and focused on influencing the political agenda, rather than economic policies solely.

1 Academic Approaches to Oligarchy

The study of oligarchy can be traced as far back as the writings of Plato and Aristotle. Often defined as ‘the rule of the few’, oligarchy was also a type of regime that developed as a reaction to democracy (Simonton 2017). Historically, the term ‘oligarchy’ has been employed to describe a political–economic system where ‘the few’ rule (Michels 1915 [1911]; Schmidt 1973; Samons 1998; Leach 2005), and is increasingly used by various commentators today. Nevertheless, oligarchy has been ‘underspecified’ in the literature (Leach 2005), and remains ‘among the most widely used yet poorly theorized concepts in the social sciences ’ (Winters 2011: 1).

Until the twentieth century oligarchy tended to be conceived as a corrupted type of regime in which the few rule for their own good at the expense of the common good. The notion of regime implies the form or structure of the society and its way of life as embodied in that structure.¹ According to this concept, the rulers are not separable from society, but rather rule society by developing its character through institutions and norms (Mansfield 1983; McCormick 1993). The fact that the few sacrifice the common good is what distinguishes oligarchy from aristocracy, and of course from democracy . In the traditional sense, therefore, oligarchy describes a political system.

Despite the abundance of contemporary writing on the concentration of wealth and power , studies have been mainly concerned with either the (somewhat derivative) problems of inequality and inadequate regulation, or with the implications of the power of the oligarchy to democracy , competition, and national political autonomy. While these issues are pivotal for a comprehensive analysis of oligarchy, they are largely of a secondary nature to the underlying mechanisms of the oligarchy ’s power basis, the causality of its evolution, and its relationship with other institutions and processes in capitalism.

Scholarly works published in the aftermath of the 2007–2008 crisis, not rooted in business groups literature or elite theory, usually refer to oligarchy or related notions, while the power of the very wealthy few fulfills a prominent role in their analysis. However, the phenomenon of oligarchs and their way of influence remains marginal and opaque, or simply understudied. Joseph Stiglitz (2018: 341), for example, asserted that ‘the big insight’ of his book Globalization and Its Discontents is that ‘corporate and financial interests within the United States’ set the rules of globalization. However, he does not explore who these corporations and individuals are, and what allows them to set the rules of globalization. In some works, oligarchy was indeed defined, but it seems as part of human history, and thus, an irrelevant factor in the dramatic changes we face today (e.g. Varoufakis 2017). Nevertheless, in other works that examine the conditions before and after the global financial crisis , this concept does not fulfill any meaningful role, and the focus is on ‘market fundamentalism’ (see for example Block and Somers 2014), or capitalism in general. Even scholars who analyze the power of the very wealthy few in developed democracies have stressed the role of ideology and ideas (Rodrik 2018: 169–179).

With a degree of consistency, many scholars tend to define oligarchy from a normative viewpoint, whic...

Table of contents

• Cover
• Front Matter
• Part I
• Part II
• Part III
• Back Matter