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 The Self Destruction of the 1% is a cautionary piece well worth bringing up for wider discussion. (Digby also picked up on it.) The gist of the commentary is that the elites of this country, by pursuing their own self-interest at the expense of everyone else, are in the process of destroying the very system that makes their existence possible. They are the biggest threat to their way of life - and everyone else's.

More below the Orange Omnilepticon.

  Chrystia Freeland brings up the case of Venice, Italy. An Italian coastal city state with chronic damp basements and not a lot in the way of natural resources, Venice nonetheless became a major economic power in the early 14th century. They did it with a basic form of a joint stock company, which allowed risk taking entrepreneurs to share in the gains with the established businessmen who financed their trading ventures.

      This enriched both the investors, the risk takers, and the city state as a whole. Much wealth was generated, but a certain amount of social turbulence as well. The circles of wealth and power kept getting redrawn as newcomers would reap the rewards of their efforts and take their place among the other elites as a new Merchant Prince. (An old game that captures something of the flavor of the times.)

      As Freeland notes, the elites eventually moved to consolidate their grasp on power and wealth by shutting down the ways in which their ranks could be overturned and refreshed.

Venice’s elites were the chief beneficiaries. Like all open economies, theirs was turbulent. Today, we think of social mobility as a good thing. But if you are on top, mobility also means competition. In 1315, when the Venetian city-state was at the height of its economic powers, the upper class acted to lock in its privileges, putting a formal stop to social mobility with the publication of the Libro d’Oro, or Book of Gold, an official register of the nobility. If you weren’t on it, you couldn’t join the ruling oligarchy.

The political shift, which had begun nearly two decades earlier, was so striking a change that the Venetians gave it a name: La Serrata, or the closure. It wasn’t long before the political Serrata became an economic one, too. Under the control of the oligarchs, Venice gradually cut off commercial opportunities for new entrants. Eventually, the colleganza was banned. The reigning elites were acting in their immediate self-interest, but in the longer term, La Serrata was the beginning of the end for them, and for Venetian prosperity more generally. By 1500, Venice’s population was smaller than it had been in 1330. In the 17th and 18th centuries, as the rest of Europe grew, the city continued to shrink.

        The elites preserved their power at the cost of strangling the system that made it grow in the first place. Wealth and Power is risk averse; those who have much to lose do everything they can to ensure they won't. They end up driving out the risk takers, the innovators and all others who threaten "the good thing" they have. They turn their efforts to instead contesting for what wealth remains and accumulating it. Again from Freeland:
The story of Venice’s rise and fall is told by the scholars Daron Acemoglu and James A. Robinson, in their book “Why Nations Fail: The Origins of Power, Prosperity, and Poverty,” as an illustration of their thesis that what separates successful states from failed ones is whether their governing institutions are inclusive or extractive. Extractive states are controlled by ruling elites whose objective is to extract as much wealth as they can from the rest of society. Inclusive states give everyone access to economic opportunity; often, greater inclusiveness creates more prosperity, which creates an incentive for ever greater inclusiveness.

The history of the United States can be read as one such virtuous circle. But as the story of Venice shows, virtuous circles can be broken. Elites that have prospered from inclusive systems can be tempted to pull up the ladder they climbed to the top. Eventually, their societies become extractive and their economies languish.

That was the future predicted by Karl Marx, who wrote that capitalism contained the seeds of its own destruction. And it is the danger America faces today, as the 1 percent pulls away from everyone else and pursues an economic, political and social agenda that will increase that gap even further — ultimately destroying the open system that made America rich and allowed its 1 percent to thrive in the first place.

     One of many dirty little secrets this country doesn't like to admit is that social mobility is disappearing, when the biggest predictor of success in life depends on who one's parents are, where they are in the socio-economic mix, and who they know. It's being driven by the war on public education, the growing cost of college while student aid is being slashed, the attacks on affirmative action, the destruction of the power of unions, shredding of the social safety net, the financialization of the economy, the rise of giant corporations, and so on. It's the growing realization of this that fueled Occupy Wall Street - matched by the fears of the elites who moved so quickly to suppress it.

     The record levels of inequality in this country are leading to social and economic stagnation. Those levels have been shown to be at the core of quality of life issues that threaten both the rich and the poor - and everyone between. This is driven by the capture of our government by these elites. (Matt Taibbi has chapter and verse here - and it hasn't gotten any better. Here's an excerpt.)

       Mitt Romney is the poster child for these elites, their stalking horse for La Serrata. He boasts of his business acumen and executive skills to explain how he amassed a fortune, but conveniently elides the role in his success of having a well known name with lots of connections to exploit, easy entry into the top schools favored by our ruling classes, and plenty of money behind him. (Which, come to think of it, pretty well describes his role model, George W. Bush.)

     When you hear conservatives attacking Barack Obama as an "Affirmative Action President", it's not just racism. It's the cry of elites resenting someone forcing his way in among them, determined to close off that route to the top. They hated Bill Clinton for much the same reason - a poor white kid from out of nowhere. As has been pointed out, no one looks too hard at Mitt Romney's background, and he's gone out of his way to cloak as much of it as possible.

      Conservatives see the election of Romney and Ryan as possibly their last chance to consolidate their grip on power and unravel the New Deal and the Great Society programs that have given so many a leg up. Having arrived at the top by whatever means, they are now determined to pull the ladder up after them. They intend to use America's military power to dominate the rest of the world - but they're destroying the economy that made it possible through their destruction of the middle class as they extract every last bit of wealth out of the country. Freeland's closing words sum it up:

It is no accident that in America today the gap between the very rich and everyone else is wider than at any time since the Gilded Age. Now, as then, the titans are seeking an even greater political voice to match their economic power. Now, as then, the inevitable danger is that they will confuse their own self-interest with the common good. The irony of the political rise of the plutocrats is that, like Venice’s oligarchs, they threaten the system that created them.

UPDATE: What looks like a clear example of elites moving to protect the wealth and power they have today, and the future be damned can be found in BruceMcF's Sunday Train.

Originally posted to xaxnar on Sun Oct 14, 2012 at 06:31 PM PDT.

Also republished by Income Inequality Kos.


Chrystia Freeman's observations about 14th century Venice and the U.S. today:

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