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 The Davos Economic Summit is currently going on. You too can attend this summit of elites for the modest price of $245,000 (does not include hotel bills, and restaurants).

  In this meeting of the 0.01% an interesting report was presented called The Vulnerability of Elites.
   [No, I'm not making this up. That was the real title.]

  While the report is obviously written from a "looking-down" approach, it manages to address a very important issue.

 When it comes to unemployment, the widening disparity of wealth, or environmental degradation, highly complex or even intractable issues set politicians up
for failure in the eyes of their constituents.
    Underperformance erodes elites’ legitimacy, making it that much harder for them to lead effectively. States captured by corruption or special interests, or that exhibit a lack of transparency, growing disparity of wealth, or a perceived indifference to the lives of the citizenry, will increasingly fall victim to this ‘legitimacy deficit.’...
    The result is a “legitimacy deficit” and a sense that we might nearly be better off without rulers. Leaders no longer have a story to rally their followers around.
  To the credit of the elite %1, they are familiar with real history. (as opposed to Fox News watchers, who know Hollywood's sanitized History)
   Republics replaced monarchies primarily for reasons of legitimacy. If the public didn't feel they had any stake in the government, then they would be far less likely to pay taxes and fight in wars. Giving the people to right to vote and effect policy gives the government legitimacy. Without that legitimacy, the king and his nobles would still be the only ones riding into battle.

"Markets like totalitarian governments."
 -  Blackrock’s Chairman and CEO, Larry Fink on Bloomberg TV

   Republicans like to accuse the government for this crisis, and they do have a point. The housing bubble could never have happened if it wasn't for the Federal Reserve's loose money and the massive subsidies from GSE's Fannie Mae and Freddie Mac.
   Democrats like to accuse Wall Street for this crisis, and they do have a point. The widespread fraud and market manipulation were the key parts of the crisis, and the most horrific. Not to mention ongoing.

  What many partisans overlook is the fact that the elements of this crisis are now indivisible. We are beyond the point of simply talking about an economic problem. It's become a political crisis.

 The political elite is responsible for the corporate elite in a unique fashion: The corporation was a political invention, so by definition, its behavior depends on the political system. But in a deeper sense, the crisis is one of both political and corporate elites, and the perception that by omission or commission they acted together -- knowingly engineering the outcome. In a sense, it does not matter whether this is what happened. That it is widely believed that this is what happened alone is the origin of the crisis. This generates a political crisis that in turn is translated into an attack on the economic system.
    The public, which is cynical about such things, expects elites to work to benefit themselves. But at the same time, there are limits to the behavior the public will tolerate. That limit might be defined, with Adam Smith in mind, as the point when the wealth of the nation itself is endangered, i.e., when the system is generating outcomes that harm the nation. In extreme form, these crises can delegitimize regimes.
  One consistent element of a banana republic is the rampant corruption. Many investors will avoid the country because of the uncertainty regarding the rule of law. What is against the law for some, is legal for others. If you don't grease the right palms then your investment can vanish with no recourse.
   Eariler this year the World Economic Forum’s annual Global Competitiveness Index was released. The U.S. ranks 21st in the world in terms of freedom from corruption.

[D]ishonest dealings tend to drive honest dealings out of the market. The cost of dishonesty, therefore, lies not only in the amount by which the purchaser is cheated; the cost also must include the loss incurred from driving legitimate business out of existence.
  - George Akerlof (1970)

  For years now people have been complaining how we are "drifting" to banana republic status.
  Well, we've arrived.
 The question is if you fully understand the consequences?

 The US is the world's largest prison state, imprisoning more of its citizens than any nation on earth, both in absolute numbers and proportionally. It imprisons people for longer periods of time, more mercilessly, and for more trivial transgressions than any nation in the west. This sprawling penal state has been constructed over decades, by both political parties, and it punishes the poor and racial minorities at overwhelmingly disproportionate rates.
    But not everyone is subjected to that system of penal harshness. It all changes radically when the nation's most powerful actors are caught breaking the law. With few exceptions, they are gifted not merely with leniency, but full-scale immunity from criminal punishment. Thus have the most egregious crimes of the last decade been fully shielded from prosecution when committed by those with the greatest political and economic power: the construction of a worldwide torture regime, spying on Americans' communications without the warrants required by criminal law by government agencies and the telecom industry, an aggressive war launched on false pretenses, and massive, systemic financial fraud in the banking and credit industry that triggered the 2008 financial crisis.
 A couple months ago the Justice Department decided not to prosecute HSBC for laundering money for drug cartels and terrorists simply because prosecutors were afraid of how it would effect the financial markets.
   Even the NY Times said  "It is a dark day for the rule of law."

  And then to show that this wasn't some exception, Justice Department prosecutor Lanny Breuer stood in front of the New York City Bar Association and basically said that the potential effect on the stock and bond markets would determine whether they would enforce the law when it came to financial institutions.
    Congress stands meekly by and asks for explanations rather than resignations for failing to enforce laws.

   The World Justice Project recently released a report that says Americans have less access to justice than even some developing countries. America ranks behind such countries as Estonia and the United Arab Emirates. The report is quite clear that the justice system in America depends on the amount of justice that you can purchase.

  I don't believe that most Americans realize we have crossed a point of no return.
Granted, we didn't get here suddenly and unexpectedly.
   We've tortured people for a decade now, and no one has had to answer for it. We engaged in illegal and immoral wars that killed hundreds of thousands of people, and people simply accept it.

 The right to indefinitely detain citizens without trial, classified kill-lists and "disposition matrices", a fast-expanding fleet of legally-unaccountable aerial drones, and the presumptive right to kill American citizens without due process - all these sweeping expansions of executive power are the legacy of four years of Barack Obama's presidency and of themselves represent a new era in the power of the American government over its citizenry.

Never before has an American president asserted their ability to act as judge, jury and executioner towards their own citizens, a power which Barack Obama claimed for the executive branch in killing the New Mexico-born fundamentalist preacher Anwar Al-Awlaki in a drone strike - followed by his 16 year-old son two weeks later.

The passage of the National Defense Authorisation Act (NDAA) provides the President with the ability to place Americans under indefinite military detention without trial or even the provision of evidence; a power which extends to citizens abroad as well as to those on US soil. Such concepts seem utterly otherworldly to most Americans, especially given their origination from a liberal president who had been elected in large part as a response to the perceived belligerence and militarism of George W Bush.

  As if to prove that this isn't some exception or oversight by the Obama Administration, Eric Holder's Justice Department has given awards to the investigative teams that refused to prosecute torturers who killed their victims (while aggresively prosecuting those who talk about torture to the press), and the team that "crafted a $25 billion settlement effectively immunizing the banksters for engaging in systemic mortgage fraud."
   The federal government's war on whistleblowers is now threatening to label journalists as terrorists if they report government misdeads.
   A policy paper published last year by the ACLU regarding domestic drone usage stated that "all the pieces appear to be lining up for the eventual introduction of routine aerial surveillance in American life - a development that would profoundly change the character of public life in the United States".

  Given the state of American society today, the first people to react to this crackdown on civil liberties are likely to be extreme right-wingers, who's first instinct would be violent. That violence would give the government its justification for further crackdowns.
   If right-wingers won't cooperate, then the government is willing to create those justifications.

 The use of entrapment as a tool by law enforcement agencies to mastermind terror plots on their own and induce young, isolated and impressionable Muslims into joining them has effectively become standard operating procedure, with the tacit endorsement of the executive branch.
 Imprisoning, torturing, and killing people without due process is "the right of Kings", not presidents. It is the domain of dictators, not democracies.

   And yet that is exactly where we find ourselves today.
The line has been crossed, and not by just a little bit.

    An government viewed as illegitimate by its people is likely to encounter mass demonstrations, strikes, riots, terrorism, and eventually military coups. So it really shouldn't surprise anyone that the government is increasingly acting like a police state. It is the logical, paranoid reaction of an entity that knows it is well outside of the law.
   Unlike a normal person, who might be incline to step back from the brink once it realizes he/she is operating outside acceptable limits, a government's first reaction is for self-preservation. That means cracking on enemies, whether real, potential, or imagined.
   The further our government drifts from the rule of law to the land of arbitrary law the more likely it is to react out of paranoia. Of course this will further undermine its legitimacy.

  That doesn't mean we are living in a dictatorship, or under tyranny. But it does mean that the future path has been cleared for it to happen. All the necessary precedents have been cleared by our court system. The campaign against civil liberties over the last 10 years has managed to remove many of legal structures that existed to prevent the empowerment of a police state.

   The situation is not hopeless, and even after the public finally wakes up to the fact that we are no different than any other banana republic it will not be hopeless, but the ability to find our way back to the rule of law without violence will become increasingly remote the longer this goes on.

Originally posted to gjohnsit on Sat Feb 02, 2013 at 08:05 AM PST.

Also republished by ClassWarfare Newsletter: WallStreet VS Working Class Global Occupy movement, Progressive Policy Zone, and The Rebel Alliance.

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Comment Preferences

  •  Highly unequal societies are never stable (13+ / 0-)

    it's a pretty common theme throughout history. The problem is that the current groups of global elites (especially in the US) have forsaken the idea of noblesse oblige and have gone into pure exploitation mode. While exploitation if more profitable in the short term it is not sustainable in the long term.

    -1.63/ -1.49 "Speaking truth to power" (with snark of course)!

    by dopper0189 on Sat Feb 02, 2013 at 08:18:44 AM PST

    •  The corruption of the upper class (10+ / 0-)

      Some time in the future a historian will write a book about how the upper class gave into greed, the same way they write about the Fall of Rome.

      ¡Cállate o despertarás la izquierda! - protest sign in Spain

      by gjohnsit on Sat Feb 02, 2013 at 08:35:10 AM PST

      [ Parent ]

    •  Need That Gated Community on Mars (1+ / 0-)
      Recommended by:

      One would imagine that the plutocrats would be investing heavily in building some sort of space program so that they could isolate and insulate themselves from the societal upheavals their policies promote.  The free trade policies of the last twenty years were promoted so that the plutocrats could ship their capital outside the US beyond the reach of the IRS.  Now, they're demanding they be able to change the rules of the game so that they can bring the money back tax free.  We really should let them just choke on the funds they've built up off-shore, because they have no place to invest it elsewhere at this point and they have no intention of investing it productively in the US.  Let them pay the Swiss banks to store the money for them, which is the Swiss practice.

      "Love the Truth, defend the Truth, speak the Truth, and hear the Truth" - Jan Hus, d.1415 CE

      by PrahaPartizan on Sat Feb 02, 2013 at 07:19:47 PM PST

      [ Parent ]

  •  Not noblesse oblige anymore (11+ / 0-)

    it seems they prefer exploitation under subjugation to the point of slavery for the rest of us. And a whole different set of rules for them and us.

    ❧To thine ownself be true

    by Agathena on Sat Feb 02, 2013 at 08:30:52 AM PST

    •  Depends on the Source of the Aristocracy (0+ / 0-)

      Noblesse oblige really only exists in societies whose aristocracies sprang from the military elites.  Those societies which were mercantile powers whose elites arose from money grubbing have been much less inclined to exhibit any idea of having some obligation to the society in which they arose.  Bankers always believe that every interaction is a financial transaction which they can somehow game to their advantage.  

      "Love the Truth, defend the Truth, speak the Truth, and hear the Truth" - Jan Hus, d.1415 CE

      by PrahaPartizan on Sat Feb 02, 2013 at 07:24:36 PM PST

      [ Parent ]

  •  A dire assessment, (14+ / 0-)

    but I cannot diasagree with it. As this super power empire of America unravels, with so mant resources being spent to shore up all the global outposts, the situation at home becomes ever more rotten at the core.

    Following recent trends in gun violence nationally, and watching the currents in politics in this SW zone of inanity called Arizona, I cannot help but think that violence is a certainty before credibility returns. I think it is unlikely that credibility will return until trends in income inequality reverse substantially; until the rampant corruption is cleaned up. That means the center of power must no longer belong to the kleptocrats-plutocrats. They won't give up that power peacefully.

    “Corruption isn’t just people profiting from betraying the public interest. It’s also people being punished for upholding the public interest.”  ― MS

    by cosmic debris on Sat Feb 02, 2013 at 08:35:07 AM PST

  •  We are no longer American citizens (17+ / 0-)

    as much as we are American Suspects. The KGB, the Gestapo, the Stasi, would gnash their teeth in envy of our surveillance state.

    Just the act of using words in a private communication can make you the object of intensive surveillance. The act of trying to organize the public to redress grievances can get you classed a terrorist.

    gjohnsit's diaries, btw, are worth more than 80% of the front-pagers at this site. If the goal here were really to "elect more and better Democrats" we'd be dealing head-on with the issues raised in this diary and his others on the economy and politics. Why they are not routinely on the front-page, or at least Rescued, ... there's no sane reason.

    The decline in party identification (both parties) is a reflection of the de-legitimizing of our government. Which they've brought upon themselves. I'll never forget Nancy Pelosi's remark when challenged to impeach King Bush the Gibbering for his vast war-crimes and betrayal of his Office to the effect "We'll defend the Constitution when it's worth it."

    Markos! Not only are the Gates Not Crashed, they've fallen on us. Actual Representatives are what we urgently need, because we have almost none.

    by Jim P on Sat Feb 02, 2013 at 09:07:51 AM PST

  •  Lets face it (12+ / 0-)

    Some people in this country are just more equal than others.

    We are a nation of men and not laws.

    Government of /for/by the 1%.

    And 1% corporate media owners are enable it.

    Where is the outrage over this blatant admission that these men are Above the law.

    Where is outrage against deliberate dereliction of duty , the malpractice against the prosecutors who have a sworn duty to uphold the laws?

    Government of, for, and by the wealthy corporate political ruling class elites. We are the 99%-OWS.

    by emal on Sat Feb 02, 2013 at 09:25:12 AM PST

  •  legitimacy is one thing money can't buy, (11+ / 0-)

    at least when the shit really starts hitting the fan.

    Not even all the quantitative easing in the world can convince Americans that the economy is doing well. Not even all of Obama's most inspiring rhetorical bromides can convince Americans that the government is genuinely interested in their concerns.

    People can sense it, even if they can't fully articulate it yet. They know that something is deeply wrong.

    Problem is, once the government has failed so badly that it has totally discredited itself in the eyes of the populace, it leaves a legitimacy vacuum that other entities will be eager to fill.

    In this country, that entity is likely to be extremely reactionary: racist, xenophobic, militarist, and religiously fanatical. Which is the real danger of the government losing legitimacy.

    "In America, the law is king." --Thomas Paine

    by limpidglass on Sat Feb 02, 2013 at 10:33:54 AM PST

  •  Wealll . . . (0+ / 0-)

    All I've got to say, is I'm not totally against the President having some of the powers of a King . . . if only he'd USE THE DAMNED THINGS effectively.  For instance, to hang at least a dozen of the top banksters from the top of the Washington monument.  Kings historically enforced honesty in commerce by draconian penalties for fraud and usury.  Or by demanding and passing a healthy national budget.  Ol' Tricky Dick Nixon knew how to force Congress to heel and he didn't have half the LEGAL powers that Obama now wields . . . he just did it anyway.

    A King who only uses his powers against the most vulnerable of targets, while shying from confrontation with his more powerful subjects, is known as weak and ineffectual.  In a real monarchy, he's also quickly known as Dead.  Our system seems to at least avoid that.  Pity. (None of the above intended in any way to wish personal harm upon Mr. Obama, who I honestly feel is doing pretty much the best he thinks he can do -- he's just far too cautious in speaking truth to Power for  my tastes).

  •  Great diary, gjohnsit (4+ / 0-)

    I would add one cause of the crisis which is not paid enough attention to, income inequality and the Great Divergence (1979 to now) from the Great Compression (WWII boom) where incomes were more in line and kept up with. Like before the Great Depression and  farming became more mechanized taking away income from farmers forcing them into taking out credit to sustain their standard of living including real estate.

    This is exactly what happened over the last 35 years as manufacturing jobs gave way to a combination of mechanized overproduction but also trade agreements and the manipulation of trade law for the elites which left your average consumer with no where to go to sustain their standard of living than credit and real estate that was sold to them as a never ending ATM with a never ending raise in the price despite their NINJA status an then it all came crashing down for reasons you know and I don't have to go into. The point is the crisis could not have happened without years of income inequality so it is not just, "Oh gee isn't it a shame people don't get by anymore" it is a direct cause of this whole economic and financial crisis and the bust.

    As economists William K. Black and George Akerloff have laid out Control Fraud built up both housing bubbles. Without underwriting standards and punishment for straying away from the perpetrators that caused these economic calamities, there can be no legitimacy to the system; a system with no standards.

    I don't negotiate grand bargains with deficit terrorists!

    by priceman on Sat Feb 02, 2013 at 03:34:59 PM PST

  •  A bleak assessment, (3+ / 0-)
    Recommended by:
    bobswern, gjohnsit, PrahaPartizan

    but one that is spot on accurate. Even monkeys know when they are being screwed. Right or left, I suspect that most people are beginning to comprehend that we are all monkeys now.

    "We are monkeys with money and guns". Tom Waits

    by northsylvania on Sat Feb 02, 2013 at 03:49:35 PM PST

  •  link incorrect? (1+ / 0-)
    Recommended by:

    The link to Global Competitiveness Index went to a BBC report.

    I googled it and found  this:

    This year’s report findings show that Switzerland tops the overall rankings in The Global Competitiveness Report for the fourth consecutive year. Singapore remains in second position with Finland, in third position, overtaking Sweden 4th). These and other Northern and Western European countries dominate the top 10 with the Netherlands, Germany and United Kingdom respectively ranked 5th, 6th and 8th. The United States (7th), Hong Kong (9th) and Japan (10th) complete the top 10.
    Nonetheless, as usual, I appreciate your reflections and perspective.  Thanks for the diary.
  •  Plutocrats Just Wanna Be Loved (1+ / 0-)
    Recommended by:

    They want your money - and your heart.  Who knew?

    "Love the Truth, defend the Truth, speak the Truth, and hear the Truth" - Jan Hus, d.1415 CE

    by PrahaPartizan on Sat Feb 02, 2013 at 07:13:50 PM PST

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