What do I mean by the power elite? The phrase was coined by Leftist sociologist C. Wright Mills in 1956. His book remains a classic. Its main chapter is here. Liberal columnist Richard Rovere in 1956 called it the American Establishment. Conservatives refer to it as the Insiders or the Conspiracy. David Rothkopf, writing from inside, calls them the superclass. Sometimes they are called the PTB: the Powers that Be. I think conservative journalist and historian Otto Scott said it best: the behind-the-scenes fellows who are too clever by half.
Who are they? They are men of influence and wealth who gain a lock on this wealth through political power. They use economic leverage -- debt -- recklessly because they can protect themselves from losses by means of political leverage: government bailouts. Some of them lose, but as a class they do not.
The key to their economic position is their unseen political manipulation. They are the masters of backroom politics. Theirs is not the backroom politics of the old big city political bosses, who were their class enemies, and whom they had generally replaced by the late 1950s. The novel The Last Hurrah (1956) describes this transfer of power, although it ignores the system that replaced the Catholic power base. The battle of the Boston Brahmins -- merchants and lawyers -- who had replaced the Boston Puritans by 1700, vs. Boston's Irish Catholics after 1870 is the archetype. The battle lasted for about 90 years. The triumph of Jack Kennedy, which seemed to be the triumph of the Irish Catholics of Boston, was in fact the victory of the Brahmins, by way of Harvard. His father got Jack into Harvard. Then he bought him the Presidency. "Honey Fitz" Fitzgerald's grandson was the symbol of this transfer of power.
The central battleground has always been the control of the faculty of Harvard, from 1636 until today. This includes the Harvard Business School and Harvard Law School. Harvard is both the symbol and the supreme leverage point. The other Ivy League schools are the second tier in this ring of power. So are the late-comers: Stanford University and the University of Chicago, which were created by two very rich capitalists in the late 19th century, who wanted into the circle of social influence, and who created universities to buy their way in. Leland Stanford never quite made it in. John D. Rockefeller, Sr.'s son did, by way of Brown University and the Rockefeller Foundation, which he took over in 1917.
New York City and Washington, D.C. -- Wall Street and the Beltway -- are where the anointed exercise their rule. This mirrors the circles of power in England: Oxford, Cambridge, and the City of London, a legally separate jurisdiction from the city of London.
Bankrolling the American power elite are fewer than a dozen large banks, mostly in New York City. They have an insurance company: the Federal Reserve System. Bankrolling the British power elite -- called the Old Boy Network -- is a similar system of banks. Their insurance company is the Bank of England, which is the model for the FED.
Note: the transfer of power began in 1660, with the restoration of Charles II to the British throne. Cromwell, the Lord Protector, had died in 1658. The Restoration displaced Cromwell's Puritans. But Cromwell had never consolidated his rule where it mattered: Oxford. He technically ruled over Oxford for almost a decade, but he never made any reforms. Next came the Glorious Revolution of 1688 and the creation of the Bank of England in 1694. This 34-year consolidation of social and economic power -- the displacement of Puritan rule -- was paralleled in Boston in these same years.
The power elite's members do not sit in the cigar smoke-filled rooms of the history textbooks. Most of them do not smoke these days. Indeed, their non-smoking status is one mark of their superior status. But, just like the old political bosses, they depend on politics for their position. That is their Achilles heel. By becoming dependent on politics to protect themselves from free market competition, they will eventually overplay their hand. They will bet the farm -- and ours -- on a busted flush. Imploding debt will remove them from the scene.
Why do I believe this?
To answer this, I begin with North's three laws of bureaucracy.
1. Some bureaucrat will inevitably enforce an official rule to the point of imbecility.2. To fix the mess which this causes, the bureaucracy will write at least two new rules.3. Law #1 applies to each of the new rules.
This is a convenient way to express the principle set forth by Ludwig von Mises in his essay, "Middle-of-the-Road Policy Leads to Socialism." Each attempt to fix the problems caused by a previous government intervention creates new problems.
Mises also argued that socialism is inherently irrational, because it destroys the market for capital goods. It destroys market pricing. He wrote that in 1920.
Conclusion: all socialist systems must collapse.
Semi-socialist systems move in the direction of bureaucracy. They fall under North's three laws.
Conclusion: The power elite will blow it. Give them time.