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Is There a Check to Financial Capitalism?

A system of checks and balances is vital in a healthy democracy. Does the lack of checks in global financial capitalism threaten it?

We live in dangerous times. When 1% of the global population will own more than the rest of the entire world next year, things aren’t looking good. The standard conservative response to this is to say the working class is full of resentment, jealousy, and envy. But this conservative dismissal is naive and equally dangerous because it fails to identify the inherent tyrannical effects of such concentration of unchecked financial power. It is, after all, the responsibility of the people to keep institutions of power in check for the sake of protecting and preserving democracy—the rule by the people, of the people and for the people.

Aristotle first proposed the idea of checks and balances of power in what he called hybrid governance. The French-Enlightenment thinker Baron de Montesquieu philosophically grounded a tripartite system divided between the executive, legislative and judicial branches, an idea infused into the U.S. constitution.

All this makes sense: it’s prudent to preserve a democratic way of life by ensuring that one governmental power can’t overpower the others and prevent the rise of tyrannical rule. In fact, this version of economic capitalism that peddles the idea of limited government and free enterprise ironically stifles economic opportunities and growth. Alan B. Kreuger, then Chairman of White House Council of Economic Advisers, Alan B. Krueger has maintained that “[t]he rise in inequality in the United States over the last three decades has reached the point that inequality in incomes is causing an unhealthy division in opportunities, and is a threat to our economic growth.” Perhaps it’s time to realize the mystical rhetoric of free-market capitalism with the faith in a trickle down effect is a farce and only serves the 1% to the detriment of the rest of us and to democracy.”

No different than in the feudalistic epoch

Is global financial capitalism really a threat to democracy? According to Philippe Legrain, Economic Advisor to the President of the EU Commission from 2011-2014, there is at least one example that it is. In his Foreign Policy article, Legrain adroitly identifies the robustly undemocratic rule by European capitalist financiers seen in the wake of Syriza’s overwhelming democratic victory in Greece. The two most prominent figures hail from Germany: Chancellor Angela Merkel and Finance Minister Wolfgang Schäuble. In a statement that directly undermines a basic tenet of democracy, namely that it operates “by the will of the people,” Schäuble said, "New elections change nothing in the accords struck with the Greek government.” The point being, democracy comes second to economic rule, never mind that the original agreements of which Schäuble speaks are highly suspected of being formed by objectively corrupt Greek politicians, something that is only now coming to light.

And this brings us back to the question of the checks and balances of power. We understand the checks and balances of power within government, but how do you hold in check a power (in this case, financial power) that has done an end-run around the entire political structure as such? But not only has financial capitalism transcended the ability to be held accountable to the will of the people, it has as Schäuble’s comment made clear, directly threatening any challenge to the unchecked regime of the 1%.

In the same article, Schäuble echoes the “mother” of global financial capital, Margaret Thatcher’s TINA (“There is no alternative” to capitalism) doctrine when he said, “These tough reforms are bearing fruit, they [Greece] have no alternative.” In other words, the brutal reality that the 1 percenters are forcing us into accepting is that their power is so omnipresent that any challenge to it, no matter its virtue, is unthinkable.

This type of radically intense concentration of power is no different than in the feudalistic epoch in which the aristocracy reigned unchecked. And we’d do well to recall that this unequal power relation precipitated the French and American Revolutions. It may be helpful to recall Thomas Jefferson’s fear of tyrannical rule highlighted in the Declaration of Independence:

“The history of the present King of Great Britain is a history of repeated injuries and usurpations, all having in direct object the establishment of an absolute Tyranny over these States. To prove this, let Facts be submitted to a candid world.”

As bold as the Greeks

The question that Greece’s Syriza government is now confronted with is analogous to the same question that the founders of America faced, we only need to replace the “King of Great Britain” with the people that the Merkels and Schäubles work for, namely the banking institutions such as the Central European bank, the IMF and the European Union.

Whether Syriza (and/or Podemos, the Spanish left-wing democracy party) succeed or fail, the questions they are forcing us to perceive are invaluable for the future hope of democracy. Is it possible, for example, for the people of the world to govern themselves or will they be governed by the 1%? This question should prompt us all not only to think seriously about it, but to be as bold as the Greeks, who are confronting what by any measure has become the most dangerous threat to all the people in our world today.

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