Is plutocracy the real face of capitalism?
Which is the future? Free-market capitalism or state-run capitalism? That was the burning question supposedly posed by the western financial crisis.
In hisessay in Foreign Affairs, later turned into The End of the Free Market: Who Wins the War Between States and Corporations, geo-political analyst Ian Bremmer wrote that even democratic, Western governments had to resort to state ownership of their collapsing financial institutions at the height of the crisis.
He warned against the advent of state capitalism and the retreat of the free market.
But is it possible the question he posed is moot? Is it possible that both types of capitalism - in China and America respectively - are essentially charades that mask an underlying plutocracy? There is the 'family business' argument put forward by authors Carl Walter and Fraser Howie about China.
And then there is the 'banana republic' argument about the US put forward by Yves Smith, an economics blogger, and Simon Johnson, a former IMF chief economist. Johnson caused an uproar from top bankers and politicians with his May 2009 article in the Atlantic Monthly in which he compared the stranglehold of the financial oligarchy on Wall Street over Washington with that of politically-connected business elites in emerging countries.
'In its depth and suddenness, the US economic and financial crisis is shockingly reminiscent of moments we have recently seen in emerging markets,' he wrote.
'There's a deeper and more disturbing similarity: elite business interests ... played a central role in creating the crisis, making ever-larger gambles, with the implicit backing of the government, until the inevitable collapse.'
The theme was further elaborated in Johnson's more recent 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown, co-authored with James Kwak.
'The fact that our American oligarch operates not by bribery or blackmail, but by the soft power of access and ideology, makes it no less powerful.
'We may have the most advanced political system in the world, but we also have its most advanced oligarchy.'The idea that a sophisticated, unrestrained financial sector was good for America became part of the conventional wisdom of the political and intellectual class ... A casual observer would be forgiven for thinking that Washington has behaved like an emerging market government - using public resources to protect a handful of large banks with strong political connections ... Wall Street became stronger as a result of the financial crisis.
'Never before has so much taxpayer money been dedicated to save an industry from the consequences of its own mistakes. In the ultimate irony, it went to an industry that had insisted for decades that it had no use for the government and would be better off regulating itself - and it was overseen by a group of policymakers who agreed that government should play little role in the financial sector.'
The era of western-dominated globalisation and the so-called Great Moderation was an illusion perpetuated by an unholy alliance of finance, hands-off governments and academia, especially in the US.
Or, as Smith wrote in Econned: How Unenlightened Self-interest Undermined Democracy and Corrupted Capitalism, 'The widespread acceptance of the phony precepts of financial economics and neoclassical economics helped bring about the financial crisis by endorsing policies and practices that allowed financial firms to exploit customers, shareholders and taxpayers on a scale heretofore seen only in banana republics.'
To wit: who needs 'money-under-the-table'corruption when a company like Goldman Sachs could legally earmark US$11.4 billion inbonuses in the first half of 2009, when the financial crisis was still boiling?
The cost, in US dollars, to the United States between September 2008 and the end of 2009, due to the financial crisis.