There is a comforting story that ordinary citizens rule themselves. Every few years we walk into polling booths, mark pieces of paper and thereby determine the direction of the country. Politicians repeatedly tell us that they are our servants. Governments speak reverently of the will of the people. If the public becomes dissatisfied, another election will supposedly put everything right. Vote out the evil party and put in the stupid party.
There is enough truth in this story to make democracy considerably preferable to dictatorship, but not enough to describe how modern societies actually work. Between one election and the next stands an immense architecture of institutions whose decisions ordinary people barely influence: government departments, central banks, courts, corporations, universities, media organisations, financial institutions, regulatory agencies, technology companies, foundations, NGOs and international bodies. Governments come and go while much of this machinery remains.
Ryan McMaken, writing for the Mises Institute and republished at ZeroHedge, approaches the problem through the classical elite theory associated with Vilfredo Pareto. His basic proposition is refreshingly unsentimental. Every political system is governed by elites. Democracy does not abolish elite rule; it merely changes the mechanisms by which elites acquire, exercise and justify power. The political elite consists not necessarily of the wisest or most virtuous people but of those particularly skilled at obtaining and retaining political power.
That distinction matters because the word "elite" has become hopelessly confused. A brilliant surgeon is elite. An Olympic athlete is elite. A farmer capable of turning marginal land into an extraordinarily productive enterprise may be elite at agriculture. A mathematician who solves problems that defeat almost everyone else is intellectually elite. There is nothing objectionable about excellence. Every functioning civilisation depends upon people who are unusually good at difficult things. The problem begins when excellence is confused with power.
McMaken therefore distinguishes genuine economic elites from political elites and politically dependent economic elites. In a reasonably free market, the successful entrepreneur must persuade people voluntarily to buy something. However rich he becomes, consumers retain a tiny but important sovereignty: they can say no. A businessman who repeatedly produces things nobody wants eventually encounters reality in the form of bankruptcy.
The politically connected corporation operates under rather different rules. It can obtain subsidies, regulatory protection, government contracts, preferential financing, bailouts or rules that impose enormous compliance costs upon smaller competitors. McMaken points to the financial crisis of 2008 as a particularly striking example. Institutions that might have failed under ordinary market discipline were rescued through political and monetary intervention. The resulting economic hierarchy therefore cannot simply be described as the outcome of free competition.
This is where the distinction between the successful and the ruling becomes interesting. Modern Western societies contain plenty of extremely wealthy people, but wealth by itself does not tell us how much political power someone possesses. The owner of a successful chain of plumbing businesses may be worth $100 million yet possess negligible influence over national policy. A comparatively obscure senior bureaucrat whom virtually nobody has heard of may participate in decisions affecting millions of people. Power therefore needs to be mapped institutionally rather than merely financially.
The first layer is obvious: elected political power. Prime ministers, presidents, ministers, legislators and their senior advisers make laws, levy taxes, spend public money and command the coercive machinery of the state. They are the visible ruling class, which is why democratic anger normally concentrates upon them.
But elected politicians occupy their offices temporarily. Behind them sits the permanent administrative state. Departments retain institutional memories, professional cultures, regulatory preferences and policy assumptions across changes of government. A minister arriving after an election may nominally command a department containing thousands of people who have spent their careers mastering a policy field that the minister began studying last Tuesday.
That asymmetry of information matters enormously. Bureaucracies do not need to stage a coup against elected government. They exercise influence through the ordinary processes of briefing, drafting, implementation and institutional inertia. They determine which options reach the minister's desk, which difficulties are emphasised, which proposals are described as impractical and how broad political instructions are translated into thousands of pages of administrative reality.
Then there is the regulatory elite. Modern citizens are governed not merely by Acts of Parliament that they can theoretically trace back to elected representatives but by an extraordinary accumulation of regulations, standards, administrative decisions, professional requirements and delegated rules. The legislature establishes broad authority and somebody considerably less visible decides what that authority means on Tuesday morning when it reaches you.
Alongside government sits the financial elite. Central banks, commercial banks, investment institutions, pension funds, asset managers and financial regulators operate systems upon which the entire economy depends. Their decisions influence interest rates, credit, investment, housing, asset prices and the survival of businesses. The ordinary voter does not choose these people, and usually could not name them.
The financial crisis demonstrated something important about this arrangement. When ordinary businesses fail, failure is usually described as capitalism. When sufficiently important financial institutions fail, capitalism can suddenly be suspended in order to save them. Losses become politically intolerable precisely when the institutions suffering those losses are sufficiently entangled with the state and the wider financial system.
This creates what might be called the bailout aristocracy. Its members enjoy the prestige and rewards of private enterprise during prosperous times while possessing an implicit claim upon public protection during catastrophe. Whatever one calls that arrangement, pure free-market capitalism is not an adequate description of it.
Next comes the corporate elite. Here again distinctions matter. A person who builds a company by satisfying millions of willing customers has done something fundamentally different from a company whose prosperity depends heavily upon licences, subsidies, government procurement, regulatory barriers or political access. In practice, enormous modern corporations may combine both characteristics.
As companies grow, the rational strategy increasingly includes cultivating government. Lobbyists proliferate because legislation has economic value. Regulation can destroy competitors as effectively as better products can defeat them. Government contracts can create markets that consumers themselves would never have created. Political influence consequently becomes another form of corporate capital.
This produces the revolving door familiar throughout Western government. Regulators move into industries they once regulated. Corporate executives enter government. Political advisers become lobbyists. Consultants move between public departments and private corporations. None of this requires a conspiracy. It requires only incentives.
That point is crucial because discussion of elites frequently degenerates into fantasies about a dozen sinister people sitting around a mahogany table deciding the future of humanity. Modern elite power is simultaneously more mundane and more formidable. The system does not require central coordination because institutions can converge upon shared interests without anybody issuing orders.
A bank wants financial stability on terms favourable to banking. A bureaucracy wants larger budgets and greater jurisdiction. A university wants grants. A corporation wants favourable regulation. An NGO wants government funding and policy influence. A politician wants favourable publicity and re-election. A media organisation wants access to influential sources. A technology company wants government contracts and regulations its smaller competitors cannot afford to satisfy. Put these actors together and considerable policy convergence can emerge without anyone telephoning headquarters.
The media elite occupies a particularly important position because it helps determine what everybody else is allowed to discuss. Media power is not principally the ability to make people believe obvious falsehoods. It is the power to establish salience. Ten thousand things happen today; perhaps twenty become major news stories. Somebody chooses those twenty.
What is ignored can be as important as what is reported. Which crime becomes nationally significant? Which scientific paper receives headlines? Which political scandal lasts three weeks and which disappears after an afternoon? Which dissident is described as a courageous whistleblower and which as a dangerous extremist? These are exercises of cultural power even when every individual sentence in the resulting reporting is technically true.
Universities form another layer of the system. Their immediate coercive power is limited, but their long-term influence is substantial because they manufacture credentials and legitimise ideas. They educate journalists, teachers, lawyers, psychologists, bureaucrats and politicians. They decide which intellectual positions count as respectable scholarship and which lie beyond the boundaries of acceptable professional opinion.
The academic elite therefore exercises power upstream. Today's obscure theoretical literature can become tomorrow's professional training, next decade's administrative doctrine and eventually the assumptions so deeply embedded in institutions that nobody remembers where they originated.
The NGO and philanthropic worlds add another dimension. Organisations that describe themselves as civil society can perform valuable work, but the description "non-government organisation" sometimes conceals complicated relationships with governments, corporations and wealthy foundations. An organisation may formally sit outside the state while depending heavily upon public grants, participating in government consultations and lobbying governments to expand programs from which its sector benefits.
The technology elite is newer and potentially more powerful still. The great digital platforms mediate communication, information discovery, commerce and increasingly artificial intelligence. Previous rulers could dream of possessing systems capable of recording the interests, associations and communications of enormous portions of the population. Modern societies constructed those systems voluntarily because they were convenient.
This does not mean technology companies control everything. Governments possess powers that corporations ultimately do not, particularly taxation, legislation, policing and military force. Yet the relationship between state and technology company increasingly resembles a negotiation between different centres of power rather than the simple regulation of an ordinary business.
Above the national level lies another collection of institutions: international organisations, treaty systems, transnational regulatory bodies, financial institutions and policy networks. Their defenders correctly point out that international cooperation is unavoidable in an interconnected world. Their critics equally correctly observe that every transfer of decision-making away from national electorates increases the distance between power and democratic accountability. The result is not a single ruling elite but an ecosystem of elites.
That is where McMaken's distinction between real and ruling elites can be extended. Pareto was interested in the circulation of elites: ruling classes decay, challengers arise and one elite replaces another. Modern Western societies have complicated this process by constructing institutions that can protect incumbents from competition. Regulation, credentialism, professional licensing, political patronage, government procurement and financial intervention can all make elite circulation more difficult.
A genuine elite should constantly face the possibility of replacement. The champion must defend his title. The scientist's theory can be overturned. The entrepreneur can lose customers. The writer can lose readers. Excellence that cannot survive competition eventually ceases to deserve the name. A ruling elite naturally prefers another arrangement. It wants the benefits of elite status without continuous exposure to replacement.
This may be the most important difference between productive elites and extractive ones. Productive elites need us. They require customers, readers, patients, clients, audiences or voluntary followers. Extractive elites need access to institutions capable of compelling us to pay, comply or remain within systems from which meaningful exit is difficult.
The question is therefore not whether society should have elites. It always will. The question is how elites acquire their position, how they retain it, and what mechanisms exist for removing them.
A healthy society should contain vigorous competition among elites. Political power should be constrained by constitutions and elections. Economic power should remain exposed to competition and bankruptcy. Academic authority should remain open to intellectual challenge. Media organisations should compete with alternative sources of information. Bureaucracies should remain subordinate to elected government. Corporations should succeed by persuading customers rather than politicians.
Once these boundaries collapse, something quite different emerges. Political elites protect economic elites, economic elites finance political influence, academic elites supply ideological legitimacy, media elites establish acceptable narratives, bureaucratic elites implement policy and technological elites increasingly provide the infrastructure through which everybody communicates. Again, conspiracy is unnecessary. Convergent interests will do most of the work.
There is nevertheless one actor missing from this map: us. Elite theory can become politically paralysing if it teaches ordinary people that power is so completely concentrated that resistance is pointless. That conclusion gives ruling elites considerably more credit than they deserve. Their power depends upon cooperation from millions of people and upon the continued legitimacy of institutions. Elections still matter. Consumer choices matter. Alternative media matter. Local communities matter. Families, churches and voluntary associations matter. Independent businesses matter. The willingness to say no matters.
McMaken ends by locating the "real elites" among people who obtain voluntary support through private and non-coercive institutions rather than through political force. One need not accept every element of his libertarian analysis to see the moral importance of that distinction.
The most dangerous ruling class is consequently not necessarily the richest collection of people. It is the network best positioned to insulate itself from correction. Wealth can disappear. Governments can lose elections. Corporations can collapse. Academic orthodoxies can become ridiculous. Newspapers can lose their readers. Technologies can be displaced. Elite power becomes pathological when institutions cooperate, intentionally or otherwise, to prevent those corrective mechanisms from operating.
That suggests a better democratic objective than the impossible dream of abolishing elites. We should make elites compete. Make political elites answer to voters, corporations answer to customers, universities answer to evidence, media answer to readers and bureaucracies answer to elected governments. Above all, preserve the possibility of exit and dissent.
The people who govern us are powerful partly because we collectively permit institutions to accumulate power. The answer is not to search endlessly for a secret room containing the people who "really run the world." There probably is no such room, and concentrating upon imaginary omnipotent conspirators distracts attention from the visible institutional machinery operating in daylight.
The more useful questions are simpler. Who made this decision? Under what authority? Who benefits from it? Who pays for it? Who can challenge it? Who can remove the decision-maker? What happens if the institution fails? Can citizens refuse its services, choose a competitor or vote its masters out? If those questions have satisfactory answers, elites can be useful servants of civilisation. If they do not, we are approaching something much closer to an oligarchy.
https://www.zerohedge.com/political/real-elites-vs-ruling-elites