Elites lose the 'mandate of heaven'

The failure of the G20 leaders, when they recently met in Los Cabos, Mexico, to agree on an alternative to the current suicidal economic course is just one more indication that the ruling elites are not able to hold the system together, says Gerald Epstein.

Gerald Epstein

EXPECTATIONS were low to non-existent for the G20 summit meeting of developed and leading developing economies held on 18-19 June in the sun-drenched resort of Los Cabos, Mexico. Policy analysts and business leaders have decried 'policy paralysis' and the 'loss of credibility' as most of the G20 policy leaders rail against the negative impacts of austerity, even as they mostly continue to implement it.

The most immediate expression of this 'paralysis' is the euro crisis, which took centrestage in Los Cabos. Even as the G20 leaders let out a sigh of relief that the anti-austerity Syriza party and its charismatic leader Alexis Tsipras lost the 17 June Greek election, they were far from whooping it up over their margaritas and mojitos. More likely, they were crying in their Dos Equis, knowing that the Greek bullet they just dodged will be followed by volleys of heavy-duty speculative attacks from the banks, hedge funds and the actions of desperate elites trying to move their money 'someplace safe' like Germany, Switzerland, or the US. But if the euro collapses, this search for safety is likely to be futile.

The Europeans have no viable visible plan for solving the euro crisis. Meanwhile, President Obama, the leader of the presumptive global economic 'hegemon' that theoretically should be leading the global economy out of the crisis, is hobbled by a tenuous electoral position in the face of a financially flush, austerity-crazy Republican Party. And the emerging developing countries of China, India, and Brazil do not yet have the economic or political power, or perhaps even the economic vision, to implement an alternative pole of genuine leadership. As a result, austerity buzzards have pushed the global economy into stagnation and the brink of crisis: as the Brookings Institution tracking index of the global economy shows, the recovery in most of the world peaked in 2010.

Analysts rightly point to many specific structural flaws in the financial and economic order of the global economy that caused the crisis, including the non-regulation of finance and financial flows and complex financial products, leverage and asset bubbles that resulted; the financialisation of non-finanical corporations that led US CEOs to garner massive pay packages while disinvesting in their workers, communities and even in their own companies; the related massive increase in inequality in the US and elsewhere driven by business and government attacks on labour and their organisations that made it difficult to keep the economy growing without massive debt; and the theory and practice of mainstream economics itself that obscures these crucial, costly dynamics.

Paul Krugman, among others, has detailed the technical flaws in the eurozone structure that have contributed to this impasse, including a fixed exchange rate that makes it impossible for less competitive countries to compete without having to impose austerity, and no central fiscal mechanism to give financial relief to regions (nations) undergoing temporary declines without forcing them to incur massive debts which build up on the balance sheets of their banks.

But this focus on technical issues, while important and necessary, nonetheless underemphasises the world-view and the political interests motivating the entire system, which have brought it to its knees: it is a system driven by elite interests which fosters financial, labour and trade liberalisation when it pushes income and wealth to the top, and supports subsidies (such as the bank bailouts, and aid for the oil industry) and protection (such as patents on pharmaceuticals) when these are necessary to protect the income of the bankers and CEOs. This is all done under the guise of the 'magic of the market' as defended by many economists.

According to this narrow analysis of the euro crisis, the US supposedly has the appropriately structured currency union: national financial regulation; fiscal transfers among states; completely free migration across states; balanced budget rules in most states. But, go tout the beauty of the American monetary union to the people of Detroit, or to the thousands of firefighters, teachers and police officers being fired as austerity dominates US economic policy; a properly structured fiscal union is not saving them from a political-economic system run by an elite focused on maximising their short-term profits underwritten by public money.

The failure of the G20 meeting is just one more indication that the elites are not able to hold the system together. Perhaps the resulting chaos is a sign that the capitalist elites have lost, in terms of ancient Chinese teaching, the 'mandate of heaven' which identified the legitimate regime of leaders. Signs that the heavens were revoking the leaders' mandate included natural disasters like the Great Tangshen Earthquake in 1976 that killed at the least 240,000 people and called into question the political hegemony of the Gang of Four who were operating under the cover of Mao Tse Tung's authority; or massive poverty and economic despair that the rulers could not or would not alleviate.

If the unforgiving dynamics of the global financial crisis are finally revoking the capitalist elite's 'mandate of heaven', who is next in line to receive it? In France, Greece and a few other countries, the left has become more unified and has achieved some gains. But overall, those who have a vision and practical ideas to implement a more egalitarian and sustainable economy are not strong enough to take over - yet. It is necessary to contest the demonstrably false visions of an elite that has lost control with clear and workable ideas of alternatives, and do this in every venue and at every local, state and federal election, if progressive forces, rather than those on the far right, are to inherit the mantle of legitimate governance that the capitalist elite has now definitively lost.                                           

Gerald Epstein is a Professor of Economics and a founding Co-Director of the Political Economy Research Institute (PERI) at the University of Massachusetts, Amherst. This article is reproduced from the Triple Crisis blog (triplecrisis.com/spotlight-g-20-elites-lose-the-mandate-of-heaven/, 20 June 2012).

*Third World Resurgence No. 261, May 2012, pp 17-18