The Concept of a "Predator State" Explains Much About Our Current State of Affairs

Great article, well worth reading it its entirety:

When the top 1% of individuals in a nation own 38% of its wealth and the bottom 40% own just 1% – when the average individual in the top 1% owns 1500 times as much wealth as the average individual in the bottom 40% – it is worth asking the question: Why? Do these people own so much more wealth than other people because they earn it by contributing to society in some way? Or are they predators? Or does the answer lie somewhere in between?

James K. Galbraith, in his book “The Predator State”, notes that the concept of a predator class is not new, and he introduces the concept by first discussing Thorstein Veblen’s “Theory of the Leisure Class”, published in 1899:

The leisure classes do not work. Rather, they hold offices. They perform rituals. They enact deeds of honor…The leisure class is predatory as a matter of course… The relation of overlords to underlings is that of predator to prey. Vested interests… live off the work of others by right and tradition, and not by their functional contribution to the productivity of the system… Predators rely on prey for their sustenance, but they also require and must motivate their assistance…

(snip)

Joseph Stiglitz explains how predation has been at work in the bailout of Wall Street by the American taxpayer:

The TARP bailout has so far been a dismal failure. Unbelievably expensive, it has failed to rekindle lending. Former Treasury Secretary Henry Paulson gave the banks a big handout…The taxpayers put out $350 billion and didn't even get the right to find out what the money was being spent on, let alone have a say in what the banks did with it.

TARP's failure comes as no surprise: incentives matter. Bankers won't restart lending unless they have a reason to do so or are forced. Receiving billions of dollars in bonus pay for racking up record losses is a peculiar "incentive" structure….

And yet, they’re still trying to get more:

The financial wizards are turning to tried and true gimmicks – the same ones that got us into the mess. One strategy is to hide the costs in nontransparent accounting… The other combines this trickery with the magic of leveraging and pretends that leveraging carries no risk… Long experience has taught us that when banks are at risk of failure, their managers engage in behaviors that risk losing even more taxpayer money. They may, for instance, undertake big bets: if they win, they keep the proceeds; if they lose, so what?--they would have died anyway…. Because the government is on the hook for so much money, it has to take an active role in managing the restructuring…

James Galbraith. Galbraith describes the takeover of our country by predators, the process that made it into a predator state:

In the late 1970s and 1980s… business leadership saw the possibility of something far more satisfactory from their point of view: complete control of the apparatus of the state. In particular, reactionary business leadership, in those sectors most affected by public regulation, saw this possibility and directed their lobbies – the K Street corridor – toward this goal. The Republican Party… became the instrument of this form of corporate control. The administration… of George W. Bush became little more than an alliance of representatives from the regulated sectors seeking to bring the regulatory system entirely to heel. And to this group was added… those who saw the economic activities of government not in ideological terms but merely as opportunities for private profit on a continental scale…

This is the predator state. It is a coalition of relentless opponents of the regulatory framework on which public purpose depends, with enterprises whose major lines of business compete with or encroach on the principal public functions of the enduring New Deal. It is a coalition, in other words, that seeks to control the state partly in order to prevent the assertion of public purpose… They are firms that have no intrinsic loyalty to any country… They assuredly do not adopt any of society’s goals as their own, and that includes the goals that may be decided on by their country of origin, the United States. As an ideological matter, it is fair to say that the very concept of public purpose is alien to, and denied by, the leaders and the operatives of this coalition… In the predator state, the organization exists principally to master the state structure itself.