The Global Financial Community

Lenin in Imperialism had talked about a financial oligarchy presiding over vast amounts of money capital through its control over banks and using this capital for diverse purposes, such as industry; speculation; real estate business; and buying bonds, including of foreign governments.  The finance capital that Lenin was talking about belonged to particular powerful nations; correspondingly, the oligarchies he was referring to were national financial oligarchies.  He talked for instance of French, German, British and American financial oligarchies.  But in the current epoch of ”globalization” when finance capital itself is international in character, the controllers of this international finance capital constitute a global financial oligarchy.  This global financial oligarchy requires for its functioning an army of spokesmen, mediapersons, professors, bureaucrats, technocrats and politicians located in different countries.

The creation of this army is a complex enterprise, in which one can discern at least three distinct processes.  Two are fairly straightforward.  If a country has got drawn into the vortex of globalized finance by opening its doors to the free movement of finance capital, then willy-nilly even well-meaning bureaucrats, politicians, and professors will demand, in the national interest, a bowing to the caprices of the global financial oligarchy, since not doing so will cost the country dear through debilitating and destabilizing capital flights.  The task in short is automatically accomplished to a large extent once a country has got trapped into opening its doors to financial flows.

The second process is the exercise of peer pressure.  Finance Ministers, Governors of Central Banks, top financial bureaucrats belonging to different countries, when they meet, tend increasingly to constitute what the distinguished Argentine economist Arturo O’Connell has described as an ”epistemic community”.  They begin increasingly to speak the same language, share the same world view, and subscribe to the same prejudices, the same ”humbug of finance” (to use Joan Robinson’s telling phrase).  Those who do not are under tremendous peer pressure to fall in line; and most eventually do.  Peer pressure may be buttressed by the more mundane temptations that Lenin had described, ranging from straightforward bribes to lucrative offers of post-retirement employment, but, whatever the method used, conformism to the ”humbug” that globalized finance dishes out as true economics becomes a mark of ”respectability”.

But even peer pressure requires that there should be a group of core ideologues of finance capital who exert and manipulate this pressure.  The ”peers” themselves are not free-floating individuals but have to be goaded into sharing a belief-system.  There has to be therefore a set of key intellectuals, ideologues, thinkers and strategists that promote this belief system, shape and broadcast the ideology of finance capital, and generally look after the interests of globalized finance.  They are not necessarily capitalists or magnates; but they are close to the financial magnates, and usually share the ”spoils”.  The financial oligarchy proper, consisting of these magnates, together with these key ideologues and publicists of finance capital, can be called the ”global financial community”.  The function of this global financial community is to promote and perpetuate the hegemony of international finance capital.  And here the most critical issue concerns the relationship of this global financial community to the politics of particular countries.

To say that the World Bank and the IMF are the main breeding ground for these key figures who are part of the global financial community and mediate the relation between particular countries and globalized finance is to state the obvious.  True, the Fund and the Bank are not the only institutions; there are sundry business schools and departments of economics, of business administration, and of finance in prestigious Anglo-Saxon universities.  But even for the products of the latter institutions, the Fund and the Bank often act as ”finishing schools”.

The relation between the key ideologues of finance capital and the governments of the various countries has itself undergone a major transformation in the more recent period.  Earlier these ideologues were transplanted from the Fund and the Bank, as part of an implicit conditionality, to the Ministries of Finance in different countries, and the whole effort was to ensure that they functioned to promote the interests of international finance capital while remaining free from political intervention.  They operated in short as career bureaucrats; governments might come and go, elections might make people throw off ”neo-liberal” rulers and replace them with the critics of ”neo-liberalism” who had hitherto occupied oppositional space.  But ”neo-liberalism” persisted notwithstanding such changes in government, because key bureaucratic positions continues to be occupied by members of the ”global financial community”, either the same ones serving ever new governments, or new ones that came with government change but from the same flock.  And there were various instruments devised to ensure that the new governments could not interfere in their functioning, such as the Fiscal Responsibility legislation that tied the hands of governments, or the so-called independence of the Central Bank that took a whole range of economic policies outside the purview of elected governments, or the sheer hard-sell of something called ”development” that was just a euphemism for the neo-liberal agenda.

But with the Fund and the Bank getting increasingly marginalized as international lenders, and hence as the gendarme of international finance capital, owing mainly to the paucity of funds at their disposal, this ”placing-Fund-Bank-employees-in-Finance-Ministries” strategy, though still practiced, has needed to be supplemented by more forthright measures whereby members of the global financial community are directly inducted into political appointments.  From occupying bureaucratic positions within an overarching political process they have started moving directly into political positions.

Obama’s political appointees include people like Rubin, Geithner, and Summers, who are indubitably members of the global financial community and who collectively are in complete charge of economic matters in the Obama administration.  Bush’s replacement by Obama has merely led to the replacement of Paulson by Geithner. The Wall Street giant to which one of them is loyal may be different from the one that commands the other’s loyalty, but each of them is loyal to some Wall Street giant and is a true exponent of the ideology of finance capital.  Larry Summers, another political appointee, who had occupied an important position in the Clinton administration, has been re-inducted into the Obama administration, having occupied the position of the President of Harvard University for a while in between.  He reportedly earned $8 million last year, $5.2 million from a leading hedge fund D. E. Shaw, and $2.77 million from forty speaking engagements before executives of banks and financial firms.  Lecture fees of this order, amounting to about $70 thousand per lecture, are not paid merely for satisfying intellectual curiosity or quenching the thirst for knowledge.  They are a pay-off for preaching the ideology of finance capital, for imparting to neophytes the belief system shared by the members of the global financial community.  It is of some interest to know that as Clinton’s Treasury Secretary, Summers had turned down all suggestions for regulating hedge funds, claiming that those who operated such funds were smart and sophisticated enough to invest prudently!

How people like Summers, Geithner and Rubin come to occupy such important political positions within the U.S. system is pretty obvious.  American Presidential elections require massive amounts of money, a good chunk of which invariably comes from Wall Street.  The story doing the rounds for a while was that Obama had got most of his funds from small donations of $100 each garnered through the internet; but this was complete nonsense.  Obama like others before him had also tapped Wall Street and the appointment of the trio, who had organized Wall Street finance for him, was a quid pro quo.  The elevation of members of the global financial community to run the American economy therefore should cause no surprise.

What is more surprising is the way the financial community has insinuated itself into political positions even in a country like India which had a prolonged anti-imperialist struggle whose legacy still remains, and where politics, admittedly electoral politics, is taken very seriously by the people.  The case of Manmohan Singh is too well-known to be recounted here, but in recent years members of the financial community have been smuggled in through the Rajya Sabha route into the nation’s politics and kept in readiness for important political positions.  None of them has ever participated in any political activity; none of them has ever won an election on the basis of popular mandate; and none of them has ever even been particularly loyal to the political Party which nominates them.  Nonetheless they emerge as key political figures and promote even within a system marked by universal adult suffrage the interests of international finance capital.

Similar examples can be cited from a host of other countries.  Everywhere, members of the global financial community are implanted upon the political process to look after ”economic affairs”, which means to promote and protect the interests of international finance capital by ensuring that the neo-liberal policies are carried on.  This dialectical interaction between traditional politics on the one hand and the members of the financial community implanted upon it on the other constitutes one of the most significant aspects contemporary bourgeois life.

Marxists, when they speak of ”bourgeois democracy”, are often accused of resorting to hyperbole.  ”Democracy” after all is ”democracy”; why talk of ”bourgeois” democracy and ”peoples”’ democracy?  True, one must never pooh-pooh bourgeois democracy, since, of all the possible forms of bourgeois rule, it is the one that gives the people the widest possible scope for organizing themselves into a force of resistance.  But the limitations of bourgeois democracy, the sham that the bourgeoisie is forever attempting to reduce it to, are equally palpable.  This country is at present engaged in a remarkable electoral exercise, but once the results are out, the jockeying to ensure that the economic levers of the country continue to remain in the hands of the members of the global financial community will be equally intense.  It is as if after the people have spoken the real game will begin to ensure that their words count for nothing.  Winning elections is not enough; defeating this post-election game acquires even greater significance.

Prabhat Patnaik is an economist at the Centre for Economic Studies and Planning in the School of Social Sciences of Jawaharlal Nehru University in New Delhi.   This article was published by the International Development Economics Associates on 21 April 2009; it is reproduced here for educational purposes.