BNN’s Amanda Lang and Kevin O’Leary reported today on SqueezePlay that three U.S. cities have just written letters into the Treasury asking for their own bailouts - Arizona, Pennsylvania and Georgia are starting to look as financially well-off as California, which is completely in the red.  Is this a sign of worse to come?  What’s the difference between a bailout and a usual subsidy?

It occurred to me earlier today - the irony of a situation in which the US government might “bailout” GM and Ford and yet the same administration failed to build sufficient levees in hurricane-torn New Orleans - let alone all the help and reconstruction that city did not receive when it needed it.  But the bailouts of these dinosaur-Detroit automakers get this much attention… amazing.

I’m also more than a bit nervous about this weekend’s G20 meeting - there better not be any drastic tinkering of the world global system - we don’t want to be releasing too many butterflies into world weather maps, if you know what I mean… it’s exactly what David Smick was warning about in his latest book, and I think it shows how we’re now at a politically fragile moment globally as well.

In other words, the economic crisis has grown from a US mess (Aug. 2007-Sept. 2008) into a global financial mess (Sept-Oct 2008) and now this month I think it’s really become more than a mere economic mess.  With this G20 meeting, it’s gone political.  News reports today showed that Ecuador is going to miss a foreign debt payment, and that Canada and the US are thinking of partnering up in order to save the gas-guzzling market.

I really don’t like the look of any of it.  It’s no longer seeming like some storm that’s going to pass over.  We al know we’re in a global recession now, but it’s no longer just a recession.  The changes that are being made now are going to create new problems in the future.  There’s less transparency and more confusion at this point.  That’s what’s really holding the markets back.

And I’m really frustrated that our (Canadian) currency isn’t reflecting the real worth of the Canadian balance sheets.  It’s completely ridiculous that the most corrupt treasury is seeing all the gains right now.

When you consider all that’s been happening and put it on a short timeline, it’s amazing that we’re still seeing so much coordinated effort internationally.  This is great.  No one anywhere wants global markets in chaos.  It’s a good sign, in a way, that there is so much financial cooperation (at least that public knowledge is privy to).

But this last week has seen a couple of new developments: namely, the fact that the crisis is showing signs of having hit both China and the Gulf region.  Will this make a difference?  You bet it will.  But I’m not sure exactly what difference yet.

It has me wondering whether the financial crisis could lead to greater political crises.  Sure, in theory, it could.  The food price problems of the summer started on that route.  What could it be this time?  I’ve seen one article in a local newspaper raise the question as to why the bankers responsible for this mess aren’t being charged as criminals.

It’s a fact that the US banks basically created their own private “market” for the exchange of off-balance-sheet entities in order to gain more profits.*  Was this illegal?  I am sure it is in someone’s books.  It’s certainly devious, non-transparent, and basically, sort of, like lying.

As the crisis unfolds and hopefully cools down, we will see more and more of this kind of analysis, I imagine.  Expect books rehashing the past two years on the shelves of Borders and Chapters in droves.

What do you think?  How bad can this get?  Do you agree with Nouriel Roubini?  He certainly has no personal motive for screaming that the sky is falling.

*You can read more about this in David Smick’s The World Is Curved (2008).

Lately I’ve found a new source of distraction in this sporadically intriguing book by David Rothkopf:

The book is ostensibly about the world’s power elite and the nature of their power, wealth and influence. Sounds like predictable, run-of-the-mill summer reading? It’s not. It’s actually quite a nuanced approach to the subject. Rothkopf has impressed me a few times with some of his references, and of course, his own in-depth research and personal interviews with some of these people.

Contents

I always find a quick skim down the chapters heads is a great way to get a sense of what the book has to offer.

Intro: The Power Elite on the Promenade
(1) Each One is One in a Million: Meet the Superclass
(2) Ceteris Non Paribus: Inequality, Backlash and the New Order
(3) Lessons of History: The Rise and Fall of Elites
(4) The Multinational Moment: When Finance and Business Became the Center of It All
(5) Globalists vs. Nationalists: Political Fault Line for a New Century
(6) The Age of Asymmetry: Decline of the Titans and the Rise of Shadow Warriors
(7) The Information Superclass: The Power of Ideas
(8) How to Become a Member of the Superclass: Myth, Reality and the Psychopathology of Success
(9) The Future of the Superclass - And What it May Mean for the Rest of Us

323 pages and loads of notes and references. What is Rothkopf’s position on all of this? In a nutshell, he’s: pro-globalization; pro-social-equality; anti-conspiracy theory. Rothkopf is on the side of greater social equality, but his presentation is not one-sided, but very thorough, considered many sides of each issue.

The World’s Most (Obvious) Power Elite

OK, so who are in the superclass? Rothkopf identifies precisely 6,000 of them. Obviously there are the usual lists of world’s wealthiest that get bandied around infotainment sites like MSN on a regular basis. But Rothkopf and his research firm have a specific measure that they use on certain kinds of indicators in order to measure global influence. They came up with some unique and some surprising findings, in addition to everyone who you might assume would be a member of this superclass, like Bill Gates. One interesting tidbit is that the membership of this elite isn’t fixed: Tony Blair was once a member but is no longer, for example. So here’s a compilation of some of the categories and people Rothkopf considers. And he does limit his list to about 6,000: because this number is still small enough to be measurable, analysable, and meaningful.

• heads of state, presidents, prime ministers of the world’s wealthier countries
  -Rothkopf measures the President of the U.S. as the most powerful individual in the world (there are actually objective indicators that decide this; it’s not based upon cultural perceptions; one of them is that the U.S. economy represents about 30% of the world total)
• top entertainers, artists and creative professionals (who influence with their ideas)
  -Bono
  -Angelina Jolie (who apparently now has membership in the Council on Foreign Relations)
  -Mark Zuckerberg (of Facebook fame)
• heads of the biggest world religions (e.g., the Pope)
• heads of terrorist regimes (whether famous or unknown)
  -includes the shadow weapons markets and private military firms like Blackwater
• CEOs of transnational companies (these comprise the largest group)
• Managers of hedge funds (these have really taken off since 1999)
• Any individuals with net worths in the billions and higher (actually, Rothkopf shows how the Billion is no longer much of a measure of fiscal power: that power is now measured with the Trillion, and the rise is not just due to inflation)

How to Become a Member of the Superclass

Pragmatism sells. I’d try to convey some of Rothkopf’s “How-to” for you, but there isn’t much in the way of that in this portion of his book. Mostly it is a thorough review of past and present members, conspiracy theories and other elite corporate classes such as the Bilderberg group and others at Davos every year. He effectively deflates (through good personal and second-hand anecdotes and conversations) the notion that Bilderberg still has any real power in the sense he’s talking about. They’re more of a symbol of the superclass power of several decades ago.

But I can cull a few tips from offhand remarks he makes throughout the book. One way to make it to the superclass is to be born into it. It makes it that much easier that you’ll also follow a career path that keeps you in the superclass. Another way is to attend the top business schools and network with others there. Rothkopf demonstrates well the extent to which powerful boards of directors across the world’s largest companies often significantly overlap, and many of these overlapping figures attended the same business schools, were in the same or contiguous graduating class, etc. Rothkopf focuses more on the business and political groups within the superclass. It would be interesting to hear more about fringe superclass groups such as certain celebrities and the type of influence they wield.

Sometimes A Bit Pedantic

There’s enough new information in this book to change (even if only slightly) your perspective on the world. But for the most part, I found myself skimming through longer sections that I found basically repeated some information that I was already familiar with: such as how great Chile’s economy has been doing recently and why. Or the world history of elites: Rothkopf actually includes the obligatory return to Ancient Greece in order to round out his analyis of current elite structures. There are a couple other similar sections that I think weigh the book down too much, such as his Brief History of Conspiracy Theories (with special sections on the Freemasons and the Skull and Bones, of course). The author is at his best when he’s telling stories about situations he was in personally, or overheard personally, and about the people and actions that are relevant to the present moment. You’ll especially enjoy his vivid account, in the Introduction, about his many meetings at Davos, Switzerland, each January. Or his description of “Washington’s many black-tie-galas, events that typically serve up little more than gossip and rubbery chicken.”

Something to Think About

Nevertheless, this book gives much to think about. One interesting angle on all of this that the author brings up is the view that this superclass or power elite function much like the proverbial canary in the coal mine. Where they are today might be a good indicator of where the world will be in the future. Or more specifically, the possibilities open to this superclass today is a good indicator of the possibilities that might be open to the majority at some point in the (near?) future. This has its positive and negative ramifications, as you can imagine. But I like this image. Think of Richard Branson, owner of Virgin, and the types of projects he’s involved in.

Reading this book is also saddening for many reasons. It truly puts one’s wealth into perspective. When one considers the inequality that exists just between a middle-class, single-income earner in North America and someone living below the dire poverty line (pick your favourite impoverished location here), it’s all the more amazing that an equivalent amount of inequality exists between the middle-class earner and the super-elite. Continua of inequality are scale-invariant. They have a scale-invariant fractal structure. It’s the “top one percent of each top one percent” phenomenon.

All in all, I recommend the book insofar as it is well researched, a thorough treatment of its subject, and the prose is quite entertaining in parts. But overall, it’s also a lot of what I’ve already read about in other places. If you’re looking for an “insider’s look” like John Perkin’s Confessions of an Economic Hit Man, or some similar read, this is not that book. But if you’d like to learn more about what goes on at Davos every year, this is a really good near-anthropological study of it (I say near only because Rothkopf is not a professional anthropologist, but this book is basically a good ethnography of the circles he frequents).