The Financial Power Elite
The dominance of the capitalist class over the U.S. state is exercised through representatives, or various power elites, drawn directly from the capitalist class itself and from its hangers-on, who come to occupy strategic positions in corporate and government circles. The concept of “the power elite” was introduced in the 1950s by sociologist C. Wright Mills, and was subsequently developed by others, notably G. William Domhoff, author of Who Rules America?For Domhoff, the power elite is “the leadership group or operating arm of the ruling class. It is made up of active, working members of the ruling class and high-level employees in institutions controlled by members of the ruling class.” In practice, the notion of a general power elite has often given rise to the consideration of specific elites, reflecting the various segments of the capitalist class (for example, industrial and financial capital) and the different dimensions of the exercise of power (economic, political, military, communications, etc.).
Although Simon Johnson and others have treated the deep penetration of finance into the Obama administration as a “coup,” it should more properly be viewed as a continuance of the pattern prevalent under previous administrations—though exacerbated by ongoing financialization. Finance is the headquarters of the capitalist class, and the growing importance of the state’s financial role reflects the general financialization of the system in the age of monopoly-finance capital. Today it is no longer the case that finance, as an external force, dominates industry. Rather, industry, which is haunted by conditions of maturity and stagnation, depends on the system of leveraged debt and speculation to stimulate the economy. The coalescence between industry and finance is complete. This is naturally reflected in the capitalist state itself.
The “financialization of the capital accumulation process” has affected the Federal Reserve Board no less than the U.S. Treasury and related government agencies (and their counterparts in the central banks and treasury departments of other leading capitalist nations). The fact that the Fed is charged with being the lender of last resort ultimately puts it in a position of socializing financial losses (while privatizing gains). Today it is widely recognized that, faced with an asset bubble, the capitalist state has little choice but to do what it can to maintain the bubble for as long as possible, and to keep asset prices rising. In a stagnating economy, financialization is the name of the game, and a financial meltdown is conceived as the worst eventuality. Pricking the bubble is seldom considered by the financial authorities, and then never seriously. The job of the Fed in this respect is thus restricted to preventing a bursting bubble from becoming a major meltdown, by speeding to the rescue of speculative capital whenever there is a risk of system-wide instability.