What are the costs of a global financial oligarchy? Here are some fun thoughts on this:
- A 35% tax on all productive activity. In the US, financial sector profits rose from ~5% to 40% of all corporate over 35 years (much more if employee bonuses are factored in). Given that financial functions are administrative overhead and not ultimately productive, this means that at least 35% of every dollar generated by the US economy is being misallocated. Worse, the advent of computer automation (which is directly transferable to increasing productivity in finance) should have brought about a decrease in the economic overhead related to finance rather than a 700% increase.
- Privatized Gains and Socialized Losses. This started as a solution to boom bust cycles in finance. Computer automation enabled participants to securitize risk (break apart debt primarily) in order to spread the burden among as many participants as possible. As a result, during bust periods, industry participants were driven to cooperate in order to prevent widespread failures (usually by preventing realization of losses). This allowed participants to use central bank subsidies (effectively costless loans) to earn themselves out of insolvency by taxing other market participants. The moral hazard this created drove successive boom and bust cycles with increasing amplitude. Ultimately, these cycles became so large and the financial sector so systemically important that it forced a taxpayer bailout in 2008 estimated at $20 + Trillion in outright subsidies or guarantees. This is a cost that is in addition to the direct tax cited above.
- Greed, Control Fraud, and Looting. In addition to the systemic costs cited above, there has been a change in behavior among individual participants. Greed, which is the drive to routinely abuse trust in order to maximize personal profit, has become rampant. Why? Studies in political economics demonstrate that weakly enforced external legal structures rapidly displace established norms of behavior. This situation leads to a rapid rise in selfish, greedy, and self-dealing behavior. In contrast, the options that do work are strong self-governance that harshly punishes deviation from norms of behavior - or - strongly enforced, albeit expensively, external legal restriction. The rise of greed has led to rampant control fraud. This is a form of looting where the managers of private companies and/or governments use their positions to maximize short term personal gain. Worse, there are indications that this behavior change has spread to the entire economy. The costs of this rampant looting are incalculable.
It's amazing how close this tracks to my work on warfare. Both predatory oligarchies and global guerrillas use the same methods: open source organizations, bazaars of violence, and systems disruption. They both destroy prosperity (through systematic "taxes"), cause opportunistic collapse and eviscerate social cohesion.