Janine Wedel - Shadow Elite - How the World's New Power Brokers Undermine Democracy, Government, and the Free Market

Some information about these players’ activities can potentially be dug up, and investigatory bodies, journalists, and public interest watchdogs can publish these findings, which can reside on their Web sites and even become common knowledge among a small sliver of society. The question is, Does it matter? Players like McCaffrey and Perle can be investigated by, say, the Pentagon’s inspector general, one of the many institutions they’ve touched. But even if such investigations are not covered up (in the case of the former, it reportedly was), they have little effect. Players like Perle, scarcely slowed, leave behind a dust cloud of investigations almost without consequence or result. The incentives that led the Pentagon to open its access to high-ranking retired military officers-cum-pundits, the media to put them on the air, and contractors to hire them are very much alive and well. These incentives will continue to be at work as other issues arise, in other incarnations and venues. Perhaps most important, once flexians’ activities are exposed, the damage usually has already been done.

Moreover, few have the power and influence to bring the new players of power and influence to light. The authority of journalism is waning. Investigative reporting is dying a swift death, as the institution of journalism itself undergoes massive gutting, newspapers fold right and left, and dwindling resources are available for investigative reporting of the kind that enabled the Washington Post to break the Watergate story. To make matters worse, flexians and their networks are skilled at warding off efforts to illuminate their methods or activities. They respond immediately and aggressively to criticism by putting out their own stories, attacking the messenger, and enlisting all possible allies in the antimessenger campaign to highlight their integrity and good works. Perle and other members of the Neocon core specialize in this strategy.

Finally, even when people can be named, can they be “shamed”? Truthiness not only facilitates flexians’ ability to appear in the moment without burden of track record; it also draws in institutions and the public, rendering them active participants in blessing the flexians. So we have Harvard professor Andrei Shleifer presenting himself as an anticorruption expert while he’s under investigation or being sued for conspiracy to defraud the U.S. government, continuing, undaunted, to deliver testimony before congressional committees as a scholar of corruption, and writing for Foreign Affairs on the success of Russian “reform”—without disclosing his role in it and nary a mention by anyone. It is perhaps why that flagship journal can be equally mum on all these issues.

The flexians’ success is greatly enhanced by the fact that no one is minding the store as a whole—even as we can’t answer the most basic of questions: Who does the player represent, who are his associates and sponsors, and with whom is he affiliated? Where do his loyalties lie and to whom is he ultimately answerable? When these questions are difficult, if not impossible, to answer for so many of today’s influencers, it follows that the prevailing means of keeping them in check are outmoded.

Serving Multiple Masters

The new system may have provided the conditions for the current global economic crisis, but that does not mean that the responses to it will unravel the system. In fact, they may well exacerbate it. There has been a multitude of responses so far on the part of governing institutions, from states, regional governments, and international financial institutions to local governments. But whether they are getting to the root of the problem remains in question. Calls for regulation and re-regulation cannot address the underlying dynamics—the span and speed of the players’ ability to flex the walls between bureaucracy and business.

Still, regulation, particularly of the financial system, can help. The hollowing out of the regulatory functions of the state—enabled by financial legerdemain that privatized profit for a megawealthy handful while socializing risk for the rest—bears considerable responsibility for the crisis. But there are limits to regulation. The more regulation is introduced, the more loopholes are often opened up for flexians to squirm through. Regulation has to be smart and anticipate people’s reactions to it; for, not unlike under a rigid communist system, regulation that doesn’t do so only encourages the most skilled players to dance around it. These are the very players who often double as the rule makers. And flexians are not only dancers, they are choreographers, adept at performing their way out of trouble and thriving amid chaos.

Financial wizards who operate globally are doing just that. Moisés Naím, who wrote a book about illicit global trade, now outlines a “shadow financial system.” Commenting in April 2009 on the effects of the economic crisis on this system, he predicted that it will not only not go away, but that it will grow. Shadow financiers, he noted, are “very important players with lots of money, lots of energy, and lots of relationships. . . . Those who understand how to play the regulations system and exploit gaps will flourish and operate even more opaquely than in the past.” 13

We’ve also seen, in response to the crisis, the creation of new institutional fusions of state and private power. What today in the United States is symbolized by “Government Sachs” does not appear altogether different from the merging of state and private power that characterized both communism and postcommunism. Such fusions, of course, are a crucial feature of the very system that helped bring about the crisis. In the United States, these mergers are not only in governing, where an interlocking handful of Wall Street–government “evolvers” create not only the financial architecture of the future, backed by the power and billions of the state, but new relationships among bureaucracy and market more generally, including new ownership structures. Via mega bailouts, the government has become a significant owner of mega companies: President Obama is now the shareholder-in-chief of three companies across economic sectors: the insurance behemoth AIG, the banking-financial conglomerate Citigroup, and the big-three automaker Chrysler. With inside information and power confined to a few actors who cozily intermingle with the beneficiaries of many of the bailouts, it is hard to get more “efficient.” This state of affairs provides even more opportunities for these deciders to further reinforce both their influence and the fusion of state and private power, and to do so with minimal public input or even notice. Gone are the messy disagreements and competing interests and involvement of a diversity of actors that is the democratic process. New institutional forms of power and influence, forged by a smattering of state-private actors, many of them invisible to the public, become not only the norm, but are ever further removed from public input.

ALTHOUGH THE NEW SYSTEM occasioned the crisis, it will adapt to the still newer, sometimes hostile circumstances that arise partly as a result—from regulation, political volatility, and cultural developments, to deepening economic turmoil. The challenge for the public is to try to preserve the accountability and transparency that is needed in a democratic society.

The world still has some hope for tracking the shadow elite. But existing means are far from being sufficient or able to cover the traveling bases of the players, who operate largely above public input, knowledge, and visibility. While new modes of dealing with some of the most obvious abuses will likely emerge (though not necessarily in the most opaque arenas such as finance), the problems presented by the new breed of players can’t be solved by going back to traditional means of accountability. Few are the champions of boundaries in today’s world.