International Monetary Fraud… Fund?

The results of inevitable elites dominating a disorganized majority is reflected in the words of Russian Prime Minister Chernomyrdin about Russian Perestroika. Which while idiomatic has approximately the following implied meaning:

“Everybody wanted improvements in the standards of living and in governance, but the net result we got is even worse than it was before…” (in the Economist translation “We wanted to do our best, but got the usual crappy results.” ―Viktor Chernomyrdin)

The practical ideal of democracy consists in the self-government of the masses in conformity with the decisions of popular assemblies.

But while this system limits the extension of the principle of delegation, it fails to provide any guarantee against the formation of an oligarchical camarilla. Undoubtedly it deprives the natural leaders of their quality as functionaries, for this quality is transferred to the people themselves. The crowd, however, is always subject to suggestion, being readily influenced by the eloquence of great popular orators; moreover, direct government by the people, admitting of no serious discussions or thoughtful deliberations, greatly facilitates coups de main of all kinds by men who are exceptionally bold, energetic, and adroit;

It is easier to dominate a large crowd than a small audience. The adhesion of the crowd is tumultuous, summary, and unconditional. Once the suggestions have taken effect, the crowd does not readily tolerate contradiction from a small minority, and still less from isolated individuals. A great multitude assembled within a small area is unquestionably more accessible to panic.

The sovereign masses are altogether incapable of undertaking the most necessary resolutions. The impotence of direct democracy, like the power of indirect democracy, is a direct outcome of the influence of number. In a polemic against Proudhon (1849), Louis Blanc asks whether it is possible for thirty-four millions of human beings (the population of France at that time) to carry on their affairs without accepting what the pettiest man of business finds necessary, the intermediation of representatives.

Organization implies the tendency to oligarchy. In every organization, whether it be a political party, a professional union,
or any other association of the kind, the aristocratic tendency manifests itself very clearly. The mechanism of the organization, while conferring a solidity of structure, induces serious changes in the organized mass, completely inverting the respective position of the leaders and the led. As a result of organization, every party or professional union becomes divided into a minority of directors and a majority of directed.

… It has been remarked that in the lower stages of civilization tyranny is dominant. Democracy cannot come into existence until there is attained a subsequent and more highly developed stage of social life. Freedoms and privileges, and among these latter the privilege of taking part in the direction of public a change in the relationship between the leaders and the mass. For the comradely leadership of local committees with all its undeniable defects there is substituted the professional leadership of the trade-union officials.

Initiative and capacity for decision thus become what may be called a professional speciality, whilst for the rank and file is left the passive virtue of discipline. There can be no doubt that this seamy side of officialism involves serious dangers for the party. The latest innovation in this direction, in the German Social Democratic Party, is the appointment of salaried secretaries to the local branches. Unless the rank and file of the party keep very much on the alert, unless they are careful that these secretaries shall be restricted to purely executive functions, the secretaries will come to be regarded as the natural and sole depositaries of all power of initiative, and as the exclusive leaders of local party life.

In the socialist party, however, by the nature of things, by the very character of the political struggle, narrower limits are imposed upon bureaucracy than in the case of the trade unions. In these latter, the technical specialization of the wage struggle (the need, for example, for the drafting of complicated sliding scales and  the like) often leads the chiefs to deny that the mass of organized workers can possess “a general view of the economic life of the country as a whole,” and to deny, therefore, their capacity of judgment in such matters.

The most typical outcome of this conception is afforded by the argument  with which the leaders are accustomed to forbid all theoretical criticism of the prospects and possibilities of practical trade-unionism, asserting that such criticism involves a danger for the spirit of organization. This reasoning starts from the assumption that the workers can be won for organization  and can be induced to remain faithful to their trade-unions only by a blind and artless belief in the saving efficacy of the trade-union struggle ‘ ‘ (Rosa Luxemburg, Massenstreih, Partei u. GewerTcschaften, Erdmann Dubber,  Hamburg, 1906, p. 61).

Democratic Parties Typically Are Not Democratic

While the US Democratic Party now is a glaring example of internal (clan) wars (with Clinton clan clinging for power after humiliating defeat), the total neo-liberalization of this Party and Clinton-initiated switch from the party of trade unions to the party of Wall Street lobbyists is not a new phenomenon. As Robert Michels observed (p50):

In the life of modern democratic parties we may observe signs of similar indifference. It is only a minority which participates in party decisions, and sometimes that minority is ludicrously small. The most important resolutions taken by the most democratic of all parties, the socialist party, always emanate from a handful of the members. It is true that the renouncement of the exercise of democratic rights is voluntary; except in those cases, which are common enough, where the active participation of the organized mass in party life is prevented by geographical or topographical conditions.

Speaking generally, it is the urban part of the organization which decides everything; the duties of the members living in country districts and in remote provincial towns are greatly restricted; they are expected to pay their subscriptions and to vote during elections in favour of the candidates selected by the organization of the great town.

There is here at work the influence of tactical considerations as well as that of local conditions. The preponderance of the townsmen over the scattered country members corresponds to the necessity of promptness in decision and speed in action to which allusion was made in an earlier chapter.

It may be added that the regular attendants at public meetings and committees are by no means always proletarians — especially where the smaller centres are concerned. When his work is finished, the proletarian can think only of rest, and of getting to bed in good time. His place at meetings is taken by petty bourgeois, by those who come to sell newspapers and picture-postcards, by clerks, by young intellectuals who have not yet got a position in their own circle, people who are all glad to hear themselves spoken of as authentic proletarians and to be glorified as the class of the future.*

The same thing happens in party life as happens in the state. In both, the demand for monetary supplies is upon a coercive foundation, but the electoral system has no established sanction. An electoral right exists, but no electoral duty. Until this duty is superimposed upon the right, it appears probable that a small minority only will continue to avail itself of the right which the majority voluntarily renounces, and that the minority will always dictate laws for the indifferent and apathetic mass.

Nomenklatura – Soviet, American, European, International

The disintegration of the USSR was not so much due to the growth of democratic tendencies of the population. Even such factors as inefficiency of the socialist mode of production and emergence of personal computers and Internet revolution that made state control of information more difficult, were not decisive.  All those factors were present, but the key factor was that the growth of new flavour of globalism — neoliberal globalism.

That increased neoliberal tendencies of the corrupt and degenerated USSR Communist Party and KGB elite (with the key role of KGB elite, which produced the blueprint for the conversion of the USSR into the neoliberal capitalist society, the blueprint developed by Andropov and which Gorbachev tried to implement. That screw up result in the dissolution of the USSR (not without help from Western states, and first of all the USA and GB,  which provided financial support and fueled nationalism in Soviet republics).  One sign of this transformation of KGB was several high raking defectors to the USA including at least one General.

The Soviet elite decided to privatize the country and join the club or Western neoliberal elites in short and swift neoliberal Coup d’état, essentially structured as a colour revolution.  This integration of the new xUSSR elite with Western Elites for which Soviet Nomenklatura strived so hard, did happened, but on West (aka vassal) terms, as nobody eliminated hierarchy with in the global elite.

This romance, which flourished during Yeltsin years (which were years of economic rape of Russia by the West and local, mostly Jewish oligarchs) partially ended with the election of President Putin. Some “neoliberal oligarchs”, who resisted the change, ended in exile, and one even managed to get into jail.

In general, any successful national-liberation and socialist movement which runs under populist and democratic slogans in reality tend to have the same “elite displacement” property, when old elite is replaced or supplemented by a new one. Which can be more cruel toward population than the previous one?

In this sense Machiavelli idea that there is nothing more dangerous then to institute a social change has new, pretty menacing meaning.  Please look at EuroMaidan at the most recent example of the elite change and what it brought to rank-and-file Ukrainians.  The standard of living dropped at least by half from 2014 to 2016.

The importance of the Iron Law of Oligarchy is that this law was the major contributing factor to the collapse of the USSR. While founded under noble slogans by a radical party, it quickly degraded into oligarchic republic (not plutocratic like the USA, but oligarchic republic with strong technocratic flavor) in which Nomenklatura was full and unrestricted political power. The main components of Soviet nomenklatura were high-ranking members of the Communist party (and their extended families), high-level managers in various enterprises and high raking officials in various state ministries (so called “Apparatchiks” similar in essence to MBA strata in the USA, but probably more competent ) and high level brass in military.

After the death of Stalin, who tried to maintain the vitality of created by him theocratic system with ruthless terror and performed periodic “purges”, which provided the “forced” rotation of Nomenklatura, they gradually started “enjoying their position” more and the process of rotation of nomenklatura stagnated with fatal consequences for the state.

While their salaries were not much higher than ordinary workers (with few exceptions, the ratio in the USSR probably was around 1:10), they created the society within the society to service their needs (special vacations places, special shops, special everything), started sending their children to Western universities, their wives could shop in Paris (like Raisa Gorbachev systematically did), so they were behaving like mini-oligarchs, without formally owning anything. In some ways Soviet nomenklatura was really technocratic elite, although nepotism played some role too but mostly up to middle range positions (there were case when such people got to the rank of minister, but they were exceptions).

In the 1980s considerable fraction of this class decided that the level of inequality that resulted from their dominance made this new variant of theocracy unsustainable and is doomed to stagnation and technological backwardness (in a condition of strict embargo of export of technologies imposed by the USA and its allies). And that they can preserve their position and multiply their wealth by switching to neoliberalism. Which they did in a decade of 1990.

Dissolution of the USSR was driven by, as paradoxical as it sounds, by KGB apparatus (starting from Andropov — the major architect of conversion of the USSR into neoliberal society) and the “renegade” tiny, but dedicated (and supported by the West) faction of Politburo consisting of such people as Gorbachev (protégé of Andropov, nicknames for his perceived “mediocre” political abilities “combiner driver” as he started his career from this position), Alexander Yakovlev (the “godfather of glasnost”-  former ambassador in Canada, a Fulbright exchange student at Columbia University for one year ), Yegor Gaidar (the victim of nepotism, being a child of prominent revolutionary, the person educated in the USA) and Eduard Shevardnadze (hand picked Gorbachev Minister of Foreign Affairs) and several highly ranked academics such as Georgy Arbatov from Institute for US and Canadian Studies. Academic turncoats in the collapse of the USSR played role similar to the institutional turncoats such as Milton Friedman in the USA in converting the country to neoliberalism.)

Their initial plan was just transition to neoliberal economy of the whole USSR (perestroika), but being inexperienced politicians (in the context of the new populist ecosystem) they rocked the boat too much and it sunk — the USSR dissolved; not without substantial help from the West which incited nationalistic feeling in the USSR republics (and lavishly financed all nationalistic movements within the USSR) and then became the real political force in 1990th due to the stagnation of the economy and financial crisis of the society, much like in 2016 they became a political force in the USA.

Perestroika created some structural elements of capitalism with which the coup d’état of the Soviet nomenklatura became possible. It was the major catalyst of the dissolution of the Soviet Union . Not without major help of friendly intelligence agencies from the USA, GB and several other countries, and financial injection to help this transition happen…

We also see this phenomenon, when a tiny faction dominates the whole party, quite clearly in DNC and Podesta emails leaks. In essence Sanders was illegitimately deprives of the possibility to represent Democratic Party in the most recent Presidential elections by the oligarchy of the Democratic Party (party Nomenklatura) Colour revolution against Trump (aka Russiagate) is another, but more modern and subtle, demonstration of the validity of the Iron Law of Oligarchy. Here we see slow motion coup d’état against the leader that does nor “fit” onto ruling neoliberal elite (we leave the judgment or whether Trump should or should not have been removed to the readers).

As Michels noted in his book Political Parties:

…society cannot exist without a… dominant… or… political class, and that the ruling class, while its elements are subject to frequent partial renewal, nevertheless constitutes the only factor of sufficiently durable efficacy in the history of human development.
[The government or… the state, cannot be anything other than the organization of a minority. It is the aim of this minority to impose upon the rest of society a “legal order” which is the outcome of the exigencies of dominion and of the exploitation of the mass…]

Even when the discontent of the masses culminates in a successful attempt to deprive the bourgeoisie of power, this is… effected only in appearance; always and “…necessarily there springs from the masses a new, organized minority which raises itself to the rank of a governing class…” (pp. 353-354).

Financial elite of international financial organization such as IMF and World Bank is an interesting special case:

Christine Lagarde, the IMF boss who caused international outrage after she suggested in an interview with the Guardian on Friday that beleaguered Greeks might do well to pay their taxes, pays no taxes, it has emerged.

As an official of an international institution, her salary of $467,940 (£298,675) a year plus $83,760 additional allowance a year is not subject to any taxes.

The former French finance minister took over as managing director of the IMF last year when she succeeded her disgraced compatriot Dominique Strauss-Kahn, who was forced to resign after he faced charges—later dropped—of sexually attacking a New York hotel maid.

Lagarde, 56, receives a pay and benefits package worth more than American president Barack Obama earns from the United States government, and he pays taxes on it.

The same applies to nearly all United Nations employees—article 34 of the Vienna convention on diplomatic relations of 1961, which has been signed by 187 states, declares: “A diplomatic agent shall be exempt from all dues and taxes, personal or real, national, regional or municipal.

According to Lagarde’s contract, she is also entitled to a pay rise on 1 July every year during her five-year contract.

Base salaries range from $46,000 to $80,521. Senior salaries range between $95,394 and $123,033 but these are topped up with adjustments for the cost of living in different countries. A UN worker based in Geneva, for example, will see their base salary increased by 106%, in Bonn by 50.6%, Paris 62% and Peshawar 38.6%. Even in Juba, the capital of South Sudan, one of the poorest areas of the world, a UN employee’s salary will be increased by 53.2%.

Other benefits include rent subsidies, dependency allowances for spouses and children, education grants for school-age children and travel and shipping expenses, as well as subsidized medical insurance.

For many years critics have complained that IMF, World Bank, and United Nations employees are able to live large at international taxpayers’ expense.

During the 1944 economic conference at Bretton Woods, where the IMF was created, American and British politicians disagreed over salaries for the bureaucrats. British delegates, including the economist John Maynard Keynes, considered the American proposals for salaries to be “monstrous”, but lost the argument.

Officials from the various organizations have long maintained that the high salaries are a way of attracting talent from the private sector. In fact, they recruit most senior employees from government posts.”