Survival__ Structuring Prosperity for Yourself and the Nation - Charles George Smith [8]
One of the single most powerful mechanisms at play is windfall exploitation.
Windfalls in Nature are rare, and thus all organisms are selected to exploit them as fully as possible--gorging, so to speak, on any newfound riches. The Plutocracy's influence enables it to suppress or weaken counterforces (such as regulatory systems) and thus open up windfalls which it can then exploit.
For example: having dispensed with troublesome barriers between finance and banking and nettlesome limitations on securities ratings and off-balance sheet assets, investment bankers opened up new windfalls: mortgage-backed securities, bogus "low-risk" ratings, CDOs and other derivatives, and so on.
A second related mechanism is over-reach.
As barriers to Plutocratic expansion topple and the Elites' share of national income rises, then a positive feedback loop forms: the more the Plutocracy expands, the greater the profits, which then fuels greater political influence, and so on. At a critical (and largely invisible) juncture the Plutocracy inevitably over-reaches.
Over-reach takes many forms. It might be an unparalleled expansion into highly risky derivatives, or a domestic Plutocracy reaching into international speculations. The key point is that over-reach pushes the Elites' financial speculations beyond a level of known, controllable risk into uncharted territory, a territory which promises stupendous profits along with equally stupendous but purposefully obscured risk.
Over-reach inevitably pushes a stable system into instability.
Once the Plutocracy's income, power and influence are threatened by the rising instability caused by over-reach, then the Elite resorts to propaganda and other mechanisms to mask the structural instability from the populace. The hope is that the system which so greatly benefits the Plutocracy can be restored to health, but the mechanisms of "recovery" are essentially inauthentic: simulacra of reform, propagandistic manipulations of financial and economic data to mask the structural instability, and outright fraud/looting of State resources (bailouts, loans, etc.)--that is, publicly-funded exemptions from risk and free market forces that would otherwise require the Plutocracy to absorb the catastrophic consequences of its over-reaching leveraged gambles.
This failure to address the underlying causes--systemic over-reach and Plutocratic domination of the economy and political system--insures the instability will only worsen. As ever-more frantic attempts to protect the interests of the Plutocracy fail, then another feedback loop forms: the more sham reforms and State bailouts fail to restore stability, the more desperate the Plutocracy's attempts to retain power.
It is worth recalling that the average compensation for the 10 top hedge fund managers during the go-go years of the 2000s was $600 million each. That is not a typo. This is an excellent (if extreme) example of over-reach and windfall exploitation.
As it enriches itself via semi-legal or simply officially sanctioned looting, fraud, deception, embezzlement, collusion, "sweetheart" State contracts, tax avoidance, environmental loopholes and a hundred other mechanisms of over-reach and windfall exploitation, the Elite inadvertently provides the lower classes with a compelling example of increasing wealth via fraud and manipulation rather than production.
Both the high-caste technocrats (who keep the State and economy running smoothly for their Plutocratic overlords) and the underclass sense their shares of the national income and wealth are diminishing as the Plutocracy diverts a greater share to their own pockets; quite naturally they seek some way to maintain or grow their own declining purchasing power/wealth.
As they watch the Plutocrats in action, they learn the most effective ways to increase one's share of the income/wealth are