By Muhammad Idrees Ahmad
May 26, 2010 (IPS) – In 2005, ahead of the G8 summit in Gleneagles, Irish rock star and philanthropist Bono dedicated a concert to Harvard economist Jeffrey Sachs for his services to global poverty alleviation. Time magazine twice named Sachs one of its 100 Most Influential People. His 2005 book “The End of Poverty” was a New York Times bestseller. He has served as a special advisor to U.N. Secretary-General Ban Ki-moon on the Millennium Development Goals. In 2007 Vanity Fair was moved to declare him the “savior of Bolivia”.
From the fawning sobriquets it would be hard to tell that Sachs was the architect of the “economic shock therapy” which in Russia during the transition years (1991-1994) contributed to a 42 percent rise in male deaths, and 56 percent in unemployment. His Bolivian “reforms” brought inflation under control but unemployment, inequality and the cost of living soared.Following a decade of unrest, Russia was only saved by an authoritarian nationalist leadership and Bolivia by economic populism. The neoliberal experiment was a failure.
If Sachs has today recanted his extreme free-market views, it is only because of a personal epiphany. At the peak of his power, he was constrained by neither public censure nor official accountability.He is an exemplar of a new breed of influencers who operate in the interstices of official and private power and exploit the ambiguity of their multiple overlapping roles to evade both public oversight and market competition. It is this emerging power that is the subject of social-anthropologist Janine Wedel’s indispensable “Shadow Elite: How the World’s New Power Brokers Undermine Democracy, Government, and the Free Market”.
Central to this new elite is the figure of the “flexian” who “serves at one and the same time as business consultant, think-tanker, TV pundit, and government adviser [who] glides in and around the organisations that enlist his services”. The flexian values personal relations over bureaucratic chains-of-command, puts official information to private use, and uses private information to steer official policy. He owes no allegiance to the institution: his loyalties lie with the informal network – the “flex net” – whose close social bonds, ideological coherence, protean facility, and infiltration of official and corporate spheres serve as fulcrum for his inordinate influence.
For Wedel, the rise of this form of power has been facilitated by four key developments: the redesign of government along business lines around the 1970s with the attendant consolidation of executive power and outsourcing of many of its functions; the end of the Cold War and the proliferation of under-governed areas; the rise of advanced communication technologies, complex information systems (particularly in finance) and the ascent of “experts”; and, finally, a transformed public sphere in which politics blends with entertainment, performance valued over truth, and self-serving claims over objectivity.
The chimera of “big government” has long animated a bipartisan drive to control the number of civil servants in government with inherently governmental functions outsourced to private contractors. This has led to the rise of a massive “shadow government”. The proportion of contractors in the U.S. federal labour force, for example, increased from three-fifths in 1990 to three-fourths in 2008. The cost of contractor services soared from 125 billion dollars in 2001 to 320 billion dollars in 2008. Between 1996 and 2006, the services budget of the Pentagon (which accounts for 75 percent of all federal procurements) increased by 78 percent. Contracts currently account for 70 percent of the intelligence budget, a quarter of whose core forces are private.
While efficiency was the rationale in redesigning government along business lines, the blurring public-private divide has pushed government functions outside the purview of public accountability while relieving private actors from the demands of market competition. The consequences for democracy are deleterious, according to Wedel. It creates an ideal habitat for “institutional nomads” such as the flexians to advance private agendas by instrumentalising official power. Wedel highlights this in two fascinating case studies.
In the early 1990s, through Sachs’s mediation, the Harvard Institute for International Development received a USAID grant to help manage the Russian transition from a centralised command economy to a market economy. Andrei Shleifer of the Harvard Project was able to use his personal relationship with then-Deputy Treasury Secretary Lawrence Summers to secure Washington’s official backing, and links with Russian presidential advisers Yigor Gaidar and Anatoly Chubais allowed the network to monopolise the transition. The result: both sides were able to serve as gatekeepers for each other and use their transnational links to sideline domestic competitors.
The close links and ambiguous roles allowed members of the Harvard-Chubais network to evade both U.S. oversight and Russian government cheques. This unaccountable group was able to borrow and disburse billions of dollars from international financial agencies without the approval of the Russian taxpayer. The consequences for the Russian people and state were devastating.
The free-for-all environment predictably descended into criminality, eventually leading to charges of fraud, racketeering, and money laundering. Though the U.S. Justice Department was able in the end to make Harvard, Shleifer and Jonathan Hay of the network pay fines, they escaped with their reputations intact. Shleifer now serves as an anti-corruption consultant, and Lawrence Summers is today President Barack Obama’s chief economic adviser.
The true archetypes of the flex net, however, are the neoconservatives, a small band of ideological kindred brought together by common goals, shared interpersonal histories, and an Israel-centric worldview, Wedel argues. Their superior coordination and ideological coherence allowed them to conceive and instigate the 2003 Iraq invasion despite strong reservations of the military and intelligence bureaucracies.
Their capacity to undermine, circumvent, or intimidate the professional intelligence community, which stretches back to their efforts to disrupt détente between the U.S. and the Soviet Union in the mid-1970s, has enabled them to insert dubious or even fabricated information into the policy-making process, often under the imprimatur of ad hoc, quasi-governmental bodies. The ambiguity of their roles has in turn allowed them to evade scrutiny while preserving their reputations. Though their star has dimmed somewhat, their militarist imprint on foreign policy shows little sign of fading.
While Wedel’s framework for studying this potent new power is immensely useful, her nomenclature isn’t always so. What she calls a “coincidence of interest” is indistinguishable from a conflict of interest; and “Evolving door” from a “revolving door”. “Truthiness” is a stand-in for “propaganda”, except it has none of the negative resonance. (Ironically, it was awareness of the negative connotations of the term that had prompted its most celebrated practitioner Edward Bernays to rebrand it as “public relations” after WWII.) Her argument is also undermined by treating “corruption” as a legal rather than a moral category.
Nonetheless, Wedel makes a compelling case, supported by a wealth of evidence. Her call for a new paradigm of checks and balances resilient enough to match the flexibility of political actors is timely and important. Citizens with an interest in political reform and accountability would do well to weave her arguments into their demands.
Muhammad Idrees Ahmad is a Glasgow-based sociologist and the co-editor of Pulsemedia.org.