In episode 996 I talk with Professor Peter Phillips whose new book is “Giants: The Global Power Elite.” Professor Phillips warns that excess capital in too few hands always seems to find that war, and the rebuilding after war, is the most efficient return on investment.
DAVID: Eight men together control half the world’s wealth. Who are these eight men? Do we know who they are?
PETER: Well course, I mean it’s the top richest people in the world. Jeff Bezos is number one. And he’s worth about a hundred and sixty-billion dollars. Now. But I guess he lost a few billion this month.
DAVID: Hey, we all had a bad November.
PETER: Okay, you know Bezos is like a giant sequoia in a forest. But the work I’ve been doing in my book “Giants: The Global Power Elite”— it’s about the elites who manage global capital, and how they’re all interconnected and know each other, and are involved in policy group agendas on how capital will be taken care of and protected.
DAVID: You write about, “The sociology of the global power elite.” Who are you talking about?
PETER: We’re looking at about three hundred people. And we name them all in the book.
DAVID: So, they are the core policymakers and decision-makers when it comes to moving global capital? And by “capital” you mean money.
PETER: Yes, they are the ones who are on the board of directors of these seventeen trillion-dollar giant investment companies like BlackRock, Vanguard, J.P. Morgan Chase, and Allianz Germany. Each of those companies has in excess of a trillion dollars. And to get an idea of what a trillion means, that’s one thousand billion.
DAVID: You could live a few years on that.
PETER: So BlackRock this year has over six trillion dollars of investment capital.
DAVID: How many asset management firms are there worldwide?
PETER: There are seventeen of these asset management firms, and they collectively manage forty-one trillion dollars’ worth of wealth, and that was last year. It is closer to fifty-trillion this year. Wealth is concentrating rapidly.
DAVID: So, it’s the actual money, the concentration of actual money that moves the markets.
PETER: Yes, these asset management firms are big engines, they’re giants of capital and they are the ones who make people like Amazon’s Jeff Bezos richer.
DAVID: Because they’re looking for places to invest capital.
PETER: And to them Amazon seems like a good place. And then they’ll put their money in there. Some of them have fifty-billion or more inside of Amazon and then that drives the Amazon stock up. So, they benefit and of course Jeff Bezos gets richer and richer.
DAVID: The inflated price of Amazon is based on the perception of these money managers, and their almost desperate need to put all this excess money to work somewhere.
PETER: They’re speculating, but ultimately they can’t continue to speculate. They know that. They’re already predicting an adjustment next year. But we’re worried that there could be a serious economic collapse that’s more than just an “adjustment.” Because you can’t continue to concentrate wealth, have it in fewer and fewer hands of greater amounts and expect to continue this way forever. And at the same time, they’re destroying the environment.
DAVID: The planet and this type of capitalism can’t coexist.
PETER: We’re facing a real crisis for humanity.
DAVID: So, what happened two years ago when Donald Trump seized power? At the beginning of 2016, sixty-two men had as much wealth as half the world. By the time Donald Trump swears on the Bible in January of 2017 there are only eight men who control half the world’s wealth. What happened?
PETER: Capitalism is like a bicycle. You know, you just keep moving forward in order to stay upright, and it has to keep moving forward, otherwise you fall over. So, that’s why they keep piling greater and greater amounts of capital in their backpack as they’re moving forward on this bike. And that’s what’s happening. We’re seeing greater and greater concentration of global capital in the hands of fewer and fewer people.
DAVID: There are fewer and fewer public companies trading on Wall Street.
PETER: You need to understand that only fewer than two hundred people are managing the core of all of that money. We’re talking about 200 people with fifty-trillion dollars’ worth of capital to move around the globe.
DAVID: So that’s how Amazon gets valued at over a trillion dollars.
PETER: They were one of the first companies in the world to reach that landmark, but that’s not “capital.” I mean, that one trillion includes their buildings, and their patents and everything else.
DAVID: You’re saying Amazon is nothing compared to the asset management firms pumping money into it. They have the real power and influence.
PETER: What we’re talking about here is the real global power elite, the money managers who are moving capital. Fifty-trillion dollars’ worth of money, and the major part of the free-flowing capital in the world, and they get to decide where to invest it. That’s power.
DAVID: And what are their biggest problems? What keeps these 200 money managers up all night?
PETER: They have more and more capital, so they have to find good, safe places to put it. That’s where we get the neoliberal policies of austerity.
DAVID: Austerity is when governments cut spending and start selling off their nation’s assets to balance their budgets instead of raising taxes.
PETER: Yes. And these asset management firms use their capital to buy up those public resources, to buy up the commons, water rights, freeways, universities, whatever. Anything that could have a good return on it.
DAVID: You’re saying that in order to placate these 200 asset managers, governments create investment opportunities by selling off what belongs to the citizens.
PETER: But even with all that, the asset managers still have more capital than they know what to do with. Before the Great Recession they created those risky investments like subprime mortgage loans. And they all knew that was dangerous back in 2008. But they did it anyway. They kept on pouring money into subprime loans until it all collapsed and the central banks around the world had to bail them out. It took trillions of dollars to put it all back together again.
DAVID: Yet after the Great Recession we now see even greater wealth inequality.
PETER: Now you have people in the upper one percent who are multi-millionaires, and there are roughly two thousand billionaires, and it’s those people whose money is being managed by these giant investment firms I write about in my book. It’s about their surplus capital and how it’s used.
DAVID: This is exactly what Marx warned about.
PETER: Not only that, what we’ve seen specifically for the last twenty years is that all this surplus capital is used to prepare for war. Having wars and then cleaning up after the war.
DAVID: Why war?
PETER: Because war is an efficient use of excess capital. It presents a positive return to these investors worldwide. When money is concentrated this way permanent war becomes a permanent fixture.