The Davos Economic Summit is currently going on. You too can attend this summit of elites for the modest price of $245,000 (does not include hotel bills, and restaurants).

  In this meeting of the 0.01% an interesting report was presented called The Vulnerability of Elites.
   [No, I'm not making this up. That was the real title.]

  While the report is obviously written from a "looking-down" approach, it manages to address a very important issue.

 When it comes to unemployment, the widening disparity of wealth, or environmental degradation, highly complex or even intractable issues set politicians up
for failure in the eyes of their constituents.
    Underperformance erodes elites’ legitimacy, making it that much harder for them to lead effectively. States captured by corruption or special interests, or that exhibit a lack of transparency, growing disparity of wealth, or a perceived indifference to the lives of the citizenry, will increasingly fall victim to this ‘legitimacy deficit.’...
    The result is a “legitimacy deficit” and a sense that we might nearly be better off without rulers. Leaders no longer have a story to rally their followers around.
  To the credit of the elite %1, they are familiar with real history. (as opposed to Fox News watchers, who know Hollywood's sanitized History)
   Republics replaced monarchies primarily for reasons of legitimacy. If the public didn't feel they had any stake in the government, then they would be far less likely to pay taxes and fight in wars. Giving the people to right to vote and effect policy gives the government legitimacy. Without that legitimacy, the king and his nobles would still be the only ones riding into battle.

"Markets like totalitarian governments."
 -  Blackrock’s Chairman and CEO, Larry Fink on Bloomberg TV

   Republicans like to accuse the government for this crisis, and they do have a point. The housing bubble could never have happened if it wasn't for the Federal Reserve's loose money and the massive subsidies from GSE's Fannie Mae and Freddie Mac.
   Democrats like to accuse Wall Street for this crisis, and they do have a point. The widespread fraud and market manipulation were the key parts of the crisis, and the most horrific. Not to mention ongoing.

  What many partisans overlook is the fact that the elements of this crisis are now indivisible. We are beyond the point of simply talking about an economic problem. It's become a political crisis.

 The political elite is responsible for the corporate elite in a unique fashion: The corporation was a political invention, so by definition, its behavior depends on the political system. But in a deeper sense, the crisis is one of both political and corporate elites, and the perception that by omission or commission they acted together -- knowingly engineering the outcome. In a sense, it does not matter whether this is what happened. That it is widely believed that this is what happened alone is the origin of the crisis. This generates a political crisis that in turn is translated into an attack on the economic system.
    The public, which is cynical about such things, expects elites to work to benefit themselves. But at the same time, there are limits to the behavior the public will tolerate. That limit might be defined, with Adam Smith in mind, as the point when the wealth of the nation itself is endangered, i.e., when the system is generating outcomes that harm the nation. In extreme form, these crises can delegitimize regimes.
  One consistent element of a banana republic is the rampant corruption. Many investors will avoid the country because of the uncertainty regarding the rule of law. What is against the law for some, is legal for others. If you don't grease the right palms then your investment can vanish with no recourse.
   Eariler this year the World Economic Forum’s annual Global Competitiveness Index was released. The U.S. ranks 21st in the world in terms of freedom from corruption.

[D]ishonest dealings tend to drive honest dealings out of the market. The cost of dishonesty, therefore, lies not only in the amount by which the purchaser is cheated; the cost also must include the loss incurred from driving legitimate business out of existence.
  - George Akerlof (1970)

  For years now people have been complaining how we are "drifting" to banana republic status.
  Well, we've arrived.
 The question is if you fully understand the consequences?

 The US is the world's largest prison state, imprisoning more of its citizens than any nation on earth, both in absolute numbers and proportionally. It imprisons people for longer periods of time, more mercilessly, and for more trivial transgressions than any nation in the west. This sprawling penal state has been constructed over decades, by both political parties, and it punishes the poor and racial minorities at overwhelmingly disproportionate rates.
    But not everyone is subjected to that system of penal harshness. It all changes radically when the nation's most powerful actors are caught breaking the law. With few exceptions, they are gifted not merely with leniency, but full-scale immunity from criminal punishment. Thus have the most egregious crimes of the last decade been fully shielded from prosecution when committed by those with the greatest political and economic power: the construction of a worldwide torture regime, spying on Americans' communications without the warrants required by criminal law by government agencies and the telecom industry, an aggressive war launched on false pretenses, and massive, systemic financial fraud in the banking and credit industry that triggered the 2008 financial crisis.
 A couple months ago the Justice Department decided not to prosecute HSBC for laundering money for drug cartels and terrorists simply because prosecutors were afraid of how it would effect the financial markets.
   Even the NY Times said  "It is a dark day for the rule of law."

  And then to show that this wasn't some exception, Justice Department prosecutor Lanny Breuer stood in front of the New York City Bar Association and basically said that the potential effect on the stock and bond markets would determine whether they would enforce the law when it came to financial institutions.
    Congress stands meekly by and asks for explanations rather than resignations for failing to enforce laws.

   The World Justice Project recently released a report that says Americans have less access to justice than even some developing countries. America ranks behind such countries as Estonia and the United Arab Emirates. The report is quite clear that the justice system in America depends on the amount of justice that you can purchase.

  I don't believe that most Americans realize we have crossed a point of no return.
Granted, we didn't get here suddenly and unexpectedly.
   We've tortured people for a decade now, and no one has had to answer for it. We engaged in illegal and immoral wars that killed hundreds of thousands of people, and people simply accept it.

 The right to indefinitely detain citizens without trial, classified kill-lists and "disposition matrices", a fast-expanding fleet of legally-unaccountable aerial drones, and the presumptive right to kill American citizens without due process - all these sweeping expansions of executive power are the legacy of four years of Barack Obama's presidency and of themselves represent a new era in the power of the American government over its citizenry.

Never before has an American president asserted their ability to act as judge, jury and executioner towards their own citizens, a power which Barack Obama claimed for the executive branch in killing the New Mexico-born fundamentalist preacher Anwar Al-Awlaki in a drone strike - followed by his 16 year-old son two weeks later.

The passage of the National Defense Authorisation Act (NDAA) provides the President with the ability to place Americans under indefinite military detention without trial or even the provision of evidence; a power which extends to citizens abroad as well as to those on US soil. Such concepts seem utterly otherworldly to most Americans, especially given their origination from a liberal president who had been elected in large part as a response to the perceived belligerence and militarism of George W Bush.

  As if to prove that this isn't some exception or oversight by the Obama Administration, Eric Holder's Justice Department has given awards to the investigative teams that refused to prosecute torturers who killed their victims (while aggresively prosecuting those who talk about torture to the press), and the team that "crafted a $25 billion settlement effectively immunizing the banksters for engaging in systemic mortgage fraud."
   The federal government's war on whistleblowers is now threatening to label journalists as terrorists if they report government misdeads.
   A policy paper published last year by the ACLU regarding domestic drone usage stated that "all the pieces appear to be lining up for the eventual introduction of routine aerial surveillance in American life - a development that would profoundly change the character of public life in the United States".

  Given the state of American society today, the first people to react to this crackdown on civil liberties are likely to be extreme right-wingers, who's first instinct would be violent. That violence would give the government its justification for further crackdowns.
   If right-wingers won't cooperate, then the government is willing to create those justifications.

 The use of entrapment as a tool by law enforcement agencies to mastermind terror plots on their own and induce young, isolated and impressionable Muslims into joining them has effectively become standard operating procedure, with the tacit endorsement of the executive branch.
 Imprisoning, torturing, and killing people without due process is "the right of Kings", not presidents. It is the domain of dictators, not democracies.

   And yet that is exactly where we find ourselves today.
The line has been crossed, and not by just a little bit.

    An government viewed as illegitimate by its people is likely to encounter mass demonstrations, strikes, riots, terrorism, and eventually military coups. So it really shouldn't surprise anyone that the government is increasingly acting like a police state. It is the logical, paranoid reaction of an entity that knows it is well outside of the law.
   Unlike a normal person, who might be incline to step back from the brink once it realizes he/she is operating outside acceptable limits, a government's first reaction is for self-preservation. That means cracking on enemies, whether real, potential, or imagined.
   The further our government drifts from the rule of law to the land of arbitrary law the more likely it is to react out of paranoia. Of course this will further undermine its legitimacy.

  That doesn't mean we are living in a dictatorship, or under tyranny. But it does mean that the future path has been cleared for it to happen. All the necessary precedents have been cleared by our court system. The campaign against civil liberties over the last 10 years has managed to remove many of legal structures that existed to prevent the empowerment of a police state.

   The situation is not hopeless, and even after the public finally wakes up to the fact that we are no different than any other banana republic it will not be hopeless, but the ability to find our way back to the rule of law without violence will become increasingly remote the longer this goes on.

Originally posted to gjohnsit on Sat Feb 02, 2013 at 08:05 AM PST.

Also republished by ClassWarfare Newsletter: WallStreet VS Working Class Global Occupy movement, Progressive Policy Zone, and The Rebel Alliance.

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