Who Are the Extractive Elites?

Since this makes many points I've made in the past, I can hardly disagree:

Who Are the Extractive Elites?, by Daron Acemoglu and James Robinson: Key to our argument in Why Nations Fail is the idea that elites, when sufficiently political powerful, will often support economic institutions and policies inimical to sustained economic growth. Sometimes they will block new technologies; sometimes they will create a non-level playing field...; sometimes they will simply violate others’ rights destroying investment and innovation incentives.

An interesting article in The Economist’s Buttonwood column asks: Who are these rapacious elites in today’s Western economies? Buttonwood suggests that two plausible candidates are too-big-fail huge-risk-taking bankers and ... public-sector unions.

Banks, which have huge political clout,... are a great candidate indeed. ... But what about public-sector employees? What about unions? Don’t they, as Buttonwood suggests, also exercise their power to block new technologies and create similar distortions?

On the face of it, this is a plausible hypothesis. ... But here is the problem... In most cases, unions and workers, even if they appear politically powerful, don’t seem to be able to stop the introduction of new technologies. Luddites feature in history books not as successful blockers, but to illustrate the futility of standing on the path of new technologies. ...

And there is a good reason for this. ... Unions can mobilize their members to strike and can act as a powerful interest group, but their power is also probably limited relative to those of the very rich both in democratic and non-democratic societies — and in the US, the power of unions was probably seriously, perhaps irreversibly, damaged by Ronald Reagan’s victory over the air traffic controllers’ strike.

In consequence, in the US today, the fear is not that unions will take over the political process, but that the rich elite — including but not limited to the banking elites — will and in fact have already done so. ... We think that some sort of organization to counterbalance the political power of the mega-rich is ... necessary. Whether this role can be — and should be — played by unions is a question that requires more thought and research (i.e., we don’t know the answer).