Peru: Elite Power and Political Capture - Softcover

John Crabtree; Francisco Durand

Softcover

ISBN 10: 1783609036 ISBN 13: 9781783609031

Publisher: Zed Books, 2017

Synopsis

While leftist governments have been elected across Latin America, this ‘Pink Tide’ has so far failed to reach Peru. Instead, the corporate elite remains firmly entrenched, and the left continues to be marginalised. Peru therefore represents a particularly stark example of ‘state capture’, in which an extreme concentration of wealth in the hands of a few corporations and pro-market technocrats has resulted in a monopoly on political power.

Post the 2016 elections, John Crabtree and Francisco Durand look at the ways in which these elites have been able to consolidate their position at the expense of genuine democracy, with a particular focus on the role of mining and other extractive industries, where extensive privatization and deregulation has contributed to extreme disparities in wealth and power.

In the process, Crabtree and Durand provide a unique case study of state development, by revealing the mechanisms used by elites to dominate political discussion and marginalize their opponents, as well as the role played by external actors such as international financial institutions and foreign investors. The significance of Crabtree’s findings therefore extends far beyond Peru, and illuminates the wider issue of why mineral-rich countries so often struggle to attain meaningful democracy.

About this title

About the Author

John Crabtree is a Research Associate at the Latin American Studies Centre, University of Oxford, a Senior Member of Saint Antony’s College, Oxford, and (currently) a Visiting Researcher at Oxford Brookes University, Oxford. His most recent published books are Bolivia: Processes of Change co-authored with Ann Chaplin (Zed 2013), and Fractured Politics: Peruvian Democracy Past and Present (2011).

Francisco Durand is a Research Associate at DESCO-Centro de Estudios de Promoción del Desarrollo and Professor of Politics at the Catholic University of Peru (PUCP). His books in English include Business and Politics in Peru (1993), and Organized Business, Democracy and Economic Change (1996).

Excerpt. © Reprinted by permission. All rights reserved.

Peru

Elite Power and Political Capture

By John Crabtree, Francisco Durand

Zed Books Ltd

Copyright © 2017 John Crabtree and Francisco Durand
All rights reserved.

ISBN: 978-1-78360-903-1

Contents

List of abbreviations, 
Map of Peru, 
Introduction, 
1 A conceptual and historical introduction to political capture, 
2 Development of the Peruvian state since Independence, 
3 State autonomy and Peruvian elites, 
4 The birth of the neoliberal state, 
5 The power of the new elites, 
6 Problems of distribution, poverty and decentralisation, 
7 The deficiencies of a disconnected state, 
8 Conclusions, 
Bibliography, 
Index, 

CHAPTER 1

A CONCEPTUAL AND HISTORICAL INTRODUCTION TO POLITICAL CAPTURE

The study of what amounts to political capture is, of course, nothing new. It has been usefully used to examine the exercise of state power in the United States. US political scientists and sociologists have long sought to pin down and define the issue of elite power and how it is exercised in a democracy. In his landmark book of 1961, Who Governs?, Robert Dahl (Dahl, 1961) begins with a disarmingly straightforward question: 'In a political system where nearly every adult may vote but where knowledge, wealth, social position, access to officials, and other resources are unequally distributed, who actually governs?' Dahl seeks to answer this question with an examination into the political workings of a mid-sized New England city, New Haven, Connecticut. His response is one that upholds a pluralist vision of politics, rather than one of 'capture', in which political influence and agency was dispersed and the city was run not by a single unified elite but by politicians responsive to the political demands of their constituents. Political competition thus helps in keeping the majority at bay. Inequalities there certainly were in New Haven, both in economic terms and in political access, but the system of governance there in the early 1960s, Dahl thought, demonstrated a plurality of actors when analysed in terms of who makes decisions in different spheres of administration. The political system was therefore stable and conflicts were normally managed by skilful professionals without much involvement by the citizenry.

Dahl acknowledges that the question of who governs in an unequal society is one 'that has been asked, I imagine, wherever popular government has developed and intelligent citizens have reached the stage of critical self-consciousness concerning their society', going back to Plato and Aristotle, if not before. In more recent times than ancient Greece, the issue was put perhaps most forcefully by Marx and Engels for whom the state in a capitalist society operated in line with the needs of capitalism as a mode of production and was dominated by the interests of the industrial bourgeoisie. The development of capitalism in nineteenth-century Europe, and then in North America, thus brought into being a capitalist state. However, it created the social struggles and class consciousness that Marx considered would lead to a socialist outcome. His analysis, of course, was underpinned by the egregious levels of social inequality in nineteenth-century Europe to which Thomas Piketty alludes in his well-known book Capital in the Twenty-First Century (2014). Nowhere was that social polarisation as evident as in the United States at the turn of the twentieth century, where society and politics were dominated by the ruling families of the so-called 'Gilded Age'.

Dahl's approach was, in no small way, intended as a critique of the radical American sociologist, C. Wright Mills, whose work in the 1950s (Mills, 1956) provided important insights as to how power worked within a seemingly democratic framework. Mills saw the power of 'ordinary men' increasingly circumscribed by what he called the 'power elite' which controlled the state in the United States. Major national power, he wrote, 'now resides in the economic, the political and the military domains' (p6), meaning the corporation, the centralised state and the military order. He saw the power of 'institutional orders' as having increased enormously over the first half of the twentieth century, with these tightly interlinked. Inequality, he argued, was intimately bound up in the evolution of corporate structures:

Wealth also is acquired and held in and through institutions. The pyramid of wealth cannot be understood merely in terms of the very rich; for the great inheriting families ... are now supplemented by the corporate institutions of modern society: every one of the very rich families has been and is closely connected – always legally and frequently managerially as well – with one of the multi-million dollar corporations. (pp9–10)

While distancing himself from what he called 'vulgar Marxists', Mills defined the power elite of the United States as 'those political, economic and military circles which act as an intricate set of overlapping cliques, share decisions having at least national consequences' (p18). He saw them as hierarchies with 'structural coincidences of commanding positions and interests' (p19). At the other end of the social spectrum he saw a mass-like society, politically 'impotent' and which had little resemblance to the sort of American society celebrated by De Tocqueville in which voluntary associations and classic publics hold the keys to power. Contrary to what Dahl would argue, the middle groups in society 'neither express such will as exists at the bottom, nor determine the decisions at the top' (pp28–29).

The existence of a ruling class notwithstanding, the pretensions of democratic governance in America were questioned further by William Domhoff (1996). Criticising Dahl's methods and conclusions and siding more with Mills, Domhoff saw the managers of large income-producing property as those who exercise real power in the United States. He took up cudgels against what he called 'state autonomy theorists', and the sociologist Theda Skocpol in particular, who stressed the relative independence of the federal government in the United States and the responsiveness of American politics to voter leverage and competition between political parties. Domhoff maintained that it is the ruling elite, primarily business leaders, which effectively controls decision making. He, however, is no neo-Marxist, and claimed that 'class domination theory' does not necessarily imply acceptance of notions of historical materialism, the labour theory of value or the pervasiveness of class conflict.

In an earlier work (1967), and unlike Dahl, Domhoff posited that the American 'upper class' is, in effect, the 'governing class' and that shifting political coalitions are dominated by it (p3). He viewed the American upper class as closely-knit by 'such institutions as stock ownership, trust funds, intermarriages, private schools, exclusive city clubs, exclusive summer resorts' etc., with well-honed methods of training and preparing new members (co-optation) (p4). The governing class was a social upper class which owned what he saw as a disproportionate amount of a country's yearly income and contributed a disproportionate number of its members to the controlling institutions and key decision-making groups. This class, he argued, does not rule alone or exercise all power, but exercises dominance over the main controlling institutions. It is this control that is important. Members of the upper class and senior executives control foundations, elite universities, think tanks, the largest of the mass media and key opinion moulding institutions. Through its control of the executive, the power elite effectively controls the various other agencies of state, the regulatory agencies, the federal judiciary, the military, the CIA and the FBI etc. The power elite, in turn, influences but does not control the legislative branch of the federal government, most state governments and most city governments (p11). Domhoff's idea of interlocking circles of influence and power relates closely to the 'revolving door' notion we will see in Peru, whereby elites pass seamlessly from one area of influence to another, unified by a strong esprit de corps and ideological commitment. Control in these circumstances depends on the solidity of informal elite networks.

Dahl's pluralism spawned other critics too. Bachrach and Baratz (1962) took issue with him on how elite groups influence patterns of decision making, rejecting the idea that the exercise of political power is only observable through the study of who took key decisions, when,how, and to what effect. What, they asked, if the 'unmeasurable' turns out to be the most significant element of how power is exercised, and whether power is only testable when there are disagreements on key issues between two or more groups, as Dahl had contended? In particular, the fact that decisions are not made can equally be the product of the exercise of power. Invisibility makes measurement problematic (not least when informal institutions prevail), but power is still being exercised nonetheless. This idea was taken further by Matthew Crenson in his important book on how he saw power exercised in two other neighbouring American cities, Gary and East Chicago on the shores of Lake Michigan in northern Indiana (Crenson,1971). Gary was the archetypal company town, built and controlled by US Steel, where local elites were effective in keeping issues such as pollution off the public agenda. Crenson thus challenged the logic of the pluralists when they argued that any dissatisfied group will be able to find spokesmen in the political stratum. The pluralist approach, he said, may suffer from insensibility to the 'power of obstruction – of enforcing inaction and thereby maintaining the impenetrability of the political process' (p21). Crenson's book has important lessons for the concentration of power at the sub-national level where corporate interests, as in some parts of Peru, may overrule state institutions.

Dahl's pluralist approach, based on a preoccupation with demonstrating the exercise of power, has also been taken to task by more recent writers. Steven Lukes (2005) took on the argument from Domhoff and Crenson, by positing that it is not simply the exercise of power that matters but the capacity or potential to exercise power, and to secure acceptance of decisions made. He identified three dimensions of power. One-dimensional power is where those who hold sway are those who prevail in decision-making situations. Two-dimensional power concerns 'agenda control', whereas three-dimensional power focuses on how the powerful secure the compliance of those they dominate. This third dimension of power, therefore, was to speak of interests imputed to but not recognised by others. Here, we are talking of political capture, not just state capture.

In raising the whole issue of compliance and acceptance Lukes thus took us back to the work of Gramsci (1971) and the power of ideology to frame the lives of ordinary citizens and to engineer consent in advanced capitalist societies. Are the subordinate classes inexorably subject to domination from above and in what circumstances do people's 'true interests' shine through, enabling them to overcome their subordination through resistance and rebellion? Why does civil society allow state capture to happen when it clearly is not in its interest to let it happen? The Gramscian concept of hegemony, whereby ruling elites maintain their dominance through largely consensual means, is clearly highly relevant to this discussion, as is the importance of discourse (for instance through elite dominance of the media) in creating a 'common sense' which encourages people, broadly, to accept their subordinate role. Unless challenged, such acceptance (and indeed apathy) helps explain the lack of social response to state capture. Gramsci's concern with ideology and how it is formed relates to this issue of acquiescence and the establishment of hegemony through intellectual and moral leadership rather than by material force, giving rise as to how consensual ideas are formed in society as a whole.

Liberalisation, globalisation and inequality: developed economies

Earlier writers thus pinpointed the role of political capture and its impact on inequality in a democratic context. However, the changes that have come about in the world economy since the late 1970s are such as to have had a profound impact on the balance of political power within economies, both developed and developing, and in their relative patterns of distribution. A circularity has become marked, with political capture influencing patterns of unequal distribution (of wealth as well as income), leading in turn to greater inequalities in the distribution of power and thus further contributing to the phenomenon of capture. The closely connected processes of liberalisation (and in particular deregulation and privatisation), technological change and the globalisation of markets have all tilted economic and political power firmly in the direction of business elites, especially those with global reach, at the expense of organised labour. Amongst other things, these influences have made it much harder to map out how power is exercised, not just within countries but globally. We have to look beyond formal institutions and how they are run to informal institutions and networks, and how the two interact. This sort of informal behaviour (whether criminal or not) is by definition obscure.

The impact on income distribution, not to mention asset ownership, has also been marked. Piketty (2014) shows us clearly how the processes of privatisation and deregulation led to further increases in degrees of income inequality in developed countries. He makes the important point that it is not a question of identifying income and wealth in the top 10per cent of the income distribution (as many writers do) but in the top 1 per cent, or even in the top tenth or hundredth of 1per cent, levels un- or under-reported in the official statistics owing to tax evasion. While the rise in inequality is clear from Piketty's figures on both sides of the Atlantic, it is also evident in much of the rest of the world, notably in post-communist Eastern Europe, in Asia (especially in China), and in Latin America during the last two decades of the twentieth century.

The sheer scale of income concentration over the last 30 years, along with its implications for democratic governance in the United States and other developed economies, has been the subject of much debate. Simply to take one study – that ofWinters and Page (2009) – the top one hundredth of 1 per cent of the population in the United States (some 300,000people) in 2008 enjoyed incomes of 463 times those of the average in the bottom 90 per cent of the income distribution. Narrowing that to the incomes of the richest 400 Americans, these had average incomes 22,000 times those of the bottom90 per cent. And the top 100 individuals had incomes 60,000times those of the bottom 90 per cent. According to another measure (Oxfam, 2015), the combined wealth of 1 per cent of the world's population was heading for half total global wealth in 2016; of the remainder, 46 per cent was in the hands of the richest one-fifth.

The story about how this shift in income distribution at the very top came about began in the late 1970s; authors have argued forcefully that it was not just the consequence of globalisation and technological development but the result of growing influence of private sector interests on policy making, especially with regard to market regulation. In the United States, it probably began during the Carter administration (1976–80) when business organisation first started to bring pressure to bear on government on issues like labour legislation and taxation, policies that businesses believed were detrimental to their interests. President Jimmy Carter was forced into humiliating retreats on such matters as business groups – such as the Business Roundtable – brought pressure to bear on Congress and public opinion more generally (Hacker and Pierson, 2011).

The political power of business lobbies in the United States went from strength to strength in the 1980s and 1990s, especially (but not exclusively) during the Republican administrations of Ronald Reagan and George H. W. Bush. They learned to collaborate and to work in the interests of business as a whole, not just of individual companies as before. They managed to win key concessions from government that impacted directly on income distribution, lowering tax on income (at the highest levels), reducing thresholds for capital gains tax, and finally (in 2001) abolishing taxes on inherited wealth altogether. At the same time, the power of organised labour to bring pressure to bear on government declined consistently over this period, further reducing any counterbalancing effect. The growth in the power of business was thus a cumulative process: increased pressure brought changes that helped reinforce the wealth of business elites, and this increased power made business ever more capable of pursuing its own agenda, irrespective of the interests of the rest of society. Indicative here has been the cumulative growth of business donations to both major political parties, with the Democratic Party increasingly in the hands of big business and far less dependent than before on traditional union backing. And the influence of business over opinion formers – whether through financial control over think tanks and universities or through the mass media – similarly went from strength to strength.

(Continues...)

Excerpted from Peru by John Crabtree, Francisco Durand. Copyright © 2017 John Crabtree and Francisco Durand. Excerpted by permission of Zed Books Ltd.
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Edition details

• Publisher: Zed Books
• Publication date: 2017
• Language: English
• ISBN 10: 1783609036
• ISBN 13: 9781783609031
• Binding: Paperback
• Number of pages: 256