Elite Networks

"Elite Networks presents a novel explanatory factor behind the rise and persistence of income inequality: extractive political power. It shows how the collusion between political and corporate power affects the distribution of incomes. Its most important goal is to offer a novel perspective on the long-run origins of inequality by introducing the concept of elite networks and examining their effects on the distribution of power and incomes. Elite networks are informal social networks between politicians in power and top executives of politically connected firms where personal ties and long-term interactions build trust and loyalty between involved actors. Both groups draw benefits from these interactions. Politicians stay in power and may extract bribes and other favours, while firms are rewarded with exclusive government contracts, favourable regulation, and direct subsidies. Top corporate executives that are successful in acquiring these rents as a consequence of their elite network interactions are rewarded by their firms with higher salaries. This consequentially widens the dispersion of earnings between the top 1% of income earners (most of which are corporate executives) and everyone else. The book recognizes that the long-run forces behind inequality were always rooted in centralized and extractive political power, generated via specific relationships between the society's elites. Centralization of power enables the network effect that creates elite networks, which encourage rent-seeking opportunities to its members, consequentially increasing inequality. Inequality is not a modern nor a natural phenomenon, but a man-made phenomenon rooted deeply within the, often violent, quest for political power"--