Failure Is an Option
Two scholars scan history to find that nations fall because once-open institutions become closed and corrupt. If this sounds ominous, it should.
The most direct way to translate political power into cold, hard cash is to advocate for lower taxes. Republican presidential candidates spent the past year competing to offer the most bountiful tax cuts to the super-rich. While they talk about closing unspecified “tax loopholes,” they want to eliminate taxes on investment income altogether, creating the biggest loophole of all. Showering goodies on the rich would require draconian cuts to Social Security and Medicare—programs that are popular among the Tea Party rank and file. Republicans’ current anti-tax orthodoxy reflects the interests of their wealthy funders rather than their middle-income base.
As Warren Buffett observed, “there’s been class warfare going on for the last twenty years, and my class has won.” This should be little surprise: “My side has had the nuclear bomb. We’ve got K Street, we’ve got lobbyists, we’ve got money on our side.” What can be done? Acemoglu and Robinson argue that a free media can protect inclusive institutions against elite capture. But the helping hand that Fox News lent to the growth of the Tea Party has shown that media institutions owned by billionaires and led by political entrepreneurs can instead become an instrument of political warfare. Constitutional checks and balances may have torpedoed Franklin Roosevelt’s attempt to pack the Supreme Court in the 1930s, but Supreme Court justices appointed by Republican presidents were instrumental in unleashing unlimited corporate political spending in Citizens United, accelerating the concentration of political power in the hands of the super-rich.
But it is too early to declare victory for the 1 percent. American billionaires are far from unified, and President Obama has plenty of friends among the wealthy. The most potent bulwark of inclusive institutions is probably the rich variety of influential interest groups that all have the ability to participate in politics. Still, the accumulation of huge fortunes and their deployment for political ends has changed the nature of our political institutions. Funding by the economic elite is a major reason why Republicans advocate transfers from ordinary people to the rich in the form of tax cuts and reductions in government services—and why Democrats have been dragged to the right along with the GOP. In addition, as Why Nations Fail teaches us, political institutions shape economic institutions. Disinvestment in public education means less social mobility and economic opportunity—key elements of inclusive institutions. A country dominated by a hereditary aristocracy, whose wealth comes from investments in multinational companies with easy access to cheap labor here and abroad, is not likely to foster the technological innovation and creative destruction that produce long-term economic growth.
Are we likely to go the way of Venice? According to Acemoglu and Robinson, the greatest strength of inclusive institutions is that many groups in society have a stake in defending those institutions; as with the robber barons over a century ago, a threat posed by a powerful elite should evoke popular political resistance. Acemoglu recently said, “We need noisy grassroots movements to deliver a shock to the political system,” citing both the Tea Party and Occupy Wall Street as potentially helpful developments. As he recognized, however, the one with more staying power—the Tea Party—has been co-opted by well-funded, elite-dominated groups (including Americans for Prosperity). If a popular movement can be bankrolled as easily as an attack ad, it is hard to see what money can’t buy in politics. The next test for America will be whether our political system can fend off the power of money and remain something resembling a real democracy—or whether it will become a playground where a privileged elite works out its internal squabbles.
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