Issue #25, Summer 2012

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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Issue #25, Summer 2012
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Jim Hebbard:

Our Representative Democracy has devolved in a Kleptocracy where the representatives are the best politicians money can buy. And buy it has.

The middle class cannot even afford to send it's children to top schools, and settles for what results say are pitiful charactures of elitism schooled in consumption and devoid of real values. The sheeple have won the right to be lambs led to slaughter.

Jun 13, 2012, 1:27 PM
Michael Martin:

The reality is globalization has fragmented the populace and allowed the corporate elite to create a superclass of New Aryans with no more regard for the common people than they have for farm animals. We are drifting into the new dark ages ruled by barbarian looters (also called Private Equity Partners) who purchase political power as a cost of doing business. But I suspect China will be less likely to succumb and thus will be the bridge taking the world through this dark age.

Jun 13, 2012, 11:08 PM
Robert Cohen:

Are we observers and lemmings, pawns of this corporatocracy, or do we want to remove the basic cause of many of our national ills, money-in-politics?

My proposed approach to getting the money-givers out of politics is to file multiple court challenges in selected district courts to two absurd Supreme Court decisions, Santa Clara ("corporations are persons") and Buckley ("money is speech").

These class-action lawsuits could be based, for example, on a Fourteenth Amendment argument pointing out how our votes are being unfairly outweighed by the legalized monetary corruption of our political leaders.

There ought to be some innovative legal arguments that are sufficiently compelling to sway at least one of the five-Justice majority (including the four ideologues) that prevailed in Citizens United. Who knows, there may be a true patriot among them who will respond to public opinion and be recognized in history. And past Supreme Courts have indeed been swayed by public opinion.

I can envision a growing public outcry as these lawsuits move toward the Supreme Court. My guess is that 80% of the people are so disgusted with the legalized corruption of our politics that they will support this rising movement.

Although the likelihood of its success may be small, this liberation movement will still have been worthwhile for what it can achieve in educating the populace as to what we are up against.

In the event of success in reversing those decisions, the liberated Congress would be enabled to legislate in the public interest, such as to enact public financing of elections, free airtime for candidates, universal health care, and raising needed revenue from those who can best afford to provide it.

Jun 15, 2012, 12:40 AM
Bolakale Sidik:

What a book. It explains why African countries and their peoples are poor and will remain poor as long as state power is rediced in favour of a class of corrupt leaders.

Jun 19, 2012, 3:09 AM
Tom Shillock:

Warren Buffett was not exaggerating. The task is to reclaim more inclusive institutions, to move them back to what they were becoming between the end of WWII and 1973. Extraction and inclusion are matters of degree. By controlling public education and commercial news media the upper class has convinced the majority of Americans that they are economically and politically included to the extent that they deserve to be. Blaming the victim is so elegantly effective when the victims internalize the moral judgment. Of course, the upper 1 percent and above thoroughly believe it themselves: they are rich because they deserve to be and their wealth proves it.

We should not forget that the upper class has very effectively marshaled almost the entire economics profession to propagandize the more educated members of society on their behalf.

Oct 24, 2012, 4:01 AM

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