[names]

Martin isn't the only one ringing alarms. It's hard to find a business thinker who isn't. 'We're in a dreadful crisis and it's accelerating by the hour,' warns Henry Mintzberg, the veteran strategy guru at McGill, Montreal, who berates short-termism and overweening corporate entitlement for today's tensions. Charles Handy, the respected UK business observer, sees yawning inequality bringing capitalism into irreconcilable conflict with democracy itself. The defiantly red-blooded US sage Gary Hamel concluded his defence of capitalism by conceding that it has never faced more, or more daunting challenges. Even pillars of the establishment such as Michael Porter, doyen of strategy teachers at Harvard Business School, and Dominic Barton, global managing director of consultancy McKinsey, see 'capitalism under siege' and 'deep reform' needed for survival. Umair Haque, author of The New Capitalist Manifesto and a fiery and influential blogger, argues that pulling levers to activate recovery is futile because the problem isn't recession: it's the wholesale implosion of worn-out, industrial-age capitalist institutions.

How did we get into this mess? Ironically, as often in business, the roots of failure lie in success. 'When communism fell, we thought it was capitalism that triumphed,' muses Mintzberg. 'It wasn't, it was balance'. The west, he says, had a much better balance of the public, private and social sectors that make up a resilient economy. Communist societies were completely unbalanced towards the public sector, 'just as we're now completely unbalanced towards the private'. The problem isn't capitalism as such, he argues: 'It's the assumption that capitalism is the be-all and end-all of human existence, rather than a means to create and fund enterprise.'

This is not, however, what this issue of The American Interest means by plutocracy. We mean not just rule by the rich, but rule by and for the rich. We mean, in other words, a state of affairs in which the rich influence government in such a way as to protect and expand their own wealth and influence, often at the expense of others. As the introductory essay to this issue shows, this influence may be exercised in four basic ways: lobbying to shift regulatory costs and other burdens away from corporations and onto the public at large; lobbying to affect the tax code so that the wealthy pay less; lobbying to allow the fullest possible use of corporate money in political campaigns; and, above all, lobbying to enable lobbying to go on with the fewest restrictions. Of these, the second has perhaps the deepest historical legacy.

Scandalous as it may sound to the ears of Republicans schooled in Reaganomics, one critical measure of the health of a modern democracy is its ability to legitimately extract taxes from its own elites. The most dysfunctional societies in the developing world are those whose elites succeed either in legally exempting themselves from taxation, or in taking advantage of lax enforcement to evade them, thereby shifting the burden of public expenditure onto the rest of society [...]

Why has a significant increase in income inequality in recent decades failed to generate political pressure from the left for redistributional redress, as similar trends did in earlier times? Instead, insofar as there is any populism bubbling from below in America today it comes from the Right, and its target is not just the “undeserving rich”—Wall Street “flip-it” shysters and their ilk—but, even more so, government policies intended to protect Americans from their predations. How do we explain this? [...]

But as it turned out, Obama was not riding a tide of left-wing populism. While the Democratic majorities in Congress succeeded in moving this ambitious legislative agenda forward, the results fell far short of expectations. The stimulus package did not produce stunning economic successes. The healthcare bill did not include a public option, and failed to address the real sources of cost inflation. Above all, the Dodd-Frank financial regulation reform bill did not change the perverse incentives that led to the crisis in the first place. Indeed, while Wall Street brought considerable opprobrium on itself, it was arguably the sector of the U.S. economy that suffered the least in the long run. Bank earnings were restored after a couple of quarters. And though the banks now face tougher regulation, Congress failed to do anything about the fact that investment banks are still too large and too interconnected to fail, and will surely be bailed out again when they get in trouble. Indeed, the U.S. financial sector is now concentrated in fewer hands than it was before the crisis [...]

here is the evidence for an American plutocracy of a narrow and discrete but hardly harmless sort. Wall Street seduced the economics profession not through overt corruption, but by aligning the incentives of economists with its own. It was very easy for academic economists to move from universities to central banks to hedge funds—a tightly knit world in which everyone shared the same views about the self-regulating and beneficial effects of open capital markets. The alliance was enormously profitable for everyone: The academics got big consulting fees, and Wall Street got legitimacy. And it has kept the system going despite the enormous policy failures it has generated, not to exclude the recent crisis.

Another set of ideas was of even more direct help to the wealthy: Reaganomics. Supply-side economics provided a principled justification for the rich paying lower taxes on the grounds that entrepreneurial incentives unleashed by lower marginal tax rates would not merely trickle but pour down both via public finance and through the creation of employment. This argument was likely true at the near 90 percent marginal rates that prevailed after World War II, but those rates were reduced in several waves beginning in the 1960s. Clinton’s tax increases of the early 1990s brought rates up only slightly, and didn’t have the growth-killing effects widely predicted by Republicans—just the opposite, they preceded one of the great economic expansions of recent memory. The benefits of the Bush-era cuts flowed overwhelmingly to the wealthy, and yet were promoted on the grounds that lower rates would redound to everyone’s benefit. This is still a gospel that many people continue to believe, including, oddly enough, all too many of those left behind.

calculating the amount of the historical federal subsidy of the Internet “depends on how one parses government spending—it’s fairly modest in terms of direct cash outlays. But once one takes into account rights of way access that were donated and the whole research agenda (through the Defense Advanced Research Projects Agency, the National Science Foundation, etc.), it’s pretty substantial. And if you include the costs of the wireless subsidies, tax breaks (e.g., no sales taxes on online purchases), etc., it’s well into the hundreds of billions range.”4 For context, Meinrath’s estimate puts the federal investment in the Internet at least ten times greater than the cost of the Manhattan Project [...]

The early Internet was not only noncommercial, it was also anti-commercial. Prior to the early 1990s, the National Science Foundation Network, the forerunner to the Internet, explicitly limited the network to noncommercial uses. If anyone dared to sell something online, that person would likely be “flamed,” meaning that other outraged Internet users would clog the individual’s email inbox with contemptuous messages demanding that the sales pitch be removed. This internal policing by Internet users was based on the assumption that commercialism and an honest, democratic public sphere did not mix. Corporate media were the problem, and the Internet was the solution. Good Internet citizens needed to be on the level; they should not hustle for profit by any means necessary [...]

In the realm of the Internet, a state-corporate alliance has developed that is matched perhaps only in finance and militarism. It makes a mockery of traditional economics, with its emphasis on an independent private sector responding to a competitive market. It also makes a mockery of the traditional liberal notion that capitalist democracy works because economic power and political power are in two distinct sets of hands, and that these interests have strong conflicts that protect the public from tyranny. Examples of how large communication corporations and the national security state work hand-in-hand are beginning to proliferate. The one that was exposed—and is singularly terrifying—concerned how, for much of the past decade, AT&T illegally and secretly monitored the communications of its customers on behalf of the National Security Agency.27 The more recent stories of how Amazon and PayPal/eBay cooperated with the government in the WikiLeaks affair may not be in the same league, but they point to the demise of the separation of public and private interests at the heart of liberal democratic theory [...]

The future increasingly looks like one where the wireless Internet world will come to equal or exceed the traditional wireline broadband sector, and this will be a proprietary system that does not practice “network neutrality” or have the openness long associated with the Internet. We should expect more great mergers among and between the largest media, telecommunication, computer, and Internet corporations, along the lines of Comcast-NBC.

As the authors of a 2011 report by the New America Foundation put it, we are entering a world of digital feudalism, where a handful of colossal corporate mega-giants rule private empires. Advertising will be given every opportunity to exploit the system, and any meaningful notion of privacy will have to be sacrificed. “For once the fate of a network—its fairness, its rule set, its capacity for social or economic reformation—is in the hands of policymakers and the corporations funding them,” one of the earliest champions of the democratic Internet recently observed, “that network loses its power to effect change.” It is a world that would have been considered impossible not too long ago, but it is the destination at which one inevitably arrives, if capitalism is behind the steering wheel.

[w/ links = full discussion]

There are several dubious aspects of the majority's opinion (principally its decision to invalidate the entire campaign finance scheme rather than exercising "judicial restraint" through a narrower holding). Beyond that, I believe that corporate influence over our political process is easily one of the top sicknesses afflicting our political culture. But there are also very real First Amendment interests implicated by laws which bar entities from spending money to express political viewpoints [...] while this decision will make things marginally worse, I can't imagine how it could worsen fundamentally. All of the hand-wringing sounds to me like someone expressing serious worry that a new law in North Korea will make the country more tyrannical. There's not much room for our corporatist political system to get more corporatist. Does anyone believe that the ability of corporations to influence our political process was meaningfully limited before yesterday's issuance of this ruling? [...] It's the smaller non-profit advocacy groups whose political speech tends to be most burdened by these laws. Campaign finance laws are a bit like gun control statutes: actual criminals continue to possess large stockpiles of weapons, but law-abiding citizens are disarmed [...] Meaningful public financing of campaigns would far more effectively achieve the ostensible objectives of campaign finance restrictions without any of the dangers or constitutional infirmities.

There is a type of transparency project that should raise more questions than it has--in particular, projects that are intended to reveal potentially improper influence, or outright corruption. Projects such as the one that the health care bill would launch--building a massive database of doctors who got money from private interests; or projects such as the ones (these are the really sexy innovations for the movement) to make it trivially easy to track every possible source of influence on a member of Congress, mapped against every single vote that the member has made. These projects assume that they are seeking an obvious good. No doubt they will have a profound effect. But will the effect of these projects--at least on their own, unqualified or unrestrained by other considerations--really be for the good? Do we really want the world that they righteously envisage?[...]not all data satisfies the simple requirement that they be information that consumers can use, presented in a way they can use it. "More information," as Fung and his colleagues put it, "does not always produce markets that are more efficient." Instead, "responses to information are inseparable from their interests, desires, resources, cognitive capacities, and social contexts. Owing to these and other factors, people may ignore information, or misunderstand it, or misuse it. Whether and how new information is used to further public objectives depends upon its incorporation into complex chains of comprehension, action, and response."[...]The public is too smart to waste its time focusing on matters that are not important for it to understand. The ignorance here is rational, not pathological. It is what we would hope everyone would do, if everyone were rational about how best to deploy their time. Yet even if rational, this ignorance produces predictable and huge misunderstandings. A mature response to these inevitable misunderstandings are policies that strive not to exacerbate them.

Maria Foscarinis, an advocate for the homeless, thinks it's ironic that some of the most powerful people in the country are using some of the most vulnerable to hold a place in line for them.

"They're likely to be standing in line for people who well may be opposed to universal health care that would be a benefit for poor and homeless people," Foscarinis said. "And yet they may be standing there for the purpose of access for the interests that are opposed to their own."

http://change-congress.org/ al gore @ 37:00 - "democracy crisis" Q&A 42:00