Dollarocracy: Money-Power, Media-Framed Elections and InequalityBy Timothy J. Barnett for FRONT PORCH REPUBLIC
When searching for semi-precious stones, one must at times loosen jewels from the mineral deposits in which they’re locked. This consideration applies to books as well as nature’s treasures. One reads certain political books not necessarily because of agreement with a thesis or set of arguments but because one finds valuable observations alongside errant assumptions. Oftentimes it is profitable to read well-crafted opposition ideas to open up the political landscape. Consequently, one need not support the social democratic policy preferences of John Nichols and Robert McChesney to benefit from their well-researched observations on democracy’s decay into what they call “dollarocracy.” There is gold here, mixed with dross.
Democracy under Corrupting Influences
Nichols and McChesney have titled their 2013 book, Dollarocracy: How the Money and Media Election Complex Is Destroying America. Their multifaceted thesis is that the increasingly pronounced economic inequality in the U.S. reflects the corruption of democracy by a money and media complex (2013, 6, 13). The result of this corruption is a dysfunctional democracy where oligarchy, kleptocracy and plutocracy are closing in as the new norms. Arguing from a Leftist but not fully polarized perspective, the authors believe fair play has been subverted by both parties. They also believe GOP elites are more to blame for this outcome than are Democrats; granted, elites in both parties regularly make provision for the subsidization of robber barons and crony capitalists in what is becoming another Gilded Age, especially in the environs of Washington D.C.
Militarism, corporatism, subterfuge-style lobbying and a shortage of credible journalism reflect the decaying condition of American politics (4-6). Red flags include the subordination of bureaucratic independence to special interests, the creation of administrative rules that benefit global elites, and a stealthy manicuring of capitalism’s architecture so as to subsidize advantaged players in their extraction of gains from central bank policies. Purportedly, these outcomes would be unconscionable to a morally scrupulous media and a properly informed electorate.
According to the authors, Americans ought not be daunted by this situation because democracy trumps plutocracy when participation is broadly based and properly informed by a competent media. (Arguably, this Goldilocks optimism ignores the fact that today’s least regular voters tend to be less educated and economically successful than others, plausibly making them less prepared to differentiate between constructive and destructive policies.) Nonetheless, Nichols and McChesney imagine a ‘remaking of the world’ (i.e., as in the Jewish concept of “tikkun olam”), the catalyst being a rehabilitation of the media and electorate (7). An ameliorated political environment would result, leading toward social democratic policies of an egalitarian nature—a prospect entertained uneasily by Aaron Wildavsky in his 1991 book, The Rise of Radical Egalitarianism.
The Hazard of Amendments with Stealth Rights
The important point Nichols and McChesney do not explain in detail until the book’s final chapter is that the sought-after outcome is unlikely without the subversion of the dominant paradigm, so as to start anew (Preface, page xv). The fresh start is premised on the success of a constitutional amendment with “positive liberties.” These new liberties (rights) are stealthy at first, emerging full cloth only as federal courts convert the amendment’s theoretical implications into equality fostering reinterpretations of law. Correctly worded, an ‘affirmative right-to-vote’ amendment invigorates egalitarian democracy” because of its extraordinary “explosive” possibilities—a concept calling to mind a panoply of new-era rights the federal judiciary was able to conjure from the Fourteenth Amendment’s clauses on due process and the equal protection of the laws (279-282).
While America’s Founding Fathers were content with narrowly constructed “negative rights,” so-called positive liberties could give liberal judges leeway, according to the authors, to constitutionally limit gerrymandering, find new legal standing for minority parties in political debates, grant free air-time to aspirational parties, create instant runoff voting in multi-candidate elections, elevate proportional representation over single-member districts, and install other measures that ensure enhanced identity group diversity and egalitarian discourse. In the process, the Electoral College could be brought low—disallowed by a judicial activism not unlike that which ended First Amendment protection for state-level church establishments in the mid-twentieth century (282). Interestingly, an end to the Electoral College would shift political power away from politically conservative low population states, owing to a loss of Senate-equivalent votes in the College. Conceivably, the impact of the change would be muted by a loss for California’s Democratic Party of its recent 100% share of the state’s 55 Electoral College votes.
On the surface, a voting rights amendment like the one proposed by the authors would look innocuous to many people. It might appear merely as a morale-building restatement of the national commitment to the “one person, one vote” democratic model—a feel good amendment to constitutionalize the sentiment of the Declaration of Independence that “all men are created equal” (the phrase originally implying the equality of the English under the law, whether in America or England). As asserted by the authors, “explosive” political change could be concealed within the shell of the voting rights amendment, allowing American social democrats to play catch up with their European counterparts. Even if the impact of the reforms fell short of instituting social democracy, progress for the Left could still be realized. For example, a reduced gerrymander by both dominant parties could provide more visibility for minority parties.
Viewed from the outside, the authors’ expectations may be misplaced. Woodrow Wilson, trained as a political scientist, mistakenly thought that the elevation of electoral primaries would strengthen political parties. In reality, primaries strengthened candidate organizations at a cost of control by political parties. Likewise, it is questionable whether the reforms espoused by social democrats would produce the ends they hope to achieve.
The Sign of Democracy vs. Virtue and Merit
This is not to say that Nichols and McChesney have dark aspirations: they see themselves as champions of political justice and defenders of the common man. They are doubtless correct in seeing democracy as diseased. However, they are likely mistaken, at least in part, regarding the causes of the disease.
As it regards details, it is best to begin where the authors start. They open, adjacent to the contents page, with a centerpiece sentence from Walt Whitman’s Song of Myself:
I speak the password primeval, I give the sign of democracy; By God! I will accept nothing which all cannot have their counterpart of on the same terms.
Whitman’s statement, out-of-context, supposes perfect democracy as the cure to what ails the art of governance. Hindsight suggests that the American Founders were rightly concerned that too much democracy complicates governance—a perspective acknowledged by Nichols and McChesney in noting James Madison’s concerns about universal suffrage (16).
From this reviewer’s perspective, if there was any touchstone during America’s First Constitutional Convention (1787), it would be earned merit ahead of democracy. Limited Republican democracy was simply a political vehicle to help support merit as the primary cultural determinant for how rewards were acquired within the economy and political system. The goal of politics was not to enshrine the means (democratic equality) but to secure a meritocractic common good. By supporting the equality of persons before the law, the American Founders hoped to facilitate a fair and opportunity-rich environment in which people could distinguish themselves honorably and acquire rewards suitable to the real value of their initiative, ingenuity, labors, prudence and contributions.
While the U.S. Constitution prohibited peerage (Article I, Sect. 9, Clause 8), constraints upon pretensions of merit were left to the province of culture and a backdrop of quality religion. James Madison supported this understanding during his June 20, 1788 speech at the Virginia Ratifying Convention:
But I go on this great republican principle, that the people will have virtue and intelligence to select men of virtue and wisdom. Is there no virtue among us? If there be not, we are in a wretched situation. No theoretical checks—no form of government can render us secure. To suppose that any form of government will secure liberty or happiness without any virtue in the people, is a chimerical idea. If there be sufficient virtue and intelligence in the community, it will be exercised in the selection of these men [to Congress]. So that we do not depend on their virtue, or put confidence in our rulers, but in the people who are to choose them.
Herein rests the philosophical chasm between the nation’s father of constitutional checks and today’s advocates of ‘democratic participation-on-steroids’ as the solution to our political ailments. James Madison understood the value of competitive structures at the constitutional level. In Madison’s view it was mandatory that the U.S. Constitution hem in the annual battles over legislative largess, a feat accomplished imperfectly by limiting the powers of the national government. Indeed, one of Madison’s chief checks in the system was decentralized federalism—a check based upon the assumption that states would jealously guard their operational and financial prerogatives. Unfortunately, when the world changed rapidly in the early 1900s, nothing was done to amend the U.S. Constitution to keep its strictures and tone adequate to check the emerging concentrations of money power—an observation consistent with the general direction of the Nichols and McChesney thesis. As civic and personal virtue gave way in many places to all-consuming materialism and avarice (something the authors miss), there was insufficient initiative in majoritarian politics to check the ambitions of elites and organized special interests. Increasingly, voter participation did little more than to rubber stamp policy agendas that the public did not understand.
The Hazard that could Sound the Republic’s Death Knell
Nichols and McChesney approach Madison’s observation before veering to their social democracy vision—their preferred system much closer to British or French socialism than to the profit-sharing arrangements a majority of German voters had in mind until their Republic was hijacked and wrecked by the Nazi calamity. On the first page of Dollarocracy’s introductory chapter, the authors quote a 1910 statement by Theodore Roosevelt.
At many stages in the advance of humanity, this conflict between the men who possess more than they have earned and the men who have earned more than they possess is the central condition of progress. In our day it appears as the struggle of freemen to gain and hold the right of self-government against the special interests, who twist the methods of free government into machinery for defeating the popular will.
In other words, some (not all) people of privilege are at pains to manipulate the system so as to grasp greater gains than their merits deserve. The greedy do so by employing lobbyists to twist the laws so as to legalize wealth distribution subsidies that would be larcenous if every person’s merits were fairly considered.
Failing to replicate Madison’s logic about the indispensability of civic virtue, Theodore Roosevelt’s brief statement neglects the point that the popular will (of the working class) during culturally challenged times tends to produce the same tolerance of party-contrived thievery that decadent elites pursue by dangling carrots in front of legislators. One side seeks to spread out a little pain among many so as to concentrate considerable benefits among the few, while the other side endeavors to concentrate a lot of pain among an (elite) few so as to spread out a thin but meaningful layer of largesse among the many. In Europe the traditional term for this political phenomenon has been class warfare. In both instances, the strategy may amount to little more than a politically instrumented attack upon merit—each side wishing to discount the contributions of the other. Granted, as demonstrated in Gilded Age excesses (both then and now), the merit associated with concentrated wealth can be difficult to justify in terms of the value of contributions to the enduring public good.
Theodore Roosevelt was neither the lap dog of elites nor the common man’s demagogue. Like Thomas Jefferson, he believed in the indispensability of financial elites whose prosperity was fairly earned and whose political guidance constituted a square deal. In chapter twelve of his autobiography, TR supports meritorious wealth while worrying about the consequences of power gained through exploitation.
Sweeping attacks upon all property, upon all men of means, without regard to whether they do well or ill, would sound the death knell of the Republic; and such attacks become inevitable if decent citizens permit rich men whose lives are corrupt and evil to domineer in swollen pride, unchecked and unhindered, over the destinies of the country (Theodore Roosevelt, 1913).
The essence of Theodore Roosevelt’s argument is this: unless true merit is appreciated, democratic reforms will accomplish little good. His idea is not to end class distinctions but to make sure they are supportive of the lasting public good. In this vein he supports an earlier vision that has been clouded by those who use generalities—like “free markets” or “equal rights”—to advocate for policies that benefit identity or positional groups without due regard to the distinctions by which careful thinkers have differentiated godly desserts from morally flawed gains. Basically, what concerns TR is the triumph of identity politics over sound philosophy—a problem that constitutional subsidies for electoral participation will never solve.
Easy Money Subsidies Wash Out Honorable Wealth
The problem for the pro-merit camp is that the concept of deservedness has been gutted of real spiritual and philosophical consequence during the last forty years. Nowadays, merit amounts to the justification that if one can get wealth within existing laws or norms—never mind how such laws or norms came about—one’s prosperity testifies of high merit. Such a line of reasoning stands only by denying the biblical message as interpreted by means of a sound hermeneutic. Additionally, this damaged logic ignores the sowing and reaping equation historically associated with the work ethic, frugality, prudence and the laudable determination to better one’s self and family by honorable means. Where narcissism reigns, superficial merit can become whatever people pretend it to be. If this is what Nichols and McChesney wish to oppose through increased electoral participation, their aim is admirable. But the warp and weave of their treatise does not suggest this to be the focus.
The 2012 Facebook IPO demonstrates that some people cash in on massive amounts of wealth for relatively little contribution to the public good. The few who garner hundreds of millions or billions of dollars effectively wash out the relative financial status of millions of small business owners who spent lifetimes building modest but meaningful entrepreneurial endeavors. It may be exciting to chatter about the way Wall Street can mint mega-fortunes overnight, but power transfers of this nature do not serve the larger enterprise of broadening the base of those who deserve reasonable financial independence. Wealth made by reason of design flaws in capitalism’s infrastructure is not the same as wealth accumulated through ingenuity and distinguished services provided across decades.
As modern society evolves it needs more than the natural resource commons of air, water and land. A technologically advancing society demands new business platforms, computer applications and electronic commons. Starting gate opportunities in new communication frontiers create winners not necessarily because of their landmark brilliance but because civilization finds itself in an incredible hurry to develop and deploy the electronic equivalents of air, water and land. In essence, some version of Facebook had to happen when Internet-based social networking became a cultural imperative. Due to the need to universalize a common communication vehicle, Facebook was catapulted to semi-monopoly status. An artificially gained status allowed for the immediate financialization of what amounts to a global commons with over 1.2 billion users and a $160 billion market cap as of February 2014. Tellingly, Facebook’s market capitalization is triple the size of the General Motors cap but owned significantly by just a few individuals. (While index-tracking ETFs and some derivatives provide a parallel universe bet for Facebook outsiders, there is no dividend or voting power replication for this class of speculators.)
The controlling coterie now ensconced in Facebook can reap outsized rewards by forcing high velocity revenue enhancing protocols upon participants, many of whom do not realize how extensively and permanently their privacy will be compromised. In utilizing the Facebook platform, most Facebook participants fail to understand how their data (when aggregated with that of millions of other users across scores of demographic markers) allows business interests to thoroughly exploit consumer proclivities. In essence, this is a privatized form of dollarocracy, Facebook acting as its own semi-autonomous government in many matters.
Wall Street initially over-priced the Facebook IPO because it knew social networking service had acquired what should have been viewed as a quasi-common domain property. Street elites also knew that the company would be able to exploit traffic destined to come to Facebook by the need for centralized social networking. Resultantly, overwhelming wealth and power was generated for a few (including Wall Street deal makers) by extrapolating the growth potential of a near-monopoly—the stock price expansion financed by central bank policies.
Comparisons can be instructive. A special district controls the Golden Gate Bridge that spans the strait leading to the San Francisco Bay from the Pacific Ocean. The district manages the monopoly-positioned bridge not to maximize profits or exploit traffic but to provide a common domain asset that benefits everyone: purchasers of shipped goods as well as commuters and travelers. Obviously, it would be ludicrous to allow a private owner of the bridge to extract, Facebook style, mountains of personal data from bridge users, then sell the demographically mined and aggregated data for billions in profits to target marketers.
By analogy, Wall Street is a Golden Gate bridge for retirement savers in America. Congress has given Wall Street special privileges with vehicles such as IRA and 401k plans. Hence, Wall Street is uniquely positioned to exploit the money flows that cross its infrastructure. Notably, over 40% of the Street’s volume in recent times is coming from lightning fast rapid-trading programs that front-run the transactions of managers of the public’s money. Situated in its crony-capitalist position and protected by its lobbyists from any congressional initiative to constructively broaden competitive opportunities to outsiders, Wall Street elites have a juggernaut power over finance—a power that can be transferred to social initiatives and political races. If that wasn’t enough, the Federal Reserve subsidizes the Wall Street enterprise through its monetary policies.
Wall Street Hijacks the Meritocracy Principle
The explication of correctives for mega-injustices resides outside the bounds of a review essay. Suffice it to say that a merit-based, opportunity rich capital system would be preferable to the one that has evolved. The problem is that Wall Street works subtly to hijack the concept of merit and apply it to itself. For example, on December 7, 2011, JP Morgan CEO Jamie Dimon claimed that he would love to lift up the poor, but still wants a meritocracy. Dimon’s concept is incredulous in view of society’s evolving asset ownership metrics. Boiled down, Dimon’s chutzpah amounts to advocacy for redacting “financial peerage” as real world deservedness. By implication the position amounts to a claim that whomever Wall Street anoints with power should also receive immunity from traditional moral standards. This narcissist ethic shows up in the infamous 2009 declaration by Goldman Sach CEO Lloyd Blankfein that investment bankers are busy doing God’s work.
Paradoxically, since 2009 investment bankers have been aggressively urging big corporations to buy back stock, thus removing hundreds of billions of dollars of excess annual profits from corporate balance sheets—a situation that reflects the circumstantial weakness of the middle class to demand its fair share of national income. Notably, in recent times corporate profits as a share of GDP are running double their normal level. If multinational American corporations employed their buy back money to rebuild American industry (admittedly at lower profit margins than they secure currently), millions of quality jobs could be created in America—jobs that reasonably match the aptitudes of millions of under-employed persons. The problem is that when public corporations invest profits domestically at considerably lower margins than they earn currently, they make themselves prey to companies that choose not to do likewise (or to private equity buccaneers). Consequently, the U.S. Congress must strategically restructure capitalism’s incentives so as to restore the business sense of patriotic capital investment. Admittedly, this feat is unlikely to occur as long as Congress is oblivious to proper market design and Wall Street lobbies deceptively for monetary-based economic stimulus.
In the juxtaposition of traditional moralism with the Nichols and McChesney perspective, where is the merit in massive stock buy backs when recent studies show that 5% of the nation’s population owns 80% of the stock? While business efficiency and worker productivity have soared during the last thirty years, the inflation adjusted income of most American workers has stagnated or declined. Where is the meritocracy that underlies this disconcerting outcome? How is Pope Francis facing the wrong way if concerned about the morality of such trends?
Civic Virtue without a Head Cold
Scholars like Nichols and McChesney think they smell a skunk. Indeed, anyone whose civic virtue has not caught a head cold can discern the stench. Unfortunately, Nichols and McChesney want to address the problem through a series of constitutional amendments aimed at empowering federal courts to enforce governmentally instrumented egalitarianism—a dangerous plan. Remember, Theodore Roosevelt declared hazardous outcomes as inevitable if the nation failed to demand a right relationship between deservedness and wealth. TR said that attacks upon property without regard to merit would sound the death knell of Republican liberties as traditionally understood. Indeed, inequality rectifying redistributive plans (big government style) are already being trumpeted by liberals and social democrats. In the context of support for an abstract equality of persons, and absent a high regard for moral merit, such initiatives could bring new trauma for the Republic. A careful contemplation of these considerations ought to move principled people to elevate prudently conceived merit to its rightful place.
Sound philosophy, quality religion and science that sticks to its knitting are promising tools for identifying and operationalizing the sustainable public good. Nationwide, trillions of dollars of capital is sequestered, so to speak, in stock market betting pools. With the right design for capitalism a significant portion of these funds could be released for real world investment in America, rebirthing the manufacturing dynamic aborted when multinational corporatism off-shored American workers’ futures to Asia. Absent suitable market design, the country will “wait for Godot” in terms of globally competitive economic development. Even in the IPO universe most public companies are getting but a sliver of the capital raised, the rest going to line privileged pockets in a market environment where moral guardrails are equated with heresy.
Areas where Dollarocracy Scores Points
The authors of Dollarocracy are undoubtedly right about many things. They decry the difficulty in forcing either party in Congress to reform itself so as to fairly represent the economic interests of its base. They view Congress as captured by a Wall Street lobby (14, 18-19). They argue that when Robert La Follette ran as a third-party candidate against the Money Power in 1924, his effort but slightly postponed the advance of plutocrats (20-23). They observe that when Democrats battle the money-and-media election complex, those advancing the reforms find themselves marginalized within their own party (32). Helpfully, this valuable insight is developed in exquisite detail in Jeff Taylor’s landmark book, Politics on a Human Scale (2013).
Calling their own side to account, Nichols and McChesney explain how President Obama denounces the Money Power, then plays along with it. They point to Newsweek reports that election cycles now cost $6 billion, then provide a more thorough accounting that reveals an election enterprise that involved over $10 billion in 2012—federal, state and local (42, 53, 65). Taking on the mass media, the authors describe an irresponsible television corporatism that feasts on bull markets of election spending, credible journalism sacrificed to the wind (100, 128, 130). Additionally, with the fall of professional journalism (163), digital marketers of political messages are free to exploit the electorate’s ignorance, individual prejudices oftentimes reinforced (230-239, 249). The outcome, according to the authors, is a policy debate that grows increasingly convoluted, superficial and misdirected.
The Risk of Unintended Consequences
Some observers may not buy into the Nichols and McChesney notion that substantially broadened electoral participation will help cure America’s governance ills. This is because the nation has been brought into “dollarocracy condition” while celebrating federal measures to enlarge the voting enterprise. Broadened voter participation may raise the volume of outbursts about inequality, yet do little to slow our drift toward plutocracy. Clueless voters don’t know how to fix the system.
James Stimson, a widely followed political scientist, argues that apart from a small segment of high participation independent voters (i.e., “scorekeepers”), most of the politically “undecideds” who irregularly vote are relatively uninformed about government. To trust the uninformed to vote the country into better times is to suppose that a fallen national media will wisely lead the sheep to good pastures. If the authors are right that the national media cannot be trusted in political matters, the help we need may rest elsewhere.
As contrasted with ‘democracy-on-steroids,’ what America needs is a renaissance of prudence by which to rightly cultivate opportunity and reward merit. The times call for a market design that honorably stimulates people and businesses to attend diligently to the nation’s enduring best interests. Happily, the logic of an advance to a quality civic environment is nicely explored in Joseph F. Kett’s groundbreaking 2013 work, Merit: The History of a Founding Ideal from the American Revolution to the 21st Century. (See my review essay in vol. 16:2 of the Journal of Markets & Morality, Fall 2013). To the degree that people come to understand merit’s irreplaceable value in capitalism, they will come to discern the hazards of using dollarocracy to fertilize the morally depleted soils of governance.
As Nichols and McChesney observe, Thomas Jefferson did declare that, “the mass of mankind has not been born, with saddles on their backs, nor a favored few booted and spurred, ready to ride them legitimately, by the grace of God” (284). Jefferson’s penknife abridged version of the Bible with its moralistic selections carries the point home. Liberty is not defended so much by a celebration of democracy as it is by an abiding determination to broaden opportunities for self-improvement while rewarding deservedness wisely. Whatever is well-rewarded grows. The real defense of economic liberty is found in creating wise incentives for the demonstration of merit, not in subsidizing pretended equalities or legislatively contrived financial rights— modernity’s sanctified version of feudalistic peerage. It is only as government is constitutionally restrained from distributing ill-deserved largesse and amoral subsidies that the hope of honorable liberty can be secured.
* * *