2016: Bernie vs. The Donald? Missing the Message.

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Most Americans are reduced to the passive role of spectators, fans, groupies. Or they are persuaded not to bother with politics. An elaborate class of professional technicians has taken charge of electoral politics—campaign managers and advertisers, pollsters, fundraisers, crowd organizers. These professionals, one could say, manage the passions or passivity of voters. They shape the content of what citizens know—and shape their ignorance too.

The ongoing circus of the presidential partisan primaries has voters fretting that our choices may whittle down to a contest between the bombastic Donald Trump vs. the radical socialist Bernie Sanders. I wouldn’t worry so much about that. Instead I would worry more about the underlying message regarding American “politics as usual.”

Below is an essay written by the journalist and author William Greider published in The Nation that reviews a book by Lawrence Goodwyn, Democratic Promise: The Populist Moment in America. Greider correctly applies this history of American populism to the modern movement that is the deeper current under the froth created by Trump and Sanders.

This movement, which is actually a gradual disenfranchisement of the American voter marked by the decline of party affiliation (as Greider points out, “Voters who stay home on Election Day are now by far the ‘largest’ political party”), is a real threat to the “politics as usual” of both the Democrats and the Republicans. And this is how it should be.

The resilience of American democracy is found in the pressures of the system to adapt to change or die. This does not imply the rise of third parties, except to displace one of the two major parties, either of which could easily suffer that fate. But the genius of our electoral two-party system has turned out to reinforce this need to adapt or die.

Multi-party systems fracture into uncompromisable positions that lead to instability in national government and over-dependence on fragile coalitions that often empower narrow interests at the margin. A two-party winner-take-all system forces parties to the center of voters’ demands in order to capture a majority. This is a good thing in a large pluralistic polity like we have in the U.S.

But, as Greider clearly points out, that doesn’t mean that democratic system cannot breakdown under this electoral design. American politics has become unresponsive to voter demands and needs for a variety of reasons. This gives rise to the anti-establishment tenor of modern movements such as the Tea Party and Occupy groups. These anti-establishment groups have more in common than in opposition, but the establishment seeks only to divide and conquer its opposition in order to continue to enjoy the spoils.

Goodwyn also wisely points out that for democracy to work, voters do not need to be perfectly informed, they only cannot be misinformed with a systemic bias. Unfortunately, the media today can promote that systemic bias, which is why it is failing us. This applies to mainstream as well as alternative media. In other words, we’re not getting the unvarnished objective truth from ABC, CBS, NBC, or FOX; and not from the NY TImes, Washington Post or The Wall Street Journal. And certainly not The Huffington Post or TownHall. We’re getting what appeals to each media channel’s targeted political audience.

On an optimistic note, the party “establishment” candidate that first discovers how to appeal to the disaffected and brings them back into the party fold by adapting to their demands and compromising the establishment party’s platform will be successful in future elections. And this is how it should be. Greider suspects we’re not quite there yet, but the momentum has been building for about 20 years now (maybe 40+). But it’s highly unlikely we will be led into the future by the likes of an angry Donald Trump or Bernie Sanders.

Bernie, Donald, and the Promise of Populism

Both candidates have been mislabeled as populists. The movement of that name was a genuine people’s rebellion that reinvigorated democracy. We can do it again.

By William Greider

September 21, 2015

The New Yorker recently attempted to explain two “populists” running for president, the only candidates generating huge and enthusiastic audiences. Instead, the article’s snide tone reflected the nearsightedness of cosmopolitan elites. Both candidates were mislabeled as “populist.” Bernie Sanders is a democratic socialist; Donald Trump is a trash-talking billionaire. But the magazine also mangled the true historical meaning of populism.

The writer seemed to be channeling Richard Hofstadter, the Columbia historian who back in the 1960s famously put down populism and other rebellious movements as “the paranoid style in American politics.” People are irrational, Hofstadter explained, driven by delusional fears and conspiracy theories. Not to be trusted with governing power.

Class condescension is as old as American democracy and is back in vogue this season, thanks mainly to the plutocrat with big hair. Only, Donald Trump turned “populist” anger upside down. He’s a super-rich guy ridiculing the “stupid” people in government and bragging about how he and his fellow billionaires buy politicians to get free stuff from government. Sanders, meanwhile, is plowing a parallel furrow of dissent—a substantive and serious program for reform.

But neither fits the label “populist” because they are both working within the established order. By definition, populism requires plain people in rebellion, organizing themselves to go up against the reigning powers. Major pushback from fed-up people is not present—not yet anyway—but the great disturbances already roiling party politics suggest that the political status quo is vulnerable to more upheavals, particularly if timidity and stalemate continue to suppress meaningful change.

It depends, first, on whether the 2016 results promise real changes in economics and social equity and/or convince people they have to dump both parties and attempt power-seeking politics of their own. This is a tender moment for the two-party system.

Elites naturally fear popular uprisings, but rebellion can be good for democracy. Even if they fail, self-generated citizen insurgencies can ventilate the musty corridors of government and compel governing parties to change or die. A century ago, the original Populists provoked fright and ridicule in establishment circles on a far more threatening scale. We are not there yet. But don’t count it out if timidity wins the election next year and politics continues to run away from fundamental questions.

The People’s Party in the last decades of the 19th century was self-organized by scattered groups of distressed farmers. It grew rapidly across the South and West to oppose the powerful forces—banks, railroads, industrial corporations—destroying small, independent producers. The farmers realized the federal government was an active accomplice in their economic destruction. There was nothing delusional about their alarm and anger. It was driven by a ruinous deflation of farm prices for three decades—hard money that rewarded capital and crushed producers.

The agrarian revolt set out audaciously to win power by winning elections—electing Populist governors, representatives, and senators—hoping ultimately to elect the People’s President. They failed, of course, but their legacy was profound. These self-taught citizens developed original ideas for governing the economy, business, and banking. They envisioned a central bank to regulate money and credit that would advance equality, serving people and producers rather than the fortunes of New York bankers. The Populist vision was the road not taken.

The New York Times called them “slime.” (This magazine was pretty bad too, as The Nation’s 1896 attack on William Jennings Bryan shows.) It denounced their proposal as “one of the wildest and most fantastic projects ever seriously proposed.” Yet years later, John Maynard Keynes saluted the American Populists as “a brave army of heretics.” They failed to gain power, but Keynes recognized that their economic analysis anticipated his own. Many of the original Populist proposals were eventually enacted as New Deal reforms.

For the true history, read Lawrence Goodwyn’s Democratic Promise: The Populist Moment in America. The book profoundly altered my understanding of American history and democracy (the excellent shorter version, widely available in paperback, is titled The Populist Moment: A Short History of the Agrarian Revolt in America). Goodwyn’s account provides powerful rebuttal to pessimism and resignation. His unsentimental narrative keeps alive the possibility of deep structural reforms in politics and government.

Democratic Promise puts people back at the center of the story—ordinary people who tried, against all odds, to act like self-directed citizens, actively participating in self-government. Goodwyn suggested that authentic democracy remains possible—not easy or assured, only possible—if people rediscover their voice and potential power.

In modern political culture, the idea of this deeper democracy has been hollowed out, obliterated. The promise endures, insofar as we have regular elections to select officeholders, but that ritual normally does very little to alter actual power relationships. And people know this.

Most Americans are reduced to the passive role of spectators, fans, groupies. Or they are persuaded not to bother with politics. An elaborate class of professional technicians has taken charge of electoral politics—campaign managers and advertisers, pollsters, fundraisers, crowd organizers. These professionals, one could say, manage the passions or passivity of voters. They shape the content of what citizens know—and shape their ignorance too.

The process of manipulating the electorate is enormously expensive, and mostly paid for by private donations. Donors naturally expect to influence the content of the messages, so campaigns are nearly always biased in favor of moneyed interests and affluent citizens. The ultimate purpose of campaigns is thus not educating citizens; it is electing or defeating politicians. The result of this narrow-form democracy is the steadily shrinking electorate. Voters who stay home on Election Day are now by far the “largest” political party.

The critical claim in Goodwyn’s analysis is that ordinary people are both capable of participating more directly in self-government and that their engagement is necessary for a genuinely functioning democracy. Otherwise, politics produces a closely held management system with control concentrated at the top. It makes distant decisions too opaque for ordinary citizens to understand or influence, much less control. This deformity roughly resembles our current conditions. Governing elites typically fault the people for their ignorance, and many discouraged citizens internalize the blame.

But Goodwyn insisted that ordinary people, though discouraged from active citizenship, have essential knowledge—knowledge they haven’t learned from books or newspapers. Their knowledge is crucial for balanced self-government. Because ordinary Americans, regardless of status or education, know things the authorities did not teach them. They frequently know things that contradict the governing experts, and they learn them before elected representatives do.

Where do people get this distinctive knowledge? From life itself, as Goodwyn explained. Of course, people are fallible and prone to error, false enthusiasm, and fears. But so are elected politicians. So are the corporate CEOs and investment bankers, including the ones who led the country over a cliff in 2008 and crashed the middle class.

The popular anger exploding in the run-up to 2016 baffled press and political leaders. They would not have been surprised if they had listened more respectfully to the broad ranks of citizens during the past three decades. Working people knew the “American dream” was falling apart. They knew because it was happening to them. They told their stories in great detail to anyone who would listen (as a young reporter I heard those stories from auto workers, steel workers, machinists, debt-burdened families, and other victims, trying to hang on and losing the struggle).

With brave exceptions, politicians in both parties turned their backs on the cries of distress. Learned economists assured political leaders that what working people saw happening in their neighborhoods wasn’t the real story. Over time, they predicted, prosperity would reach everyone and people would agree that deindustrialization was a good thing, a necessary evolution in the economy. It didn’t happen, and neither party has come clean on its failure.

I think that’s where the anger comes from. There is widespread feeling across ideological and partisan divides not only that government failed to ensure economic prosperity and security but also that both political parties denied or ignored what average working stiffs knew and were trying to tell the politicians. Many believe they were betrayed, that the politicians lied.

Modern government lost its sense of balance and credibility for many reasons, but partly because authorities distanced themselves from the common-sense and popular knowledge of ordinary Americans. This disconnect permeates government and politics, and it’s not always due to corporate greed or corruption. Sometimes, it is due to plain ignorance.

It’s true that we have not arrived at a new “populist moment”—not yet. But the political situation looks combustible, and perhaps more promising than the usual cynicism and resignation will recognize. Could citizens come out of their passivity and restart the fight for authentic self-government? Sounds fanciful, I know, but consider this: If the original Populists could organize millions to overcome their handicaps, people should be able to do the same now. After all, the Populists didn’t even have telephones, much less e-mail.

We are already deep into a stormy new era of democratizing technologies—people are getting the power to control their own communications—and inventive new channels are flowing freely from citizens themselves.

This new condition potentially destabilizes the old politics. I think it is a major factor in generating the dizziness of this election season. Among other things, it drastically reduces the cost of making political connections, of organizing across long distances and social divisions. That itself could become an insurrectionary virtue. It might even dilute the political domination of the 1 Percent, the corporations and billionaires.

I see possibilities for meaningful unrest ahead.

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IRS Shenanigans: Oops!

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The IRS scandal is just one inevitable result of a national political class that has chosen to divide and conquer to stay in power rather than serve the interests of the people. We’ve heard the attacks on the Tea Party ad nauseum by liberal Democrats in the mainstream press. And we’ve heard the same attacks against OWS from alternative media sources. My, how this all serves the interests of the crony class.

Unfortunately for this administration, their tenor of denigrating voter protests they “don’t like” has now gotten them neck deep in another serious scandal. How did this happen? This quoted excerpt explains:

…the IRS crackdown on conservative organizations was a direct and inevitable consequence of political and policy messaging by the Obama administration, and by the campaign-finance reformers who share these views. Congressional Democrats are also to blame, since many of them have publicly—as with Max Baucus, chairman of the Senate Finance Committee, which oversees the IRS—or privately urged the IRS to go after conservative tax-exempt organizations.

It’s hard to feel sorry for politicians and activists who attack the peoples’ right to assemble and protest the government and the politicians that serve them. Think about that next time you hear a disparaging remark about the Tea Party or Occupy Wall Street. We’ve got a problem with the dysfunction of politics and government in this country and a large part of the problem is how we are (not) dealing with it.

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Last week an unusual breeze of fairness blew through the capital, often from unlikely sources. Consider these remarks from Senate Majority Leader Harry Reid of Nevada:

“There are these shadowy political groups masquerading as social welfare organizations in order to solicit anonymous donations from we don’t know who — big corporations and also wealthy people. That needs to stop. We do not know exactly how much money was spent in the last election by these groups, and I acknowledge most of the money was spent on the right wing, but there was plenty on the left wing.”

Here is the scary thing: USA Today reports that the IRS approved nonprofit status for liberal groups at the same time it was denying that status for conservative groups. Rhetoricians at the University of Pittsburgh and Jesus College, Cambridge, have developed a theory of “keywords,” and it doesn’t take a Pitt or Cambridge degree to ascertain the political leanings of a group with a name such as Missourians Organizing for Reform and Empowerment, which received tax-exempt status at the time when Tea Party groups employing words such as “patriot” did not.

None of this is good for the Obama administration, which otherwise would have had something big to crow about last week. Revised nonpartisan Congressional Budget Office figures put the federal budget deficit at $642 billion. That marks a $203 billion improvement from earlier forecasts — and eerily, $203 billion was the size of the 1981 deficit, expressed in today’s dollars, that propelled Ronald Reagan into office.

But that wasn’t the predominant discussion of the week. Instead, the talk was of how the administration breached some of the most sacred lines in American life. First Amendment purists are right that attacking press prerogatives is an attack on American values. And maybe conservatives are right about taxes, because the type of flat tax they espouse could help take the IRS out of politics and make all of these exemptions meaningless.

This graphic is instructive too:
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(Disclaimer: Hope this doesn’t get me audited!)

A Look at the Global One Percent

We need to parse out this data and argument offered by Meltzer to understand what is really going on. Meltzer is right to criticize the idea that tax policies are causing inequality and that domestic tax and redistributionist policies can best mitigate it. But he is wrong to say that a rising tide will lift all boats equally, and that is the problem.

The dynamics of a globalized market economy show capital returns outpacing labor returns because capital is mobile and labor is relatively fixed. Human capital marked by skills, fame, and easy access to financial capital have aggravated the winner-take-all economy where incomes and accumulated wealth follow a power law, as evidenced by the superstar economy and growing inequality since 1980, and shown in the graph below.

Of these factors, financial capital is most amenable to democratization. Capital concentrates, and the rising inequality we see in global markets is caused by the concentration of success as measured by financial capital. The USA and UK show marked upturns in inequality due to the rapid growth of the finance industries in these two countries. We can also note this phenomenon by comparing the two cases of Sweden, including and excluding capital gains.

Financial markets behave differently than product markets, as dually noted and analyzed by Hyman Minsky. Our policies will have to address this uniqueness of capital in a global capitalist society in order for the system to be politically and economically stable and sustainable. In analyzing a capitalist economy, one must focus on the risk and returns of CAPITAL and how it gets distributed through free market exchange. Our tax policies should compensate for this simple fact, though our political leaders across the globe are mostly ignoring it.

From the WSJ:

The remarkable similarity in income distribution across countries over the past century means domestic policy has less effect than many believe on who gets what.

By ALLAN H. MELTZER

While the Occupy Wall Street movement may be waning, the perception of growing income inequality in America is not. For those on the left, the widening gap between the top 1% of earners and the remaining 99% is proof that American capitalism is unjust and should be traded in for an economic model more closely resembling the social democracies of Europe.

But an examination of changes in income distribution over nearly 100 years, not just in the United States but elsewhere in the developed world, does not bear this out. In a 2006 study titled “The Evolution of Top Incomes in an Egalitarian Society,” Swedish economists Jesper Roine and Daniel Waldenström compared the income share of the top 1% of earners in seven countries from the early 1900s to 2004. Those countries—the U.S., Sweden, France, Australia, Britain, Canada and the Netherlands—all practice some type of democratic capitalism but also a fair amount of redistribution.

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As the nearby chart from the Roine and Waldenström study shows, the share of income for the top 1% in these seven countries generally follows the same trend line. That means domestic policy can’t be the principal reason for the current spread between high earners and others. Since the 1980s, that spread has increased in nearly all seven countries. The U.S. and Sweden, countries with very different systems of redistribution, along with the U.K. and Canada show the largest increase in the share of income for the top 1%.

The main reasons for these increases are not hard to find. Adding a few hundred million Chinese and Indians to the world’s productive labor force after 1980 slowed the rise in income for workers all over the developed world. That’s the most important factor at work. The top 1% gain relatively because they are less affected by the hordes of newly productive workers.

But the top 1% have another advantage. Many of them have unique skills that are difficult to replicate. Our top earners include entrepreneurs, rock stars, professional athletes, surgeons and lawyers. Also included are the managers of large international corporations and, yes, bankers and financiers. (Interestingly, the Occupy movement seldom criticizes athletes or rock stars.)

The most dramatic change shown in the chart is the decline in the top 1% of Swedish earners’ share of total income to between 5%-10% in the 1960s from well over 25% in 1903. The Swedish authors explain that drop as mainly due to the decline in real interest rates that lowered incomes of rentiers who depended on interest and dividends. Capitalist development, not income redistribution, brought that change.

Income-redistribution programs that became widespread in the 1960s and 1970s had a much smaller influence than market forces. Between 1960 and 1980, the share going to the top 1% declined, but the decline is modest. The share of the top percentile had been reduced everywhere by 1960. Massive redistributive policies in Sweden did more than elsewhere to lower the top earners’ share of total income. Still, the difference in 1980 between Sweden and the U.S. is only about four percentage points. As the chart shows, the top earners in both countries began to increase their share of income in 1980.

The big error made by those on the left is to believe that redistribution permits the 99% or 90% to gain at the expense of top earners. In much current political discussion, this is taken as an unchallenged truth. It should not be. The lasting opportunity for the poor is better jobs produced by investments, many of which are financed by those who earn high incomes. It makes little sense to applaud the contribution to all of us made by the late Steve Jobs while favoring policies that reduce incentives for innovators and investors.

Our system is democratic capitalism. In every national election, the public expresses its preference for taxation and redistribution. It is a democratic choice, not a plot controlled by one’s most despised interest group. The much-maligned Congress is unable to pass a budget because it is elected by people who have conflicting ideas about taxes and redistribution. President Obama wants higher tax rates to pay for more redistribution now. The Republicans, recalling Ronald Reagan and Margaret Thatcher and much of the history of democratic capitalist countries, want lower tax rates and less regulation to bring higher growth and to help pay for some of the future health care and pensions promised to an aging population.

Regardless of one’s economic philosophy, the public deserves an accurate presentation of the reasons for the change in income distribution. The change is occurring in all the developed countries. The chart shows that policies that redistribute wealth and income have at most a modest effect on income shares. As President John F. Kennedy often said, the better way is “a rising tide that lifts all boats.”

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