How can we have a legitimate democratic political system without a democratized economy

January 22, 2009 · Posted in Finance, Government, Politics, Social Change, Social Issues, Society, Thoughts on the economy 
Too Big for the Average Joe

Too Big for the Average Joe

Recently an acquaintance of mine, sent me an email with several questions in it.  One of these questions I found more intriguing then the others, and it goes as follows.

How can we have a legitimate democratic political system without a democratized economy? In other words, when wealth and power are concentrated in the hands of a few at the expense of the many, what’s to stop the rich and powerful from buying up, owning, and operating the American government, and running it to suit their own self serving ends?

The answer as unpleasant as it may be, is NOTHING.  The other day I was listening to David Cay Johnston a New York Times best selling author and Pulitzer Prize winning journalist and economist talk about the fiscal imbalance in America and how the poor are getting poorer and the rich are getting richer.  Although this is not shocking in and of itself, what is shocking is some of the subject matter he addressed.  Here is a link to his article on Mother Jones I think everyone should read – http://www.mojones.com/news/feature/2009/01/fiscal-therapy.html

David Cay Johnston mentions in this article that the top 1,000 wage earners in America make one percent of the total salaries paid.  In other words, out of the 200 million or so employed people in the United States 1,000 of them take 1 penny for every dollar earned by the rest.  This is amazing, truly amazing.  Furthermore, the lower 90% of wage earners, or roughly 180 million people earn less money on an equivalency basis then they did in 1973.  Yep that is correct, you are truly worse off than your parents, if you do the same work.

It really does make since if you think about it.  The poor rarely vote, the poor never lobby and the poor never become representatives of the people, so who cares about them.  It costs money to be in office, it costs money to run for office, it costs money to get politicians to care about you, so if you do not have money what good are you?

There are several key points in the Johnston article that deserve their own post, so I will stop this one now, and address the others later, but keep the question in mind, and if you come up with a different answer, please let us know.

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Comments

One Response to “How can we have a legitimate democratic political system without a democratized economy”

  1. we on January 23rd, 2009 6:45 pm

    That is an interesting question. Indeed, I think below the surface there are several inter-related issues which seem frustrating – especially at this time – to working people (and more so to the unemployed).

    It so happens that one of my (many) nerdy pass-times is to study economic history.

    A casual study of economic history will show that there has always been a fundamental tension between the providers of financial capital (whose money is required to actually start a business and provide any jobs at all) and the providers of human capital (workers), whose efforts are required to actually make the company make anything – including the profits used to reward the providers of financial capital.

    Within this dynamic is supposed to be management which uses the financial capital and manages the human capital to provide (in theory) job security and benefits for employees and profits for investors.

    I think a compelling case can be made than many managements have failed both sets of stakeholders (investors and workers). However, that discussion is not the purpose of this comment.

    An examination of economic history of several decades will show that there are periods where the system is tilted in favor of the providers of financial capital and periods where the system is tilted in favor of the providers of human capital.

    The interesting thing about the human condition is that there is an “optimal” balance between the two where both should be satisfied. In practice this optimal balance is only ever achieved for a fleeting period of time while the momentum is shifting from one extreme to the other (for instance from a system where you have many protections in place for workers and strong union’s to one where union’s have relatively less influence and employers enjoy an “at will” system). I call this basic view of the world my “Pendelum Theory”. Think of a pendelum on a grandfather clock swinging back and forth with one end representing a system where things unsustainably favor employees and one end where things unsustainably favor employers/investors.

    We were last at the end favoring employees in the 70’s. Reagan and the 80’s saw things move strongly in favor of employers and investors. Excesses of recent years have, in my judgement, started the pendulum moving back the otherway. It will probably continue to do so for 20-30 years. These are long generational cycles because each generation knows what is wrong with the present system, they can not appreciate what is wrong with the other system.

    This is a reflection of the proverb “he who forgets history is destained to repeat it”. The 20 years up to this point had a lot in common with the U.S. economy in the early 1900’s and 1920’s. The next period will have much in common with the “New Deal” era.

    So this should make your emailer feel better. The winds have changed for a while. Eventually this will go to an extreme yet again and the pendulum will reverse again and the game starts all over.

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