You are now entering the Jewish Currents archive.

Building the Myth: Capitalism=Democracy, Part 2

George Salamon
June 13, 2017

by George Salamon

To read part 1, click here.

“Republican politicians have always been in our pocket. Now we have most of the Democrats.” — Jeff Faux, in “Class War: The View from the Board Room,” Economic Policy Institute, January 15, 2014.

THE BOARD ROOM exultation that Jeff Faux reports is not hyperbole. Politics in America today is mostly performance art, vulgar fluff posing as historical drama. Big Business and its Wall Street paymaster have neutered our once vibrant and contentious political beast. Economist Michael Hudson laments the consequences: “What has disappeared is the past century’s idea of politics as a struggle between labor and capital, democracy and oligarchy.”

The politics of yesteryear disappeared because a capitalist oligarchy acquired our political system. It merged the institutions and processes, the people and their roles in public life, with the private sector pursuits and attitudes of its own assets. This acquisition and merger transformed American politics into the junior partner of American business.

That transformation demolished the balance of power that since the New Deal had served as the checks and balances of governance: the shared power of the State, Business and Labor. Business now reigns as captain of our ship of state.

The highest office in our country, the presidency, is in the hands of a businessman who ran and won the race as an anti-politician. He tapped into widespread contempt for politics and the inability or unwillingness of many of our citizens to participate in politics as a citizens’ forum. He continues to reshape our government, as our presidents since Ronald Reagan have done, into that of a market democracy with voters as consumers of its politics, not as its makers.

The will and the welfare of the people are supposed to be represented by the politicians we choose to serve both. For decades now, they have ignored the will and neglected the welfare. Look at what the majority of Americans wanted to happen in polls conducted in 2006:
⁃ 55 percent thought the war in Iraq was a mistake and thought we should get out
⁃ 65 percent wanted a single-payer health care system
⁃ 66 percent asked that the deficit be reduced not by cutting domestic expenditure but by reducing Pentagon spending or by raising taxes
⁃ 77 percent expected the government to do “whatever it takes” to protect the environment

We know, a decade later, what happened instead. But how did we get to the current rule by government for the interests of the wealthy few and corporate and financial powerhouses? When and why did we abandon our much-cited “government of, by and for the people?” Especially the “for.”

IT ALL BEGAN during a period when politics and business made the people quite happy, the “Historical Exception Period” from 1945 to 1973. Our democracy had just helped defeat German fascism and Japanese imperialism, and our industry had played a critical role in that effort. Now it partnered with our democratic government in holding off a new enemy while providing an extraordinary number of citizens with unparalleled opportunity to become prosperous.

What other society could claim, as America did during the 1950s, that over one million families joined the middle class annually? In 1956 it was predicted that soon half of the people in the United States would be so classed, which would be unprecedented in history. The marriage of democracy and business seemed made in heaven, and the happy days they created and shared together seemed never to end, notwithstanding the challenges by movements for a counter-culture, for civil rights for people of color, and for equal rights for women.

Starting in 1973, everything changed. That’s when Big Business’s long march toward control of government, and the decimated role of labor and the toothlessness of politics, began.

First, the country and Big Business had to digest the events of the 1960s. The ideal of the student movement, articulated by SDS’s 1962 Port Huron statement, was to turn America into a “participatory democracy,” a grassroots democracy operating quite differently from the impersonal bureaucracy in a giant state that many of the Old Left endorsed. This ethical and political dream of the New Left was killed by its own leadership in the late 1960s and was never understood by America’s working and middle classes, who were appalled by the violence and turmoil of those years. (Those classes, once called “the bone and sinew of the country” by Andrew Jackson, were a blank to the liberal establishment in those years -- and remained so in the 2016 election.)

Stability is what counted to those “racist-redneck-ethnic-Irish-Italian-Polish Hunkies and yahoos.” Stability on the job, stability in the family, stability in the neighborhood: That’s what the 1950s gave them and the movements of the 1960s threatened. So they voted for Nixon in 1968, and politics has not been the same since they deserted the party that had acted in their economic and social interests since the New Deal and drifted to the one that never gave much of a damn about them.

BUSINESS saw itself stymied and frustrated as the 1960s failed to fulfill the expectations raised by the successes of the previous decade. Corporations had hoped to grow bigger and raise profitability. But it was not the protests and demonstrations that stymied them. They turned the quests for liberation and equality into a cornucopia of consumer culture. But the federal government, led by Lyndon Johnson, brought back regulatory roadblocks that the corporations could not yet smash or evade.

LBJ started the regulatory upsurge rolling with the establishment of the EEOC (Equal Employment Opportunities Commission) in 1964. Some regulations applied to specific industries, such as banking, civil aviation and telecommunications. Others were pan-industrial. When corporations followed capitalism’s appetite for “big is better, ” Senate committees investigated if the newly formed organizations, known as conglomerates, violated anti-trust laws.

The conglomerate boom, which welded a hodgepodge of businesses into single entities, lasted throughout the decade. In 1967, analysts were recording 150 mergers per month, 70 percent of them by mega-corporations. They formed conglomerates, hobbled together without discernible synergy among the products and services, such as under the LTV banner: golf balls, rental cars, electronics, missiles and packaged meats. The formation of such giant corporations, although most disappeared and are not remembered today, signaled to economist J.K. Galbraith the coming of a “New Industrial State.”

Some saw in their brief appearance a danger to the democratic State. Senator Estes Kefauver feared, as he watched the conglomerate explosion, the likelihood of “the people losing power to direct their own economic welfare. When they lose their economic welfare, they also lose the means to direct their political future” (Congressional Record, 96:16452).

Big business learned from the conglomerate bubble what was needed to make come true the very thing Kefauver feared: that it was not size that guaranteed success, but the financial manipulation of tax and accounting laws, and that it needed to find ways and means to control politics so that the regulatory surge could be halted and reversed. In recognizing this, big business was on its way to ending “industrial capitalism” and moving on to “managerial capitalism” and, finally, to the “finance capitalism” of today.

It was America’s business leaders, not the often-invoked “invisible hand” of the market, who made the decisions that put their corporations on this path.

Capitalism does not possess inherent ethical values. It can be used to create good or evil; it can thrive under authoritarian as well as under democratic governments. Capitalism did well in Hitler’s Germany, Mussolini’s Italy, Franco’s Spain, and Pinochet’s Chile. And it did well in the democratic United States from 1910 to 1973.

It also spread the wealth it created to many. For example, in the twenty-eight years between 1945 and 1973, the average family’s purchasing power doubled and the percentage of Americans in poverty dropped from one third to one seventh. But after 1973, average family purchasing power did not grow, poverty rates edged up, and income inequality widened.

The post-war “moment” was brought to an end by the OPEC oil embargo, by intensifying foreign competition from industries rebuilt after World War II’s devastation, and by rising inflation at home. Our huge industrial complex could not cope constructively. Instead, it started dismantling itself: allowing factories and equipment to deteriorate, using others as cash cows through resale, shutting down plants or parts of them to contractors or jobbers. In the 1970s, between 32 million and 38 million jobs were lost to this kind of disinvestment.

The 1970s therefore saw the passing of the relics of America’s 19th century industrial empire. The companies that survived needed a new approach to thrive and profit. Their workers were told to join the economy under the new “managerial capitalism” and the service and financial industries it began to build. Here’s a striking illustration of what this transformation came to mean: Today there are more Americans dealing cards in casinos than running lathes in factories, and three times more employed as security guards than as machinists.

Companies made themselves lean and mean. In charge of the transformation was the business-school-educated manager, the CEO from Wharton School or the Harvard Business School. Top executives rarely came up through the company hierarchy, embodying the legendary climb from mail room to board room, but hit the ground running with a grand strategy and matrices or spreadsheets for corporate profitability. Did the new approach work? Not really. Writing in 1985, Robert Reich noted that since 1970 “America’s 500 largest industrial corporations together have failed to generate a single new job.” Yet businessmen were looked upon as the potential saviors of our economy and the struggling middle-and-working-classes’ places in it.

LITTLE HAS CHANGED since. In 2016, the same blue-and-white-collar workers cast their vote for real estate tycoon Trump to return America to the economic security and prosperity of the 1950s. A bad bet, but let us understand why it was made.

Politicians from both parties, and the professionals serving them, no longer saw the lunch-pail factory worker, or the civilian Rosie the Riveter, as the backbone for the new economy. He or she, and whole communities they worked and lived in, were abandoned, from Appalachia to the Rust Belt. The assembly-line guy depicted as the amiable Chester Riley in the TV sitcom The Life of Riley from 1953 to 1958 had become a bigot and a racist by the time Archie Bunker and his lunch pail made it to the loading platform on All in the Family between 1971 and 1979. By 2016, he was one of Hillary Clinton’s “deplorables.”

The country was divided and mocked as the helpless giant of the West, and the politicians had led us there via Watergate, Vietnam, the Iran hostage crisis, and a lousy economy — and they were locked into a cycle of verbal warfare as to who was to blame. The savior could not come from lying Nixon or weak Carter politician types, but from businessmen who didn’t talk so much but acted decisively. Ronald Reagan, an actor who received his political education as spokesman for General Electric, became the first president to focus a successful campaign for running the government on an anti-government platform. His victory was a kick in the teeth of democratic politics. But it ushered in an era in which politics became the Ringling Brothers of big business. Big business bought it fair if not square.

Under its control, described as “influence” by the media it owns, business has reshaped politics into a marketing tool and its political processes, such as elections, into circus acts. The audience chooses the winning and losing acts as they choose the best commercials on the Super Bowl, by the volume of their approval, cast as ballots. Elections, however, are not democracy, just an instrument of it. Politics is a business today, the public sector asset of business to the private sector’s big brother asset. And when things go bad, big brother blames little brother, the senior vice president blames the vice president who blames the director . . .

Americans, polls tell us, love democracy but hate politics. But if you love democracy, you must love, or at least accept, the nature of democratic politics. It’s the same with peace and war. Peace lacks organization, war is organized, as Brecht observed. That, more often than not, applies to the disorganized but open politics in a democracy compared to the tightly controlled politics in an authoritarian state.

It came to this, in part, because of the people’s despair over and disillusionment with politics in America. And it came about, also, because liberal and conservative politicians alike cast aside ideology and followed the advice of Robert Ringer’s 1977 bestseller Looking Out for Number One and the lessons of books like Million Dollar Habits and Winning through Intimidation. What was good for business success was good for personal development as well. The advice and mood of the lean-and-mean 1970s controlled professional life, private life and public attitudes, and continues to control them today. As one comment on Amazon Books reminded us: “Why after more than three decades is Winning Through Intimidation still one of the most talked about personal development books of all time?” Because, after more than three decades, we are still rejecting the 1960s.

Those left behind, those who could not look out for themselves well enough and became the have-nots of today, stopped paying attention to politics. “The chances of voting increase with income level,” the Bureau of the U.S. Census told us in 1991. They had expected little, but got even less. When they woke up, after more than three decades of abandonment and neglect, they were given a choice for their leader between a fake right-wing populist and money-worshiping lout and a triangulating betrayer of her party’s past agenda for the fraternity and equality parts of the democratic ideal.

BUSINESS IN AMERICA should thrive while providing decent jobs, living wages, and feasible lives for many. But democracy is not its business. Democracy is the work of the people and those they choose to represent their interests in the functions of democratic governance. Business has no roots in democracy. Business, at its best, is efficient and profitable and does good. Democracy, on the other hand, is messy, even chaotic, and only occasionally efficient.

When the economy of the 1970s fell, business began a long campaign to return to its past successes. It bought politics so politics could not become a roadblock. Myth-making about capitalism played a substantial role in the support business received. That is understandable: Business has done well in much of the past two decades, while the people, except for a small percentage, has not. American capitalism went off the rails with the capitalism=democracy train that the people thought they had boarded after World War II.

What can be done to effect a revolution in our political behavior by engaging the millions who have experienced buyer’s regret in almost forty years of market democracy? One hint came from the cable guy a couple of years ago. While he was doing the installing, I asked him where he got his news. “Fox News,” he answered. “Why,” I asked, “would a blue-collar guy like you watch Fox and not a progressive network like MSNBC?”

“On Fox,” he replied, “in case I need a new job, I can find out what the rich people are thinking. What can the progressives offer me?”