Category Archives: Random Blogging

Democracy, Inequality and Voice

Most of us have heard the old adage “politics is war without the guns.” It’s shorthand for a basic premise of democratic theory: when people have an opportunity to express their preferences and argue for their point of view in a fair fight, they are less likely to shoot each other and far more likely to abide by the results, albeit grudgingly, if they lose the fight.

There’s a substantial amount of history supporting that thesis. What we sometimes forget, however, is that the fight must be fair. Not only that, participants must view it as fair. At the end of a public debate, if the combatants have been able to express their positions, articulate their concerns–if they’ve had what sociologists sometimes refer to as voice–they generally can live with adverse results.

Lawyers often see this same psychology; clients who would be well-advised to settle a case often insist on having their “day in court,” even when that decision entails considerable risk, because they want the opportunity to make their case in a public forum.

Humans want to be heard. We want our points of view acknowledged. When we feel our arguments have been dismissed without proper consideration–when we feel “dissed”– we get belligerent.

One of the reasons that inequality is so corrosive to democratic systems is that people without money are almost always people without voice. A healthy democratic system doesn’t require a population where everyone has comparable resources, but it does require a population where everyone who wants to participate–who wants to be heard–has sufficient resources to do so.

Anyone who has been part of a legislative body–as an elected official, a paid lobbyist or a citizen activist–will confirm that the voices of poor people are rarely if ever heard in the corridors of power. When policymakers move to cut food stamps or drug test welfare recipients, they rarely hear testimony from people who will actually be affected by those actions. They hear disproportionately from business and taxpayer groups. With the exception of social welfare nonprofits (most of which have their own resource issues), no one is there to lobby for the poorest American citizens.

And the poor sure aren’t contributing to political campaigns.

When poor people have virtually no voice, even in the decisions that most directly affect them, that hurts democracies in two ways.

When legislators make decisions based on partial information, even the best-intentioned among them will opt for policies that have by definition been inadequately vetted. They will pass laws with unintended (and often unfortunate) consequences.

Worse, the people who had no voice–the people who are affected by rules they had no part in creating and no opportunity to debate–tend to be the people with the most legitimate grievances and the fewest outlets for expressing those grievances. When a society includes a large number of people who have effectively been disenfranchised–people who, thanks to their poverty, have little to lose– history tells us they will eventually take to the streets.

That’s not only bad for democracy and rational policymaking–it’s bad for business. Civil unrest is certainly not in the best interests of the privileged and well-to-do, who would be better served by sharing some reasonable measure of their power and wealth.

There’s another old adage that comes to mind: pigs get fed. Hogs get slaughtered.

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Tea Leaves and Prognostications

There are..what? Seventeen Republicans contending for the party’s nomination? How does one tell which one –if any– has “legs”?

Predicting political outcomes is perilous. I’ve lived long enough–and seen enough “pundit predictions”–to take all of them with a whole shaker of salt. With the possible exception of Nate Silver, political “analysis” is mostly the analyst’s wishful thinking.

That doesn’t mean they can’t be fun to read. Especially the ones that tell you things you want to believe.

One such “analysis,” I came across was written not long after the 2014 midterms–midterms that Republicans won big– by a GOP columnist for the Houston Chronicle, Chris Ladd. Rather than celebrating those victories, Ladd declared the week of the Midterm Elections “a dark week for Republicans.” 

And why was what looked like a resounding victory “a dark week”?

The Midterms of 2014 demonstrate the continuation of a 20 year old trend. Republicans are disappearing from the competitive landscape at the national level where the population is the largest utilizing a declining electoral base of aging, white, and rural voters. As a result no GOP candidate on the horizon has a chance at the White House in 2016 and the chance of holding the Senate beyond 2016 is vanishingly small.

Ladd identified a “blue wall” on the electoral college map, and noted that in 2014, GOP support had gotten deeper, but no wider.

The Blue Wall is a block of states that no Republican Presidential candidate can realistically hope to win. On Election Day that block added New Hampshire to its number and Virginia is shifting At the outset of any Presidential campaign, a minimally effective Democratic candidate can expect to win 257 electoral votes out of the 270 needed to win. If Virginia joins New Hampshire that number will be 270 out of 270.

To win, a GOP  candidate has to win all nine “tossup” state and one solidly Blue state. Thus, in the next, and into the foreseeable future, Presidential elections will be decided in the Democratic Primary. What are the chances that a Republican candidate capable of appealing to the increasingly right wing GOP will appeal to enough Democrats to win in tossup and Blue states?

Ladd makes a number of other points (my favorite: “Voter suppression is working remarkably well, but that won’t last.” Glad to see someone willing to call it what it is..), and the whole piece is well worth reading, especially if you are a Democrat looking for a feel-good few minutes.

The problem with taking this–or any– analysis at face value is that things change. Predictions are particularly hazardous in state-level races: Favored candidates do stupid things (RFRA, God intended that rape, etc.), or get caught playing footsie in public restrooms. A hurricane keeps voters away from the polls. Even at the national level, parties have been known to nominate people who are simply unelectable– unsalable even to the party base.

National trends can also change. At some point (admittedly, probably not 2016), the GOP is going to realize that a strategy that depends on playing to the anger and fear of old white guys isn’t viable, and the party will revert to its more rational roots.

The only political prediction that is usually true is: the party that gets more voters to the polls, wins.

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Scott Walker Wants to Do for the US What He Did for (to?) Wisconsin

Well well…to the surprise of absolutely no one, Wisconsin Governor Scott Walker (aka Koch Brothers’ favorite errand boy) has squeezed into the GOP’s presidential campaign clown car.

Walker’s positions were summarized by former Labor Secretary Robert Reich:

1. On immigration, Walker says he’s changed his mind on a path to legal status for undocumented immigrants and no longer supports the idea. He’s expressed skepticism toward legal immigration as well.

2. On gay marriage, Walker is calling for a constitutional amendment allowing states to ban it.

3. On abortion rights, Walker is pushing for a 20-week ban in Wisconsin with no exceptions for rape or incest. (In 2014 he told voters his previous legislation left “the final decision to a woman and her doctor.”)

4. On “gun rights,” Walker is against any attempt to ban assault weapons or limit the ability of anyone to own a gun.

5. On labor unions, he is the GOP’s most virulent anti-labor candidate, having taken on teachers and other public employees and signing a “right-to-work” law. (He says his battles with labor leaders have prepared him to take on the Islamic State.)

6. He favors tax cuts over deficit reduction and public education. His most recent Wisconsin budget cuts taxes, requires steep cuts to education, and deepens the state deficit.

7. He has tried to weaken Wisconsin’s “open records” law by blocking press requests that have yielded some embarrassing finds in the past.

Reich omits Walker’s persistent attacks on higher education– his sneering dismissal of scholarly endeavors and his ongoing effort to make the University of Wisconsin focus upon  job-training to the exclusion of the life of the mind. (He also fails to mention the criminal investigations that have been triggered by charges of serious wrongdoing.)

So how has Wisconsin fared under the administration of this paragon of the far Right?

The Pew Charitable Trust recently reported that Wisconsin has had the largest decline of any state in the percentage of families considered “middle class,” or those earning between 67 and 200 percent of their state’s median income.

In 2000, 54.6 percent of Wisconsin families fell into the middle class category but that has fallen to 48.9 percent in 2013, according to U.S. Census figures compiled by Pew.

All other states showed some decline but none as great as Wisconsin’s 5.7 percent figure.

Wisconsin ranks dead last among the 50 states in terms of a shrinking middle class, with real median household incomes there falling 14.7 percent since 2000.

I assume he’ll run on his record….

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The Bottom Line and the Common Good

I’ve done my share of business-bashing on this blog–pointing out corporate overreach and bad behavior. But as Frank Bruni recently reminded us in a timely and excellent column for the New York Times, there’s a sunny side to greed.

Self-interest has contributed to sanity on a wide number of issues. As Bruni notes,

They’ve been great on the issue of the Confederate flag. Almost immediately after the fatal shooting of nine black churchgoers in Charleston, S.C., several prominent corporate leaders, including the heads of Walmart and Sears, took steps to retire the banner as a public symbol of the South; others made impassioned calls for that.

And when Nikki Haley, the South Carolina governor, said that the Confederate flag at the State House should come down, she did so knowing that Boeing and BMW, two of the state’s major employers, had her back. In fact the state’s chamber of commerce had urged her and other politicians to see the light.

Eli Lilly, American Airlines, Intel and other corporations were crucial to the defeat or amendment of proposed “religious freedom” laws in Indiana, Arkansas and Arizona over the last year and a half. Their leaders weighed in against the measures, which licensed anti-gay discrimination, and put a special kind of pressure on politicians, who had to worry about losing investment and jobs if companies with operations in their states didn’t like what the government was doing.

Bruni quotes a business consultant for the observation that successful businesses must be more responsive to the general public than politicians.

If you’re a politician and all you care about is staying in office, you’re worried about a small group of voters in your district who vote in the primary,” he told me, referring to members of the House of Representatives. “If you’re a corporation, you need to be much more in sync with public opinion, because you’re appealing to people across the spectrum.”

Does this sensitivity to the population outweigh the damage that some corporations do to the environment? Does it make up for others’ exploitation of workers? Of course not, but as Bruni notes, “it does force you to admit that corporations aren’t always the bad guys. Sometimes the bottom line matches the common good.”

And it should force those of us who think and write about such matters to make important distinctions. I get angry when people make sweeping generalizations based on race, religion or sexual orientation, because there is no monolithic group. Every human category includes assholes and saints and everything in-between.

That’s equally true of corporations and business enterprises.

The market provides many incentives for good behavior. As I noted yesterday, many existing public policies reward less salutary behaviors, and those need to change.

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Changing Perverse Incentives

The Brookings Institution has released a report that I can only describe as “compelling.” Titled “More Builders and Fewer Traders,” it focuses like a laser on the perverse policy incentives that have contributed to dramatic levels of inequality.

In our new paper “More builders and fewer traders: a growth strategy for the American economy” we identify a handful of obscure but important shifts—in laws, regulations, and standard practices—which, taken together, have changed the incentive structure of leaders in American corporations. This set of incentives has led to short term behavior on the part of corporate leadership. These incentives are so powerful that once they became pervasive in the private sector, they began to have broad effects. No one set out to create this myopic system, which arose piecemeal over a period of decades. But taken together, these perverse new micro-incentives have created a macroeconomic problem.

The report zeros in on four trends that have contributed to what the authors call “short-termism.”  One consequence of these trends is that–while cash distributed to shareholders as a share of cash flow has surged– the share devoted to capital investment has fallen to a record low.

I don’t disagree with the authors’ focus on these trends, the problems they pose for the economy, or their contribution to inequality.  I do wonder, however, how much of the lack of investment in the future of American industry can be traced back to the way we  finance corporations and the separation of ownership from management.

“Ownership” can mean many things, but it is difficult to square our common-sense understanding of ownership with the purchase of a few hundred shares of stock in a major corporation. Such “ownership” carries with it no meaningful control, no right to make decisions, and “risk” only to the extent that there may be a decrease in the value of one’s stock.

The reality is that American corporations borrow money two ways–through the sale of bonds, which are more secure but which carry only a stated rate of return, and the sale of stock, the proceeds of which represent a gamble on the future of the enterprise: more risk, but the chance of a superior “reward.” Let’s be honest: Neither the bondholder nor the small or medium-sized shareholder is an owner in any meaningful sense of the word.

Meanwhile, the people managing these companies are frequently not “owners,” either. They’re hired hands, often with little investment in the business. Their compensation and continued employment depend significantly upon their ability to keep short-term stock prices high, thus they have every incentive to keep workers’ wages down and their own paychecks as high as possible.

None of this fosters the capitalist virtue of pride in the product, or good corporate citizenship (except as a marketing tool), or decision-making that is in the long-term best interests of the enterprise.

When a company is truly owned by an individual or small group, when those owners see their own prospects intimately bound up with the long-term success of the venture, corporate behavior changes. Such owners are certainly focused upon earnings and the bottom line–but they understand what innovations and behaviors will be needed to protect that bottom line into the future. Concern for long-term fiscal health provides incentives to care about their reputation, their workforce, the quality of their products and the health of the communities in which they operate.

When public policies incentivize short-term gains over long-term decision-making, the focus turns from producing goods and services to playing financial games–with broad negative consequences for job creation, wages, economic stability–and ultimately, American competitiveness.

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