Democracy on the Brink

Over the past three decades, America’s capitalistic democracy has evolved into a flawed socio-economic system that is destined to fall off the edge of the planet. Democracy’s affliction is the result of the buying and controlling of America by a cadre of elite capitalists. From coast-to-coast, they’re everywhere in plain sight for all to see, e.g. they were on full display for the Wisconsin recall vote. Unfortunately, the outcome of crony capitalism buying public office and political influence, as well as dictating national policy, has undermined 200 years of democracy.

One of the most extravagant attempts of exploitation of the democratic electoral process was the 2010 race for the governorship of California between Meg Whitman (formerly a consultant to Bain & Company and currently national finance co-chair of the Romney campaign and mentioned as a potential U.S. Treasury Secretary), a candidate who did not vote for 28 years, versus former governor Jerry Brown. But, wait a moment! Whitman did not participate in the political process for nearly three decades, and suddenly, she was the Republican candidate for the highest elected state office in the land. Well, the truth is: Her money ‘campaigned for the governorship’. She is the personification of crony capitalism buying control of democracy.

Ironically, Whitman’s campaign served to enlighten the general public of crony capitalism gone berserk! She performed a civic duty by demonstrating unrelenting impertinence as well as a disregard for the true spirit of electoral democracy, and the public owes her a depth of gratitude for exposing the unvarnished dark and shallow philistine tendencies behind her elite comrades, attempting to “privatize politics” via the machinations of free markets where the highest bidder wins!

Meg set all-time spending records in her failed attempt to buy the California governorship; however, she had no political credentials whatsoever… zero… but she did have a big bank account, over $1 billion, and nowadays that’s all that is required to qualify for political office. Never before in history did a candidate spend over $100 million for a statewide or municipal office, other than Mayor Bloomberg (NY) in 2009. Meg’s spending obliterated Bloomberg’s previous record of $108 million by spending $178.5 million, including $144 million out of her own pocket. This exorbitant undertaking by a rookie political operative is demonstrative of how ‘covetous mindsets’ superficially value money more so than years, and years, of hard work in the political trenches, rolling up one’s shirtsleeves and paying one’s dues, like Jerry Brown. She commoditized politics by trying to purchase the office outright like a transaction on the stock market, but the public saw thru this façade. In the end, she made a spectacle of herself by wallowing, and suffocating, in her own money, begging the question: Will Mitt Romney’s opulent forces fall into the same trap?

Meg’s aborted appropriation of a major political office highlights one aspect of how crony capitalism attempts to highjack control of political affaires. In a concession speech at a glum gathering in Universal City, Meg drew boos from supporters when she admitted, “We’ve come up a little short.”  Without a doubt the boo-heads were spontaneously bemoaning the failure of her money to buy enough votes.

The mere fact that any candidate would spend over $100 million to win a state office is powerful evidence that the principles of democracy have rotted-to-the-core. This debases public office; it is like buying ’politics’ on the New York Stock Exchange, symbol- LUCRE. This type of behavior is characteristic of megalomaniacal narcissists at work. In the end, people voted against her rather than for her!

As of today, crony capitalism’s tendencies have become so deadly poisonous as to threaten the survival of democracy and former stalwarts of the Republican establishment are coming out of the closet; they are shocked, e.g., David Stockman, former budget director for President Reagan, in a 2012 interview with Bill Moyers said, “…we have neither capitalism nor democracy. We have crony capitalism.” Democracy is “lost” according to Stockman’s new book, The Great Deformation, as large sectors of American enterprise have channeled productive resources into pure speculation, utilizing near zero interest rates to arbitrage markets, exploiting enormous leverage, and if things go wrong with this risky strategy, bankers and Wall Street can not fail because average taxpayers are pillaged, bailing out the perpetrators. This is crony capitalism at work, stiffing the broad middle class, breaking down the spirit of fairness and equality represented by democracy.

Stockman’s selection of a poster boy for crony capitalism is Jeffrey Immelt, CEO of GE, who sent the U.S. Treasury an “S-O-S” for $140 billion when the 2008 crisis exposed GE Capital’s reckless use of short term funding to finance long-term commitments. This is an example of how amateurs, not sophisticated business people, run public companies. It was sometime later that Stockman got the idea for the title of his new book when Obama, in January 2011, heedlessly appointed Immelt head of the President’s Council on Jobs and Competitiveness. This appointment is compelling evidence of how deep crony capitalism is embedded within the system, a Democratic president appointing, as head of the nation’s Jobs Council, one of America’s biggest proponents of shipping jobs offshore (by the tens of thousands.) Progressives and Democrats must have fainted dead in their tracks! What kind of a joke is this? After all, it was Jack Welch, the former CEO of GE, who infamously said, “Ideally, you’d have every plant we own on a barge,” so the barge could be moved to whichever country has the cheapest labor. This is typical of crony capitalism, undercutting America’s middle class, annihilating the fundamental basis of democracy…  but at the end of the day, what’s left for the capitalists?

Stockman fears for the future of democracy, which according to him, is “lost,” and he believes the public, sensing this, is pessimistic because they “clearly see the current system as not working… the process is getting worse.”  He believes it will take a “real crisis,” something worse than the 2007-08 financial meltdown, before things turn around. The foreboding undertone of Stockman’s message is that crony capitalism will self-destruct by pulverizing the foundations of democracy. For example, today financial transactions represent over 40% of profits in the national economy whereas historically this component of the economy was 15%. Thus, financial resources normally employed for building the economy, like infrastructure, are now used to speculate in carry trades arbitraging the financial markets to make quick profits, using money to make more money exclusively for wealthy interests, rather than products. The evidence of this risky pattern of trading is the financial meltdown of 2007-08. According to Stockman:  “Look at 2008… clearly reckless speculation on Wall Street for years… the public bailed them out… and game restarted.” The end result is: America’s broad middle class is indirectly, and directly, plundered by wealthy elites who profited from the causes of their downfall…  but isn’t this how 12th century feudalism works, not 21st century democracy!

Ominously, capitalistic democracy is headed for a Depression, and the capitalistic system is to blame for its own faults according to A Failure of Capitalism, Harvard University Press (2009) by Judge Richard Posner, whom the New York Times characterizes as: “… Posner is the late Daniel Patrick Moynihan’s successor as the country’s most omnivorous and independent-minded public intellectual,” a dyed-in-the-wool conservative who was appointed to the bench by President Reagan. And, when analyzing the judge’s reasons for democracy/capitalism’s failure, crony capitalism is front and center, e.g., lack of enforceable usury laws which would discourage risky loans, the FDIC, as well as central bank, taking too big of risks, securitization of toxic mortgages, the resultant housing bubble, and rigid laissez faire ideology. These are one-sided policies that leave the middle class out of luck.  He blames the Bush administration for advocating policies like the “ownership society” with passage of the American Dream Down Payment Act of 2003, allowing anybody who could sign with an “X” to purchase a home, a multi-multi-trillion dollar national debt, out of control budget deficits, and propping up stock prices by artificially keeping interest rates low. Crony-capitalism-for-profit is the motivating factor behind all of these failed policies that generate huge fees. Posner advocates increasing the top marginal tax rate as one solution to re-balancing the economy. It is a national disgrace that multi-millionaires like Mitt Romney pay a “carried interest” tax rate of only 15% whilst schoolteachers pay more. This glaring discrepancy is a “national tragedy of the past decade.”

Crony capitalism has skewed the tax code so lopsidedly in their favour it has turned the ship of state onto its side like the Costa Concordia marooned offshore Italy, setting there like a fat, immovable lump. Thus, America’s middle class is financially stuck whilst multimillionaires capture ever-larger percentages of their earnings at the expense of average taxpayers. By rigging the tax code, and starving the government of its fair share, crony capitalism is pushing the country towards bankruptcy. However, bankruptcy is not a necessary course of action because Federal tax receipts, as a percentage of Gross Domestic Product (“GDP”), are at 50-year lows. Therefore, there is plenty of room to increase taxes… especially from select elites who pay a measly tax rate of 15%. The behind-the-scenes maneuvering/fixing of the tax code by crony capitalism is the epitome of insolence; it permanently disarms millions of innocent middle class taxpayers who are responsible for the national debt chasm created as a direct result of low-paying elites. Manipulation of the tax code in conjunction with neoliberal principles, i.e., off-shoring American jobs, has left a gapping hole in middle America, and thus, crony capitalism has shot itself in the foot by undermining the very essence of a democratic nation-state, which is a strong middle class. Without it, democracy fails!

Like it, or not, the future of America is now in the hands of an elite who dictate the country’s course of action, including insane foreign wars, covert drone attacks, cryptic citizen surveillance, cheap offshore labor, and exploitation of the tax code… all of these courses of action are extraneous to the proper functioning of a normal democratic nation-state! In fact, the middle class has been so thoroughly abused by the upper-most class it is a wonder they’ve not, en mass, taken to the streets, an American Spring!

Furthermore, overriding control by the elite has brought America within one step of ‘walking in the fictional shoes’ of Winston Smith, the protagonist of George Orwell’s Nineteen Eighty-Four. Smith, who spent his evenings wandering through the poorest neighborhoods in London where the proletarians live squalid lives but at least free of Party monitoring!

‘Party monitoring’ in the real world is right around the corner as the National Security Agency’s (NSA) one-million-square-foot Utah Data Center is scheduled to open in 2013 in Bluffdale, Utah alongside the Apostolic United Brethren, one of the largest polygamist sects in America. This is a heavily fortified $2 billion project of immense secrecy; even construction workers have security clearances. Its purpose is intercept, decipher, analyze, and store vast swaths of the world’s communications. This is finally the completion of the infamous “Total Information Awareness” program created by George W’s henchmen but initially blocked by Congress in 2003 in response to public outrage.

The NSA data center will store and analyze private emails, phone calls, Google searches, parking receipts, travel itineraries, bookstore purchases, etc. Plus, it’s The Big Cheese of spying; the NSA data center is a code-breaker, able to de-encrypt financial information, stock transactions, business dealings, diplomatic secrets, legal documents, and any transmission that is encrypted. Thus, the fictional character Winston Smith of Nineteen Eighty-Four springs to life, and the old insider NSA saying, “Never Say Anything,” is now more apropos than ever before. Most likely, this will deter many of the world’s terrorists, but what about average citizens? How do they fare in a hollowed democratic environment controlled by elite comrades of a capitalistic system that is split into two distinct classes, the working poor and the all-powerful rich?

Robert Hunziker earned an MA in economic history at DePaul University. He lives in Los Angeles.

Robert Hunziker lives in Los Angeles and can be reached at