In the LRB, David Runciman provides some telling insights in a review of recent books about the “off-shoring” of the world economy into tax havens, where the hyper-elite hide their money from the taxes and regulations that ordinary citizens are subject to. The review also deals with the political machinations involved in this corrosive process, which lies behind much of our dysfunctions and discontents. You should read the whole article, which provides rich historical context, but are some excerpts, in medias res:
When officials from Delaware toured the globe in the late 1980s advertising their services (and hoping, among other things, to provide a haven for all the hot money that was expected to flow out of Hong Kong in the run-up to the handover to China), they did so under the slogan ‘Delaware can protect you from politics.’ Shaxson defines a tax haven as ‘a place that seeks to attract business by offering politically stable facilities to help people or entities get around the rules, laws and regulations of jurisdictions elsewhere’. But this is the crux: where is the politics? Why aren’t these moves more politically unstable, or at least politically contentious? In the case of Delaware, as with other goldfish bowl communities, size probably tells (for a long time Delaware politics was shaped by the influence of the Du Pont family, whose vast chemical operations dominated the local economy). What, though, about Washington, where the shift to an offshore mindset at the national level might be expected to run up against some serious political opposition? What happened to the representatives of all those people who don’t have lots of money to move around, who can’t relocate even if they wanted to, and who have an interest in a fair, open and broadly progressive tax system? Didn’t they notice what was going on?
This is the question that Jacob Hacker and Paul Pierson tackle in Winner-Take-All Politics. They don’t spend much time talking about offshore, but the story they tell has striking parallels with the one laid out by Shaxson. One of the ways you can identify an offshore environment, according to Shaxson, is that local politics gets captured by financial services. In that sense, Washington has gone offshore: its politics has been captured by the interests of a narrow group of very wealthy individuals, many of whom work in finance.
For Hacker and Pierson this, more than anything else, explains why the rich have got so much richer over the last 30 years or so. And by the rich they don’t mean simply the generally wealthy; they mean the super-rich. The real beneficiaries of the explosion in income for top earners since the 1970s have been not the top 1 per cent but the top 0.1 per cent of the general population. Since 1974, the share of national income of the top 0.1 per cent of Americans has grown from 2.7 to 12.3 per cent of the total, a truly mind-boggling level of redistribution from the have-nots to the haves. Who are these people? As Hacker and Pierson note, they are ‘not, for the most part, superstars and celebrities in the arts, entertainment and sports. Nor are they rentiers, living off their accumulated wealth, as was true in the early part of the last century. A substantial majority are company executives and managers, and a growing share of these are financial company executives and managers.’
Hacker and Pierson believe that politics is responsible for this. It happened because law-makers and public officials allowed it to happen, not because international markets, or globalisation, or differentials in education or life-chances made it inevitable. It was a choice, driven by the pressure of lobbyists and other organisations to create an environment much more hospitable to the needs of the very rich. It was even so a particular kind of politics and a particular kind of choice. It wasn’t a conspiracy, because it happened in the open. But nor was it an explicit political movement, characterised by rallies, speeches and electoral triumphs. It relied in large part on what Hacker and Pierson call a process of drift: ‘systematic, prolonged failures of government to respond to the shifting realities of a dynamic economy’. More often than not the politicians were persuaded to do nothing, to let up on enforcement, to look the other way, as money moved around the globe and up to the very top of the financial chain.
As Runciman notes, Hacker and Pierson make a vital point on the true nature of the “political engagement” we see today among our partisan flag-wavers:
One of Hacker and Pierson’s complaints about the way we usually regard politics is that we miss what’s really going on by focusing on the show of elections and the competition between parties. This is the theatre of electoral politics, to set alongside the theatre of probity. Too often, they say, we reduce politics to the level of sport: ‘This is no doubt why politics as electoral spectacle is so appealing to the media: it’s exciting and it’s simple. Aficionados can memorise the stats of their favourite players or become experts on the great games of the past. Everyone, however, can enjoy the gripping spectacle of two highly motivated teams slugging it out.’
Certainly this has been borne out, to a glaring degree, by our stalwart “progressives” since the election of Barack Obama. There are mounds – mountains – mountain ranges of evidence showing “progressives” staunchly defending, or meekly countenancing, a whole raft of outrageous crimes and follies that they once decried with furious indignation ... simply because it is now the guy from “their” team commiting them, instead of that goober from the other team. And even among those progressives who do bestir themselves to sternly denounce this or that policy of the Obama administration – one of his many, many “continuities” and exacerbations of Bush’s record on military aggression, civil liberties, torture, the manipulation and overthrow of governments, the orgasmic embrace of Wall Street, the deficit hawkishness, tax cuts for the rich, etc., etc. – you will hear, almost uniformly, the anguished cry that despite all this, we must fight to re-elect Obama. Because otherwise, one of those right-wing extremists might get in and ... er ... continue all the Bush policies that ... er ... Obama is continuing.
This is a politics almost entirely without substance, based on unsifted tribal loyalties and unsupported myths – just as we see on the Right.
Runciman and the authors also make a very important point that is almost universally overlooked. The true acceleration of the brutal rule of the hyper-rich that we see today did not begin with the ascension of Ronald Reagan (however avidly he helped the process along); its true origins can found in the grand collapses of political will, the surrender to the elite’s most pernicious power blocs, under the administration of the hapless Jimmy Carter:
Elections are seductive, and these days the build-up is so protracted that they can drown out the real business of politics: the way organised groups use pressure – money, lobbying, threats – to squeeze whichever politicians happen to be in power, in order to influence the shaping of policy. Elections also suggest false historical turning points. It is easy to assume that if the rich have been winning in recent decades, the process must have started with the election of the pro-big business, anti-big government Ronald Reagan in 1980 (and concomitantly, Margaret Thatcher in Britain in 1979). But Hacker and Pierson argue that the real turning point came in 1978, during the presidency of Jimmy Carter. This was the year the lobbyists and other organised groups who were pushing hard to relax the burden of tax and regulation on wealthy individuals and corporate interests discovered that no one was pushing back all that hard. Despite Democratic control of the White House and both Houses of Congress, 1978 saw the defeat of attempts to introduce progressive tax reform and to improve the legal position of trade unions. Instead, legislation was passed that reduced the tax burden on corporations and increased the burden on their employees (through a hike in the payroll tax, a regressive measure). All this happened because the politicians followed the path of least resistance – as elected politicians invariably do – and the better organised and better-funded resistance came from the representatives of big business, not organised labour.
What took place in the 1980s was therefore an extension of the Carter years, not a reversal of them. The process of deregulation and redistribution up the chain accelerated under Reagan, who was broadly sympathetic to these goals. Yet it happened not because he was sympathetic to them, but because his sympathies were allowed free rein in a political environment where the opposition was muted and the expected coalition of interests opposed to the changes never materialised. After all, as Hacker and Pierson point out, Richard Nixon, who might have been expected to share some of Reagan’s sympathies, had gone the other way in his actual policies a decade earlier, shoring up the legislative framework of the welfare state and maintaining a broadly progressive tax system. ... He acted like this because he felt he had little choice: the organised pressure ready to resist change appeared much too strong. It was only during the Carter years ... that this pressure turned out to be weaker than anyone thought. The politicians of the Reagan/ Thatcher revolution did what they did not because they were committed ideologues, determined to stick to their principles. They did it because they found they could get away with it.
This is an important point. Politicians are, with the rarest of exceptions, venal, preening, shallow-minded third-raters. Many of them are psychologically damaged, which is what draws them into the pursuit of power – of dominating other people -- in the first place. Mostly, they like the perks (material and emotional) of power. They are not figures of deep character and solid principles. Strong political resistance -- or even a great lot of noise -- can scare them out of whatever “principles” they find it expedient to hold at any given moment. The Right has triumphed because no one has resisted it. Big Money has bought off and/or subsumed almost all of the institutional forces that once offered some resistance to its iron-fisted rule. Runciman then takes up the obvious question:
So where did the resistance go? This is the real puzzle, and Hacker and Pierson take it seriously because they take democracy seriously, despite its unhealthy fixation on elections. Democracies are meant to favour the interests of the many over those of the few. As Hacker and Pierson put it, ‘Democracy may not be good at a lot of things. But one thing it is supposed to be good at is responding to problems that affect broad majorities.’ Did the majority not actually mind that they were losing out for the sake of the super-rich elite? In the American case, one common view is that the voters allowed it to happen because they minded more about other things: religion, culture, abortion, guns etc. The assumption is that many ordinary Americans have signed a kind of Faustian pact with the Republican Party, in which the rich get the money and the poor get support for the cultural values they care about. Hacker and Pierson reject this view, and not just because they don’t think the process they describe depends on there being a Republican in the White House: they see strong evidence that the American public do still want a fairer tax system and do still see it as the job of politicians to protect their interests against the interests of high finance. The problem is that the public simply don’t know what the politicians are up to. They are not properly informed about how the rules have been steadily changed to their disadvantage. ‘Americans are no less egalitarian when it comes to their vision of an ideal world,’ Hacker and Pierson write. ‘But they are much less accurate when it comes to their vision of the real world.’
Why is no one paying attention? ... Hacker and Pierson’s argument ... does not see the weakness of democracy as a matter of the voters wanting the wrong things, or not really knowing what they want. They know what they want but they don’t know how to get it. It’s because they don’t understand the world they live in that democracy isn’t working. People aren’t stupid, but when it comes to politics they are ignorant, lazy and easily satisfied with pat answers to difficult questions. Hacker and Pierson recognise that it has become bad manners to point this out even in serious political discourse. But it remains the truth. ‘Most citizens pay very little attention to politics, and it shows. To call their knowledge of even the most elementary facts about the political system shaky would be generous.’
The traditional solution to this problem was to supplement the ignorance of the voters with guidance from experts, who would reform the system in the voters’ best interests. The difficulty is that the more the experts take charge, the less incentive there is for the voters to inform themselves about what’s going on. This is what Hacker and Pierson call the catch-22 of democratic politics: in order to combat what’s taking place under the voters’ radar it’s necessary to continue the fight under the voters’ radar. The best hope is that eventually the public might wake up to what is going on and join in. But that will take time. As Hacker and Pierson admit, ‘Political reformers will need to mobilise for the long haul.’
Yet time may be one of the things that the reformers do not have on their side. As Shaxson points out in his account of the rise of the tax havens, one of the reasons for the drift towards deregulation is that politics has been too slow to resist it. This, again, is one of the traditional critiques of democracy: while decent-minded democrats are organising themselves to make the world a better place, the world has moved on. In a fast-moving financial environment, it is usually easier to assemble a coalition of interests in favour of relaxing the rules than one in favour of tightening them. Similarly, it’s easier not to enforce the rules you have than to enforce them: non-enforcement is the work of a moment – all you have to do is turn a blind eye – whereas enforcement is a slow and laborious process.
And of course, what happens in a world ruled by Big Money is that the “experts” themselves are bought off; or rather, as time goes by, the system itself breeds “experts” who do not and cannot rise in the system unless they already, naturally, unthinkingly buy into the basic premises of elitist rule. In such a world, even the “reformers” accept the underlying assumptions – and agenda – of the elite, and seek, at the very most, only the most tepid reforms. Do the hyper-rich – the 0.1 percent – now control 12 percent of the nation’s income? Why, goodness gracious, we’ve got to get that down to ... 10 percent, maybe, or even – why not shoot the moon? – 8 percent! That’ll show ‘em! Power to the people, man! But of course, to do that, we must not raise their taxes, or regulate their dodgy investment schemes, or punish them when they crash the world economy; and we must continue the valiant humanitarian interventions and assassinations for peace we are conducting in dozens and dozens of nations all over the world, at exorbitant cost year after year – campaigns which perpetuate the extremism and instability they profess to combat, and which ensure there is no money in the treasury to address the actual needs and aspirations of ordinary citizens.
There are no easy answers to this situation, no Gordian knot to cut with one bold stroke, no single doctrine or program that will answer all ills. Especially given the conundrum that Runciman identifies, between the hard, slow slog of genuine change and the rapidity with which the worst elements in society (and in ourselves) can strike. But one thing is certain: adhering blindly (or even with grudging, gritted-teeth "savvy") to organizations and leaders – such as the Democratic Party and its bloodstained standard-bearers – who have demonstrated, time and again, beyond all doubt, their willing, eager embrace of the elitist agenda will only further entrench and empower the very forces that are devouring and degrading the world.