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The Foundational Tension at the Base of Democratic Capitalism

By Sheri Rivlin and Allan Rivlin -- June 2015

If you want to understand a tree, you must look at the roots.  If the roots are healthy, the tree is healthy.  But no matter how healthy the tree branches or leaves may look now, if there is a problem with the roots of the tree, the tree has a problem. The same is true of a building.  If there is a problem with the foundation, cracks will form in the walls.  Applying plaster and paint will only be a temporary solution.  More cracks will appear, and then the roof will develop leaks.

Looking deeply at American politics from the ground up, we can clearly see the inherent tension buried deep in the foundational structure of our capitalist democracy.  It is the perpetual tension between one-person-one-vote democracy and one-dollar-one-vote capitalism.  When these forces achieve a proper balance, this can be the source of our greatest strength, but when out of balance as our system is now, this tension is the cause of a great deal of our frustrations.  


This foundational tension, inherent in our system, touches all aspects of our politics and economy.  It is at the heart of what makes politics so frustrating for most people and explains why Democrats and Republicans find so little to agree about these days: explaining their differences on taxes and  economic policy; environmental, safety, and financial regulations; campaign finance laws and many other policy disputes.  It also explains why nearly every election is about the economy (stupid), and why Americans were so proud of their economy in the 1940s, 50s, and 60s; but also why most Americans have been so disappointed with the economy over the past several decades, as it returned to boom and bust cycles, and middle-class wages stopped increasing.  


The Source of Political Conflict


This foundational tension is the source of most of the conflict between Democrats and Republicans.  Although there are factions and contradictions within both political parties, in broad strokes, most Democrats hold the view that the proper role of government is to do what is in the best interest of the majority of the people -- this defines the democracy we so cherish.  Republicans believe government interferes with markets that, if only left alone, would deliver the greatest economic good to the greatest number of people.  For them, this is the proven promise of the capitalist system they so cherish.


Turn on any news program, and whatever specific issue is up for discussion at that moment, you are likely to see two political operatives debating politics from the left and the right perspectives.  The points of view of the two sides can nearly always be understood as representing the view, that government should do what is best for the most people (democracy), or government should do as little as possible, because it only interferes with the efficiency of markets (capitalism).


While the largest number of Americans describe themselves as independent of either of the two major parties, strong partisans feel a calling, not only to promote their agenda, but also to inflict justice upon what they see as the immoral actors on the the other side.  Progressive Democrats believe wealthy Americans and large corporations have rigged the system to reward the rich and punish the poor.  They believe that many people deserve to go to jail for financial crimes, creating pollution, putting workers in unsafe conditions, or other activities that either are or should be crimes.  


Conservative Republican partisans tell themselves that President Obama deserves to go to jail for his supposed crimes (to nearly the same degree that they said the same about President Clinton, the most recent preceding Democrat in the White House).  Civilian government employees are routinely characterized as selfishly working only to maintain their own jobs and benefits, and the government itself is reviled on a daily basis, as for example, when conservative leader Grover Norquist told NPR: “I don't want to abolish government. I simply want to reduce it to the size where I can drag it into the bathroom and drown it in the bathtub.”

While the rest of the nation feels quite proud of our democratic and capitalist traditions, and sees little conflict between them, the loudest voices in our political system, the strongest partisans, attack the bedrock foundational beliefs of those who support the other side of the democracy versus capitalism equation.  Few partisan Democrats would describe themselves as “anti-capitalist,” but most would acknowledge that they see a proper role for government in reigning in the destructive elements of capitalism.  And few partisan Republicans would label themselves as “anti-democratic;” yet most would eagerly select the label “anti-government,” taking their aim at undermining the regulations that, however demonized, are the very product of this democracy.  

There is some legitimacy to both points of view.  Government action can indeed have unintended consequences, and the sum total of government regulation does inflict a heavy burden on businesses that would prefer to keep their attention on serving their customers. However, in most cases these regulations were born in tragedies that caused the public, through their elected leaders, to respond with legislation -- implemented as regulations.  When workers were becoming injured in mines and factories, we passed laws to protect worker safety.  We pass laws to stop polluters, because we have seen businesses that exploit the land, air and water, placing families in danger.   


When financial markets collapse, causing economic harm to multitudes, we pass laws to protect borrowers and investors against securities fraud and manipulation.  We have a history, born out of drastic cases of labor exploitation, of enacting laws to protect the rights of workers to bargain for higher wages and an opportunity for families to work their way into the middle class.  In recent years, these laws have been eroded, contributing greatly to the wage stagnation that has been making it harder for families to earn their way into middle class economic security.  This is just a short list of the regulations targeted by the anti-government partisans on the right.


The foundational tension inherent in democratic capitalism gives the two parties dramatically different approaches to the economy, and fuels the battles on Capitol Hill, the campaign trail, and in the Supreme Court.  We will detail how this plays out in the next installment.

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