Plutocrats vs. Populists By CHRYSTIA FREELAND

Published: November 1, 2013 249 Comments

TORONTO — HERE’S the puzzle of America today: the plutocrats have never been richer, and their economic power continues to grow, but the populists, the wilder the better, are taking over. The rise of the political extremes is most evident, of course, in the domination of the Republican Party by the Tea Party and in the astonishing ability of this small group to shut down the American government. But the centrists are losing out in more genteel political battles on the left, too — that is the story of Bill de Blasio’s dark-horse surge to the mayoralty in New York, and of the Democratic president’s inability to push through his choice to run the Federal Reserve, Lawrence H. Summers.

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Joohee Yoon

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Joohee Yoon

 

All of these are triumphs of populists over plutocrats: Mr. de Blasio is winning because he is offering New Yorkers a chance to reject the plutocratic politics of Michael R. Bloomberg. The left wing of the Democratic Party opposed the appointment of Mr. Summers as part of a wider backlash against the so-called Rubin Democrats (as in Robert E. Rubin, who preceded Mr. Summers as Treasury secretary during the Clinton administration) and their sympathy for Wall Street. Even the Tea Party, which in its initial phase was to some extent the creation of plutocrats like Charles and David Koch, has slipped the leash of its very conservative backers and alienated more centrist corporate bosses and organizations. 

The limits of plutocratic politics, at both ends of the ideological spectrum, are being tested. That’s a surprise. Political scientists like Larry M. Bartels and Martin Gilens have documented the frightening degree to which, in America, more money means a more effective political voice: Democratic and Republican politicians are more likely to agree with the views of their wealthier constituents and to listen to them than they are to those lower down the income scale. Money also drives political engagement: Citizens United, which removed some restrictions on political spending, strengthened these trends.

Why are the plutocrats, with their great wealth and a political system more likely to listen to them anyway, losing some control to the populists? The answer lies in the particular nature of plutocratic political power in the 21st century and its limitations in a wired mass democracy. 

Consider the methods with which plutocrats actually exercise power in America’s New Gilded Age. The Koch brothers, who have found a way to blend their business interests and personal ideological convictions with the sponsorship of a highly effective political network, are easy to latch on to partly because this self-dealing fits so perfectly with our imagined idea of a nefarious plutocracy and partly because they have had such an impact. But the Kochs are the exception rather than the rule, and even in their case the grass roots they nurtured now follow their script imperfectly.

MOST plutocrats are translating their vast economic power into political influence in two principle ways. The first is political lobbying strictly focused on the defense or expansion of their economic interests. This is very specific work, with each company or, at most, narrowly defined industry group advocating its self-interest: the hedge fund industry protecting the carried-interest tax loophole from which it benefits, or agribusiness pushing for continued subsidies. Often, these are fights for lower taxes and less regulation, but they are motivated by the bottom line, not by strictly political ideals, and they benefit very specific business people and companies, not the business community as a whole. 

As Mark S. Mizruchi, a sociologist at the University of Michigan, documents in his recent book “The Fracturing of the American Corporate Elite,” this is not the business lobby that shaped America so powerfully in the 1950s and 1960s. Business leaders of the postwar era were individually weaker but collectively more effective; C.E.O. salaries were relatively lower, but the voice of business in the national conversation was much more potent, perhaps in part because it was less exclusively self-interested. The postwar era, not coincidentally a period when income inequality declined, was the time when business executives could say that what was good for G.M. was good for America and really believe it. It didn’t hurt that they were sometimes willing to forgo short-term personal and corporate gain when they judged that the national interest required it.

The second way today’s plutocrats flex their political muscle is more novel. Matthew Bishop and Michael Green, a pair of business writers, have called this approach “philanthrocapitalism” — activist engagement with public policy and social problems. This isn’t the traditional charity of supporting hospitals and museums, uncontroversial good causes in which sitting on the board can offer the additional perk of status in the social elite. Philanthrocapitalism is a more self-consciously innovative and entrepreneurial effort to tackle the world’s most urgent social problems; philanthrocapitalists deploy not merely the fortunes they accumulated, but also the skills, energy and ambition they used to amass those fortunes in the first place.

 

Bill Gates is the leading philanthrocapitalist, and he has many emulators — nowadays, having your own policy-oriented think tank is a far more effective status symbol among the super-rich than the mere conspicuous consumption of yachts or private jets. Philanthrocapitalism can be partisan — George Soros, one of the pioneers of this new approach, backed a big effort to try to prevent the re-election of George W. Bush — but it is most often about finding technocratic, evidence-based solutions to social problems and then advocating their wider adoption. 

Philanthrocapitalism, particularly when you agree with the basic values of the capitalist in charge, can achieve remarkable things. Consider the work the Bill and Melinda Gates Foundation has done on malaria, or the transformative impact of Mr. Soros’s Open Society Foundations in Eastern Europe.

Mr. Bloomberg took philanthrocapitalism one step further — he used his résumé and his wealth to win elected political office. In City Hall, Mr. Bloomberg’s greatest achievements were technocratic triumphs — restricting smoking in public places, posting calorie counts and championing biking. As he prepares for life after political office, he is already honing the more typical plutocratic skill of using his money to shape public policy by energetically engaging in national battles over issues like gun control and immigration reform.

At its best, this form of plutocratic political power offers the tantalizing possibility of policy practiced at the highest professional level with none of the messiness and deal making and venality of traditional politics. You might call it the Silicon Valley school of politics — a technocratic, data-based, objective search for solutions to our problems, uncorrupted by vested interests or, when it comes to issues like smoking or soft drinks, our own self-indulgence. 

But the same economic forces that have made this technocratic version of plutocratic politics possible — particularly the winner-take-all spiral that has increased inequality — have also helped define its limits. Surging income inequality doesn’t create just an economic divide. The gap is cultural and social, too. Plutocrats inhabit a different world from everyone else, with different schools, different means of travel, different food, even different life expectancies. The technocratic solutions to public-policy problems they deliver from those Olympian heights arrive in a wrapper of remote benevolence. Plutocrats are no more likely to send their own children to the charter schools they champion than they are to need the malaria cures they support. 

People might not mind that if the political economy were delivering for society as a whole. But it is not: wages for 70 percent of the work force have stagnated, unemployment is high and many people with jobs feel insecure about them and about their retirement. Meanwhile, the plutocrats continue to prosper. And for more and more people, the plutocrats’ technocratic paternalism seems at best weak broth and at worst an effort to preserve the rules of a game that is rigged in their favor. More radical ideas, particularly ones explicitly hostile to elites and technocratic intellectuals, gain traction. And that is true not just in the United States but across the Western developed world — for instance, the Italian prime minister Enrico Letta, recently warned that “the rise of populism is today the main European social and political issue.”

AS this populist wave crashes in on both sides of the Atlantic, the plutocrats, for all their treasure and their intellect, are in a weak position to hold it back.

Part of the appeal of plutocratic politics is their power to liberate policy making from the messiness and the deal making of grass-roots and retail politics. In the postwar era, civic engagement was built through a network of community organizations with thousands of monthly-dues-paying members and through the often unseemly patronage networks of old-fashioned party machines, sometimes serving only particular ethnic communities or groups of workers.

 

The age of plutocracy made it possible to liberate public policy from all of that, and to professionalize it. Instead of going to work as community organizers, or simply taking part in the civic life of their own communities, smart, publicly minded technocrats go to work for plutocrats whose values they share. The technocrats get to focus full time on the policy issues they love, without the tedium of building, rallying — and serving — a permanent mass membership. They can be pretty well paid to boot. 

The Democratic political advisers who went from working on behalf of the president or his party to advising the San Francisco billionaire Thomas F. Steyer on his campaign against the Keystone XL pipeline provide a telling example. Twenty years ago, they might have gone to work for the Sierra Club or the Nature Conservancy or run for public office themselves. Today, they are helping to build a pop-up political movement for a plutocrat. 

Plutocratic politics have much to recommend them. They are pure, smart and focused. But at a time when society as a whole is riven by an ever widening economic chasm, policy delivered from on high can get you only so far. Voters on both the right and the left are suspicious of whether the plutocrats and the technocrats they employ understand their real needs, and whether they truly have their best interests at heart. That rift means we should all brace ourselves for more extremist politics and a more rancorous political debate.

Where does that leave smart centrists with their clever, fact-based policies designed to fine-tune 21st century capitalism and make it work better for everyone?

Part of the problem is that no one has yet come up with a fully convincing answer to the question of how you harness the power of the technology revolution and globalization without hollowing out middle-class jobs. Liberal nanny-state paternalism, as it has been brilliantly described and practiced by Cass R. Sunstein and like-minded thinkers, can help, as can shoring up the welfare state. But neither is enough, and voters are smart enough to appreciate that. Even multiple nudges won’t make 21st-century capitalism work for everyone. Plutocrats, as well as the rest of us, need to rise to this larger challenge, to find solutions that work on the global scale at which business already operates. 

The other task is to fully engage in retail, bottom-up politics — not just to sell those carefully thought-through, data-based technocratic solutions but to figure out what they should be in the first place. The Tea Party was able to steer the Republican Party away from its traditional country-club base because its anti-establishment rage resonated better with all of the grass-roots Republican voters who are part of the squeezed middle class. Mr. de Blasio will be the next mayor of New York because he built a constituency among those who are losing out and those who sympathize with them. Politics in the winner-take-all economy don’t have to be extremist and nasty, but they have to grow out of, and speak for, the 99 percent. The pop-up political movements that come so naturally to the plutocrats won’t be enough.

The author of “Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else” and a Liberal Party candidate for the Canadian Parliament.