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Make Democracy Work

Two centuries ago a unique nation was formed, not on the basis of any ethnic, cultural or religious community but on universal human values of equality and freedom. It gradually grew more prominent on the world scene. Then the major wars of the Twentieth Century thrust it into a global leadership role. Its ideals spurred a fundamental effort to build a peaceful and prosperous world. Its Marshall Plan for Europe and postwar development of Japan demonstrated unprecedented conciliatory treatment of vanquished enemies. Its leadership ended centuries European warfare, while on a global scale the founding of the United Nations and the World Bank set universal standards for peace and prosperity. Continuing leadership of the Free World led to the collapse of the totalitarian Soviet Union. Entering the Twenty-first Century, the United States was the sole global superpower, leading a world of peace. The situation was even labeled the End of History, a world without any major conflicts, the end point of mankind's ideological evolution and the universalization of Western liberal democracy as the final form of human government.

Somehow it is all falling apart. An assertive China challenges the United States not only in the coastal waters of the South China Sea, but globally with an economic outreach into both Africa and Latin America. A resurgent Russia seizes and incorporates part of neighboring Ukraine, strongly backs the genocidal regime in Syria, and covers its domestic economic failings with a confrontational policy to the West. Syria itself is at the center of intractable wars in the Middle East, including a self-proclaimed Islamic State tenaciously fighting to maintain territorial control while simultaneously fomenting terrorist actions globally. Africa stagnates, while turmoil there and the Middle East results in millions of refugees flooding into a fragmenting Europe, already unsettled by Greek bankruptcy and British Brexit. A stable democratic world is no where to be seen.

What has gone wrong?

The central shortcoming, the root of all this disarray, is that the United States has failed to demonstrate democratic governance can produce a peaceful and prosperous society. Its global Beacon of Freedom has all but disappeared as its domestic disarray is visible everywhere. For millions the American Dream has turned into a nightmare. While the top 1% prospers, the middle class stagnates. Work force participation rates are the lowest in a quarter century with millions employed only in low paying and dead end jobs. People with low skill levels are increasingly shut out of employment. Technology worsens the problem as more and more tasks are automated. Racism continues to plague the country, exacerbating inequality, as forcefully emphasized by a dynamic Black Lives Matter movement protesting a continuing series of police killings of blacks. Unwanted immigrants and refugees flood into the country, giving lie to the inscription on the Statue of Liberty, the physical embodiment of the Beacon of Freedom: "Give me your tired, your poor, your huddled masses yearning to breathe free..." The conditions that welcomed the earlier huddled masses no longer exist, particularly the absence of an open West, which faded away a century ago, and of a vibrant, growing economy in constant need of fresh labor. The new huddled masses can fit into the economy only at the very lowest levels, where they are badly exploited and keep associated wage rates so low that Americans avoid the jobs. Economic pressures promote social frictions; people lash out in anger; increasingly desperate individuals turn to drugs and petty crime, as vividly testified to by the burgeoning homeless class and the highest incarceration rate in the world. Militias and hate groups flourish as the Ladder of Success disappears.

The concentration of wealth at the very top of society also undermines government, especially at the state and local level. Education suffers - in one recent assessment, the US education system was ranked 17th out of 50 countries. A top-heavy health care system is not only overly expensive but fails to reach millions. This is particularly true with mental health issues as millions of untreated cases add to social violence, suicides, and prison populations. Infrastructure degrades. Disaster preparedness withers. Public parks deteriorate. Politics degenerates into personal squabbles as candidates focus on each other rather than issues. At the national level, gridlock means that government can barely function. It is increasingly difficult to define the objectives of the biggest national security budget in the world. Overall economic policy becomes increasingly incoherent as the American economy fails o address challenges of globalization. Civil liberties are more and more constrained to address fears of terrorism.

America has all the wealth it needs to address these challenges. The problem is not wealth inequality – some people will naturally be richer than others. The problem is that the top layer of society has concentrated so much wealth that it undermines broader social development. Much of this accumulated wealth does not result from any kind of real benefit to society. Rather, it is extracted from society by manipulation of the commercial and financial systems. In this sense, much of the accumulated wealth represents ill-gotten gains rather than earned wealth. Of course there is no exact line of how much wealth can be legitimately earned. Society needs to set this standard. It needs to re-structure the economy so that it works for everyone and claw back wealth that represents ill-gotten or excessive gains. This retrieval of unwarranted wealth needs to be done not to re-distribute to others but to strengthen and modify the economy so that it works for everyone.

This means structuring the economy so that higher levels of wealth are increasingly difficult to obtain and to keep. This has to constantly address the challenge that wealth manipulation is self-reinforcing thanks to campaign finance efforts and intensive. A central challenge is that the framework for corporations is set up by the government; they are the main engine of the economy and should work for the benefit of all. Unfortunately, a widely read 1970 article by Milton Friedman claimed "there is one and only one social responsibility of business #150; to use its resources and engage in activities designed to increase its profits.” This legitimized a widespread belief that shareholders have every right to take care of themselves first and that other stakeholders - including government, customers, workers, and the general public – can be, indeed, should be, neglected to the maximum extent possible.

Ensuring that corporations are not run simply by greed puts an emphasis on regulations, an essential component of economic policy. Of course it is true that regulations complicate corporate operations and increase costs, so it is easy to sympathize with President Reagan's words, that “government is the problem.” But in an extraordinarily complex socio-economic system, the rules of the game must also be extraordinarily complex. Thousands of pages of laws and regulations protect the public's interests, including environmental standards, as well as health and safety requirements and mandatory quality requirements. Thousands of regulations of course mean thousands of opportunities for corporations to advance their own narrow interests. One result is strongly focused lobbying efforts aimed at favorable treatment in the specific provisions of some law or regulation. Such lobbying efforts are typically backed not only by considerable corporate resources but also by a broad network of largely invisible ties among legislators, lobbyists, regulators and officials. The public interest, on the other hand, is often diffuse, with no one to counter specific corporate arguments which, at any rate, are often invisible to the general public. The result is that the public interest is frequently a casualty.

Regulations also embody tax policy, setting criteria for payments and tax benefits, with vested interests systematically defending favorable provisions. So, for example, President Reagan also promoted a “trickle-down“ economic theory that a reduced tax burden for the wealthy would increase the money available for investment and create more jobs. It did indeed increase the money available to the wealthy, but not the jobs for the middle class. Similarly, low capital gains tax rates also heavily favor the wealthy, as do low estate taxes, derided by lobbyists as “death taxes” but insuring that maximum wealth stays in the hands of the wealthy.

Overall, the U.S. experience vividly illustrates how a democracy can be undermined by systematic manipulation of a capitalist market economy. The result is not only an increasingly fragmented and troubled society at home. It has also resulted in a global loss of respect for American leadership and an increasing rejection of democracy as an attractive system of government. Unfortunately, no other more attractive system has risen up, and no other nation capable of global leadership is visible.

American leadership remains critical for global stability and prosperity, but has to be based on a renewed effort to demonstrate that democracy can indeed lead toward an End of History.

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