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Democracy vs. Capitalism

Ken Nesmith

The New York Times reported Monday that both the Republican and Democratic Parties have created fundraising arms at the state level that exploit a loophole in the McCain-Feingold Campaign Finance bill. With these fundraising mechanisms in place, both parties say that they will be able to continue to accept the large soft-money donations targeted by the bill without interruption. As of this development, the bill is completely ineffectual, and we’re left wondering how many politicians who supported this bill did so despite the fact that its impotence wasn’t uncommon knowledge in congressional circles.

McCain-Feingold was to be a step towards reducing the influence of wealthy special interests in national politics, but its failure illustrates the near impossibility of doing so. The problem at the core of campaign finance reform is that democracy and capitalism are, in their pure forms, fundamentally incompatible. Placing checks on democracy in the form of inviolable individual rights protects us from various tyrannies of the majority, and placing restrictions on the freedom of capitalism balances the philosophic beauty of the system with the reality of necessarily limited freedoms. The current structure allows citizens to encourage politicians to make decisions that may violate the freedom and sovereignty of individuals. Those decisions can be encouraged or coerced either by the wealthy through massive donations, needed by politicians to maintain their powerful positions, or by the masses through the threat of eviction from office at the next election. The result is that the wealthy and the masses stamp upon each other’s interests in different ways. A miniscule percentage of our citizens fund the vast majority of the government’s bloated operations, demanded at the polls by a majority of citizens, and that same percentage uses its influence to obtain favorable regulation and rulings, be it related to environment, investment, labor laws, or other sometimes vital restrictions of capitalist impulses.

In democracy, we make collective decisions about how to use the government’s powers and who will guide their use. Though not a socialist behemoth, our powerful government is also distant from the philosophically pure government put forth by libertarianism. It does much more than defending the nation and upholding the rule of law. It has the power to violate individual rights for the sake of the public good by disproportionately taxing the populace and redistributing their money to those with less money. This violation obtains at least minimal justification thanks to distortions stemming from inherited position and wealth that leave unworthy, unthoughtful, and undeserving citizens with control of huge sums of unearned wealth that simply grows unattended.

Further justifications are that although it is not morally right, it is practically useful for the government to redistribute wealth in this way. Regardless of whether or not it is just that the wealthiest one percent of our citizens fund 26% of the operations of the government, our system is such that a majority bloc of voters has the power to extort arbitrary sums of money from the wealthy for whatever they choose.

The government also has the power to restrict and regulate the behavior of businesses. Once so decided, everyone must abide by the decision. In capitalism, each individual is free to enter into an agreement, be it a purchase, or a sale of labor, only if they so choose. However, the limited vision of economic agents means that these freely made choices can have disastrous consequences and costs that are impossible to represent in the cost structures of these transactions.

These are actions which regulation must address in order, to be quite extreme, to preserve life on earth. Take a hypothetical analysis of global warming: it is a reasonable scientific possibility that as man-made carbon dioxide concentrations rise, the chance that the earth will suddenly enter another ice age rises dramatically. In making a decision of whether or not to take actions that will raise CO2 levels, we are not economically encouraged to account for that chance, but instead examine cost of gas as our only price signal. The blunt hand of government regulation can forcefully create mechanisms here that do indeed limit freedom by affecting that price signal or even more clumsily restricting emissions, but also may protect the future of all life. These policies, if made reasonably and with the support of strong scientific evidence, are quite justifiable, and quite necessary.

Sometimes, of course, government makes silly regulations that unnecessarily hinder progress and development. A ban on human cloning, made arbitrarily and based in no small part upon a fundamentalist Christian worldview, might be one such regulatory restriction of freedom. OSHA regulations also tend to fall in this category. The wealthy, should they choose, have the power to purchase away these regulations. This happens all the time as big business lobbies aggressively to shift subtle policies that, properly crafted, bring them huge profits.

The leaders who spend the skimmed wealth of the nation are ideally held ultimately accountable to voters, and if a majority disapprove of their behavior, the sum of their rational decisions will lead to that leader’s eviction. This doesn’t always work out so well for a couple of reasons: firstly, all the candidates may suck, and be under similar influence of lobbyist wealth or populist demands, so that a good choice cannot be found. Secondly, “rational choice” is influenced by designed advertisements. The result is that the candidate who spends the most money, obtained from wealthy special interests, generally wins an election.

So the system’s a mess -- dramatic revelation, I know. But what’s important is that it’s not just an incidental mess; it’s a philosophical mess. Capitalism respects the power of human freedom and defends that freedom of the individual from restriction and incursion.

At the same time, democracy empowers any majority to destroy such freedoms, as democracy grants the collective the power to destroy the individual for its own purposes; likewise, it allows individuals to purchase decisions affecting the masses for better or for worse. Democracy sanctions equality; capitalism sanctions freedom. This freedom leads directly to inequality, even in affairs of democracy. When opponents of campaign finance reform decry that it is a limitation on free speech, they clearly reveal how much they respect the equal rights of all individuals to speak.

Of course, when implemented in practice, democracy and capitalism go together nicely enough, thanks to their mutual respect for basic freedoms. Their conflict becomes relevant when we begin to examine means of reforming the ability of wealth to determine national politics. It’s not easy. Money will flow through every crack available. There’s no reason to stop trying, though. Hopefully this latest loophole will be closed quickly.