How The US Became An Oligarchy

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AP Photo / Patrick Semansky

According to a new study from Princeton University, American democracy no longer exists. Using data from over 1,800 policy initiatives from 1981 to 2002, researchers Martin Gilens and Benjamin Page concluded that rich, well-connected individuals on the political scene now steer the direction of the country, regardless of – or even against – the will of the majority of voters. America’s political system has transformed from a democracy into an oligarchy, where power is wielded by wealthy elites.

“Making the world safe for democracy” was President Woodrow Wilson’s rationale for World War I, and it has been used to justify American military intervention ever since. Can we justify sending troops into other countries to spread a political system we cannot maintain at home?

The Magna Carta, considered the first Bill of Rights in the Western world, established the rights of nobles as against the king. But the doctrine that “all men are created equal” – that all people have “certain inalienable rights,” including “life, liberty and the pursuit of happiness” – is an American original. And those rights, supposedly insured by the Bill of Rights, have the right to vote at their core. We have the right to vote but the voters’ collective will no longer prevails.

In Greece, the left-wing populist Syriza Party came out of nowhere to take the presidential election by storm; and in Spain, the populist Podemos Party appears poised to do the same. But for over a century, no third-party candidate has had any chance of winning a US presidential election. We have a two-party winner-take-all system, in which our choice is between two candidates, both of whom necessarily cater to big money. It takes big money just to put on the mass media campaigns required to win an election involving 240 million people of voting age.

In state and local elections, third party candidates have sometimes won. In a modest-sized city, candidates can actually influence the vote by going door to door, passing out flyers and bumper stickers, giving local presentations, and getting on local radio and TV. But in a national election, those efforts are easily trumped by the mass media. And local governments too are beholden to big money.

When governments of any size need to borrow money, the megabanks in a position to supply it can generally dictate the terms. Even in Greece, where the populist Syriza Party managed to prevail in January, the anti-austerity platform of the new government is being throttled by the moneylenders who have the government in a chokehold.

How did we lose our democracy? Were the Founding Fathers remiss in leaving something out of the Constitution? Or have we simply gotten too big to be governed by majority vote?

Democracy’s Rise and Fall

The stages of the capture of democracy by big money are traced in a paper called “The Collapse of Democratic Nation States” by theologian and environmentalist Dr. John Cobb. Going back several centuries, he points to the rise of private banking, which usurped the power to create money from governments:

“The influence of money was greatly enhanced by the emergence of private banking.  The banks are able to create money and so to lend amounts far in excess of their actual wealth.  This control of money-creation . . . has given banks overwhelming control over human affairs.  In the United States, Wall Street makes most of the truly important decisions that are directly attributed to Washington.”

Today the vast majority of the money supply in Western countries is created by private bankers. That tradition goes back to the 17th century, when the privately-owned Bank of England, the mother of all central banks, negotiated the right to print England’s money after Parliament stripped that power from the Crown. When King William needed money to fight a war, he had to borrow. The government as borrower then became servant of the lender.

In America, however, the colonists defied the Bank of England and issued their own paper scrip; and they thrived. When King George forbade that practice, the colonists rebelled.

They won the Revolution but lost the power to create their own money supply, when they opted for gold rather than paper money as their official means of exchange. Gold was in limited supply and was controlled by the bankers, who surreptitiously expanded the money supply by issuing multiple banknotes against a limited supply of gold.

This was the system euphemistically called “fractional reserve” banking, meaning only a fraction of the gold necessary to back the banks’ privately-issued notes was actually held in their vaults. These notes were lent at interest, putting citizens and the government in debt to bankers who created the notes with a printing press. It was something the government could have done itself debt-free, and the American colonies had done with great success until England went to war to stop them.

President Abraham Lincoln revived the colonists’ paper money system when he issued the Treasury notes called “Greenbacks” that helped the Union win the Civil War. But Lincoln was assassinated, and the Greenback issues were discontinued.

In every presidential election between 1872 and 1896, there was a third national party running on a platform of financial reform. Typically organized under the auspices of labor or farmer organizations, these were parties of the people rather than the banks. They included the Populist Party, the Greenback and Greenback Labor Parties, the Labor Reform Party, the Antimonopolist Party, and the Union Labor Party. They advocated expanding the national currency to meet the needs of trade, reform of the banking system, and democratic control of the financial system.

The Populist movement of the 1890s represented the last serious challenge to the bankers’ monopoly over the right to create the nation’s money.  According to monetary historian Murray Rothbard, politics after the turn of the century became a struggle between two competing banking giants, the Morgans and the Rockefellers.  The parties sometimes changed hands, but the puppeteers pulling the strings were always one of these two big-money players.

In All the Presidents’ Bankers, Nomi Prins names six banking giants and associated banking families that have dominated politics for over a century. No popular third party candidates have a real chance of prevailing, because they have to compete with two entrenched parties funded by these massively powerful Wall Street banks.

Democracy Succumbs to Globalization

In an earlier era, notes Dr. Cobb, wealthy landowners were able to control democracies by restricting government participation to the propertied class. When those restrictions were removed, big money controlled elections by other means:

“First, running for office became expensive, so that those who seek office require wealthy sponsors to whom they are then beholden.  Second, the great majority of voters have little independent knowledge of those for whom they vote or of the issues to be dealt with.  Their judgments are, accordingly, dependent on what they learn from the mass media.  These media, in turn, are controlled by moneyed interests.”

Control of the media and financial leverage over elected officials then enabled those other curbs on democracy we know today, including high barriers to ballot placement for third parties and their elimination from presidential debates, vote suppression, registration restrictions, identification laws, voter roll purges, gerrymandering, computer voting, and secrecy in government.

The final blow to democracy, says Dr. Cobb, was “globalization” – an expanding global market that overrides national interests:

“[T]oday’s global economy is fully transnational.  The money power is not much interested in boundaries between states and generally works to reduce their influence on markets and investments. . . . Thus transnational corporations inherently work to undermine nation states, whether they are democratic or not.”

The most glaring example today is the secret twelve-country trade agreement called the Trans-Pacific Partnership. If it goes through, the TPP will dramatically expand the power of multinational corporations to use closed-door tribunals to challenge and supersede domestic laws, including environmental, labor, health and other protections.

Looking at Alternatives

Some critics ask whether our system of making decisions by a mass popular vote easily manipulated by the paid-for media is the most effective way of governing on behalf of the people. In an interesting Ted Talk, political scientist Eric Li makes a compelling case for the system of “meritocracy” that has been quite successful in China.

In America Beyond Capitalism, Prof. Gar Alperovitz argues that the US is simply too big to operate as a democracy at the national level. Excluding Canada and Australia, which have large empty landmasses, the United States is larger geographically than all the other advanced industrial countries of the OECD (Organization for Economic Cooperation and Development) combined. He proposes what he calls “The Pluralist Commonwealth“: a system anchored in the reconstruction of communities and the democratization of wealth. It involves plural forms of cooperative and common ownership beginning with decentralization and moving to higher levels of regional and national coordination when necessary. He is co-chair along with James Gustav Speth of an initiative called The Next System Project, which seeks to help open a far-ranging discussion of how to move beyond the failing traditional political-economic systems of both left and Right..

Dr. Alperovitz quotes Prof. Donald Livingston, who asked in 2002:

“What value is there in continuing to prop up a union of this monstrous size? . . . [T]here are ample resources in the American federal tradition to justify states’ and local communities’ recalling, out of their own sovereignty, powers they have allowed the central government to usurp.”

Taking Back Our Power

If governments are recalling their sovereign powers, they might start with the power to create money, which was usurped by private interests while the people were asleep at the wheel. State and local governments are not allowed to print their own currencies; but they can own banks, and all depository banks create money when they make loans, as the Bank of England recently acknowledged.

The federal government could take back the power to create the national money supply by issuing its own Treasury notes as Abraham Lincoln did. Alternatively, it could issue some very large denomination coins as authorized in the Constitution; or it could nationalize the central bank and use quantitative easing to fund infrastructure, education, job creation, and social services, responding to the needs of the people rather than the banks.

The freedom to vote carries little weight without economic freedom – the freedom to work and to have food, shelter, education, medical care and a decent retirement. President Franklin Roosevelt maintained that we need an Economic Bill of Rights. If our elected representatives were not beholden to the moneylenders, they might be able both to pass such a bill and to come up with the money to fund it.

  • Aquifer

    Well, OK – so if the 2 major parties are in thrall to the corp PTB, and 3rd parties “can’t win” – how do you propose to enact such an Economic Bill of Rights?

  • rgaura

    I´d say its time for a third, fourth and fifth parties! Take the pledge, at least to not vote for either major party. Boycott TV, boycott processed foods, start your own school, or take over the local one as a co op. We need to divest from the system as much as possible. I just love this site! Margaret and Kevin, you are my easter flowers, both harbingers of spring, and reminders of the endless renewal inherent in all life. Blessings!

  • The number one criteria should be to only vote for candidates that do not accept large or corporate donations (and not self-funded either).

  • “And the banks — hard to believe in a time when we’re facing a banking crisis that many of the banks created — are still the most powerful lobby on Capitol Hill. And they frankly own the place.” –Dick Durbin

  • Hey– that Ratchet Effect article you pointed me to is awesome! Really made sense. I’ve been uneasy believing there was some “vast right-wing conspiracy” afoot, but unconvinced there wasn’t something going on behind the scenes– if not the Wealth Oligarchs themselves using their money to pull strings to maneuver the country to where we are today, then some Good Shepherd (the movie) scenario where CIA spies and black ops manipulated things eventually allowing the establishment of a corporate fascist state. But it makes more sense to visualize the political processes evolving according to a form of “physics” where random choices and activities create cause and effect phenomena leading inevitably in certain directions– an apple falling out of a tree and hitting someone on the head is simply due to gravity and being at the right place at the right time, not some willful supernatural or even human-caused force applied to it. Not everything is a dark “conspiracy.” Shit just happens sometimes. For the simplest and most basic reasons.

  • Changeneededbadly

    Through a grass root mass movements. They have been the catalyst for change in the past and they could be now as well, People have to be determined and persistent.

  • This was a great article. The financial elites really do sit at the top of the pyramid. The companion article “Rogue Reporter Takes On The Masters Of The Universe” is a must read too:

    Also, in the top left hand corner, I highly recommend that you sign up for the daily email digest and the (weekly) newsletter.

  • Don’t vote for third parties because they can’t win. But third parties can’t win if you don’t vote for them. It’s a catch 22.

    The truth is we desperately need third parties. Good things can happen if a third party reaches the 5% threshold to qualify for government funding.

    The other way to think of it is that the Republican Party and the Democratic Party make up the one super-party funded by our ruling elites. So you have a choice: vote for the one ruling party or vote against it. Your choice.

  • Aquifer

    That is the point – the reason i put “3rd parties can’t win” in quotes is to emphasize that that is the meme that has been pounded into our heads to discourage us from trying – and it, along with “spoiler”, has been very effective in getting folks to shy away from supporting them – after all, why put time, energy and money into doing something that “can’t be done” … it has been so effectively ingrained in us that even progs, who, one would think, would be most invested in advancing the principles of third parties, have bought into it, and eschew any serious effort at promoting electoral politics, nay, even denigrating them, in favor of other endeavors …

    But these memes are eminently absurd – anyone on a ballot “can win” if enough folks vote for ’em … and the only “spoilers” are the D/Rs who have “spoiled” just about everything we hold near and dear …

    I really do think we have to openly and vociferously challenge, debunk and uproot this nonsense at every opportunity – otherwise it will continue to eat away at any possibility of turning things around – by continuing to believe, and even worse, spread this stuff, we become our own worst enemies …

  • Aquifer

    I agree!

  • Jon

    If we designate the parties Demagogues (represented by a skunk) and Repugnants (represented by a porcupine–very prickly) by visual arts, the point can be made easily. Can we initiate an avalanche of defectins into the Green (non-corporate) Party, whcih already has ballot access in many states? Satirists of the World Unite! You Have Nothing to Lose but Your Cheneys!

  • My error! Excellent analysis!

  • Aquifer

    Thank you, it’s sorta my schtick 🙂

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  • MOPstr

    Like every article that seeks political equality by instead talking about economic equality this article starts off in the wrong direction, gets lost in economic aracana, and never makes it back. “The freedom to vote carries little weight without economic freedom” The truth is that there cannot be “economic freedom” for the majority unless the majority rules. The majority does not rule – as Gilens shows — because democracy was deliberately corrupted when the Supreme Court legalized money in politics. Everything else, like this article, is only a diversion.

  • lobdillj

    These questions were posed: “How did we lose our democracy? Were the Founding Fathers remiss in leaving something out of the Constitution? Or have we simply gotten too big to be governed by majority vote?”

    I was particularly interested in answers to the latter two questions. I have long known the answer to the first one. I think the Founding Fathers had no way to know that the positions of power would naturally attract psychopaths and that if there was no safeguard against their rise, then rise they would, and the democracy would be lost. They didn’t know there was such a personality disorder (or even what a personality disorder is). Consequently, the Constitution contains no such safeguard, and that is why things have turned out this way. I’m not optimistic that there is a way to guard against psychopaths.

    The last question assumes that there is a maximum size for a democracy, and the maximum size may be smaller than our nation. I have never seen this question discussed and have no idea what characteristics would make democracy impossible.

  • kevinzeese

    Interesting question about size. No doubt smaller is better in democracy for many reasons, but not sure of the answer about we are to large to be ungovernable.

    We never really had much of a democracy to begin with. Only 6% of people in the United States could vote at the outset, no women, blacks or non-property owners. The constitution was written by people who were the oligarchs of the era — the wealthiest plantation and slave owners, lawyers who defended slave holders and business people who profited from that economy. They wrote a constitution that protected property so we have a property rights constitution not a human rights constitution. They put in a lot of protections against democracy, e.g. the senate was appointed, the Electoral College was a buffer for election of president. They were not worried about the wealthy class being in control (oligarchy) in fact that is what they preferred!

  • lobdillj

    Very good points Kevin. And I agree 100%. Still, I wonder if they would have considered the problem of psychopaths rising to power positions if they had known what we know today about psychopathy.

  • mikekrohde

    I wonder about how our species has evolved in the last 15,000 years since we started growing food and staying in one place. We do know that the original empires were monarchies passed down through families. How this came to be all over the planet has never been explained to my satisfaction. We evolved from hunter/gatherers in small family units to totalitarian monarchies. I honestly thought we as a species had turned a corner in the 70’s, that shadow governments and oligarchies, at least in the industrialized democracies, were a thing of the past, and we were moving into an era of true democratic government of and by the people. Somewhere we took a wrong turn and we are now dominated by antidemocratic forces wielding not guns but check books. They are no less pernicious than the revolutionaries with weapons that shoot bullets. They took over a little more with each election cycle since Reagan and they do not seem to be stymied by progressive candidates with populist ideals. They have successfully changed the discussion to guns, marijauna and marriage from the evil economics they practice. I’m not sure where this ends but we are in the midst of a new Gilded Age and these guys aren’t taking any prisoners. There are a few females in this crowd but it is by and large the usual suspects, White Males born to privilege that feel entitled.

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