What happens in a two-party system if the elite of one party controls the commanding heights of the economy, but power in the government is divided among both parties, thanks to the separation of powers and constitutional checks and balances? In the United States, we now know the answer. The party of the economic elite will be tempted to do an end run around electoral democracy by using its private economic power directly to impose partisan policies on society as a whole.
As the former social base of the Democratic Party of Franklin Roosevelt and Lyndon Johnson—the white working class—has migrated into the GOP over the last half century, well-educated, upper-income Republicans and their children have moved in the opposite direction to become corporate-suite Democrats. This upscale elite has reshaped the Democratic Party to embody the values of the suburban, moderate “Rockefeller Republicans” of the 1950s and ’60s—fiscal conservatism and dread of deficits; corporation-friendly internationalism; indifference or hostility to organized labor; liberal attitudes toward contraception, abortion, and sex; environmentalism; support for minority rights, as long as it costs little or nothing; and snobbery toward working-class whites and rural whites.
The displacement of downscale Roosevelt Democrats by upscale Rockefeller Democrats among white Democrats continues. According to TechCrunch, in the 2016 election 39% of the richest donors backed Democrats more than Republicans. In 2014, Democrats represented 17 of the 25 wealthiest congressional districts. Only four years later in the 2018 midterm elections, Democrats in the House won 41 of the 50 wealthiest congressional districts and all 10 of the wealthiest.
Even as they are becoming the party of the economic elite, Democrats complain that the political power of their voters, now largely affluent whites and minorities concentrated in major metropolitan areas, is diluted by the Senate and the Electoral College, which exaggerate the impact of voters in low-population states. Today’s post-New Deal, Rockefeller Democrats could deal with this problem in one of two ways, one democratic, the other fatal to democracy.
One small-d democratic road to Democratic victories in the White House and Senate would involve winning over voters in a number of low-population states outside of those of New England which Democrats already dominate. First the Lincoln Republicans, between the Civil War and the Great Depression, and then the Roosevelt Democrats, between the New Deal and the Reagan era, obtained hegemony in Washington, D.C., thanks to alliances with voters in thinly populated Great Plains and Rocky Mountain states. But for this strategy to work, the Democratic Party’s metropolitan leaders and media representatives and intellectuals cannot seem to be hostile or indifferent to rural and small-town Americans and their values.
If urban Democrats reject any pragmatic attempt to try to win the votes of deplorable voters in flyover country as immoral or just tasteless, they have a second, undemocratic option, now that they represent much of the economic elite. They can just skip the hard work of electoral politics and use the raw power of the banks and corporations they control to impose some progressive policies on their customers or borrowers directly.
Case in point: California is the first state in the nation to pass a law imposing gender quotas on corporate boards of companies with headquarters in California. By the end of 2021, companies with five board members need at least two female directors and those with six or more need at least three female directors, with fines beginning at $100,000.
Because organized labor represents workers of both genders and all races, I for one would prefer to see a law mandating employee representation on boards rather than one that mandates the inclusion of mostly elite individuals on the basis of gender or race. But whether it is a good idea or not, the California measure seems likely to hold up in court against legal challenges. The state and federal governments have broad discretion to impose regulations on corporations as they see fit.
At present California is the only state that has quotas for women on boards. Under our system of representative government, proponents of this measure should agitate for the legislatures in the other 49 states to pass laws modeled on that of California. This is how democracy is supposed to work.
But now Goldman Sachs has announced that it will not assist companies in initial public offerings (IPOs) if they have all-male boards. As this example suggests, if you cannot get the legislature or a democratically accountable government department or independent agency to pass your policy, you can try to persuade the major corporations and banks which dominate U.S. economic life to act as though your proposed policy was already the law of the land. The end justifies the means.
Here is another example of the use of private corporate power to promote partisan progressive dogma. Google is a company whose founders, officers, and staff are overwhelmingly partisan Democrats and make no secret of it.
Now that it owns YouTube, Google is banning or removing videos that dare to question any policy guidance from the World Health Organization (WHO), a corrupt international agency, known for its appeasement of the dictatorship in China, and responsible for countless deaths as a result of its initial downplaying of the danger of COVID-19. According to YouTube CEO Susan Wojcicki, “Anything that goes against WHO recommendations would be a violation of our policy and so remove is another really important part of our policy.”
President Donald Trump has announced the withdrawal of the United States from WHO, so perhaps this is just typical Trump Derangement Syndrome (TDS)—whatever Trump is against, knee-jerk Democrats will be for, and vice versa. But Google/YouTube justifies this censorship on the grounds that it is defending public health from “fake news” at odds with the expert consensus on public health.
No doubt it is just a coincidence that the only viewpoint that Google/YouTube will allow—trust the experts on lockdowns—was the one temporarily adopted in April and May by most Democrats, with Republicans showing more skepticism. According to center-left orthodoxy only a few weeks ago, public health requires many traditional religious services to be banned and families to be separated from their dying loved ones. Anyone who questions this expert consensus is practically a mass murderer.
At least that was the progressive consensus until May 25, 2020, when George Floyd was killed by police in an incident captured on horrifying video. In the mass demonstrations that followed in cities throughout the United States, in defiance of the previous quarantine orders, huge crowds gathered to protest his death, and, in some cases, to take part in rioting and looting.
Abruptly the Democratic Party line changed. The new line was expressed in an open letter on the protests signed by a number of left-leaning public health academics and practitioners, which might have been drafted by the Ministry of Truth in Orwell’s 1984: “However, we do not condemn these [protest] gatherings as risky for COVID-19 transmission. … This should not be confused with a permissive stance on all gatherings, particularly protests against stay-at-home orders. Those actions not only oppose public health interventions, but are also rooted in white nationalism and run contrary to respect for Black lives.” It remains to be seen whether the crowded protests contributed to the recent spike in COVID-19 infections in California, Texas, Florida, and other states.
Following the protests, Uber Eats announced that it would waive delivery fees for customers who order from black-owned restaurants in the United States until the end of the year. Let us set aside the question of whether this is a violation of the Civil Rights Act of 1964, which would seem to ban economic discrimination by other businesses against companies on the basis of the race or ethnicity or religion of their owners. This is another case in which a policy that is controversial even when it is undertaken by government—in this case, special treatment of minority-owned businesses—is adopted without debate or oversight by a major corporation whose managers and investors use their concentrated economic power to promote a political agenda that is unrelated to their line of work.
In all of these cases Goldman Sachs, Google/YouTube and Uber Eats have adopted progressive causes. Unlike old-fashioned labor liberalism or Marxist socialism, contemporary progressivism is a placebo version of leftism, fabricated by activists in nonprofits and university programs funded by billionaire-endowed foundations, corporations and capitalists, which does not threaten the rich and powerful because it focuses attention on cost-free “social justice” symbolism rather than on organized labor or structural economic reform.
Charity begins at home, so you might think that corporations and banks which ostentatiously support progressive causes would be model citizens when it comes to the treatment of workers and payment of taxes. You might think that, but you would be wrong.
William Littleton, a former Goldman Sachs Group Inc. vice president, has sued the firm claiming that he was fired after he complained of discrimination because he was gay. In 2015, Google, Apple, Disney, and a number of other corporations had to pay a $415 million settlement to end a lawsuit by the victims of their secret and illegal “no-poaching” agreement that was intended to keep the wages of their employees down. Uber Eats profits from a business model in which gig workers without benefits or labor rights are treated as contractors even when they are de facto employees.
Goldman Sachs, Google, and Uber have not endorsed the trendy leftist slogan “defund the police,” but their long histories of tax avoidance demonstrate that these three firms have worked hard to defund the governments of the U.S. and other democracies. According to Citizens for Tax Justice, in 2016 Goldman Sachs had 987 subsidiaries in offshore tax havens, including 537 in the Cayman Islands alone. In one of the largest tax avoidance cases in years, the British government in 2018 won £79 million in penalties from Goldman Sachs and Cargill, its partner in an illegal scheme to evade taxes by use of an offshore tax haven, the island of Jersey, and a British company, Teesside Power, which Goldman Sachs and Cargill took over in 2001 from the bankrupt, criminal Enron corporation.
Earlier this year Google announced that it would no longer seek to avoid U.S. income taxes and European overseas-profits taxes by means of a strategy known variously as Double Dutch, Double Irish, or Dutch Sandwich, which involves shuttling money from an Irish subsidiary to a Dutch holding company and then back to an Irish shell company in Bermuda. Like Google, Uber avoided taxes with the Double Dutch strategy, but in 2019, to head off a European crackdown on offshore tax havens, it transferred intellectual property out of a Bermuda shell company to a Dutch shell company controlled by a Singaporean holding company. (Perhaps it is time for an update of The Sting with corporate tax experts as lovable swindlers.)
None of this chicanery is likely to deter opportunistic progressives from forming alliances with leaders in the business community on symbolic issues involving subjects that do not threaten the bottom lines of banks and corporations or require them to treat their workers better. The possibilities for enlisting concentrated private corporate and financial power in the United States to promote the social causes of progressive neoliberalism are limited only by the imagination.
In the name of reparations for millennia of patriarchy, socially conscious banks might charge higher fees to men than women. Banks and other private lenders could agree not to extend credit to firms whose CEOs or shareholders contribute to pro-life organizations or the National Rifle Association. Credit cards could charge lower rates to those who made donations to the Democratic Party or left-wing NGOs. Search engines could use algorithms that hide books and speeches by Republicans, while promoting those by Democrats. America could have its own progressive private sector version of the Chinese government’s social credit system, making it difficult for you to book a bus or plane reservation if you tweet “All lives matter” or “Make America Great Again.”
To be sure, such a regime of progressive corporate social engineering, imposed on ordinary American borrowers and consumers and workers in the private sector by powerful companies and banks, would suffer from a perceived lack of democratic legitimacy. This public image problem might be addressed by greater diversity on corporate boards. Invoking the progressive trickle-down theory of virtual representation, which holds that any member of any racial or gender or sexual-orientation category, no matter how rich and out of touch and unaccountable, can mystically represent all members of that category, America’s business leaders could argue that their newly diverse corporate boards were more demographically representative of the American population than the U.S. Congress, and therefore more legitimate than American government itself.
Who needs democratic legitimacy when you can have demographic legitimacy? Under the private authoritarian rule of woke capital, the United States could be Singapore, but with diversity.
Today the threat of partisan private power chiefly comes from wealthy elites on the center left. Tomorrow it could come from the right.
In the case of Burwell v. Hobby Lobby in 2014, a conservative 5-to-4 majority on the Supreme Court struck down as an unconstitutional violation of religious freedom a mandate imposed by the Affordable Care Act requiring that insurance coverage provided by companies for their employees must include the costs of contraceptives. Although the court limited the scope of the decision to closely held corporations, its holding implied that a corporation, an artificial government-chartered entity, could somehow by osmosis take on the religion or worldview of its founders or shareholders or managers. If you concede that there can be Christian corporations, there can also be atheist and Buddhist and Muslim corporations and Republican and Democratic corporations. If that is so, there should be no restrictions on the ability of companies to campaign for a particular party and banks to proselytize for a particular religion.
A for-profit corporation or bank, as distinct from a religious institution or other nonprofit organization, is an entity chartered by a government for economic purposes, not open-ended social reform. It is not a church. It is not a charity. It is not a movement. It is not a political party. To the separation of church and state, we need to add the separation of church and business and the separation of party and business. In a properly governed marketplace people should meet only as buyers and sellers, not nonwhites and whites, women and men, old and young, believers and freethinkers.
Whether it is deployed by the left or the right, this innovative form of corruption, in which the private sector is enlisted to serve partisan goals, is just as harmful to democracy as the old-fashioned kind, in which the public sector is suborned to serve private interests. In a democracy, the only legitimate way to change public policy is to win elections and pass laws and enact regulations that apply impartially to all. Capitalism should not be politics by other means.
Michael Lind is a Professor of Practice at the Lyndon B. Johnson School of Public Affairs, a columnist for Tablet, and a fellow at New America. He has a master’s degree from Yale and has taught at Harvard. His most recent book is The New Class War: Saving Democracy from the Managerial Elite.