Death of Democracy in America: Chapter 3

If you would like to start at the beginning of this series of posts, go here.

The previous chapter in this series is located here.

The Role of Free-Market Capitalism in the Death of Democracy in America

In the previous section we pointed to the central role of equality as a driving force behind American democracy. We also alerted the reader to the fact that, of all the dimensions of equality, equality of outcome or (economic) condition has not continued to advance over the years, actually reversing its trend to less equality in the past 30 or more years.

Typically the statistic GDP per capita (Gross Domestic Product) is quoted to bolster the conventional wisdom that America is the most prosperous country in the world (note that even by that statistic the US is only second, behind Luxembourg). However, the realization that GDP per capita is a very misleading statistic to measure economic well-being is getting al lot of attention. As reported in The Wall Street Journal(5), European leaders such as David Cameron of the UK and Nicolas Sarkozy of France have started efforts to find more relevant measures. This article also references research being conducted at Stanford University(6), in which the authors state

“As many economists have noted, GDP is a flawed measure of economic welfare. Leisure, inequality, mortality, morbidity, crime, and a pristine environment are just some of the major factors affecting living standards within a country that are incorporated imperfectly, if at all, in GDP”.

Work on these kinds of statistics are in their early stages and are always subjective to a certain extent. Thus we will try to use more straight forward statistics to highlight the degree to which America today suffers from economic inequality.

The graph below shows inflation adjusted percentage increase in after-tax household income for the top 1% and the four quintiles, between 1979 and 2005(7) (Source: Wikipedia http://en.wikipedia.org/wiki/Income_inequality_in_the_United_States#Gini_index), which shows how dramatically the income of the top 1% has outpaced the rest of the population.

The Gini index is an internationally standardized measure of inequality, with 0 (zero) representing total equality and 100 representing complete inequality; for income distribution 0 would signify that everyone has the same income, while 100 would signify that all wealth is in the hands of a single person. (The formal Gini index goes from 0 to 1, but for some reason most people choose to multiply by 100).

The Gini index for the US between 1967 and 2001 as shown below (Source: Wikipedia from US Census data) shows the steady rise in income inequality since the 1970’s.

Internationally, America’s history in terms of economic equality is anything other than the envy of and model for the rest of the world. Denmark, one of the most equal in terms of income distribution, had a score of 24.7 compared to a score of 46.5 in the US. In 2005 (newest OECD data available), the US ranked last (i.e. the must unequal) in terms of income distribution among 20 OECD countries.

Author’s note: GINI values need to be reconciled. OECD data has the US at 38.14, while the data from Wikipedia -- US Census? reports a value of 46.5 in 2001.

As Dahl points out, this suggests that American politics and society at large has become much too focused on its market economy at the expense if its democracy. He goes on to say that there exists “... a kind of antagonistic symbiosis” between democracy and market-capitalism. He points out that 

“[Representative(8)] democracy has endured only in countries with a predominantly market-capitalist economy; and it has never endured in a country with a predominantly non-market economy”.

Dahl argues that the non-centralized “egalitarian” nature in which market-capitalism is organized (a multitude of individual entities - tiny to huge companies, farms, and individuals, “...guided solely by self-interested incentives”) reenforces the egalitarian and individualistic characteristics of democracy. 

He also argues that market-capitalism has, as a rule led to economic growth, initially reducing extreme poverty and increasing living standards, which in turn reduces social and political conflict. Market-capitalism has, in the past, also contributed to the creation of “...a large middling stratum of property owners who typically seek education, autonomy, personal freedom, property rights, the rule of law and participation in government” -- the “middle class” so near and dear to all politicians, at least in their rhetoric.

And market-capitalism benefits form exactly the environment which a stable democracy fosters: personal freedom, property rights and the rule of law. It has been amply documented that free-market capitalism could not survive without the laws and regulations that governments enact and enforce.

However, Dahl also points out 

“Yet if the affiliation between democracy and market economies had advantages for both, we cannot overlook an important cost that market economies impose on democracy. Because a market economy generates economic inequality, it can also diminish the prospects for attaining full political equality among the citizens of a democratic country” [my emphases].

Left to its own devices, market capitalism, by definition, will attempt to concentrate more and more wealth and power (both economic and political) in the hands of fewer and fewer individuals (a natural tendency towards monopolies) without any regard to the damage it does on the way. To quote the fictional Gordon Gekko in the original movie Wall Street, “greed is good”, or the even more disturbing quote from the (unfortunately non-fictional) Alan Greenspan:

”Those of us who have looked to the self-interest of lending institutions to protect shareholder’s equity (myself especially) are in a state of shocked disbelief.”

The popular myth that “markets are self-regulating” (in anything except perhaps prices) and that the self-interest of market-capitalism will prevent it from killing the goose which lays the golden eggs (a large, healthy middle class) are demonstrably wrong.

Sometime during the late 70’s, and especially during the presidency of Ronal Reagan, the public perception of market-capitalism and the political discussion about the natural give and take between democracy and market capitalism shifted to an unquestioning acceptance of the “benefits” of market capitalism and the “evils” of government intervention and regulation.

That shift signaled the beginning of the end of American democracy. A recent column in the Seattle Times by Jerry Large(9) profiles the thoughts and concerns of a 74 year old retiree who used to be a manager in the defense industries and is a self-described conservative. He echoes my own concern that the Reagan years proved a watershed in American politics:

“He recalls Ronald Reagan declaring government isn't the solution, government is the problem. Something in America changed then”.

Today even the “liberal” factions in political discourse have taken a defensive posture when arguing for the self-evident need to control, moderate and regulate the natural undemocratic tendencies of market-capitalism, when actually they should see it as their duty in protecting democracy to do so. Note the oath of office:

“...defend the Constitution of the United States against all enemies, foreign and domestic...”

And as Dahl points out, left to its own devices, not maliciously, but be definition, market-capitalism will work to destroy democracy, the fundamental premise of the Constitution.

So what is the reason for this dramatic shift in public discourse away from a natural and necessary ongoing discussion of the proper balance between naturally antagonistic democracy and free-market capitalism, towards an unquestioning acceptance of free-market capitalism and a reviling of the “evils of government”? The free-enterprise dominated media have succeeded in excluding the general public from setting the agenda for political discourse (see the fourth of Dahl’s criteria for a functioning democracy), instead restricting the agenda-setting rights to a new oligarchy(10), characterized by wealth and power. For more on the role of the media in killing democracy in America, see the next chapter.

In spite of what Robert Dahl has proposed as requirements for democracy, there has always been a discussion(11) (generally in the background away from public scrutiny) of whether the “ignorance and stupidity [of]... the masses” need to by guided by an “intelligent minority”. Madison assumed this intelligent minority to be composed of “pure and noble” men, each an “enlightened statesman” and “benevolent philosopher”. 

So one might speculate that the increased power of the free-enterprise capitalist oligarchy is a natural development in this direction. Not so, for it has become painfully obvious by the financial meltdown of 2008/09, that this minority is not intelligent, nor enlightened, nor benevolent.

The economic and political “elite” (actually one and the same), unquestionably does have virtually all the power in today’s America. It would be much more honest to come out and proclaim their beliefs that only they, the elite, are capable of actually making the needed decisions, rather than hide behind the propaganda mind control veneer of “protecting the Constitution”. In that sense we have taken a huge step backwards from the monarchies of pre-Enlightenment Europe: at least the old monarchs had the courage to be honest about their belief that they had the “divine power” to rule. But more of that in the chapter on The Role of the Media.

By now the reader might be convinced that I am arguing for the abolition of free-market capitalism. Not at all. Alternative systems for organizing the economic affairs of a state, such as outright communism, state capitalism or old style socialism, have been tried and have failed. They have failed both as economic systems (efficient distribution of goods and resources) and in their demonstrated incompatibility with democratic governance. As Dahl points out 

“... democracy has endured only in countries with a predominantly market-capitalist economy; and it has never endured in a country with a predominantly non-market economy”.

It is inevitable that the battle lines between Anglo-American free-market capitalism and other forms of capitalism will become hardened. Especially now that the proponents of the former have seen themselves pushed somewhat into the defensive by the horrendous failures of the American dominated world financial markets, there will be a concerted effort to cloak Anglo-American free-market capitalism in the mantel of the savior of democracy, rather than the threat to democracy it actually is. This is most easily done by contrasting extreme opposites so as to make the option one favors seem like the only rational one.

An interesting example of this is presented by Ian Bremmer(12) in The End of the Free Market, where he argues the following:

“With the ‘rise of the rest’, these [China and Russia] and other developing states have cut into U.S. political, economic and cultural hegemony over the past several years, and Washington has seen its great-power advantage shrink, at least on a relative basis ... The risk for the United States -- and for free-market democracies generally -- is that distortions created by state capitalism will ensure that the pie isn’t expanding quickly enough to accommodate all the new mouths it will soon be expected to feed. That will threaten not just standards of living, but eventually perhaps the security of the world’s free-market democracies.

Note how cleverly Bremmer moves from his true fear (reducing U.S. hegemony over the rest of the world -- perhaps unintended candor) to wrapping the flag around free-market capitalism as vital to feed the world and save democracy.

The “distortions” by state capitalism Bremmer refers to are the efforts by these countries to use their new-found economic power to promote their own national interests. When in its history has the U.S. ever shied away from using its economic power to ruthlessly promote it’s own national interest?

In fairness, Bremmer has some thoughtful comments on the limits of extreme laissez-faire free-market capitalism and the needs for increased government regulation. He also somewhat obliquely says that left-of-center political parties, both in America and Europe, which in general favor more government oversight and regulation of free-market enterprise, might be able to offer useful input. However, these sensible analyses are interspersed with some gems, such as

“By forcing managers to maximize share price through cost-cutting, more capital and workers are released back into the marketplace to power other companies and sectors” [emphasis mine - a nice euphemism for being laid off]

And beyond that, Bremmer’s critique of state capitalism vis-a-vise free-market capitalism is rather myopic. Virtually every criticism he levels against state capitalism applies equally to free-market capitalism as practiced in the U.S..

Some examples:

“[state capitalism is] not a formula for producing more efficient or more equitable economic performance”.

There is ample evidence that the U.S. free-market capitalist system has become world champion in unequal distribution of wealth.

Bremmer is critical of China’s response to the world-wide financial crisis of investing $586 billion in infrastructure and affordable housing, supposedly leaving other vital sectors and geographic areas floundering.

How is that different from the U.S.’s “stimulus package”? Any investments in “social” programs (such as China’s affordable housing) were met by howling protests from America’s business leaders and conservative politicians.

Bremmer is critical of the close ties between “political and business elites”.

Such ties are just as strong in the U.S. but in the opposite direction, where business leaders mover into government and exert huge influence on the direction of the state, even to the extent of inciting wars to benefit their (former) business contacts (as in Chaney and Halliburton).

Bremmer minimizes the bailout of “too large to fail” companies in the U.S., claiming, without a shred of evidence, that this problem is or would be much larger in China because of large investments China makes in both state-owned and private companies. But what about the huge selective subsidies the US government provides to all sorts of industries (as a result of extensive lobbying by those industries) where many of these subsidies never were “efficient” in a long-term holistic sense.

The final hypocrisy of Bremmer’s arguments in favor of U.S. style free-market capitalism are evident in his description of how China won mining contracts in the West African country of Guinea. The unspoken implication is that China had a hand in the killing of 157 people in a local revolution which preceded the awarding of contracts. Apparently Mr. Bremmer is not familiar with the U.S. history (especially in Central America) where it fomented revolutions and even created new countries just to gain economic advantages.

Even though I found Bremmer’s defense of Anglo-American free-market capitalism very myopic, self-serving and uninspiring, I by no means would argue for state capitalism for America. As Dahl points out, democracy has only survived with free-market capitalism and vis-versa.

However, what I would point out is that there exist many stable democracies where free-market capitalism is used, but where governments do a much better job of modifying the anti-democratic, elitist and authoritarian characteristics of free-market capitalism. 

Rather than reference academic studies on the different flavors of free-market capitalism which exist today in the world, I will draw primarily from my own personal experiences from living and working in Europe for more that 20 years.

This is where it gets difficult communicating with an American audience - there is a pervasive mis-conception in large segments of the population (judging by the media, almost the entire population) which equates Europe = Socialism = Communism. This misconception, aside from being completely false and a sign of deplorable ignorance, is of course not coincidental but is very much part of The Media’s deliberate mind control in order to keep the agenda of public and political discourse within the limits set by the power elite-- but I’m getting ahead of myself; more on that topic in the next chapter.

Let’s look at Germany. That’s the country where I spent almost 20 years, living and working there. I still speak the language, and oh yes, I did mention that I am originally from Germany. Admittedly, Germany is a somewhat special case, even within Europe, but it will do as an example for my main point that there are alternatives to the Anglo-American version of  laissez-faire free-market capitalism while still maintaining a free-market economy and enjoying a stable democracy.

Many of you may find my delving into the German version of a “social market economy” rather tedious. You are welcome to skip to the “Conclusions” to this chapter.

Germany refers to its version of free-market capitalism as soziale Marktwirtschaft, literally social market economy, but I like to refer to it as free-market capitalism with a social conscience. It is also worth pointing out that this economic model was introduced and promulgated in Germany not by socialists, but by a free-market conservative (Christian Democratic Union) Ludwig Erhard. Aside from its historical basis (see below) , social market economy is loosely based on work done at the University of Freiburg under the name “ordoliberalism”. It also has significant roots in catholic social teachings -- after the war, western Germany was primarily a catholic country.

Germany has a fairly strong history in socialism - after all Karl Marx was German - but it also has a strong background in mercantilism and commercialism. As early as 1848, when revolutions against feudal aristocracies were erupting all over Europe, the ill-fated Frankfurt Parliament passed a minority resolution for the establishment of labour councils to set boundaries against arbitrary corporate power. These were different from traditional labour unions, which are mainly designed to give workers greater leverage in terms of wage negotiations and working conditions. The Labor Councils had the broader aim of giving workers a voice in the actual corporate decision making process (Mitbestimmung, or co-determination). Little by little, as the excesses of corporate power became apparent during the industrial revolution, additional types of companies were included and co-determination became part of the laws of the Weimar Republic.

With the end of World War II, as the Allies were seeking to move Germany back into the arena of (more or less) independent countries, the Allied Control Council helped to draft a new German constitution (Grundgesetz) based partly on the Weimar Constitution, but also with significant input from New Deal Democrats. One of the elements which made it into the new German Grundgesetz was the co-determination law.

Over the years this law has been fine-tuned and expanded. Today the law gives employee representatives half the seats on the “supervisory board” (its chairman is always a representative of the stockholders and has a double-vote in case of ties) applies to any company with 2000 or more employees, which translates to less than 800 companies in Germany today. For companies with 500-2000 employees the law provides for a one-third representation of employees on the supervisory board(13). 

This model has not always been an unqualified success. Early on management grudgingly adhered to the various legal prerogatives of the employee representatives on the supervisory board and these representatives sometimes delayed innovations if there was any chance these innovations would cause termination of employees. However, today co-determination forms the bedrock of Germans’ understanding of employee-management relations. Management has learned that employee input, formalized through the employee representatives on the supervisory board, can provide invaluable input, especially in the areas of productivity, quality and safety. By the same token employees have a better understanding and appreciation of company policy decisions and are more willing to make concessions based on this understanding.

Germany also has some of the toughest laws protecting employees from termination, compared to the “at will” employment typical in the US. Basically this means that any employee of a company with five or more employees who has been employed for more than six months is very difficult to terminate. 

As always with laws and regulations, there are positive and negative impacts(14). On the negative side there is the perception (mostly from outside of Germany) that this results in a lot of non-productive “dead wood” among employees, that it makes it more difficult for companies to react to ups and downs in the economy, and that it makes companies reluctant to hire.

On the positive side, for the employee obviously there is a greater sense of security. However, for the company too there are advantages such as protecting and maintaining their reservoir of experienced and skilled employees. This has become such a vital issue for some of the largest German companies today (2010) that they have guaranteed no terminations other than through normal attrition.

Now that we have a basic understanding of the German economic model, labor law and labor relations, how does this translate to individual (my) day to day experience working in Germany. Durning my time in Germany I worked both for a large company (BMW) which falls under the co-determination laws, and for (initially) small companies which fall outside of that law.

The co-determination affected me only indirectly at BMW in that some of the projects I was working on, which involved the introduction of what was then state-of-the-art Computer-Aided-Design/Manufacturing technology (CAD/CAM), needed to be reviewed and approved by the supervisory board. However, I was not directly involved in this process and at BMW there were no significant delays resulting from co-determination. I did hear anecdotal accounts of some companies (such as VW) which had large storage areas filled with already purchased CAD/CAM work stations going unused while their supervisory boards grappled with issues of employee obsolescence due to technology.

Other than that, I must admit that my personal experience with co-determination is non-existent. But there are personal experiences which can shed light on the differences between US and German-style free-market capitalism. The most profound difference I remember was in the “experience” of being an employee in Germany compared to the US. 

US companies are hyperactive in their claims to consider employees (“team members”) to be their greatest asset. There is much pontificating in HR brochures and the “all-hands meetings”, with prizes and acknowledgments handed out to “employees of the month” and a lot of rah, rah, team spirit hyperactivity. However when push comes to shove and there is a need to lay off these “valuable assets” in the name of “efficiency” (translate: profit), or as Bremmer referred to it, releasing workers back into the market to power other companies and sectors, these employees suddenly become virtual criminals -- they are immediately escorted off the premises, often not even allowed the basic human dignity of saying goodbye to their co-workers. The two week severance in America’s “at will” non-contract employment model is interpreted as a purely financial obligation. And this act of “efficiency” immediately has huge side-effects on the former “team member” and possibly past “employee of the month” - aside from the fact that income is no longer coming in, health insurance is gone!

In my previous career as manager I myself was in the position of having to execute a mandate to “cut 10% of employees across the board” (how is that for “efficiency” based decision making). And with the extremely short range thinking typical of American management (the next quarterly results are seemingly the only thing which counts), many companies which execute these draconian layoffs (in the name of efficiency) find themselves hiring again a few months later. Even in the best of circumstances the learning curve for new employees is such that the company-specific know-how needed to truly replace the laid off employee takes at least six months or more to regain.

This is a truly dehumanizing experience, not just for those who are laid off but also for the person having to do it. For me personally, it was the turning point which caused me to give up the management path and go back to my engineering roots.

In Germany the employee feels much more secure and in control of his or her destiny. Yes, there is grumbling and critique of “management”, but in all my time working in Germany I never personally experienced a co-worker who was unproductive “dead wood”, taking advantage of the “job security” - I’m sure it exists, but I never experienced it. Even without the “all-hand meetings”, the esprit de corps was always palpably present and an employee did not need to be named “employee of the month” to know his or her worth to the company.

However, German workers do loose their jobs; companies do go out of business or have to downsize. These companies will defer layoffs until the last, yes, partly because, with German labour laws being what they are, layoffs are expensive for the companies involved (severance, retraining, etc). However, German employers are also acutely aware of the “skill loss” whenever an employee is let go. Note that this is not dissimilar to some privately held companies in the US (see for example SAS under CEO Jim Goodnight), which often not only hold on to their employees during lean periods, but use waves of layoffs by other companies to hire and acquire skills for themselves.

During much of my time in Germany I was “Director of Technology” (executive VP) of a fast growing technology company (German subsidiary of an American company) spending a good portion of my time recruiting to satisfy the 100% annual growth. The recruiting and hiring process is very exacting in Germany (for good reason, given the labour laws), and the expectation is that you hire “permanent” employees -- all work contracts are of “indefinite length”, not the “at will” arrangements of the US. Even now, some 20 years or more later, most of the people I hired are still with the company, often now in management positions themselves.

If there is one feature of the German model which to me is the most important in distinguishing it from the US, it is by far the maintenance of health insurance for everyone, independent of one’s employment status. Although I was happily never without a job in Germany, the peace of mind which this provides is in my view incomparable. I will not go into details about my experience with the German health insurance and health care system compared to its American counterpart -- that would be a whole chapter (if not book) of its own -- suffice it to say that I found it vastly superior to the American health care system.

Furthermore, German (and European) employees do get significantly higher unemployment benefits, and for longer periods than their American counterparts, and yes, there is documented fraud and misuse of these benefits which need to be controlled and reduced. However, even American economists have agreed that unemployment benefits are one of the most efficient “transfer payments”(15).

The typical argument put forward by free-market capitalism purists is that unemployment benefits will encourage people to remain unemployed. This argument, believe it or not, was put forth recently (December 2010) by prominent politicians during the negotiations to extend the Bush tax cuts in order to pass a bill to extend unemployment benefits. Even though unemployment is at almost 10%, and every sane person realizes that even to most energetic job seeker will not find a job, this was still put forward as the reason for opposing the unemployment benefit extension. As Krugman(16) points out, there is some validity to this argument during times of full employment. But even in those times the degree to which unemployment benefits increase unemployment is much disputed. Larry Summers claims the amount to be 0.5% of “full employment” unemployment rates.

But I digress; I promised a personal view. During most of the time we spent in Germany unemployment was between 6 and 9 percent (average around 8%), which is high by American standards. Interestingly, we saw very few (if any) street people, beggars or homeless on the streets of Munich. By contrast, even during the glory days of the recent period of “full employment” (unemployment rate between 4% and 5%), Seattle was full of street people and homeless camps were continually being shuttled from one church parking lot to another.

Admittedly, Munich is one of the most prosperous regions in Germany and there are many cities in Germany (Berlin and the Ruhr area, for example) where the disparity is much more obvious. But then Seattle is not Detroit either.

Given that, again, the typical argument put forward by free-market capitalism purists is that “we” cannot afford social programs such as universal healthcare and generous unemployment, one would expect the German government debt to be astronomical compared to the US, especially given the long term high unemployment rates in Germany compared to the US. However, in 2008(17) (for example), the government debt in Germany was 68.84% of GDP, while in the US is was 69.98%.

This shows that what a country can “afford” is simply a function of priorities rather than absolute financial constraints. Germany and most of Europe have “chosen” to spend their resources on maintaining general economic stability with highly effective transfer payments in the form of unemployment benefits, rather than allowing millions of citizens to descend into abject poverty, not because they are lazy or unmotivated, but because politicians and the much vaunted free-enterprise managers at the highest levels have screwed up.

There are other choices which Germany and other European countries make in deciding the degree to which governments need to constrain and modify the natural greed of free-market capitalism. One which has direct impacts on my experience of working in Germany compared to the US can be illustrated by my daily commute to work: investments in infrastructure.

In Munich I would leave our downtown apartment early in the morning, usually around 7:00am. I would step out into the streets, which were clean and well maintained. We did not own a car (this alone is an option which most Americans do not have unless they happen to live in New York City), but I would have a choice between several options for getting to work. I could walk a few blocks to the nearest subway station (a system which was built from the ground up in the late 1960’s in preparation for the Olympic Summer Games) or, if the weather was bad, I could hop a street car to take me to the subway station. The stations were clean, the trains running every three to six minutes during the peak periods. At my destination I would exit and again have the choice of walking the remaining five blocks or hopping a bus. Including transfers, the whole trip would take less than half an hour.

In Seattle (by design because of our European experience, we chose to live in near-down-town apartments) I have, by American standards, excellent public transportation - a direct bus route from home to my work. However, whenever possible I would choose to walk, not because I am big on exercise, but because the busses are, frankly, dirty and unreliable. Because of Seattle’s laudable policy of a down-town free-ride zone, the busses have become movable flop-houses for the homeless (or Reagan’s happy campers, as I like to call them -- one of Reagan’ brilliant moves to balance the budget was to remove all federal funding from mental care facilities) trying to get some warmth and catch a few hours of sleep.

However, walking the streets of Seattle in the early morning hours is not a pleasant experience either. Garbage tends to be strewn all over because of the fact that the mid-block alleys are where garbage is deposited in preparation for pickup. Originally this was a very efficient design, allowing garbage trucks to use alleys, thus not blocking traffic on the streets. However, with Reagan’s happy campers now out all night looking for food and whatever else people might have thrown out, garbage containers tend to be opened or even overturned.

My place of work is in the heart of downtown, but even here in the early morning hours many doorways are occupied by homeless men; some are just curled up on some flattened cardboard boxes with old newspapers used as blankets; others have old moth-eaten sleeping bags with all their worldly possessions stacked up around them like a little wall to stake out their quarters.

This description may strike some readers as gratuitous and irrelevant in a high-level discussion of the role of free-market capitalism in a democratic society. However, to me it is extremely relevant (if anecdotal) that America, the self-described richest country in the world, has so many people living in the most abject poverty, while other democratic countries seem to have found the will and the means to afford its citizens with a minimum subsistence allowing them to retain some human dignity. 

And besides, for the average citizen what better way is there to compare the effectiveness of political and economic systems than by average every day experiences. What struck me is that while living and working in Germany, with its admittedly marginally higher overall tax burden, I never resented paying these taxes, because every day I saw the benefits from these taxes (clean and safe streets, excellent urban infrastructure, superb healthcare). In the US, however, when I see the city around me disintegrating, the abject poverty on the streets, the mentally ill roaming the streets, the lack of functioning public services, then I do resent the taxes I pay, because all I see is corporations and the 1% corporate and political elite getting richer and my tax money being spent on idiotic wars.

Conclusions

The major points I would like the reader to keep in mind as we proceed to the the next contributor of the Death of Democracy in America are:

• Democracy in America is tied intimately to equality.
• Free-market capitalism is the organizing mechanism for its economy, as it is for every stable democracy which exists today.
• Democracy and free-market capitalism, although symbiotic up to a point, are in conflict because free-market capitalism, as a result of its guiding principles (self-interest), has a strong tendency towards (economic) inequality.
• In this antagonistic relationship between democracy and free-market capitalism, America has chosen to err on the side of free-market “efficiency” and chosen to characterize government attempts to modify the resulting inequality as “evil”.
• This has resulted in the evisceration of what was once a large and vibrant middle class and the rise of a large caste poor un- and underemployed, who have virtually no input to the political process.

Footnotes:
(5) Mark Whitehouse, Nations Seek Success Beyond GDP, WSJ, Jan 11, 2011

(6) Beyond GDP? Welfare across Countries and Time, Charles Jones and Peter Klenow. http://www.scribd.com/doc/37781551/Jones-Klenow-Happines-and-economic-growth

(7) Source: Wikipedia http://en.wikipedia.org/wiki/Income_inequality_in_the_United_States#Gini_index

(8) Dahl uses the term “polyarchal” in place of “representative”, but for this non-academic book that term is unnecessarily obscure and confusing.

(9) Jerry Large, “What’s wrong with America?”, Seattle Times, Jan. 3, 2011

(10) From Wikipedia: The oligarchy is a form of power structure in which power effectively rests with a small segment of society distinguished by royalty, wealth, family ties, corporate, or military control. The word oligarchy is from the Greek words "ὀλίγος" (olígos), "a few" and the verb "ἄρχω" (archo), "to rule, to govern, to command". Such states are often controlled by a few prominent families who pass their influence from one generation to the next.

(11) Being lazy, I am taking much of this from Noam Chomsky’s Foreword to Our Media Not Theirs by Robert W. McChesney and John Nichols. However, I have dipped directly into some of the referenced material to assure myself of its validity.

(12) Ian Bremmer, The End of the Free Market, Who Wins the War between States and Corporations; Portfolio, Penguin Books, 2010.

(13) The supervisory board sets the companies long term policies, goals and agenda. The management board (Vorstand) is charged with day-to-day management. The management board must have one member from the employee representatives of the supervisory board, usually in the capacity of Director (or Executive VP) for Human Resources.
(14) See a very interesting paper by Ullrich Witt, Germany’s “Social Market Economy” Between Social Ethos and Rent Seeking, which is actually critical of Germany’s social market economy because in “practice it cannot easily be aligned with economic efficiency and robust individual freedom”. However, it presents a very good discussion of the tradeoffs between free-market and social policies.
(15) From the Huffington Post: The Congressional Budget Office says every $1 spent on unemployment benefits generates up to $1.90 in economic growth. The program is the most effective government policy for generating growth among 11 options the CBO has analyzed.

Mark Zandi, chief economist at Moody's Analytics, puts the bang-for-a-buck figure at $1.61, and a recent Labor Department study estimates it at $2.

(16) See for example Paul Krugman, Punishing the Jobless, New York Times, 07/05/2010

(17) Source: OECD. Note that in 2000 the US was at 54.4% and Germany at 60.35%, but by 2008 US debt rate had surpassed Germany, and this despite Germany’s higher unemployment rates between 2000 and 2008.