Stumbling and Mumbling

Author: chris dillow   |   Latest post: Sat, 8 May 2021, 1:46 PM


Capital's political power

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The Tories are corrupt. That's the message of handing out PPE contracts to government cronies; Cameron's lobbying for Greensill; the murky financing of Johnson's home "improvements"; and Robert Jenrick's doing the bidding of Tory donors. All this, says Grace Blakeley, highlights the problem of "politicians and business people being in each others' pockets."

All this, however, is only part of the story. Even if our politicians were honest and even if the media were unbiased capitalists would still have disproportionate (pdf) power over government. Grace is right to say that "our 'democracy' works for the powerful, not the people." But this is due not to the shortcomings of particular individuals, but to systemic forces.

One of these was pointed out by that great left-wing economist Adam Smith. We have, he wrote, a "disposition to admire, and almost to worship, the rich and the powerful, and to despise, or, at least, to neglect persons of poor and mean condition":

We frequently see the respectful attentions of the world more strongly directed towards the rich and the great, than towards the wise and the virtuous. We see frequently the vices and follies of the powerful much less despised than the poverty and weakness of the innocent...The great mob of mankind are the admirers and worshippers, and, what may seem more extraordinary, most frequently the disinterested admirers and worshippers, of wealth and greatness.

Gordon Brown - a more honest man than his successors - was prone to this. He praised top bosses as "wealth creators" and courageous leaders, inviting several to become ministers or advisors, such as Mervyn Davies, James Crosby, Shriti Vadera and David Freud. David-cameron-lex-greensill_5342014

The financial crisis and decade-plus long stagnation in productivity have of course shown that bosses in aggregate do not have the especial expertise Brown imputed to them. But the deference continues. If you listen to pretty much any 7.20 interview on Radio 4's Today programme you hear bosses being interviewed as if they were impartial (even heroic) experts, whereas trades unions are portrayed as sectional interests.

It's not just politicians and journalists who are deferential, though. So too are voters. How else to explain their belief that the Tories are economically competent when the truth is that they are criminally stupid?

Such deference amplifies a separate lever that capitalists have - business confidence. This, it is believed, is essential for investment and job creation. And so, wrote Michal Kalecki, "everything which may shake the state of confidence must be carefully avoided because it would cause an economic crisis." Hence the success of demands for low corporate and top tax rates.

There's a third lever - ideology. John Jost has written of system justification theory (pdf), which he defines as the "process by which existing social arrangements are legitimized, even at the expense of personal and group interest." This works through many mechanisms. There's a form of anchoring (pdf) effect: Kris-Stella Trump shows how our perceptions of what's fair are heavily influenced by the existing distribution of income. There are reference group effects: we compare ourselves to those around us, so many low-wage workers resent benefit claimants more than rich bosses. Then there are status quo biases and the just world illusion - mechanisms whereby we tolerate or even deny existing injustices.

Related to this is an asymmetric noise effect. As Amartya Sen pointed out, the very worst off are often "more easily reconciled to deprivations than others reared in more fortunate and affluent circumstances" (Ethics and Economics, p45). And so they make less noise than the wealthy, even if the latter's complaints are trivial or arise from narcissistic over-entitlement.

I've no doubt that our media magnify these ideological biases towards capital. But I'm not sure they create them. One reason I say this is that we see the same cognitive biases that dispose voters to accept inequality in other domains such as the stock market. For example, analysts' forecasts for a firms' earnings growth are wrongly anchored (pdf) by the industry average growth, and the same reference group effect that causes people to punch down or across rather than up might help explain where there is often no risk-reward trade-off in finance. It has long puzzled me that when I write about cognitive biases in stock markets I'm seen as an intelligent technocrat but when I discuss the same ones in politics I become a loony Marxist drivelling about false consciousness.

None of this is to say that it is always a terrible thing that capital has undue sway over politics: sometimes the interests of capital and labour coincide. Our problem is that, in recent years, it has been the most backward segments of capital that has had most influence - rentiers rather than genuine entrepreneurs.

My point, though, is that the political power of capital over governments is not merely the result of cronyism and corruption. It is not therefore something to be cured simply by electing decent, honest people - although this job seems too much for the British electorate. If we are to have genuine democracy - in the sense of equality of political power - we need structural change.

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