Are American Elites Killing Democracy?

I have often written about Friedrich Hayek’s Road to Serfdom as the most likely route America might travel to tyranny. Yet, there is another mechanism, the killing of a democracy at the hands of an elite, by which the United States could lose its democracy. It is an additional process to destroy democracy that can operate simultaneously with Hayek’s Road to Serfdom. This new mechanism is suggested to us by ancient Athens at the end of the Peloponnesian War in 404 BC.

The Thirty Tyrants of Ancient Athens

The Peloponnesian War was a conflict between authoritarian Sparta and democratic Athens between 431 and 404 BC. Like many other totalitarian powers down to the present day, the Greek city-state Sparta, known as Lacedaemon in ancient Greece, was jealous of its rivals’ power. In Book I, Chapter I, paragraph 23 of The History of the Peloponnesian War, Thucydides wrote,

The growth of the power of Athens and the alarm which this inspired in Lacedaemon, made war inevitable.

Thucydides, The History of the Peloponnesian War

In addition to the power rivalry, Sparta and its allies were motivated by their dislike of Athenian democracy. Athens was a direct democracy, not a republic. Any male citizen could debate and vote to enact laws in the Assembly of the Demos. Female citizens had a restricted citizen status that did not include political rights. Sparta on the other hand shared aspects of an oligarchy (rule by a few) and of a monarchy.

After 27 years of war, Sparta finally prevailed over Athens and its Delian League. Having overthrown Athenian democracy, Sparta opted to replace it with a friendly government more in Sparta’s image and more to Sparta’s liking. Athenian democracy gave way to an oligarchy known to history as the Thirty Tyrants.

In forming this oligarchy, the Spartans found willing partners among the Athenian elites. In the view of those elites, democracy gave entirely too much power to the common citizens. That Athens had been defeated by Sparta convinced those elites that Sparta’s authoritarian system was superior.

The rule of the Thirty Tyrants was brief and bloody. It lasted for all of eight months, overthrown by a group of Athenian exiles. To enforce their rule, the tyrants had exiled democracy supporters, confiscated citizen’s property, and killed approximately five percent of Athen’s population. Among the murdered Athenians was the iconic philosopher Socrates. Ironically, Socrates himself seems to have been a critic of democracy.

The Killing of Democracy by an Elitist Oligarchy

The death of democracy at the hands of an elite is somewhat different from its demise at the end of Hayek’s Road to Serfdom. The forces that push us down the Road to Serfdom are the citizens’ own desires that government solve most of their problems for them. The killing of democracy by elites occurs independently from the electorate when elites believe democracy does not work for them. Then, as with the Thirty Tyrants of Athens, the elites transform their democratic regime into an oligarchy. The evolving oligarchy might retain some democratic forms such as sham elections, but it would continue to grow more autocratic.

There is no fundamental reason these two nemeses of democracy cannot operate simultaneously. In fact, one can spur the other. As the electorate demands more government action, the elites can be spurred to accumulate (or encourage) increasing powers in a government controlled by them. As the government develops programs to solve social and economic problems, it will allocate a growing fraction of the GDP to support those programs. That fraction of the national income will then be unavailable to individuals and companies, reducing their freedom of choice. Eventually, when government directs a large enough share of the economy and controls the allocation of a large enough share of GDP, the country becomes socialist and democracy dies.

The fact that academic, Democratic Party, most news media, and cultural elites have been in favor of increasingly authoritarian government is very old news. What is new is the defection of many from the economic elites to the ranks of progressive authoritarians. Time Magazine reporter Molly Ball noted two odd things happened after the 2020 elections. First, despite expectations, there were no riots in the streets after the election (at least not immediately). Second, and more telling, hundreds of major business leaders turned on Trump and his supporters. Ball asserts that after the election,

There was a conspiracy unfolding behind the scenes, one that both curtailed the protests and coordinated the resistance from CEOs. Both surprises were the result of an informal alliance between left-wing activists and business titans. The pact was formalized in a terse, little-noticed joint statement of the U.S. Chamber of Commerce and AFL-CIO published on Election Day. Both sides would come to see it as a sort of implicit bargain – inspired by the summer’s massive, sometimes destructive racial-justice protests – in which the forces of labor came together with the forces of capital to keep the peace and oppose Trump’s assault on democracy. …

(It was) a well-funded cabal of powerful people, ranging across industries and ideologies, working together behind the scenes to influence perceptions, change rules and laws, steer media coverage and control the flow of information. They were not rigging the election; they were fortifying it.

Molly Ball, Times.com

Or at least Molly Ball thought, along with most other progressives, that Trump was the one assaulting democracy. Yet what can we call a “conspiracy” to “influence perceptions, change rules and laws, steer media coverage and control the flow of information?” Democracy was a casualty in a war against any and all supporters of free-market capitalism. This included Trump supporters. During Trump’s entire administration, progressives and their media supporters claimed that Trump’s 2016 election was fraudulent and illegitimate. These phony claims were based on the now-debunked charges of Trump’s collusion with the Russian government. Yet, now, progressives and their allies consider any questions about statistically improbable 2020 election results to be tantamount to treason.

The defection of CEOs and corporations to the progressives is actually the culmination of many decades’ evolution. Over time, the managements of many companies have been seduced by the idea that government can give them special privileges and advantages. Rather than being guided by the marketplace in what they produced and how they allocated capital, corporations increasingly followed the suggestions, or dictates, of the government. The quid they received for this quo were special ad hoc tax breaks and reductions in regulation that were industry-specific. Economic success was determined for these companies not by meeting the demands of a free-market, but by doing what the government wanted. This kind of government-business partnership is known as crony capitalism. Despite its name, crony capitalism is the very opposite of real free-market capitalism. Instead, it is a form of fascism.

In a 2009 New York Times article, Thomas Friedman quoted a global trade consultant, Edward Golderg, a professor at Baruch College.

Globalization has neutered the Republican Party, leaving it to represent not the have-nots of the recession but the have-nots of globalized America, the people who have been left behind either in reality or in their fears. The need to compete in a globalized world has forced the meritocracy, the multinational corporate manager, the eastern financier and the technology entrepreneur to reconsider what the Republican Party has to offer. In principle, they have left the party, leaving behind not a pragmatic coalition but a group of ideological naysayers.

Prof. Edward Goldberg, quoted by Thomas Friedman

What triggered CEOs and corporate managements to finally abandon the Republicans completely? Surely, the Trump administration’s trade wars, particularly against China, played a large role. It did not matter to these economic elites that those wars were being fought against hostile mercantilists. Instead, what was of greater importance to them was the costly disruption of supply chains with China. In addition, the constant false drumbeat by progressive-allied media that Republicans supported the January 6 “insurrection” made continued support of the GOP disreputable.

Will Business Titans Remain Allied to the Left?

When most American elites, including now our corporate elites, seek increasing governmental control of society, they are favoring an oligarchy. Democracy is simply not working for them. Perhaps, corporate managements might think, crony capitalism might reward their companies far more than free-market capitalism. If they continue to think this way, while all the rest of the nation’s elites push towards an oligarchy, and while about half the electorate wants to travel down Hayek’s Road to Serfdom, American democracy will indubitably die.

But will our business titans remain allied to the progressive Left? The empirical evidence from the history of all economically developed countries is that as governments expend an ever-larger share of GDP, their economic growth declines. As government monopolizes an ever-larger fraction of the nation’s income, that leaves less for companies to invest to increase their productive capacity. Also, companies tend to invest in productive capacity only when they think what they make can be sold. Welcome to the declining branch of Rahn’s Curve. This is shown in the scatter plot below. Each dot represents a developed country in the Organization for Economic Cooperation and Development (OECD) in the year 2013.

Yet another way to demonstrate the same thing is to make a scatter plot of developed OECD countries’ GDP growth versus their Heritage Foundation Index of Economic Freedom. This index is zero when the country’s government completely controls the economy and there is no individual economic freedom. It is 100 when private individuals and companies totally control the economy and the government has no say. The result for the year 2013 is shown below.

Clearly, the fortunes of most companies would benefit far more in a free-market capitalist economy than in one substantially controlled by the government. The fact that in both these plots the data points scatter about the trend line indicates there are factors other than government expenditures and economic freedom determining GDP growth. Nevertheless, that we can find a well-defined trend line in both plots with limited scattering points out how strong government expenditures and economic freedom are as determining factors. We can only hope the captains of industry discover these truths themselves. Otherwise, democracy certainly will die in darkness.

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