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The Great Debate: Is Democracy For Sale?

A CASI-hosted panel discussion reveals the challenges of creating a fair economy.

Is Democracy for Sale? Watch the full event

In an era when economic inequality is increasing at an alarming pace, concerns over the expanding power of money in politics and the erosion of democratic values have prompted a critical examination of corporations’ single-minded pursuit of ever-greater profits. How do the forces of capitalism impact democracy and society?  And how can we build a more equitable global economic system that upholds fairness and integrity for more than just the wealthy and powerful?

On April 4, the Corporations and Society Initiative (CASI) hosted a discussion titled, Is Democracy for Sale?  with a panel of distinguished experts.  Patrick Alley, co-founder of Global Witness, a leading voice in fighting environmental and human rights abuses, was joined by David Leonhardt, a Pulitzer Prize-winning journalist and senior writer for The New York Times, and Bethany McLean an acclaimed author and journalist known for her investigations of corporate scandals and the financial system. Together, they provided a timely exploration of the challenges of creating a prosperous, fair, and trustworthy system.

After a brief introduction by co-faculty director Anat Admati, CASI student leader Claudia Alvarez-Pujol moderated the session and set the stage for thoughtful dialogue by asking each of the panelists what sparked their interest in this topic and why future business leaders and faculty should care.

David Leonhardt emphasized the disconnect between America's robust economic growth and the overall well-being of its citizens.

“The United States, in many ways has the healthiest economy among high-income countries right now,” he said.  “Americans should be thriving. We should be doing very well, but we're not.”

Leonhardt pointed to measures of social health that reveal some of the ways in which American capitalism hasn’t translated into prosperity for large numbers of Americans, particularly those without a four-year college degree.

“For the last 15 years or so, the United States has had the lowest life expectancy of any rich country in the world. It's not particularly close anymore. We trail every other rich country in life expectancy by a substantial amount.”

Leonhardt stressed that all citizens, even those who have had rising standards, should be deeply worried about these trends because they're the source of many problems in our society.

“I think we need to use our democratic system to figure out how to produce a healthier version of capitalism than we have today.”

Bethany McLean confessed that as a math major in college, she had little interest in economics or history. When she worked at Fortune Magazine, she said she never questioned the idea of a “free market” economy. 

“When I wrote about Enron, I saw it as a malfunction, but not as anything systemic, not as anything that pointed out any larger problems in our economy.”

McLean told the audience that the global financial crisis in 2007-2008 led her to scrutinize how a system that ostensibly promotes prosperity can fail so many. McLean stressed the importance of ensuring that capitalism does not lead to societal upheaval, underscoring the dangers of economic discontent.

“If we like this system and we think that capitalism throughout history has offered the best chance for the most people, of raising people out of poverty and providing a better living standard, then we really need to be thinking about how to save it,” she said.

Patrick Alley shared his journey that began with an investigation of the illegal timber trade along the Thai-Cambodia border and led to his activism in confronting global corruption.

“Corruption for me is like a cancer that eats the heart out of democracy,” he said.

Alley spoke about the ‘resource curse’ plaguing countries such as the  Democratic Republic of Congo (DRC) and Myanmar and similar countries that have extraordinary wealth in oil, minerals, and other natural resources.

“Those countries are, in fact, some of the poorest in the world with some of the worst human rights conditions in the world. They are very often prone to conflict, precisely because they're rich in natural resources.”

Alley’s work with Global Witness revealed how the corruption that causes so much misery and undermines democracy is intricately linked with and supported by the global financial system. Many players are implicated including the banks and the luxury goods markets in the West.

Alvarez-Pujol asked David Leonardt to talk about changes in the economic and political landscape of the US in the late 1970s, which moved the country from a period of robust government intervention and collective welfare to an era characterized by a diminished governmental role and heightened individualism.

“Our economy went through tremendous turmoil and problems in the 1970s,” Leonhardt began.

He recounted arguments at that time from notable figures such as Milton Friedman and Ronald Reagan who advocated for deregulation, tax cuts, and the weakening of labor unions as solutions to economic stagnation and inflation.

“Ronald Reagan had very deep beliefs about why these ideas would be better for the economy. I think some of these were reasonable diagnoses at the time and very specific promises about what this kind of laissez-faire economy would bring for Americans.

They didn't say it'll be good for rich people and bad for everyone else. They said it would be good for everyone. And I think the results suggest it hasn't been good for everyone.”

Leonhardt argued that rather than upholding an economic model that fails to deliver its promised benefits, an alternative form of democratic capitalism should be considered, one that emphasizes the need for government intervention in key areas such as education, regulation of harmful practices, and support for labor unions to enhance workers' political power.

Alvarez-Pujol then raised questions about the effectiveness of corporate self-regulation efforts, including Environmental, Social, and Governance (ESG) and Corporate Social Responsibility (CSR) initiatives. She asked Alley for his views on the real-world impact of businesses pledging to self-regulate in the absence of formal regulatory frameworks, aiming to combat corruption and contribute positively to society and the environment.

Patrick Alley responded with a stark assessment, condemning self-regulation efforts as "totally ineffective." Drawing from his extensive experience in environmental and human rights advocacy, Alley criticized the reliability of certification schemes, such as those claiming to ensure sustainable timber or conflict-free minerals from the Congo.

“Corporate social responsibility is one of the biggest jokes that I can think of. [Corporations] on the whole do not give a damn about those things.”

Alley highlighted the failure of corporations and world leaders to fulfill their environmental pledges since the 1992 Rio Earth Summit, including unmet goals for carbon emissions reduction and biodiversity preservation.

He argued that the profit motive and the fundamental structure of business, especially for publicly listed companies with obligations to shareholders, inherently conflict with the voluntary adoption of measures that might limit profitability, even when such measures are critical for environmental sustainability or social welfare.

Alley emphasized that given the overpowering drive for corporate profits, it is absolutely necessary to have regulatory frameworks that hold corporations accountable when their actions come at the expense of the planet and society.

The conversation then shifted to the vital role of critical thinking and ethical decision-making in business and journalism. McLean and Leonhardt shared insights on navigating the complexities of modern capitalism. 

McLean recounted an inspiring story of a small mortgage business owner who, during the financial crisis, chose ethical practice over profit, ultimately leading to long-term success. This anecdote underlined the value of contrarian thinking and ethical decision-making in an industry often swayed by short-term gains.

“I think there is a lot to be said for being contrarian and for not just going with the flow and it is so much easier to go with the flow.”

McLean emphasized the power of admitting ignorance and the importance of intellectual honesty, especially in complex fields like finance. She urged future leaders to cultivate the courage to acknowledge what they don't understand, suggesting that this humility can lead to deeper insights and stronger decision-making.

“Figure out what it is that makes you admit to yourself that you don't understand something. Even today. I'll pretend to understand something I don't. I don't even know I'm doing it. It's only when I sit down to write. And for me, writing is what keeps me intellectually honest and to say, I didn't really understand that after all.”

Echoing McLean's sentiments, David Leonhardt shared his own experiences as a journalist covering the housing crisis, lamenting his hesitance to probe deeper into the complexities of mortgage-backed securities. He regretted that he was intimidated by experts' apparent confidence and the complexity of the issues.

Leonhardt encouraged persistent questioning and the pursuit of logic. Maintaining intellectual curiosity and skepticism is a good way to uncover truths and avoid ethical pitfalls.

“Just because there's some academic study that says something, don't shut your mind off. Maybe it's not replicable. Maybe there's another academic study you haven't heard about that says the exact opposite thing,” he explained. “You will find investment opportunities by doing that.”

For her final question, Alvarez-Pujol asked each of the panel members, “Is Democracy for Sale?”

Leonhardt expressed cautious optimism, acknowledging that while democracy can indeed be compromised, historical movements like those for labor, civil rights, and disability rights demonstrate its resilience and capacity for positive change.

“Our political system still has the power to work, to improve our country, and to make sure that democracy isn't just for the one percent.”

McLean took a more critical stance by calling our attention to the overwhelming presence of lobbyists in Washington as evidence of corporate influence distorting the political process and market competition. McLean argued that these dynamics, coupled with antitrust laws that favor established corporations, represent a perversion of true capitalist principles.

“If you allow companies to develop moats around themselves where nobody really can compete with them, is that capitalism, or is that a bastardization of capitalism?

Alley provided a global perspective, noting a decline in the quality of politicians and an increase in their susceptibility to corruption and undue influence. He pointed to the UK, where rapid changes in leadership and questionable political donations suggest a democracy vulnerable to financial influence.

“I would like to see political donations taken out of politics. Why should a corporation or someone with corporate interests be funding political parties? Wouldn't it be better to allocate money by the state to campaigns, so people are independent?”

As the panelists illustrated, the intricate relationship between capitalism, democracy, and corruption means that democratic systems are vulnerable, but at the same time, there is potential for reform through informed leadership and policy changes. Their insights can be taken as a crucial call to action for future leaders to cultivate a fairer and more transparent global economy.

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