Triumph of The Reactionaries

I began this series three years ago as a way to talk to my students, but I stopped teaching two years ago and so I discontinued the letters. For the last six months I have been on a speaking tour in connection with the publication of my book, Move Fast and Break Things: How Facebook, Google and Amazon Cornered Culture and Undermined Democracy.That trip has taken me to forty cities in eight countries and once again connected me up with many millenials who were interested in talking about monopoly, privacy, democracy and Trump. And so I decided to start this letter series again because the main question I get from your generation is, “How did we get here?” The society seems to be in such a strange place. And my response has been that this has been a long term, very intentional project of libertarian billionaires like Charles Koch, Robert Mercer and Peter Thiel. They are very happy with the current situation. It wasn’t always so.

Nine years ago in a piece for the Koch Brothers Cato Unbound magazine, Thiel, the libertarian billionaire founder of PayPal wrote, “For those of us who are libertarian in 2009, our education culminates with the knowledge that the broader education of the body politic has become a fool’s errand.”

The 1920s were the last decade in American history during which one could be genuinely optimistic about politics. Since 1920, the vast increase in welfare beneficiaries and the extension of the franchise to women — two constituencies that are notoriously tough for libertarians — have rendered the notion of “capitalist democracy” into an oxymoron.

The notion that the nation had gone wrong when it granted women the vote hardly seemed like the kind of forward thinking ideas that a Silicon Valley leader appealing to your generation, would say. But for Thiel, the true capitalist is always brought down by democracy. This is a gospel that came right from Ayn Rand’s (the godmother of libertarianism) first hero Howard Roark — the individualistic architect in her 1943 novel The Fountainhead — who eventually blows up his own building to keep his ideas from being polluted by “the demos”. As Thiel saw it, “In our time, the great task for libertarians is to find an escape from politics in all its forms — from the totalitarian and fundamentalist catastrophes to the unthinking demos that guides so-called “social democracy.”

But Thiel was wrong, He did not have to escape from politics — he and his billionaire libertarian friends (the Koch’s and the Mercer’s) actually succeeded in capturing the American political agenda. In December of 2017, thanks to Donald Trump, the final triumph of libertarianism had arrived and the seventy-five year struggle to get the ideas of Ayn Rand implemented into policy had been accomplished. For men like David and Charles Koch, who had backed the Libertarian Party since the mid 1970’s, and then turned their attention to controlling the Republican Party, the hundreds of millions invested in the Party had been worth it. They now had their former political director, Marc Short placed in the same job in the Trump White House. Their 15 year investment in Vice President Mike Pence had paid off.

And now at the start of 2018, Thiel and his libertarian allies no longer had to worry about the “unthinking demos.” They had a achieved their goal of plutocracy: a giant tax cut for the 1%, the ability of Koch Industries to go on polluting without worrying about the EPA, new lands in the Artic wilderness to drill for oil, less regulation of the Wall Street trading that made Bob Mercer a billionaire. When Charles Koch founded the Cato Institute in 1974, his mission (in words from the Institute journal) was “protecting capitalism from government.” With Trump as President, that goal had been achieved and the Ayn Rand fan, Paul Ryan, had promised to now take on the libertarians other bête noirs: Social Security, Medicare and Medicaid.

In the very first one of the Letters I wrote this.

When I was your age, I had my heart broken and my idealism challenged multiple times by the assassinations of my political heroes: namely, John and Bobby Kennedy and Martin Luther King. Many in my generation turned away from politics and found our solace in works of art and entertainment.

What I am going to say to you now is this: “don’t make the mistake your parents did” of turning away from politics, like we did in 1968 after the murder of Bobby Kennedy. You need to engage in good old fashioned electoral politics. You are the largest numerical generation. Just imagine if 15 million more of your peers voted in 2018 and 20 million more voted in 2020. You could change American politics forever.The plutocrats and their paid for politicians take the apathy of many in your generation for granted. If you don’t engage in politics, the trajectory of this chart will condemn 90% of your generation to a life of constant economic struggle, while the top 1/10 of 1% controls your destiny.

The plutocrats are pretty happy now, but I am going to argue that in their moment of triumph, they are about to deliver us into a dystopian nightmare in which Democracy shrinks away in the face of corporate monopoly, increasing inequality and epic insider corruption. Equally importantly the specter of digital deflation hangs over the economy as the producers of goods and services have little or no pricing power in a world ruled by digital monopolies like Amazon and Google. Much like early periods of plutocratic rule (The Gilded Age and The Roaring Twenties) these periods inevitably end in a crash. The panic of 1893 and the Crash of 1929 both ushered in periods of epic deflation. It is my contention that the already Moore’s Law nature of digital deflation will be accentuated if there is a crash brought on by bitcoin or Internet bubbles or even geopolitical events like a war with North Korea. You may not realize that the current flush stock market environment is due in large part to the aggressive Fed buying of bonds and ETF’s and the less widely known selling of the VIX contract to “calm the markets.

Let’s be clear, the epic rise of the S & P 500 (SPY on the chart) will not continue forever because the Fed is now a seller of bonds and ETF’s, not a buyer. And added to this possibility is the deflation that is a component of the digital economy. Moore’s Law says you will be able to do more for less money every year. In the media economy, more content is offered for free every month. The sharing economy is totally deflationary. Why should I buy a car, when I can use Uber? Why would I build new hotels when AirBnB has 550,000 rooms for rent in the U.S. on any given night? And deflation is a self-fulfilling prophecy. If I believe prices will be lower next week, I will hold off purchasing today. The invisible hand of the free market that the libertarians worship can do nothing in the face of deflation. Just ask you grandparents about 1932.

So the question for America in the 2020 election will be to surrender to the plutocracy, or to make a radical adjustment and reject the free market religion that the Koch’s are selling. Know that Trump and his friends will not surrender power without an epic battle. The have shown the ability to motivate their Tea Party stalwarts in both violent and non-violent ways. The authoritarian values that Trump represents are part of what cognitive scientist George Lakoff calls “Strict Father Conservatism.”

The basic idea is that authority is justified by morality (the strict father version), and that, in a well-ordered world, there should be (and traditionally has been) a moral hierarchy in which those who have traditionally dominated should dominate. The hierarchy is: God above Man, Man above Nature, The Disciplined (Strong) above the Undisciplined (Weak), The Rich above the Poor, Employers above Employees, Adults above Children, Western culture above other cultures, Our Country above other countries. The hierarchy extends to: Men above women, Whites above Nonwhites, Christians above non-Christians, Straights above Gays.

This taxonomy of the Trump era is a total rejection of the post civil rights liberal order that many of your parents fought for. Trump’s ability to appeal to the white working class on these reactionary values was critical to his election. But we need to understand that this worldview is trying to move us back to the 1950’s before the rights for women, people of color and gays were truly codified. Ray Dalio, who runs the world’s largest hedge fund recently told the Wall Street Journal that “his biggest worry is that lower corporate taxes and higher stock prices do nothing for the bottom 60% of households who own almost no assets and whose stagnant wages are the mirror image of expanding profit margins, feeding resentment and political polarization. Says Mr. Dalio: ‘If we do have an economic downturn, I worry we will be at each other’s throats’”.

Although the libertarians will argue that America is a meritocracy, this is not true. In fact social mobility is at an all time low. We have morphed into a country of four classes in which movement between them is relatively circumscribed.At the top is the ruling class made up of the 1% which controls most of the capital and what James Burnham called “The Managerial Elite”. In Burnham’s vision, the middle class gets wiped out and so below the managerial elite are the working class of both industrial and service workers. This is the only class represented by unions, and yet they have seen very few pay raises.

Below the working class is a new class which economists have taken to calling The Precariat — defined as living “in a condition of existence without predictability or security, affecting material or psychological welfare.” These are the free lancers, the Uber drivers, the Amazon warehouse workers. They have no unions and no employee healthcare or retirement accounts. They are divided by whether the live above or below the API (Application Program Interface). Those above tell computers what to do (coders, designers, etc). Those below are told by computers what to do (Uber drivers, Amazon warehouse workers). Many of you are already living in the Precariat with mountains of student debt hanging over your heads.

And below the Precariat lies the Underclass. The unemployed, on disability, homeless, mentally disturbed, opiod and meth consuming population. Although James Burnham could not have imagined the Precariat or the size of the underclass in 1941, he cerainly understood that democracy was going to be severely challenged by the managerial elite and the 1%. Raised in the 1930’s as a Socialist Trotskyite, Burnham came to believe that neither socialism nor democracy would survive under what he called “The Managerial Revolution.” George Orwell wrote an appreciation of Burnham’s theory.

Capitalism is disappearing, but Socialism is not replacing it. What is now arising is a new kind of planned, centralised society which will be neither capitalist nor, in any accepted sense of the word, democratic. The rulers of this new society will be the people who effectively control the means of production: that is, business executives, technicians, bureaucrats and soldiers, lumped together by Burnham, under the name of ‘managers’. These people will eliminate the old capitalist class, crush the working class, and so organize society that all power and economic privilege remain in their own hands.

Burnham’s vision is the future you will live in if our present political system does not change. This vision is perfectly reflected in comments Peter Thiel made to Wall Street Journal columnist Holman W. Jenkins: that only 2 percent of the populace — the scientists, entrepreneurs, and venture capitalists — understand what is going on and “the other 98 percent don’t know anything.” The rise of this libertarian techno-elite required a long process of destroying unions, eliminating business regulation and manipulating a large portion of the working class into identifying with their overlords. That latter task was the job of people like Rush Limbaugh and Sean Hannity backed by the investments of men like Rupert Murdoch (Fox News) and Lawry Mays (Clear Channel Radio Networks). In 2016 Donald Trump ran a phony populist campaign to fight for the working class against the corrupt influence of Wall Street and Big Business and shrink our overseas military commitments. This big lie was supported by Fox News, talk radio and the Breitbart propaganda organ. But it was the greatest con job in the history of American politics because Trump is governing in the classic Republican plutocratic tradition.

For years the Chicago School economists to whom the Koch brothers looked for inspiration, had pondered the dilemma that the majority had rejected their free market ideas. Libertarians were regarded as cranks by most academics and Ayn Rand was seen as a minor novelist with philosophical pretentions. University of Chicago economist George Stigler suggested that what was needed to achieve the libertarian goals were “the restriction of the franchise to property owners, educated classes and employed persons.” In other words, a return to the early 19th Century. As Nancy MacLean noted in Democracy in Chains, the Koch’s main advisor, James Buchanan “argued that representative government had shown that it would destroy capitalism by fleecing the propertied class — unless constitutional reform ensured economic liberty, no matter what most voters wanted.”

Just how “the propertied class” came to control the government is an important story. Creating a political economy in which the wealthy minority rule over the middle and lower class majority is a hard task. It requires mechanisms that suppress voting and mechanisms for propaganda that convince working class voters that cultural divisions are more important than economic equality. Even Peter Thiel, the first outside investor in Facebook was not aware in 2009 how powerful social networks could become in amplifying the already loud right wing propaganda machine of Fox News and talk radio. In my book Move Fast and Break Things, I showed how right wing propaganda and voter suppression is a two-pronged attack. Aldous Huxley’s Brave New World foresaw our current dilemma. Huxley’s assertion was that technology would lead to passivity. The ease with which we could consume mind-numbing entertainments and distractions would ultimately rot our democracy. And this is exactly what may be happening. In the 2016 presidential election in the United States, ninety-eight million citizens who were eligible to vote declined to exercise that privilege (compared to the 126 million who voted), according to the United States Election Project. More importantly, a much larger percentage of your generation are nonvoters. As Kevin Drum reported in Mother Jones, “In 1967 there was very little difference between the voting patterns of youngest and oldest voters. By 1987 a gap had opened up, and by 2014 that gap had become a chasm.” Beyond the extreme apathy, Republican legislatures in many states have instituted far more restrictive voter ID laws, which have also contributed to lower vote counts.

At the turn of the 20th Century there was a similar opportunity to the one your generation is about to face. Of that era Richard Hofstadter noted that the progressive reform movement“was the effort to restore a type of economic individualism and political democracy that was widely believed to have existed earlier in America and to have been destroyed by the great corporation and the corrupt political machine.” 110 years later, the brief victories of the Teddy Roosevelt administration over the forces of great corporate power and political corruption have faded into historical memory. And our current President’s cabinet and ruling style show every appearance of a return to rule by corporate power and political corruption. But our task of reform against these same powers is more complicated. Notions of economic individualism and autonomy are continually under attack by the quiet invasions of privacy brought about by business and government data mining technologies — surveillance capitalism. But even though Trump commands a massive media megaphone (Fox TV, Talk Radio, Breitbart and Twitter), there is still the possibility of bottom up, networked resistance.

But to believe that resistance in the form of demonstrations and street politics will lead to real change, like my generation did, is a fools errand. Go find yourselves a political candidate that you can stand behind in the presidential election of 2020. And help reorganize the opposition party, The Democrats. Today the Democrats are controlled at a Congressional level by the oldest members of my generation, The Boomers. This needs to change soon. We had our chance and screwed up, so now it is your turn to lead. The leaders of the Democratic Party in their 70’s and 80’s will not surrender power without the real involvement by your generation.You need to get your friends to register to vote, now. Join the Democratic Party and make your voice heard. I really believe that Tom Perez and Keith Ellison will listen. If you do this, I promise many of your parents generation will come to your side in support.

The plutocrats think they have won. They are sure you will sit out the 2018 and maybe even the 2020 election. You need to prove them wrong.

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Director Emeritus, USC Annenberg Innovation Lab. Producer/Author, “Mean Streets”, “Move Fast & Break Things”. New book, “The Magic Years”, out 3/21.

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Jonathan Taplin

Jonathan Taplin

Director Emeritus, USC Annenberg Innovation Lab. Producer/Author, “Mean Streets”, “Move Fast & Break Things”. New book, “The Magic Years”, out 3/21.

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