What's Wrong With Democracy

Enraging stuff about why rich people are getting so much richer and votin' don't seem to help

I opened Jeffrey Winters’s new book The Blind Spot: How Oligarchs Dominate Our Democracies thinking on the basis of the subtitle, lawks, here’s another book that’s going to be about the awfulness of Elon Musk and Jeff Bezos, moaning about campaign finance and suchlike. Actually, it’s making a subtler and more systemic argument with great clarity, and it’s one that I think is important. Plus, it has some wild, hair-raising, eyestretching facts and figures, some of which I’ll pick out for your delectation here.

It says, basically, that we assume that democracy and oligarchic rule are in opposition — the former being rule by the many and the latter being rule by the few — but we’re wrong: the structures of our democracy enable, and even accelerate, the power of the mega-rich over the rest of us. This, he says, is why wealth inequality in advanced democracies is vastly, vastly higher than it was in even the ancient world. Vide, wild fact number one:

The wealth multiple for Rome is as bad as one might expect for an authoritarian regime. The top 600 Roman oligarchs had on average 16,000 times the wealth of an ordinary person in the empire. […] In 1989, after seven generations of American democracy, the ratio of 30,000:1 was already twice the wealth inequality level of ancient Rome. From there, the wealth gap between ordinary Americans and the 400 richest shoots up at a meteoric pace. The explosion of wealth concentration was so huge that by 2024 American oligarchs on the Forbes list were 136,000 times richer than the average American. This is more than eight times the wealth gap in slave- based Rome, one of the worst examples from the ancient world.

Wild fact number two. Those of us accustomed to thinking of the Nordic countries as social democratic paradises are quite wrong. Sweden does indeed have an encouragingly modest level of income inequality (a Gini score of 29), and excellent state provision. But when you look at wealth inequality — because it’s wealth rather than income that make an oligarch — its Gini level is a stratospheric 87 (the global wealth Gini — which includes countries with really very many of the wretched of the earth — is only one point higher at 88). All that social-democratic policy is having the effect, as Winters puts it, of redistributing income among the non-rich.

So why is democracy making us more unequal? Winters sets out to explain — and he finds that, as the kids say, it’s a feature not a bug. The Constitutional Convention of 1787 in the US, for instance, taught to schoolchildren as a Great Democratic Moment, was in fact a rearguard action to prevent the US being too democratic, and to build in safeguards (upper chamber; ixnay on paper money as debt relief; other forms of veto power higher up the chain) against the proles deciding to take the first line of the Declaration of Independence too literally.

Money is power, right? It’s power in all sorts of ways, and always will be. One of the clever things it does, though, is to conceal its power in the political realm — to stash it in the “blind spot” of the title. Politics belongs to the public sector, runs this argument, and wealth to the private sphere.¹

And for oligarchs, the political power of their money manifests in a specific way and to a specific end. In lots of areas of political life, democracy works fine when we argue over, I don’t know, where to build a motorway or whether to go to war or whether we should give free school meals to the deprived or change the laws on abortion. The vast power of oligarchical capital may not make a decisive difference in these matters — Winters calls them “horizontal issues” — because these are issues about which. often, oligarchs will take different views, or won’t care all that much. So we tend to feel, because these issues sometimes go one way and sometimes go the other, that democracy is kinda working.

The one thing on which oligarchs are absolutely as one, though, and about which they care very much, is the continued existence and growing prosperity of oligarchs. This is the “vertical issue”, and on this they always unite and they always win. Colleagues of Winters sampled 1800 issues on which the interests of oligarchical wealth and the interests of the majority population had been at odds, and totted up how many times the common man came out on top. Spoiler alert. The answer was zero, or a figure so close to zero as to be statistically insignificant.

There are some obvious ways in which oligarchs achieve these results, and they’re the things we have already tended to notice. In democracies in general, and in the US in particular, a gigantic bank account gets you better access to the levers of power. First, there’s control over the media: Murdoch and Fox News, Bezos and the Washington Post, Musk and Twitter and so on and so forth. It also, especially in the UK, puts a heavy thumb on the scale when it comes to what independent or state-funded media is able to report. An old colleague of mine, the lawyer Arthur Wynn-Davies, used to be Robert Maxwell’s legal consigliere and would say quite openly that his job had been to create what he called “libel chill” around the reporting of Cap’n Bob’s affairs.

Then, yes, there’s campaign finance. In the US, years before the ordinary schmo gets a look-in at the ballot box, there’s the “wealth primary” — in which prospective candidates for office are obliged to make nice with the ultra-rich in order to secure the campaign donations which will make their candidacy viable in the first place. That means that ordinary voters are effectively picking from a slate of candidates pre-approved by oligarchs — and, guess what, the positions of each party on giving the ultra-rich a haircut, however they might differ on other matters, turn out to be very similar indeed.

In the UK we’ve already seen — thanks only to some excellent investigative journalism conducted in the face of all that I describe in the paragraphs above — how much Nigel Farage is in hock to this crypto billionaire, this hedgie, that property developer and that manufacturer of pothole machines. But Labour and the Tories, too, depend very heavily on oligarchical sugar-daddies. And, of course, if you own a newspaper and/or have funded the candidate, and if you’re able to threaten to fund a recall vote if things don’t go your way, your elected representative will tend to take your phone calls.

And if, as we agree, wealth is power, the compounding of wealth equals the compounding of power. That’s where tax avoidance comes in. If you’re not an Ayn Rand style wingnut you will tend to take the baseline view that governments are entitled to collect taxes; that taxation, even progressive taxation, isn’t the same as expropriation or theft; and that it’s reasonable to think that the question of how much everyone should contribute to the pot and how it should be spent might be responsive to democratic deliberation.

Winter says that at this stage, though, if you’re ultra-rich paying tax at all is effectively optional. Why? In the first place, a government can’t tax what it can’t see, and what Winters calls the Wealth Defence Industry is brilliant at making wealth invisible to the taxman. The tax system is incredibly complicated, and gets more complicated every year. The ultra-rich employ teams of the best and most ingenious lawyers and accountants to spend their whole time looking for schemes and loopholes, and it’s no surprise that these full-time tax-planning experts will tend to run rings round the less well staffed and less well paid and bureaucratically hobbled operatives of the IRS.

Sad trombone historical detour. There was a moment in the 1970s, which Winters describes in detail, when the whole offshore cup-and-ball game (“tax planning” as it’s now euphemistically called was then in its infancy) looked like being upset. An enterprising special agent of the IRS, Richard Jaffe, while scouting for mafia and drug cartel money, managed to get hold of the secret client list of Castle Bank in the Bahamas. On it were the names of some very prominent figures in public life — caught red-handed, as it seemed, criminally avoiding taxation. Did the whole stinking applecart go over? Um, no.

In short order, Richard Nixon replaced the head of the IRS with a political appointee called Donald Alexander, whose entire career to that point had been as… a lawyer in the wealth defence industry, ie a guy whose professional mission had been to help oligarchs avoid tax. Our hero’s new boss immediately dismantled/hobbled the investigations division, caused our man to be all but hounded out of his job (he was interviewed under caution over how he had obtained this client list), and effectively put the kibosh on the IRS taking any action against oligarchical tax avoidance at all. He even ensured that a check-box on tax forms in which you had to say whether you have any offshore accounts — which was a mechanism by which criminal charges could be preferred for lying on your tax return — be removed from the form. He judged that the layout of the things was too cluttered, apparently.

It has all just got much, much worse in the half century since. If they do get rumbled for tax avoidance — a vanishingly rare occurrence — oligarchs will be let off, at absolute worst, with a (to them) small fine. None of them ever, ever goes to jail. The good guys, even when they have the support of their managers, which they usually don’t, have neither the time nor the personnel nor the legal firepower to take the cases to trial — because, among other things, even if they had a slam-dunk case, a jury of ordinary people would be likely to be so baffled by the aforementioned complexity that introducing reasonable doubt is a doddle.

And that complexity. Ever heard of a Large Partnership? They’re quite the thing, these days. There are more than 20,000 of them now, up 600 per cent since 2002. They’re multi-tiered financial instruments — sort of like corporations made up of subcorporations, partnerships, trusts. “pass-through entities” and all those semi-imaginary legal/financial fictions accountants love — which basically black-hole your money so nobody can figure out where it’s going or who it even belongs to.

And these things, which according to Winters have no reason to exist except to hide money from the IRS, are getting more complex and multi-tiered year by year. Even financial professionals don’t understand them, and they are next to impossible to audit even if you manage to get access to the details of them, which you probably won’t. Winters:

a partnership can have so many tiers and complex connections that a partner can circle back and be partnered with itself before continuing to be partnered with another partner — with all of this being reconfigured across tax years.

I mean, just look at this shit. This is the financial equivalent of the unspeakable geometries of Lovecraft’s sunken city of R’lyeh:

So. No surprise that the IRS doesn’t actually know how much wealth is stashed offshore. According to Winters best guesses have it — next wild fact — that “revenue losses to the US government from secrecy havens are at least $100 billion every year […] enough to give a 50 per cent raise to every public school teacher in America”.

Winters is not making the case that democracy isn’t real or doesn’t (in many respects) work. Nor is he calling for enforced equality, a communist revolution or anything like that. Winters is simply observing that if we’re to stop these bastards cheating the tax man to get richer and more powerful while everyone else gets poorer and less powerful, we need to break the link between oligarchical wealth and political power — and campaign finance reform, though helpful at the margins, isn’t going to cut it. The issue isn’t preventing wealth inequalities from existing so much as severing or moderating the circular connection between obscene wealth and obscene political influence.

Winters has some ideas on this front — some of them moderate and plausible, and some of them (like abolishing election by vote and instead empanelling politicians by sortition, aka lottery) a bit more out there; he says the dramatic structural solutions are only really available in a crisis, but worth having up our sleeves. For now, though, the diagnosis is quite enough to be going on with.

Anyway, if you’re interested in hearing Jeffrey talk about his book, I recorded a podcast with him for this week’s Book Club.²

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This week’s column was on Frank Cottrell-Boyce’s thoughtful intervention on the subject of screens, childhood reading and all that jazz.

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And I wrote a review for the Guardian of Will Maclean’s very enjoyable and mind-mangling debut chiller Solace House.

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Till next time…

1. In rhetorical terms, this is an argument about what’s called translative stasis, ie which court is appropriate to judge a given issue.

2. At time of posting, our audio team having been a bit busy with the Starmpocalypse, the conversation hasn’t yet gone up, actually — apologies; we usually post new ones Wednesday — but it should be on that link very shortly. Meanwhile you can listen to the last one, about Sylvia Plath.