View from
The Center

On the American Economy Being “Rigged”

(Joshua Roberts/Bloomberg)

The evidence is overwhelming; the American economy is rigged in favor of the government-business elite and has become more so over time.”

The election is done. Its results embarrass both pollsters and media pronouncements. The United States appears to be more conservative than many had thought. Its minorities have voted less as a bloc than was expected or as the grievance industry would like. People are less inclined to crash into the brave new world outlined for them by large sections of elite opinion. Well, they might have reservations about following the elite’s lead. Vast parts of this country’s population—some leaning left, some leaning right—have genuine grievances that this elite agenda fails to address. Until those grievances are addressed, the nation’s politics will get no relief. 

An especially powerful contributor to this dissatisfaction is the revulsion against what has come to be called the “rigged” economy and financial markets—the sense that a government-corporate elite runs the economy for its own advantage with little regard for the public weal. Resistance to such arrangements impels both supporters of President Donald Trump and those who cheer Senators Bernie Sanders and Elizabeth Warren. They cut across demographic groups, as well. It brought President Trump to prominence and has pulled the Democratic Party towards the Left. And it is well-founded. The evidence is overwhelming; the American economy is rigged in favor of the government-business elite and has become more so over time. 

Ironically, this highly inequitable system seems to have emerged from what many would describe as the best intentions. When politicians, corporate executives, pundits, journalists, academics, and activists alike propose ways to make society more just or efficient or globally competitive, they invariably call for some kind of government-corporate cooperation. Though well-meaning, these arrangements invariably drift from their original purposes into a self-serving collusion among those charged to cooperate. It would overstate to describe the colluders as conspirators. They may, in fact, believe earnestly that the arrangements that serve them so well also serve the greater good. These arrangements may even occasionally advance that greater good. But because this collusive system benefits mostly the colluders, it should be no wonder that citizens—Left and Right—resent it and feel ignored if not abused outright.

It would no doubt horrify the members of this elite group to learn that the economic arrangements over which they reign have fascist roots. Indeed, some libertarian thinkers, recognizing this, have begun to describe our economic system as “participatory fascism.” Of course, American streets are free from the likes of Mussolini’s Blackshirts or Hitler’s Brownshirts, but fascist economics can occur apart from such stark forms of abuse. Those arrangements dominate in the United States today. Popular imagination would no doubt resist such comparisons. It might argue that the Italian fascists and the Nazis simply took over their respective economies to serve their evil ends. The fascists did direct their economies, but unlike the communists in the Soviet Union and elsewhere, they never expropriated the “means of production,” to use the Marxist expression. The fascists relied on a subtler and probably more effective approach. Instead of running the economy from a central plan administered by often less-than-competent bureaucrats, the fascists left the management of the firms with the businesspeople who knew what they were doing. They bent business managers to serve party objectives by seducing them with the benefits and advantages that only government can give and offering them influence in how that largess was apportioned. 

Hitler, for instance, never took over Krupp. It remained a shareholder-owned corporation throughout the Nazi regime, as did the manufacturer of the famous Messerschmitt fighter planes, Bayerische Flugzeugwerke (BFW). The Berlin stock exchange remained open until August of 1944. These fascist governments got an enthusiastic response of business talent by offering cooperating firms huge contracts, protection from foreign and domestic competition, freedom from certain regulations (even from laws), and help in calming labor disputes. Effectively, corporate partners received near-monopoly advantages. It mattered little whether the cooperating firms bought into Nazi or fascist ideologies. The profits on offer from the contracts, exemptions, and other benefits were compelling enough. Violence and bullying were hardly necessary. 

However innocently things began here in the United States, however inadvertently they have developed, there can be no mistake these same arrangements have arrived. Washington has come to use its huge economic power through contracts and subsidies in defense, research, technology, and many other activities to direct business priorities. By applying, more or less severely, the rules and regulations embodied in the federal regulatory code (which now verges on 180,000 pages), government priorities exert great influence on profitability in all businesses and, consequently, on how they behave. Legally speaking, of course, American businesses can choose to ignore government preferences and follow their own lights—presumably market signals—but managements are neither blind nor stupid. They can see the benefits on offer to cooperating firms and how cooperation empowers them to influence the process. “Industry experts” from corporate partners help write regulations and recommend how they are applied. Exemptions from troublesome rules have become commonplace, and they bestow on cooperating firms a powerful competitive edge. Apple, for instance, was excused paying tariffs on Chinese imports. Administrative decisions to stay anti-trust action have given favored businesses license to merge or expand in ways that less-favored businesses have not enjoyed. 

These elites have indeed rigged the economy for their own benefit.

All this favoritism and maneuvering might be acceptable, even desirable, if the cooperation had solved problems of, for instance, income inequity. But the cooperating parties have increasingly managed things less to solve national problems than to benefit themselves. Government helps corporate elites remain securely and profitably in place as corporate elites help politicians get re-elected and bureaucrats gather more power and prestige. These elites have indeed rigged the economy for their own benefit. They have, in fact, created a merger of government and business power. And that combination is just how Mussolini described the essence of fascism when he indicated—in a passage often attributed to him—in the 1932 Enciclopedia Italiana: “Fascism should more properly be called corporatism because it is the merger of state and corporate power.” It may be just these sorts of arrangements that prompted President Dwight Eisenhower to warn on January 17, 1961, of what he called a “military-industrial complex.” 

Historically speaking, this is a strange place for the United States to have reached. Such government-corporate collusion is antithetical to the principles—economic and political—on which the republic was founded. From this country’s beginnings, it has resisted the concentrations of power that typify the present system. America’s founders, of course, had little concern over commercial concentrations. Although Adam Smith’s 1776 bestseller, The Wealth of Nations, warned against commercial monopolies and state-sponsored corporations, these were less a threat in undeveloped America than in Great Britain. America, having just won independence from the British crown’s abuses, worried mostly about concentrations of government power. James Madison, in The Federalist No. 10, made his concern about government monopoly crystal clear. If governments were administered by “angels,” he wrote, people would have no need to worry about concentrations of power. The natural goodness of government administrators would serve as a safeguard against abuse. But because human beings administer governments, he saw a need for institutionalized checks on power. A “greater variety of parties and interests,” Madison argued, “would make it less probable that [any one of them could] invade the rights of other citizens.”

Efforts to create such competition for power framed the entire political organization that Madison and the other founders created. The federal system gives the various states “sovereign rights” which they were expected to guard jealously against pressure from the federal government. The United States Constitution made this explicit in the Tenth Amendment: The central government has only those powers delineated to it in the Constitution, while all other powers reside with the states or individual citizens. The Founders created a Senate in which voting power was diffused among the nation’s various regions so that the more populous areas, presumably with a common commercial or ideological agenda, could not force their wishes on the rest of the country. The Electoral College reflected similar concerns. The Founders famously also established “checks and balances” within the federal government. If the Senate provided a regional check on the more population-centered House, the two houses of Congress could check the power of the president, and the president, if necessary, could bring a countervailing competition—the power of the veto as part of it—to Congress. In turn, federal courts, led by the Supreme Court, could check the power of the administration, the Congress, or even a combination of the two.

The history of the 19th century, most especially the Civil War, made the imperfections in these efforts clear but showed also how the Founders had nevertheless accomplished many of their aims. By the last third of that century, however, it became apparent that developing capitalism presented society with new concentrations of power that the Founders had not envisaged. Corporate monopolies (and the aggregation of businesses into great trusts) had created loci of power that came near to challenging the political authorities. These capitalist machines manipulated financial markets, abused workers, and forced higher prices on consumers even as they limited consumer choices by controlling the flows of products to market. These powers required different sorts of checks. True to the ideals of the Founders, the government moved to limit the growth of such concentrations. Senator John Sherman made that link clear when he promoted his Sherman Anti-Trust Act of 1890: “If we will not endure a king as a political power,” he argued with deep purple prose typical of the time, “we should not endure a king over the production…of the necessities of life. If we would not submit to an emperor, we should not submit to an autocrat of trade.” 

Despite Senator Sherman’s efforts, the United States government had only spotty success in checking concentrations of commercial and financial power. As fast as the Senator’s legislation broke up some trusts, new ones formed. Commercial and industrial monopolies thwarted government efforts by corrupting politicians and administrators to narrow pecuniary purposes, practices that today would be referred to as “crony capitalism.” Yet, at the same time, Washington saw how concentrations of corporate power could serve its aims. In a forerunner to today’s cooperative-collusive arrangements, Washington offered the railroads vast tracks of land if they cooperated with government goals. Despite Washington’s failure, a successful check on concentrated commercial power did emerge from the countervailing and competitive power of newly formed labor unions, which began in the 1860s with the Knights of Labor and grew into a broader movement with the founding of the American Federation of Labor (AFL) in the 1880s. In this way, the nation recovered Madison’s goal of checking power with a “variety of parties and interests.” 

It was President Franklin D. Roosevelt’s administration that began the shift from this competitive, market-driven economy towards today’s corporatist arrangements with its concentrations of power. As with later manifestations of government-business collusion, President Roosevelt’s effort grew from the best of intentions—namely his heroic efforts to fight the Great Depression. It is strange to think of President Roosevelt colluding with big business. His rhetoric was, if anything, openly hostile to commercial interests. In one of his famous fireside chats, he expressed satisfaction with how much business leaders hated him. But for all of his talk, President Roosevelt nevertheless strove—fascist-like—to co-opt corporate power. Nor did he make a secret of his model. Early on, the Roosevelt administration stated clearly its admiration for Mussolini’s fascist Italian state. One of Roosevelt’s original “brain trust” advisors, Columbia University economist Rexford Tugwell, openly voiced his enthusiasm for the fascist leader, as did the man President Roosevelt picked to head the National Recovery Administration (NRA), General Hugh Johnson, who several times referred to the “shining name” of Benito Mussolini. President Roosevelt himself expressed interest in “bringing to America” the programs of “that admirable Italian gentleman.” 

Such public talk ceased abruptly when in 1935 Italy invaded Ethiopia and Mussolini lost sympathy among the American public. Even Cole Porter dropped from his popular hit the lyric, “You’re the top. You’re Mussolini.” The Roosevelt administration was also sobered by the Supreme Court’s decision to strike down as unconstitutional the National Recovery Act. But if Mussolini-worship and the extremes of the First New Deal ended in 1936 with those two events, President Roosevelt’s administration nevertheless continued its program of bending business to Washington’s purposes by giving corporate elites the benefits and preferences they wanted, admittedly without the bullying—and worse—that was part of Italian fascism.

World War II, and afterward the Cold War, understandably furthered the journey towards government-business collusion. The war effort in the 1940s demanded a close working relationship between business, finance, and Washington. The administration and the War Department set the agenda, and those who supported it enjoyed the contracts and useful exemptions from certain regulations. After the World War ended, the long Cold War that followed institutionalized and deepened this collusive approach. 

Especially conducive to these developments was America’s confrontation with communist ideology. Washington’s anti-communist stand made it reluctant to attack business, even if it meant sacrificing a commitment to serve markets by aggressively pursuing anti-trust actions. Since the nation’s ongoing war footing gave the government enormous power and money, it had little trouble enticing the cooperation of business simply by threatening to exclude uncooperative firms from what had become a tsunami of money. When people reflect on President Eisenhower’s concerns about this developing pattern, they mostly associate it with defense contracting, but even as Eisenhower introduced the phrase “military-industrial complex” into the national lexicon, he likely saw the broader picture of government-business collusion run comfortably by and for a corporate-government elite. 

The auto industry is a case in point. Washington had long protected it—no doubt a legacy of the auto companies’ enormous cooperation during World War II and, later, as part of the Cold War effort. In an earlier time, the government might have used anti-trust legislation to break up these companies, especially the behemoth General Motors. Indeed, for years there were calls to do just that. As it was, Washington allowed the industry to become what economists call an oligopoly, and what the public then referred to as the “Big Three”: GM, Ford, and Chrysler. Giving voice to these arrangements, GM President Charles Wilson in 1953, at the peak of GM’s dominance, declared before Congress that what was good for the country was good for GM and vice versa.

These firms hardly competed with each other. They drove out any potential competition, including Packard, Studebaker, American Motors, and even Checker Cab. Washington throughout turned a blind eye, even as the lack of competition allowed the Big Three to build ever-shoddier vehicles, preferring tailfins to engineering innovations, and guaranteeing themselves future sales by building obsolescence into their vehicles. Because this structure generated huge cash flows, which managements wanted to keep uninterrupted, the Big Three eagerly bought peace with the United Auto Workers (UAW) union by sharing the monies taken from hapless consumers. Thus, the UAW, along with the government and the Big Three, became the fifth party to this collusion. The comfort and protection afforded by these arrangements leave little wonder why this crowd had so much trouble coping when real automotive competition docked from Japan in the late 1970s and 1980s.

By then, Toyota, Nissan, and Honda had already moved production facilities to the United States and were employing about as many people as GM, Chrysler, and Ford.

Rather than adjust to the market realities of Japanese competition, the collusive elites used Japan as an adjunct to the Cold War to secure their positions and justify corporatist economics. A perfect illustration emerges from President George H.W. Bush’s late 1980s visit to Japan. In asking for concessions for American auto manufacturers, his rhetoric focused on jobs for Americans, but that was a veil. By then, Toyota, Nissan, and Honda had already moved production facilities to the United States and were employing about as many people as GM, Chrysler, and Ford. Instead of protecting jobs, Washington was serving its well-established partners: the American corporations, as well as the United Auto Workers, which had power in Detroit but not in the Japanese factories then locating elsewhere in this country. Shortly after, a new president, Bill Clinton, found another way to use Japan to bolster government-business collusion. He announced that just this cooperative model had produced Japan’s economic success and that the United States needed to imitate it. What he did not say was that his way forward offered Americans nothing new. Nor did he point out, even as he plugged the cooperative approach, that Japanese commentators at the time were complaining that their country’s ongoing government-business collusion was a continuation of economic practices used by Japan’s wartime fascist leadership. 

By the time Japan’s economy unraveled in the 1990s, China’s economic power had grown sufficiently to take Japan’s place as a justification for America’s continuing corporatist arrangements. Washington may have appeared to become harder on business as its regulatory agencies grew, but behind the seemingly harsh rhetoric, the explosion of rules served only to bind established and favored firms closer to Washington. Think of it this way: the more pervasive the regulation, the more value to the business of any government-issued breaks, and so the more motivated managements become to cooperate and secure these breaks. Additional government licensing and regulatory hurdles also benefit established cooperators because those rules make it more difficult for new firms—potential competitors—to enter existing industries. 

Technology firms, often viewed as symbols of independent entrepreneurial effort, nevertheless also exemplify the workings of this corporatist economic system. The Obama administration certainly offered favored firms protection and even lavish subsidies when they did what the government wanted: Energy alternatives and electric cars stand out as examples. Even such firms as Facebook and Google, which reached near-monopoly status without government assistance, have embraced the cooperative approach. A stark example is Mark Zuckerberg’s recent plea for government regulation of his company. No doubt he would prefer to continue abusing his customers as in the past, but because public outcries have moved Washington to question Facebook’s practices, he has had to make a difficult choice. Fearing the competition that anti-trust action would bring, he has opted for greater regulation with new rules that he no doubt would have a hand in writing. Embracing regulation would also allow him to head off any possibility that Washington might thwart ongoing efforts by Facebook to stifle competition. He would have no need to do it for himself because the new set of regulations—by making entry into the industry more difficult and expensive—would do it for him.

Probably the clearest evidence of the by-now well-entrenched government-business collusion emerged in the 2008-09 financial crisis. In the long run-up to that disaster, Washington had enlisted the cooperation of the banking industry to promote a political interest—widespread homeownership among less affluent Americans. Desirable as such a goal is, it required the risky practice of lending mortgage money to people with a questionable ability to repay the loan—the called sub-prime borrowers. Because banks were understandably reluctant to take such risks, Washington applied incentives. Under the 1992 Housing Community Development Act, the two federal agencies designated to support private mortgage lending, the Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC), announced they would extend support only to lenders who made many subprime loans. By the aughts, those two agencies limited that support to lenders that reserved fully half their mortgage lending for subprime borrowers. 

Because these demands put lenders in an unusually risky situation, government regulators stepped in to help their cooperative colleagues. They allowed lenders to shed the risk through for instance “credit default swaps.” These allowed insurers to sell indemnification insurance to lenders against the risk that a borrower might default. The authorities also allowed these arrangements to stand outside normal insurance regulations and, consequently, also outside the usual security protocols. To spare cooperating banks further, Washington also encouraged “securitization,” by which mortgage lenders created bonds backed by a bundle of individual mortgages. These lenders could then sell those bonds on the open market and thereby spread the sub-prime risks to bond buyers: individuals, foundations, pension funds, and even foreign governments. Washington promoted this effort by also willfully ignoring the credit rating agencies that were giving undeservedly high safety ratings to these bonds, even though they included a large proportion of risky sub-prime debt. 

Despite all this maneuvering, this house of cards began to collapse in 2007. The always-risky sub-prime borrowers began to fail on their mortgage obligations. In the face of such widespread default, the firms that had so actively cooperated with Washington’s guidance faced insolvency, as did those who bought that questionable debt. Washington sprang into action, to save, it claimed, the financial system, but as it turned out, also to protect its corporate partners. 

The fate of Bear Stearns is instructive. When, in 2008, this New York-based global investment bank first showed signs of having trouble, it was in complete compliance with all federal and international regulations. It was solvent. What it did face was a temporary shortage of liquidity. It was well within Washington’s power and experience to arrange an emergency loan to protect the firm and those parts of the financial system that depended on Bear’s ability to meet its obligations. That is what Washington did later for several companies, putting more than $430 billion of tax money at risk through the Troubled Asset Relief Program (TARP). But it treated Bear Stearns differently. It surely was no coincidence that this broker-dealer had always been a disruptive and uncooperative agent in financial markets. Notable is how Bear Stearns some years earlier had refused to join a Federal Reserve effort to arrange loans for the failing investment firm, Long-Term Capital Management, whose top executives, not coincidentally, had exceptionally good Wall Street, Washington, and academic connections. So instead of smoothing over Bear Stearns’ troubled moment, Washington forced the company to sell itself at a bargain price to J.P. Morgan, a firm notably cooperative with Washington.

It was only after the forced sale of Bear Stearns that Congress passed the TARP legislation and opened a huge flow of money to assist Citibank, Chase, and other banks with less obstreperous reputations and who could boast of their cooperation with Washington’s earlier subprime push. TARP also assisted Goldman Sachs, so renowned for its links to Washington that one standing Wall Street joke holds that Goldman’s URL has a “.gov suffix,” while another joke, playing on the firm’s name, refers to it as “Government Sachs.” Because TARP funds could only go to banks, and because Goldman at the time lacked a commercial banking license, the authorities rushed a license through for it. But they made no such effort for Lehman Brothers, a firm that—despite its long pedigree—was well outside the collusive establishment. Washington offered no help, and the firm went bankrupt. Then the government—in a remarkably novel move—effectively nationalized the insurer AIG. This firm, too, had a less-than-cooperative reputation. It was also disputing the management of credit default swaps it had sold to Goldman Sachs. Goldman had demanded that AIG put up more assets to ensure that it could pay should the loans fail. AIG resisted. Once the federal government took over, it forced AIG to pay the full amount Goldman had demanded—in excess of $4 billion. These particular default swaps were one of the few assets that paid in full during the 2008-09 crisis.

This elaborate cherry-picking of winners and losers is that much more revealing because Washington all along had at its disposal a more egalitarian and coherent approach. In the early 1990s, when a similar crisis developed among savings and loan associations (S&Ls), the government behaved very differently. Because most of these institutions were too small to “qualify” for government-business collusion, the authorities had little need to protect some and not others. Washington treated all the S&Ls equally. To oversee the orderly bankruptcy of many of them, it established and funded the so-called Resolution Trust Cooperation (RTC). The RTC sold off the good assets of troubled S&Ls to meet their obligations to creditors and, for the sake of financial stability, took their questionable assets onto its own books for resolution over time. Over the long term, the government actually made a profit on the taxpayers’ monies involved. That a solution like the RTC was never considered in 2008-09 suggests that either everyone in Washington had suffered memory loss or that their desire to pick winners and losers impelled them to choose a more chaotic and less consistent approach.

Earlier evidence of collusive behavior emerges from the 1990 destruction of Drexel Burnham. That company’s “sin” was to disrupt government-business collusion through its invention of what became known as the “leveraged buyout.” This financial innovation enabled relatively small players to take over large, established firms. It worked like this: A group of investors would identify a company with an ineffective management and attempt to take over the firm by buying out its shareholders. To pay for these purchases, the takeover group would issue bonds through Drexel Burnham, which would promote those bonds by offering the assets of the targeted company as an informal repayment guarantee. If the targeted firm had a good competitive position but was saddled with an inefficient management (as is usually the case with monopolies or companies otherwise protected by government), Drexel Burnham’s promise was compelling.

Such “hostile takeovers” were long considered taboo among established firms because they disrupted accepted business practices and the ordered hierarchies with which managements were comfortable and on which Washington depended for cooperation. Mutually agreed-upon mergers were fine (especially those blessed by Washington), but usurpations such as those orchestrated by Drexel Burnham were deemed simply too disruptive. Drexel, for instance, backed T. Boone Pickens’ attempt to take over Gulf Oil in 1983 and Unocal in 1985, as well as Carl Icahn’s 1985 bid for Phillips 66. These efforts failed but came close enough to succeeding to unsettle managements, as did Ted Turner’s success in 1985 using Drexel’s leveraged buyout techniques to take over MGM/UA and Kohlberg Kravis Robert’s famously successful 1988 takeover of RJR Nabisco. 

Washington moved to protect its corporate partners. Before authorities made any accusation of wrongdoing, the Securities Exchange Commission (SEC) investigated Drexel intensively. Eventually, it uncovered illegalities on the part of one Drexel Burnham employee. Instead of an individual prosecution, the discovery generated a deeper examination of Drexel. Such investigations were common enough—one illegality often leads to another. What was unusual is that even before uncovering any major wrongdoing, the United States Attorney used the RICO (Racketeer Influenced and Corrupt Organization) statute to freeze Drexel’s assets during the investigation. The asset freeze effectively made it impossible for Drexel Burnham to meet its obligations. It was a death sentence for the firm, as it would have been for any financial institution. Drexel closed its doors in early 1990. The firm never admitted guilt, but it did accept the judgment of the authorities. It had little choice. Only later did it emerge that Drexel Burnham had indeed broken laws, also common enough because the rules are so extensive that few firms can remain entirely compliant all the time. Something other than common compliance failures, however, must explain the zeal with which the authorities attacked Drexel, even before they discovered any significant wrongdoing. It had less to do with law than with stopping Drexel’s disruption of the cooperative-collusive system. 

Imagine the action in Silicon Valley today had Washington not crushed Drexel Burnham and its practices. Tesla, for instance, has occasional management difficulties, enjoys a leading competitive position, has missed several self-imposed production deadlines, and what is most important, enjoys considerable public subsidy. If leveraged buyouts were still the order of the day, Tesla would present a ripe takeover target for an aggressive outside management. Apple, Microsoft, Google, and other technology giants have enormous—and enormously attractive—pools of cash on their balance sheets. These liquid assets earn little and support no project to improve their companies’ technologies or expand their businesses. Were a takeover as feasible as in the past, a management team would view these hordes of cash as an easy way to promise repayment to bond buyers when raising buyout funds. But having crushed Drexel Burnham, Washington has warned off any such behavior and, in doing so, has assured Tesla, Apple, Google, and others that no such threat exists, that they face neither competition nor pressure to use these idle funds—to further research, for example, or to increase employment. 

These different groups see different solutions to the problem, but they can agree that the present system is obnoxious.

Disgust with this system’s practices has taken time to gain political traction, but there is no denying that it has risen to prominence. Whatever else the 2016 election of President Trump signified, surely it was, in part, an expression of public revulsion at this corporatist, fascist-like system. Because President Trump’s rhetoric attacked the government-business elite, it motivated followers who otherwise might have rejected him as a presidential candidate. The leftward lurch of the Democratic Party that has been going on especially since President Trump’s rise—no doubt—has similar roots. Left-leaning supporters also see the inequity and view any moderation that would support the existing practice as hateful and unfair because it would continue to benefit those who least need it at the expense of the working and middle classes. These different groups see different solutions to the problem, but they can agree that the present system is obnoxious. The existence of each of these trends, Trumpian resistance on one side and the leftward lurch on the other, offer reason for optimism—not because either offer a solution but because they reflect a reaction that neither President Trump’s defeat nor Senator Sanders’ new lower profile will dissipate. Until the United States actually begins to unwind this fundamentally abusive system, the messy politics plaguing the country will continue.

If the country were to conduct such an unwinding, the place to start—whether the impulse came from the Left or the Right—would be with the highly arbitrary nature of the nation’s regulatory system. Allowing regulatory exemptions for cooperation with Washington is a fundamental way the government can direct business and allow it to influence public policy. Forbidding such practices (and insisting that the government set the rules and then stick to them in all cases) would weaken this primary lever of the country’s corporatist economic system. President Trump moved marginally in this direction by dispensing some regulations. By limiting the regulatory burdens placed on business, he—no doubt inadvertently—reduced the value of the government-issued exemptions at the heart of this system. But because much regulation is also essential to protect the public welfare, President Trump’s approach can only go so far. Ending this abusive system is less a matter of limiting the scope of regulations than stopping agency discretion from applying them. For similar reasons, the country needs clear and consistent criteria—not bureaucratic discretion in directing anti-trust measures.

Although such avenues of relief are clear enough, the prospect of meaningful progress remains remote. The members of this collusive elite hold the levers of power and will not readily relinquish them. Industry and finance will fight hard to retain the monopoly-like privileges offered by this long-established approach. Indeed, one could argue that corporations have operated under this system for so long that they have lost the institutional ability to respond to anything other than government signals—and certainly not to those of the market. As for the government, those in elected office will part most unwillingly with the significant financial support of their corporate partners, while those in the bureaucracy enjoy the power that comes from having discretion over what rules to apply to whom and when.

Against such formidable opposition, it is hard to see much progress on the horizon. President Trump clearly failed to erode elite power. It is not even clear that President Trump understood the public discontent to which he owed his initial elevation. In office, he showed only slight inclination to root out this fascist-like system at the base of the “swamp” that he once promised to “drain.” Most of his behavior showed less desire to rid the country of the collusive system’s basic character than simply to redirect it toward a different agenda with different favorites. Even in trade, his efforts to remake trade agreements to help working people did less to break the power of elite control than to bring different elements of the economy into the collusive system while excluding others and, as it turned out, not many of them.

If President Trump’s attack from the Right has faltered, the elite system will now have to confront a parallel insurgency from the Left. To be sure, President Joe Biden has talked a lot about a return to normal, which to many ears means the smooth running of collusive elite management. But he will fail at that given how far grievances over the rigged economy have already carried his party away from easy compliance with this system. Even were he to embrace the Democratic Socialist insurgency and advance its agenda, the history of socialism suggests that would do little to weaken elite control or its ability to manage the economy for its own sake. All it would do is replace the current elite with a different favored group chosen to direct the economy’s effort and the government’s agenda. A government-affiliated elite would continue, no doubt little changed, indeed maybe even with the same individuals. 

Because there is little hope near term of a remedy from either the Right or the Left, it seems likely that the battle between a dissatisfied public and a collusive elite will continue to color the country’s politics for some time to come. Future years may witness ebb and flow in the intensity of feeling; however, unless the public gives up its objections and accepts this abuse, today’s hostile politics will surely continue. The collusive elite will mount its formidable defense, and the public will continue to object to the “rigged” economy. As for those who despair of seeing politics of good feeling anytime soon, there is compensation. An ongoing dispute—no matter how bitter—is preferable to supine acquiescence.

Milton Ezrati is a contributing editor at The National Interest, an affiliate of the Center for the Study of Human Capital at the University at Buffalo (SUNY) and chief economist for Vested, the New York-based communications firm. His latest book is Thirty Tomorrows: The Next Three Decades of Globalization, Demographics, and How We Will Live.

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