The Undemocratic Institutions in Our Democracy
The following post will consist of a two-part critique of the American political system’s dependence upon centralized and unaccountable institutions. The first part will focus on the general philosophical problems with the American system, and the second part will provide an example of policy that has had detrimental effects on the populous as a result of the poor institutional power structure. This may sound incredibly boring, but I promise it’s not and I promise it’s important. It may not be what we think about everyday, but precisely for that reason it is worthy of acquiring a greater understanding of it; the ills perpetuated by the status quo tend to go wholly unnoticed and consequently unchanged.
Part 1:
This essay seems to have a theme: the number two. Remaining consistent with the numeric motif, TWO of the most instrumental and powerful institutions in affecting American people and American policy are the Federal Reserve (our central bank) and the Supreme Court. Both the Fed and the Court consist of appointed members who serve for cross-congressional terms and both our unaccountable to anyone except Congress – who provides a check insofar as the body can threaten sanctions or removal of Fed governors or Court justices. In practice, the two institutions act independently of popularly-elected government officials and unresponsive to voters: for a Fed governor or a Court justice, “voters” is a bland and meaningless concept because voters have no concrete bargaining power against unpopular decisions.
The response to the problem of accountability tends to be that the leaders who appointed the members of the impenetrable and politically independent institutions are accountable; that is to say, a president who appoints a justice must choose wisely so as to be responsive to the public interest. The common assertion, however, fails to acknowledge the length of the terms of justices – which proceed long after a president and his staff have left office – and the dearth of public knowledge of the appointees. Part of the problem is not only the inherent flaws of the institutional structure, but also the irresponsibility of the American people. As Franklin Roosevelt noted: “The only sure bulwark of continuing liberty is a government strong enough to protect the interests of the people and a people strong enough and well enough informed to maintain its sovereign control over its government.” The reality is that the American people are not well informed of the aforementioned politically-independent institutions: less than 2% of Americans can name all nine members of the Supreme Court and in a poll taken in the 90’s more Americans could name the judge on a popular TV show than those who could name William Rehnquist, the Chief Justice of the Supreme Court at the time. And though many Americans can probably name Alan Greenspan, it would be surprising if more than 1% of Americans could name his successor Ben Bernanke. Not only are people apathetic, but the Court and the Fed have done a remarkable job of established an image of objectivity and expertise, such that people actually believe that accountability is unnecessary; the American people take the leaders of these institutions as given, only rarely complaining about a justice nominee and never mentioning a Fed governor. Even if people could name the members of the institutions, very few could cogently argue against a court ruling that cites abstruse court cases and Fed decisions that seem to simply play with esoteric numbers.
Despite having no accountability directly to the people and the people having no knowledge and no real interest in knowledge of the the actions of the institutions, the pseudo-Democratic bodies have an enormity of power in the American political system. The Supreme Court determines precedents for the interpretation and execution of laws – which can often be more important than legislating the laws – and the Federal Reserve affects the monetary policy of the nation – which has a more responsive and dramatic effect on the state of the economy than fiscal measures. Since both are centralized and have powerful policy tools, they can mold and shape all aspects of American social and political life, from civil rights to the job market. It becomes very difficult – tenuous at best – to call the American system purely Democratic when two of its most powerful mechanisms are controlled by a handful of elites who are theoretically and practically unaccountable to the American people.
Part 2:
The second part of the essay examines a specific policy that has been sustained by the Federal Reserve for the past decades, that of constant inflation rates. Though there is notable fluctuation at times, the rate tends to hover around three percent, causing a number of detrimental effects. The justification for allowing inflation has always been that to stop inflation would be to effect the market of goods and services in a negative way, thus doing so would put the breaks on economic growth. The analysis, however, posits a couple salient fallacies: First, it assumes that supply-side economics actually helps the goods market. The increase in money supply -which is the long-run source of inflation – directly affects a select group of financial institutions that are then expected to utilize the nominal wealth increase so as to benefit the wealth perceptions of consumers. In reality, as seen in countless empirical studies, the supply-side mechanisms never operate as intended; the wealth never gets dispersed as expected. Second, changes in the goods market that arise from money supply changes only occur with shocks to the money supply; that is to say, only when there are immediate and unexpected changes in the money supply are institutions fooled into believing they are more wealthy. For this to work consistently, the Fed would have to increase the inflation growth rate nearly exponentially on an annual basis. (note that this refers to the second derivative, not the first derivative of inflation. Inflation growing every year is not enough, rather the rate of growth would have to grow every year.) Since the inflation rate is relatively constant, the potential benefits to the goods market are never realized. Institutions know what to expect and plan based on real rates (not nominal rates), thus even if the supply-side mechanism were to work, the institutions themselves would never consider themselves wealthier and therefore no economic growth would occur.
This then calls to question the validity of negative effects of inflation rates. Constant inflation in not intrinsically bad, but it is bad in our economic environment because it serves as a regressive tax on the populous. To understand this, the nature of inflation and real wealth should be more adequately explained (apologies to Doan, who already knows how this works). Assume a simple economy of 100 people and a GDP of 200 dollars, with a completely equal distribution (N=100, Y=200, N identical consumers). Then each individual has a nominal wealth of 2 dollars. Suppose an inflation rate of 50 percent, so the new GDP becomes 300 dollars and the per capita income becomes 3 dollars. The real value of wealth in the second time period is still 2 dollars in real (period 1) dollars, since no new wealth has been created. As mentioned before, increases in the money supply cause inflation (and are the sole culprit in the long run), thus when the government prints more money or creates more money through other methods, inflation causes the value of each dollar to lessen. In the model of 100 citizens, imagine 1 of the citizens as the government who is capable of printing money. So in the second period the government prints 100 dollars, which it allocates to itself. Now 1 firm has 102 dollars and 99 citizens have 2 dollars, but the wealth of the 99 citizens is less than in the first period because inflation has occurred. In effect, each individual has 2/3 the amount of wealth they once had. In the American system, creating money serves as a way for the government to pay debts and to otherwise spend on various programs. Each time the method is used, however, real wealth is taken from money holders without them knowing, thus acting as a clandestine tax on the populous. What is worse is that the tax is regressive because it only lowers the wealth of currency holders, not wealthy stock-holders and bond-holders. Since the financial insitutions at the top levels have anti-inflation mechanisms (like calculating real rates and controlling nominal money supply increases), people who have their wealth saved or invested are not affected by inflation in the same way people who do not have money invested are. Thus, the lowest classes of Americans -who hold currency or low-interest savings accounts – are taxed by the government when money is printed, but economic elites – who can hold money in inflation-safe accounts – are not taxed. This problem is exacerbated by the stickiness of working-class wages, which rarely increase on an annual basis. Unlike high-end jobs in which raises and promotions are expected (and often contracts are written to include expected inflation such that the salary increases automatically annually by roughly 3 percent), non-union low-end workers are left hoping for wage increases that match inflation rates. Since incomes do not change nominally, the real incomes of the poorest Americans decline every time money is printed in excess and inflation devalues currency. In these ways, constant inflation rates – which do not promote growth in the goods market – perpetuates wealth disparities among socio-economic classes in America.
Conclusion:
The problems of constant inflation rates are never questioned because of the lack of accountability of the Federal Reserve; not only do Americans lack the bargaining power to alter the behavior of the Fed, they are apathetic and ignorant to the institution’s actions such that they do not even know how the Fed’s policies are hurting them. The Supreme Court likewise ignores the interests of equality and often serves the interests of elites; for more on this, see Hershel’s article concerning the role of judicial review in maintaining the hegemony of elites in society. Until accountability is established, the Court and the Fed will continue to support policies that are not necessarily in the interests of the American people, and the American people will not be able to do anything to stop the deleterious effects. This is not to say that both bodies are comprised of leaders who want to destroy America. It is to say, however, that both bodies are comprised of a very small amount of people who have unique and unpredictable interests that may or may not align with the popular opinion of Americans. When this is the case, the American people are left with no recourse; they are left with only the hope that the unaccountable technocrats at the top have the right intentions and enough talent and knowledge to execute ubiquitously beneficial policy.
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Feeding Elephants in a Small Room
Despite the many cassandras who profess end-of-the-world theories of the recent conflagration in the Middle East, it does not seem that there is any real threat of World War Three. The problem is not that we will soon be engaged in a horrific war that permeates to all corners of the globe, but rather that serious and salient moral and pragmatic approaches are being neglected in favor of nationalistic, passionate, and brutal responses. Even more alarming is the United States’ tacit approval of the excessive retaliation employed by Israel against Israel’s Palestinian and Lebanese neighbors.
A proper moral perspective of the latest events is particularly difficult, as is the case in conflicts of any nature. For this reason many analysts revert to nihilistic or neorealist lenses on the basis that determining right and wrong is simply too difficult. Most lacking in the discourses is any definition of a moral approach; that is to say, most people who use moral arguments do not actually provide information about the system of morality being used when making judgments. What we often hear is who thinks who started it first, which has no logical merit in the context of a war that has proceeded for decades. We also hear who has bombed what and how many have been killed. Again, without a system, the numbers and the accounts of actions are arbitrary, as they are suspended into nonsense when lacking a foundation by which to ground their reasoning. Though few moral judgments can by crystallized absent of a ubiquitously-applied moral doctrine, it is much easier and more agreeable to discount moral arguments that have been made, especially by individuals who expose notable hypocrisies. In this way, a moral system that seems to conform to most metaphysical, objective, and pragmatic moral doctrines can be applied; hypocrisy serves as a common denominator consistent across any ideology (at least in theory). A deontologist clearly does not tolerate hypocrisy, because all actions must conform to tangible principles that are universally legislated. An objectivist cannot tolerate hypocrisy because definitional objective logic is violated. Nor can a utilitarian tolerate hypocrisy, as doing so ineluctably compromises happiness and welfare (more on this in another post). Thus, hypocrisy is one measure of morality that can be applied to the conflict between Lebanon and Israel, as it adheres to a coherent system that can be ubiquitously applied. It becomes readily apparent that the moral highground that many American Jews are scrambling to climb to is ill-fated; the hypocrisy of Israel’s actions in the past weeks immediately discredits any moral justification they may otherwise adopt. For instance, it is not an act of self-defense, as many have claimed Israel’s actions to be, if the same aggression that has been committed toward Israel has been perpetuated by Israel against its neighboring countries at a higher frequency and of a greater magnitude. The homemade Kassam missiles that have been launched occasionally into Gaza do not compare to the massive and technologically-advanced airstrikes that have been unleashed consistently against Palestinians. The one -and now three- Israeli soldiers who have been captured by terrorist organizations do not compare to the hundreds upon hundreds of Palestinians and Lebanese militants and citizens who have been unlawfully detained by Israel in the past. Finally, Israel is not an unsuspecting victim of egregious and inhumane acts of civilian-targeted terrorism if Israel has devastated civilian schools, powerplants, and other capital infrastructure unrelated to Hezbollah or Hamas. It is true that Israelis are more often faced with suicide bombers on busses, which is not indicative of a moral highground, but rather a superiority in weaponry; whereas Palestinian terrorists can execute low-casualty and inexpensive bombings, Israel can tap into its unending funding sources in order to slaughter greater numbers of innocent civilians under the guise of legitimate methods of warfare, which are nothing shy of terrorism except they are condoned by the omnipotent judge of rhetoric, the United States. For these reasons, delineating from the indisputable hypocrisy of Israel, no moral highground can be justified when making arguments defending Israel’s attacks against Palestine and Lebanon.
The pragmatic perspective of Israel’s actions is likewise alarming, as Israel is noticeably exacerbating the problem of terrorism in the Middle East. This will be read as very cliche: Terrorism is not an entity, but a method of fighting. This means it cannot be destroyed by extirpating military personnel by way of airstrikes or ground offenses. The more terrorists and civilians who are killed, the more human capital that terrorist organizations will have at their disposal in the future. Even if Israel were to be successful in eliminating Hezbollah, terrorism against Israel would be no less severe. Instead, the Arabs who have been displaced, ill-treated, or whose families have been slaughtered, will be more prepared to use any means necessary to destroy Israel, including low-cost terrorist methods. Thus, while Israel continues to launch attacks against Lebanese and Palestinian civilians, with Hezbollah and Hamas using their financial resources to provide welfare, emergency, and rebuilding programs in affected areas, the more fuel Israel is adding to the terrorism fire. If ending terrorism is the goal of Israel, then Israel’s approach is ignorant and counterproductive. The consequence will be more terrorism in the Middle East and a more prolific and cultivated hatred for Israel and America by the entire Middle East populous.
Lastly, the American support of Israel is baffling. Though the Bush Administration has often resorted to political propaganda to inflate jingoism in order to pass idiotic legislation, blind nationalism tends to be a practice that is pejoratively viewed as deleterious to the often-forgotten ideals of democracy and freedom of thought. Even so, Americans have a confusing acceptance of the blind nationalism adopted by most Jews who live in America and elsewhere. In this way Jewish citizens have received a free pass to engage in as much nationalism as they want, consequently fully capable of justifying their illogical support for immoral and impractical actions by Israel as adhering to tradition and a moral sense of national identity. Blind nationalism, Jewish or otherwise, should not be condoned, especially when the result is an interest group within the United States having unwavering influence over the foreign policy of the federal government. The tolerance of blind nationalism has manifested itself in the illogical and immoral support of Israel by the United States, which will result in further conflicts in the Middle East, greater disdain by Middle East countries against the United States, and more superfluous civilian casualties on all sides involved.
