Building an Economy that Works for Everyone

Why a healthy democracy needs a strong civil society

Stan Sorscher

By Stan Sorscher,
EOI Board Member

The other day, I had lunch with an economist I respect and admire. I asked him, what would it take for China to become a modern democracy and build a strong middle class?

OK. I didn’t ask him that. I told him that China would need strong institutions of civil society, and a deeper sense of Social Contract to become a stable modern democracy with a dynamic middle class.

In America’s early history, we had strong institutions of civil society, such as free press, good education, and strong national identity. We wrote individual freedoms into our Constitution. We had respect for the rule of law, not much bribery, respect for science, and technical progress. We had social and economic mobility, opportunity and fairness. Well, at least for white males who owned property. But you see where I’m going with this. A robust civil society gives voice to workers, families and communities. It serves as a counter-balance to wealthy and powerful economic interests.

China has a rich culture and strong national identity, but income inequality is growing in China, no free press, no unions, no environmental groups, and no real political system to make tough tradeoffs between wealthy powerful economic interests and the public good. Workers have no economic bargaining power. China’s leaders have limited respect for the rule of law, and little willingness to enforce rule of law.

China has done an exceptional job of acquiring the means of production. Not so much for human rights, labor rights, public health, or environmental protections.

My economist friend told me, “No! Not buying it.” China will modernize simply through economic transformation. I’m not sure what he meant, exactly. Maybe he meant that industrialization and democracy were the same thing, more or less. You get one with the other.

My point was that you don’t get one with the other. You might get a banana republic. You might get Egypt or something like Egypt, or Victorian England without a history of individual freedoms. Russians got plutocracy, corruption, murdered journalists, and a political system with zero credibility.

You might get a lot of things, depending on what kind of civil society you have.

National politics is really a contest between short-term investor interests and long-term public interests. Investors will act in their short-term interest. Public good often works in the long term. Market forces will not protect public good. For that, you need an effective political system.

Colombia is a poster child for dysfunctional political and economic systems. Their culture and national identity are proud enough, but working Colombians are kidnapped, intimidated and killed routinely, as punishment for political involvement. Prosecutors, judges and justice ministers live in the shadow of violence.

The last thing Colombia needed was a so-called Free Trade Agreement, which increases rights and powers for global businesses and weakens rights and powers for civil society. Now, Colombia faces worsening inequality and more social disruption.

Japan, Germany, Korea, Singapore, Taiwan, and other modern democracies have strong social cohesion, strong institutions of civil society and strong middle classes. These outcomes are not accidental. They are the result of deliberate political choices these countries made.

I asked my friend about China becoming a modern democracy. My real question wasn’t about China, or Colombia, for that matter. I was really asking about America. What happens to our prosperity, our middle class, and our institutions of civil society?

In the last 30 years, our civil society has weakened. Political and economic power are concentrating in the hands of the top 1%. Our respect for science has been replaced with ideology and denial. We disparage public education, and public employees. Our social cohesion is so weak that we envy our neighbors who still have pensions. Rule of law is becoming situational – it doesn’t really apply to big banks or foreclosure robo-signers. Political campaigns are so expensive that elected officials literally cannot afford to govern for the public good. They can only govern for the wealthy and powerful.

Within this 30-year decline for civil society, our so-called free trade policy steadily lowers the bar for democratic political process, substituting global business interests for public interest.

In his new book, Nobel laureate economist, Joseph Stiglitz, calls globalization, as we’ve managed it, “global governance without global government.”

In Western democracies, we solve tough social and political problems through a political process. However, in so-called free trade agreements, global businesses write the rules, then we send disputes to anonymous tribunals. Democratic problem-solving does not happen in the trade agreements. It won’t happen in Colombia. I don’t see how it will happen in China. It’s becoming more difficult in America.

This is really about political and economic power.

In the conclusion to his book, Stiglitz offers two possibilities. One is that we in the 99%, can recognize our predicament and reclaim our political birthright. Alternatively, the 1% can recognize their “self-interest, properly understood,” and lead the way back to a sustainable democracy. Stiglitz traces this back to Alexis de Tocqueville in 1835.

Americans understood a basic fact: looking out for the other guy isn’t just good for the soul – it’s good for business. The top 1 percent have the best houses, the best educations, the best doctors, and the best lifestyles, but there is one thing that money doesn’t seem to have bought: an understanding that their fate is bound up with how the other 99 percent live. Throughout history, this is something that the top 1 percent eventually do learn.

Yeah. That would be good.

By EOI Board Member Stan Sorscher, from the Huffington Post

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