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Nonprofits and Oligarchy

April 22, 2014

(Mark Rosenman is emeritus professor at Union Institute & University and a frequent contributor to PhilanTopic. In his previous post, he wrote about the link between corruption and declining trust in our public and private institutions.)

Rosenman_headshotThe Supreme Court's recent campaign finance ruling is fraught with irony for lovers of democracy, underscoring as it does the fact that the United States is becoming more and more like Russia, where wealthy oligarchs dominate the political system as well as the marketplace.

Equating money with speech, and refusing to limit its influence in elections, as the Court has done in recent rulings, is a problem for society – and especially for charities and foundations that work to help the least advantaged among us. They know that government programs are critical to the well-being of millions and millions of Americans and that government plays an essential role in protecting the environment and promoting the health, safety, and security of all of us.

They also know that when the super-rich intervene in politics to promote their own interests over the public interest, it can be profoundly problematic.

Unfortunately, that's exactly what is happening. While we live in a democracy where each of us has an equal vote, most of us have become aware that the outcome of many elections, especially at the congressional, state and national levels, is determined before we get to the voting booth – in part as a result of increasingly negative campaigns funded by deep-pocketed donors. Nor are we under any illusions as to our ability to compete with wealthy corporations or their lobbyists when it comes to influencing politicians' decisions once they've been elected to office.

In the last election cycle, for example, a total of more than $6 billion in campaign contributions was raised for various candidates. More than a quarter of that money came from the top one percent of the top one percent of all Americans. In fact, the money of the super-rich was so important that not a single politician running for a Senate or House seat was elected without their campaign contributions. Although more than half the members of Congress are themselves millionaires, they depend on the wealthy to win and hold on to their seats.

The wealthy are willing to provide stunning sums to political campaigns for a simple reason: it's good business. Take the financial/insurance/real estate (FIRE) sector, which accounted for more than 20 percent of the top 31,000 (0.01%) of donors to political campaigns in 2012 and over 34 percent of the top 1,000 donors.

Needless to say, they get a very good return on that investment. The share of GDP claimed by just a portion of the FIRE sector has almost doubled since 1980 – a period, as Nobel Prize-winning economist Paul Krugman points out, in which elected officials acted to deregulate the financial industry. It should come as no surprise that the FIRE sector significantly increased its campaign contributions and lobbying activities over those decades, especially when re-regulation of the sector was being considered. Indeed, elected officials bring new meaning to the term FIRE sale: As the late philanthropist Phil Stern pointed out in his 1988 book, we have The Best Congress Money Can Buy.

Such self-interested behavior by the wealthy and the politicians beholden to them creates real problems for nonprofit and the people and causes they serve. The deregulation of the financial services industry by Congress during the Clinton and Bush administrations – a series of policy decisions that led to the worst economic crisis since the Great Depression and untold hardship for millions of Americans – is the most obvious recent example.

Current battles over the environment offer another example, as businesses and wealthy donors wager millions to oppose government regulation of greenhouse gases from existing power plants in an attempt to stave off significant action to address climate change.

In an effort to counter such industry initiatives, two leading environmental groups are organizing a collaborative that will employ the same tactics – collecting and spending millions in campaign contributions to lobby elected officials and influence policy related to climate change. One of the environmental leaders involved in the effort has said "we need more environmental money in politics."

Yet, the challenge for the nonprofit sector is not to try to win a corrupt game, especially a game in which the rules are stacked in favor of the wealthy. The rules of that game are written by those in power, and as long as campaign finance is unregulated, those representing private interests always will be able to outspend groups fighting for the common good. When money is the name of the political game, oligarchs win.

In fact, according to a paper soon to be published in a journal of the American Political Science Association, the U.S. already is an oligarchy in which policy decisions reflect the preferences of "economic elites and organized groups representing business interests."

That has to change.

The questions all nonprofits and foundations should be asking are: What can we do to counter the economically and socially destructive corrosion of the democratic process in the U.S.? And if the rules of the game aren't easily changed, what can we do to help average Americans better understand and promote their shared interests and elect politicians who make policy aligned with those interests?

The answer, in part, lies in building broad democratic participation at the community level. It's important to remember that much of the money flowing into politics is spent during elections at the congressional, state, and national levels. Nonprofits and foundations, in contrast, should focus on building enduring grassroots organizations that use new techniques and technologies (in addition to tried and true methods) to continually engage and activate people around their shared interests.

It's not too late to make investments in the American people instead of in donor-serving politicians. The popular infrastructure of democracy can and must be strengthened, and nonprofits and foundations are critical to those efforts.

Mark Rosenman

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Posted by David Jacobs  |   April 29, 2014 at 11:32 AM

Hello Mark-

I agree, there is large space for real grassroots organizations (rather than groups created by having someone like Bloomberg pumping in millions to fund a pet cause) to do some good work in strengthening the infrastructure of democracy, as opposed to having a congress at the beck and call of billionaires such as Tom Steyer.

This is especially important in the area of helping stamp out voter fraud. After all, nothing weakens our faith in democracy faster than a broken system, a system that can't be fundamentally trusted to be fair. An organization like True the Vote - which just happened to be politically targeted by the IRS, - is an example of a grassroots action to strengthen democracy and take on the entrenched power interests inside and outside of our government.

Posted by Pat  |   May 12, 2014 at 07:48 AM

Oligarchy is only for the few able to participate in all socity has to offer: education, health care, entrepreneurship, and political opportunity. It shrinks the pie rather than expands it, and turns all nonparticipants into low wagers.

Where will second generation professionals come from?

Tax all and spread the wealth by having society's benefits to all starting with education. Depriving a child of education for short term indulgence by some few is dishonorable, not honorable. America needs to create all those engineers, physicians, technicians, and pros, not outsource for them!

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