Democracy and our Economy

Author

Timothy Wirth
May 15, 2024

An excellent column, reminding us how important democratic procedures and safeguards are to a well-functioning economy, and how dangerous would be the siren song of sacrificing democracy for tax cuts and deregulation. T

The Washington Post

Opinion 

Those who would trade democracy for economic gain would get neither

The business community should beware helping put an authoritarian figure back in office.

 

Columnist

May 14, 2024 at 8:00 a.m. EDT

Selling democracy by advertising its economic benefits is a little like marketing chocolate for its antioxidant properties. Sure, it’s a pleasant side effect; it’s also beside the point. Democracy, that Godiva of political systems, should be desirable for its own sake.

Apparently, that’s not so obvious to a few industry titans. Financiers and oil execs have lately bet that another Donald Trump presidency would bring more tax cuts and deregulation, among other near-term financial gains. And, hey, maybe it would. But they should consider also the longer-term economic damage they might endure if they help put an open authoritarian back in office.

Treasury Secretary Janet L. Yellen recently spoke about the “economic case for democracy” at the McCain Institute. Likewise, Brookings Institution senior fellow Vanessa Williamson warned last month about the economic consequences of democratic backsliding and urged the business community to serve as a bulwark for democratic institutions. Both cited research finding causal links between democratic institutions and higher economic growth.

That’s because democracies tend to be better at a whole bunch of things critical to economic flourishing, such as maintaining the rule of law; protecting property rights; providing public goods (education, public health, infrastructure); ensuring policymakers are accountable to all citizens (not just their cronies); and resolving disputes via compromise rather than violence. (Violence, you might have heard, is not great for business.)

There’s more to capitalism than tax cuts, in other words. Why would anyone engage in a private economic transaction without assurance that their counterparty can be held accountable if they don’t deliver, regardless of political connections? Why would a company invest if it’s unclear whether the state might expropriate their assets without cause?

Or as Yellen aptly put it: “Every day the rule of law supports thousands of other economic decisions — from purchasing a home because you know your deed will be upheld in court to expanding your business because you will be competing based on your ingenuity and hard work, not on the biggest bribe to your local officials.”

These are the attributes that make the United States a better place to do business than, say, Russia or China — whose strongman leaders Trump has explicitly praised and sometimes tried to emulate.

(To be clear, Yellen never mentioned Trump by name — as well she shouldn’t; the Hatch Act prohibits Cabinet secretaries from politicking. But she also didn’t need to. The fact that relatively banal remarks about the importance of democracy could be read as a subtweet of a presidential candidate is probably a bigger indictment anyway.)

I get it. If you’re a business leader staring down President Biden’s proposed corporate tax hikes, these kinds of economic benefits might seem abstract. Meanwhile, Trump has placed concrete, lucrative trades on the table. For instance, at a recent Mar-a-Lago dinner, Trump offered huge tax cuts and environmental deregulation to a group of oil executives. The value of these measures, Trump argued, would vastly exceed the $1 billion in political donations that he wanted in return. Oil execs would be getting a great “deal,” he said, according to my Post colleagues.

Or perhaps a second Trump administration doesn’t seem terribly scary since our country managed to survive the first one without turning into a full-blown banana republic. Sure, last time he was in office, Trump tried to reward friends and punish enemies by weaponizing powers of state — including through antitrust actions, government procurement, tax audits, broadcast licensing and law enforcement investigations. But those abuses of power involved other people and other businesses. And most of them weren’t even successful! The “adults in the room” usually intervened.

Such logic might explain why billionaire Republican donors who disavowed Trump after the Jan. 6, 2021, Capitol riot are back to hosting his fundraisers. “I think some C.E.O.s are telling themselves that there were similar warnings about Trump in 2016, and that they believe he’s so transactional that they can work with him,” New York Times reporter Maggie Haberman explained. They’ll make their deal with their preferred devil, who’ll surely exercise self-restraint.

How naive. Trump is notorious for reneging on his promises — to banks, small-time contractors, political allies and yes, even people who think they’re his friends. This might involve shredding a deal or relationship entirely, or shaking down counterparties for more.

Sure, business leaders might get a few lousy tax cuts. What else might they get, now that the adults have all left the room? Trump is advertising, and wannabe oligarchs are implicitly endorsing, the idea that U.S. democracy is for sale. What price might Russia or Saudi Arabia need to pay for a similar bargain? Or, for that matter, a significant TikTok investor, who seems to have lately changed Trump’s mind about the Beijing-linked social network?

What happens if these U.S. companies and megadonors get outbid?

U.S. business titans might think they’re trading democracy for financial gain. In reality, they’re gambling both.

Opinion by Catherine Rampell

Catherine Rampell is an opinion columnist at The Washington Post. She frequently covers economics, public policy, immigration and politics, with a special emphasis on data-driven journalism. Before joining The Post, she wrote about economics and theater for the New York Times.