C Wright Mills, America's Elite, and the Wisdom of Third Parties

I finished reading C. Wright Mills's Power Elite over the past couple of weeks.  Published in 1956, the book offers more insight into current events than most contemporary commentary.  Mills says that there are three levels of power--lower, middle, and upper--and that the pluralism upon which most political science focuses is characteristic of the local (lower) and Congressional (middle) levels. Although interest groups function on the lower and middle levels, there is little diversity at the upper level.  The upper elite does, of course, contain advocates of different social orientations and degrees of socialism, but the underlying viewpoint is stable.  The upper elite that runs America is comprised of presidential appointees selected from the broader power elite, which Mills depicts as coming from multiple sources: the Metropolitan 400 or social register types, the corporate rich, and the senior officers in the military.

When Mills wrote the book, the military and the military budget were more important than now.  Mills was unaware of the Fed's role (hence the centrality of banking interests) in the subsidization of the power elite and the US governmental system. As a result, he understates the importance of banking interests, which Murray Rothbard and Ronald Radosh tease out in their New History of Leviathan and that James Perloff illustrates in his Shadows of Power.

Mills  briefly describes the central role of the white-shoe law firms and investment banks, but these were more central in the 1950s than Mills describes them; they have become  more so since Nixon's ending of the gold standard in 1971.

According to Mills, the president and his advisers select the highest-level elite from the various groups within the power elite.  During the Kennedy years social and intellectual elites, represented by the Bundys, Dean Rusk, and Robert McNamara (recommended by fellow Skull-and-Bonesman and partner of Prescott Bush at Brown Brothers Harriman, Robert Lovett ) were dominant.  More recently, much as in the days of George Washington, bankers like Henry Paulson (who parallels but is not the intellectual equivalent of Hamilton) have been dominant.

The upper elite interacts within itself, and typically there are one or two degrees of separation between any two members.  Mills  does not claim that there is any sort of conspiracy, for that would be foolish.  Rather, each takes cues from the other.  Conformity derived from educational-and-university experiences obviates the need for overt conspiracy.

The last few chapters move from analysis to broadside as Mills criticizes what he calls the crackpot realism of America's narrow-minded upper elite.

Mills's depiction of America as having moved from a public liberal to a mass society is on point.  His emphasis on the mass media as transforming Americans from a free, imaginative people to a nation of cowed serfs (my word, not his) is also on point.  Mills is not that far from writers like James Perloff, who writes about the Council on Foreign Relations.  No president since Hoover has been independent of  the CFR.   That does not imply conspiracy any more than the leadership of a modern corporation's interacting with each other is a conspiracy.  The elite interacts and forms opinions. Its mindset, like that of leading university professors, is conformist, lockstep, cowardly, and lacking in vision.

Mills offers little hope for those who care about America or hope to see a change from the current trend. It occurred to me that his book was the inspiration for Eisenhower's 1961 speech about the military-industrial complex.   If Mills is right, then a useful long-term strategy in politics is to support third parties.  Another is simply to jump ship and move to a smaller country in which a mass culture and an elite bred to narrow-minded arrogance and the subjugation of a foolish mass of TV-news-viewing idiots won't exist because of the smaller scale.

In the Federalist 10 Madison argued that America's large scale was an impediment to the formation of faction.  As transportation and communication modernized, universities began to serve as the proving ground for elite conformity and groupthink.  The power of America's elite is made possible by large scale combined with modern communication methods.  The Internet and other postmodern developments, such as community activism, pose a challenge to America's mass culture.  Nevertheless, as long as Americans continue to support the two mass parties and as long as at least a plurality of Americans derive their news from mass-market newspapers and television,  the trends that Mills observed will continue to escalate.

America Has Let Madison Down--Why?

In the Federalist Number 10 James Madison described faction, or special interest activism, as the chief threat to republican government. In our era special interest lobbying has arisen as an increasing threat to the American republic, just as Madison prophetically predicted. The monotone media support for the Wall Street and banking "bailout"; the absence of intelligent discussion on television; the continued exponential growth in the federal budget in which both parties participate; the Democrats' use of the "bailout" as an excuse to subsidize special interests; the Republicans', including Ronald Reagan's, inability to meaningfully cut government; and both parties' loyalty to the Federal Reserve Bank's ever-escalating subsidization of Wall Street all portend ever steeper decline in American wealth, power and freedom. The two party system has failed. Yet, Americans lack the competence or education to identify the underlying problems. Why has America let Madison down? Why do the voters repeatedly elect the same corrupt politicians, beholden to special interests? Why have so few presidents displayed a fraction of the vision or leadership ability of the presidents of an earlier age?

Even in the 1780s factional rivalry challenged popular government. Madison defined faction as "a number of citizens, whether amounting to a majority or minority of the whole, who are united and actuated by some common impulse of passion, or of interest, adverse to the rights of other citizens, or to the permanent and aggregate interests of the community."

His definition suggests a few possible reasons for the failure of twenty-first century American democracy. First, in the Progressive era, which occurred a century ago, Herbert Croly and John Dewey argued that democracy is an end to itself. They defined away the possibility that the majority could oppress the individual or a minority. This was a paramount concern to Madison but of no concern to Croly or Dewey. The Progressives' fetishization of democracy continues today even in many libertarian circles. Excessive democracy fails because the public is easily manipulated by wealthy factions.

The extension of democracy in the Progressive era, specifically, the direct election of Senators and the creation of the primary system in the two parties, opened the door to manipulation of public opinion. By increasing choice the Progressives reduced choice. Today's Congressmen, like the general public, are incompetent to discuss key issues such as the Federal Reserve Bank. Nevertheless, public opinion is more easily manipulated than Congress's, and more democracy has meant that public decision making has deviated from the public interest to a greater degree than Madison hoped. Madison believed that elected representatives would refine public opinion. Instead, the public is so dazed that it repeatedly elects representatives who act against its economic interests and who are themselves incompetent to discuss policy.

The second reason that democratic faction may no longer be recognized is the education system. The public has been educated to believe that Congress and the bureaucratic apparatus of the federal government make rational decisions; that the Federal Reserve Bank is a necessary and optimal institution; that politicians act in their interest; and that they are like children who must depend on the federal government. In the 18th and 19th centuries Americans were not so indoctrinated. A sheepish, indoctrinated populace is incapable of self government.

A third reason that faction has been increasingly triumphant is the mediazvestia*. In Madison's day there was a host of opinion sources. Newspapers, public debate and local discussion permitted a diversity of opinion. Today's mediazvestia is on a lower intellectual level than the newspapers of Madison's day, yet the public passively accepts its numerous distortions, lies and errors (the reporters themselves are badly educated so make frequent errors of interpretation and judgment). One wonders why a viewer would take CNN seriously. But millions do.

Thus, excessive democracy; indoctrination through the education system; and indoctrination through the mediazvestia are reasons for the public's inability to cope with democratic faction.

Madison goes on to argue that although the causes of faction cannot be eliminated the effects can be. Here he makes honest errors that economists identified two centuries later. First, he believes that if a faction consists of a minority, the democratic process will defeat it through a majority vote. This is an error, as I will discuss. Second, when majority faction arrives at a "scheme of oppression" the safeguard that Madison proposes is republican government and large size, neither of which work because of modern technology and the scope of government.

Since, argues Madison, small numbers of citizens are most easily captured by momentary emotion that leads to oppressive faction, republican safeguards such as representative government inhibit what de Tocqueville later termed "tyranny of the majority". He argues that "the two great points of difference between a democracy and a republic are delegation to a small number of elected representatives" who are potentially more rational than the citizens themselves and "secondly, the greater number of citizens and greater sphere of country over which the latter may be extended."

But a small number of elected representatives cannot serve as a safeguard if they have been brainwashed by an ideological educational system that teaches them to support special interests. Today's elite educational system impresses upon its subjects the importance of subsidizing Wall Street. As well, the great land mass over which the nation eventually extended was diminished first by print media, then radio, then television. Television has rendered the nation the equivalent of a small town by which the public is easily riled to violent emotion.

Contrary to Madison's hopes, as the country has grown larger, the quality of leadership has declined. A nation of 310 million produces leaders of vastly inferior quality to a nation of 3 million, the approximate population of the United States in 1790. One must wonder why a large nation like America has produced a failed, despised Congress; and presidents who are fools.

There are several interpretations of leadership. Among the most famous is the distinction between transactional and transformational leadership. Transactional leadership involves quid pro quo. The leader provides expertise and resources while the followers provide effort and other contributions. With respect to government, transactional leadership would amount to overseeing of factions. Congress and the president provide benefits to various factions. In turn, the factions offer support to Congress and the President. Transactional leadership is necessarily redistributive. It is not inspirational and is inconsistent with the Lockean values on which the nation is based. Yet it is the basis of both Progressivism and New Deal liberalism.

The alternative view of leadership is tranformational. Transformational leaders inspire. They project values and vision that motivate belief and commitment. They are likely charismatic (which was Max von Weber's term for this kind of leader). In order to be transformational, a leader must project the American value system. In American history, there have been several transformational leaders: Washington, Jefferson, Jackson, Lincoln and both Roosevelts. Until the Roosevelts all of the leaders projected Lockean values. Theodore Roosevelt and Franklin D. Roosevelt rejected Lockean values. Since then there has been a basic value conflict within the United States. Many people, called conservatives or libertarians, continue to believe in Lockean values. Many others called "liberals" have rejected American values in favor of a European value system. Still others are indifferent.

Great leaders cannot be transactional. The reason is that the brokerage of special interests limits the scope of leadership. It involves manipulation. It is inconsistent with the vision on which the nation's Constitution rests. Great leadership is visionary. It is transformational. It is impossible in post-New Deal America. Great leadership is not possible in a nation with disjointed values because Americans do not agree. Ronald Reagan disturbs social democrats. Barack Obama disturbs individualists. It will not be possible to mend the rifts in the American value system because those who advocate the European-style value system are as committed to it as those who advocate the American approach. America is divided so that great vision and leadership are impossible.

Moreover, and unfortunately, Madison was wrong in his hope that the fittest would be selected as representatives for the same reason that he was wrong that minority factions would not succeed. He did not understand the economic incentives at play in the post-New Deal democracy. These concerns were less true in the era of limited government, until say, 1950, when the federal government spent only 10 percent of gross national product. As the stakes have been raised, so has the corruption level.

The best do not enter government for a host of reasons. The selection process in politics involves a training period during which an amibitious college graduate is expected to confrom to a political machine. Only someone with flexible values, capable of ignoring corruption and stupidity, would be able to see through this apprenticeship. Second, the opportunities for gain are greater in other fields. Third, specialization is greater in the modern world than it was in the 1790s so that people who choose to specialize in science or business are unlikely to consider or be considered for a political career.

With respect to public indifference to poor leadership, costs of education about politics inhibit the population from thinking carefully about their representatives. Costs of organization inhibit public spirited groups from forming. In contrast, special interests enjoy economic advantages because their stakes are high. Wall Street gains billions from the Fed. It pays for Wall Street to organize. If each American each year pays a "tax" of $500, it is not worth it to fight them.

Special interests enjoy asymmetric incentives and low organization costs because corporations, Wall Street banks and similar lobbies are few in number. The gain from Fed counterfeiting and special interest regulation are skewed to favor a few groups but the costs are spread over a large number of voters. Therefore, minority factions triumph and inferior representatives are elected because of the costs and benefits that face voters. It is costly to learn about one's state legislator or Congressman. One person can educate himself, but to what avail? He cannot influence the election's outcome anyway.

Morals and idealism do not trump economics in most cases, unless the problems that special interests create become large enough to interfere in the daily lives and economic plans of Americans in a visible way.

Of course, the endless regulations and special interest arrangements that hamstring Americans already do interfere significantly in Americans' ability to function; to innovate; and to progress. Socialism has already done incalculable harm to progress. But the harm needs to be visible and sufficiently egregious so that the costs of organization to any one American are covered by the losses sustained due to efforts to correct the problem. Apparently, this has yet to occur. The majority does not see the current situation as warranting self education. Moreover, the mediazvestia supplies considerable disinformation, confusing most Americans and raising the costs of practical action. For instance the claim that the "bailout" is essential has been hammered home via almost every media outlet. How many Americans are not bamboozled?

Madison notes that smaller societies have fewer individuals who are more easily manipulated while larger states with more citizens are more difficult to manipulate. "Extend the sphere and you take in a greater variety of parties and interests; you make it less probable that a majority of the whole will have a common motive to invade the rights of other citizens; or if such a common motive exists, it will be more difficult for all who feel it to discover their own strength and to act in unison with each other."

Again, Madison fails to understand the insights that Mancur Olson grasped in "Logic of Collective Action" and "Rise and Fall of Great Powers" and that George Stigler notes in his "Theory of Economic Regulation". Economic incentives cause groups to form and to agitate in ways that are predictable based on benefits from lobbying and organizational costs. Size defers but does not eliminate faction. Rather, small groups of corporations or labor unions find it convenient and profitable to form. Large groups are difficult to organize and so cannot resist the smaller groups.

One of the things that kept faction in check until the 1950s was limitation on the scope of government. As the power to tax increased, the incentive to manipulate the state increased. Today, we have the bailout and increased subsidy of the wealthy because the average American has been tricked into believing that subsidization means helping the poor.

Madison's final point is that the influence of factious leaders will be limited by geography. But television excels at flaming tyrannical emotion among the majority. The public is easily fooled by supposed experts who parade on national television, each one less competent and less informed than the last. Television conquered Madison's vision. It has destroyed the ability of republicanism to restrain tyranny. Lockean Americans are right to resist the "liberal media". Even if the media was conservative or libertarian it would pose a threat. By linking the mass mind it recreates the small town, the direct democracy. Heretofore the chief manipulator of the public mind has been Wall Street. It is entirely possible that a fascist or other totalitarian movement could replace it and play the same role.

Madison could not have anticipated the development of technology. Mass market newspapers and yellow journalism flowered in the post Civil War era and were followed by the expansion of Progressivism. Nikola Tesla patented the key elements of radio and television in 1897, at the beginning of the Progressive moment and the height of the late 19th century's innovative explosion. The practical implementation took somewhat longer but the military had begun using it by 1912, the year of Woodrow Wilson's election and it had been adapted to commercial use by the 1920s. The shift to social democratic Progressivism was effected in 1930, at the height of the radio age. Television was adopted in the 1950s, and the massive expansion of federal power occurred soon thereafter.

Madison believed that distance and population enhanced republicanism. Technology has successively reduced distance through improved transportation and, most of all, through more rapid communication. Rapid communication enhances the extent of decmocracy. Emotion such as outrage and superficially thought out strategies such as the bailout are passed off by interested economic actors as "policy". Economists for hire parade before the television camera, claiming that multi-billion dollar subsidies to firms that happen to have contributed to the universities that employ them are essential to economic progress. The public lacks the ability to rationally digest these claims. Crackpot schemes tack hold rapidly.

Much as Hitler and Mussolini were products of the radio age and New York Times social democracy was the chief product of the television age, so will the advent of the Internet influence the course of history.

But is the decentralization that will follow the Internet explosion be sufficient to counterbalance the longer term centralizing trend of television or radio?

Just as centralization of the federal structure enhanced and re-enforced the "small town" effects of television and radio, so decentralization will enhance and re-enforce the "big tent" effect of the Internet. Conflicting informational sources threaten and de-legitimize traditional centralized media. Even with the massive pro-bailout propaganda campaign on television and radio, the majority of the public remains unconvinced. Only Obama's fanatic followers on CNN and its mindless viewers think otherwise.

The Internet poses some hope to counteract the mass mind era of radio and television and its concomitant rejection of Lockean values. But Americans need to think about a new organization that will enhance the new Lockean revolution that can take root. Decentralization is consistent with the multi-faceted potential of computer and Internet technology. The centralizing trend of the last century can potentially be counteracted. But enhancement of Madison's vision requires the creation of a new frontier, a new form of diversity by which alternative social visions can coexist peaceably and the die hard rigidity of "Progressivism" and its pro-Wall Street fanaticism can be sidestepped. Of course, many liberals prefer the Wall Street liberalism of the New York Times and the Democratic and Republican Parties. But this aging system is increasingly incoherent. The academics who support it are increasingly self interested and foolish.


*In case your wondering, Izvestia was the official newspaper of the Soviet government. My point is that the American "media" is today little more than a propaganda organ for Wall Street.