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The Sources Of America's Political & Financial Dysfunction

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

The way to preserve great wealth is to buy political protection of that wealth. The way to protect great political leverage is to grease the machinery of governance with cash.

I confess that reading Francis Fukuyama's latest cri du coeur in Foreign Affairs,America in Decay: The Sources of Political Dysfunction made me think Mr. Fukuyama has either been reading or channeling Of Two , as his brutal assessment of America's terminal political dysfunction reflects many of the themes I've been hammering on for the past 9 years.

Unfortunately for his readers, Mr. Fukuyama stops short of identifying the key dynamic in America's dysfunction: the exhaustion of Central Planning and centralized government as a "solution" for every ill. Despite his failure to cross the goal line and put truly incisive points on the scoreboard, Mr. Fukuyama does the nation a valuable service in cogently describing the dynamics of our terminal political dysfunction.

Fukuyama describes the inevitable end-game of money capturing the political machinery of the central state: every big-bucks lobby/constituency has veto powerover Federal policies and budget priorities. In effect, every lobby can veto any initiative that crimps their power or share of Federal swag.
As a result, any serious reform that causes financial-political pain is soon reduced by entrenched interests to a toothless public-relations shell: the shell will still carry an idealistic-sounding label ("financial reform," etc.) but the machinery of governance is unchanged.
With serious reform rendered impossible by our governance by the highest bidder, the structural problems facing the nation fester and become even more intractable/painful to fix. Ironically, this increasing vulnerability to crisis causes lobbyists to react even more rabidly to any potentially threatening reforms; as the entrenched interests recognize the end-game is approaching, they are increasingly desperate to push the inevitable cuts onto some less politically potent constituency--for example, the powerless, passive tax donkeys who pay most of the Federal taxes.
Only highly centralized governments can be so easily captured by free-spending lobbies. Consider the challenge of entrenched interests to influence government functions at the county level rather than the Federal level. Lobbyists would have to fan out to hundreds of counties, each of which has a complex thicket of local interests and constituencies who might resist big-bucks private interests.
But with the vast majority of power concentrated in Federal agencies and budgets, entrenched interests only need to buy a few key legislators and spin the revolving door between corporations and the agencies that regulate them to groom pliant regulators.
This is the dynamic that Fukuyama dares not identify, as doing so would undermine the Central State that he still holds up as the "solution" to every ill. Like all centralist reformers--even those like Fukuyama who doubt reform is even possible--Fukuyama clearly pines not for a decentralized state but for a reformed central state that functions in an idealized version of every centralist's fantasy of good governance: America, 1942-45, when the Federal government marshalled the nation's resources to wage global war and limited the influence of entrenched interests as a matter of national survival.
To say the central state is beyond reform is one thing; to say that centralized political power and financial wealth are the systemic sources of dysfunction is another thing entirely.
Though Fukuyama focuses on political dysfunction, the dysfunction is intrinsically political and financial: concentrated wealth and the political process are the yin and yang of a single system. It is meaningless to speak of one as being separate from the other.
The way to preserve great wealth is to buy political protection of that wealth. The way to protect great political leverage is to grease the machinery of governance with cash.

What Fukuyama cannot bring himself to see is that the ontology of the Central State leads to this end-game of competing financial-political interests fighting to protect their turf even as the storm clouds of global transformation darken the horizon.