Number 547 February 10, 2014

This Week: Corruption at the System Level

"Quote" of the Week: Bills to pay, profits to make
Mayors, Money, and Systems of Power
How Investment Corrupts Politics, and More
The Corruption of the Public Debate


Thank you to all of you who have recently sent in Pledges of support for Nygaard Notes! 2013 was the best year yet for donations, and that is no doubt related to the busy-ness over here at Nygaard Notes World Headquarters. I'm busy with regular TV and radio appearances, as well as publishing piece periodically in wider-circulation venues and making periodic presentations in the community. All of this is made possible by your solidarity and support for this project. Thank you!

Despite being about as busy as I think I can handle, I'm getting strong messages that Nygaard Notes should delve into social media a bit. So, as much as I dislike them personally, I predict that it won't be too long before I have both a Facebook page and a Twitter account.

Actually, I already have a Facebook page (I think) but since I don't know how it works I have not "friended" anybody, despite the emails I get all the time telling me that many people—apparently—would like to be my "friend." Don't take it personally! I'll figure it out someday.

Despite the fact that I don't even know how these social sites work, people who do know tell me that I should get with it. So, as soon as I figure them out (including figuring out how to avoid having them eat up what little time I have), I'll crank them up and announce them in these pages. I've already asked Pledgers if they any ideas on the subject. If I haven't asked you, and you have an opinion, let me know.

Nygaard Notes will be on vacation from February 19 through March 1st. I hope to get another issue of the Notes out before I leave, but in case I don't, now you'll know not to write to me the last 10 days of the month. I'll be looking at birds in a place far, far warmer than Minnesota. It's 10 degrees below zero as I write these words. Sympathy cards can be addressed to Nygaard Notes, North Pole.

Shiveringly yours,



"Quote" of the Week: Bills to pay, profits to make

The January 31st Star Tribune provided a useful economics lesson, although they didn't label it as such. It explained how our local public electric utility monopoly—Xcel Energy—profits from our misfortunes. The headline, naturally appearing in the Business Section, read, "Weather Extremes Lifted Xcel's 2013 Profit." The article tells us:

"Minnesota's largest utility said Thursday that its profit grew 7 percent, or 13 cents a share, in 2013 and much of that came from the effect that extreme weather conditions had on energy demand. Weather contributed earnings of 11 cents a share, Xcel said."

"On Thursday, the company reaffirmed its forecast for 2014 earnings of $1.90 to $2.05 a share, only slightly higher than the $1.95 a share it earned for full-year 2013. Meanwhile, the company said it expects to deliver dividend increases of 4 to 6 percent this year and for several years ahead."

Such matter-of-fact reporting obscures an important dynamic of the capitalist economy, which is that every transaction has a winner and a loser. Higher prices benefit the seller, lower prices the buyer. This article reports the interests of the sellers of electricity—Xcel and its shareholders—while ignoring the interests of the buyers—the people of the state of Minnesota. If we had something other than a state-sponsored monopoly, that "4 to 6 percent" could be returned to consumers "for several years ahead." But we have a system in which the surplus goes to those who choose to hold "shares" and not to all of those who use electricity. That is, everyone. Why is this?

(Speaking of winners and losers, see this week's article on Mayors, and Money for another clue about where Xcel's profit goes.)

Bonus "Quote" of the Week: "The governed can be controlled by control of opinion."

This is an excerpt from the just released second edition of Noam Chomsky's "Occupy: Class War, Rebellion and Solidarity," edited by Greg Ruggiero and published by Zuccotti Park Press. I found it on the Alternet website a couple of months ago, can't get it out of my head. (Plus, I had some extra space in the paper version of the Notes this week, so this bonus "Quote" fills the empty space!)

"There's a famous sort of paradox posed by David Hume centuries ago. Hume is one of the founders of classical liberalism. He's an important philosopher and a political philosopher. He said that if you take a look at societies around the world—any of them—power is in the hands of the governed, those who are being ruled. Hume asked, why don't they use that power and overthrow the masters and take control? He says, the answer has to be that, in all societies, the most brutal, the most free, the governed can be controlled by control of opinion. If you can control their attitudes and beliefs and separate them from one another and so on, then they won't rise up and overthrow you.

"That does require a qualification. In the more brutal and repressive societies, controlling opinion is less important, because you can beat people with a stick. But as societies become more free, it becomes more of a problem, and we see that historically. The societies that develop the most expansive propaganda systems are also the most free societies.

"The most extensive propaganda system in the world is the public relations industry, which developed in Britain and the United States. A century ago, dominant sectors recognized that enough freedom had been won by the population. They reasoned that it's hard to control people by force, so they had to do it by turning the attitudes and opinions of the population with propaganda and other devices of separation and marginalization, and so on. Western powers have become highly skilled in this."

You can read the entire article HERE.


Mayors, Money, and Systems of Power

We had a mayoral election in Minneapolis a few months ago, and a very revealing article appeared on the front page of the local newspaper, the Star Tribune, four days before that election. Headlined "Big Contributors Have Much at Stake at City Hall," the article led off by saying "A major utility, developers and labor unions with money and clout on the line at City Hall are donating heavily to the Minneapolis mayoral race."

The article was well-intentioned but, as is the case with virtually every article on money and politics, it was based on a common, and very serious, misunderstanding of how money works, at City Hall or anywhere. It's worth taking a look at the misunderstanding. Note the italicized phrases in the following excerpts.

The article noted that one of the front-runners, Mark Andrew, "has raised $420,284, on top of an independent spending group raising $136,500 to campaign on his behalf. The three independent groups in the race can raise and spend unlimited amounts, but campaigns have no say over their operations."

Our local electric utility monopoly is called Xcel, and "Andrew received at least $5,600 from employees and lobbyists for Xcel Energy," which "has major interests at City Hall next year, when its multimillion-dollar utility franchise agreement to provide electricity to the city is set to expire."

"Earlier this year, city officials discussed the possibility of not renewing the agreement and seeking authorization from voters to form a municipal utility, a proposal that Xcel lobbied heavily against and Andrew described then as reckless and irresponsible."

Now that they're funding his campaign, an Andrew campaign aide felt it necessary to state that "In public life, you have to be able to take a contribution from someone and then be able to disagree with them."

A Green Party Council member (from my ward, in fact) "said that it's difficult for people who accept money from those doing business with the city not to appear like they have been influenced by it."

A local developer who is "pitching a controversial residential-retail project" in the city "said he is not seeking any favors. 'It's actually kind of offensive to think you give somebody a few hundred dollars and somehow they're going to vote for you,' he said."

A Certain Way of Thinking

This article utilizes what I will call a Morality Theory to assess the existence, or level, of the corruption of public officials by Big Money. This theory is based on an Idea, and that Idea is supported by a way of thinking, or Thought Style. Both the Idea and the Thought Style are so common that it's hard for many people to see them, even when they are exposed as clearly as they are in this article.

The Idea that is exposed here is this one: Corruption is a personal, moral issue.

The thought style that is exposed doesn't really have a name, but I'll call it Analytic, or Cause/Effect, Thinking.

Typically, the article doesn't spell out any of this, but rather assumes that readers will have already internalized the basics of the Morality Theory that is the foundation for this article.

We can see the outlines of the Morality Theory in the phrases that I put in italics. Big-money organizations give money to support candidates, but the reporter stresses that there is no moral issue here because "campaigns have no say over their operations." Candidates receive the money but it's OK if they are "able to disagree with" the people or organizations that gave it to them. As long as candidates are not "influenced by" the money they receive, then everything is on the up-and-up. And a developer who donates to campaigns finds it offensive that anyone might think that his donations are an attempt to get office-holders "to vote for" his projects. That would be immoral!

We can debate any of the above points: Do politicians alter their votes to get money, or not? Can a politician maintain her or his integrity even after receiving money? Etc, etc. All of this debate makes it difficult to consider that there may be an entirely different theory that we could use to explain money and elections. I call that theory the Investment Theory, and I'll discuss it in the next article.


How Investment Corrupts Politics, and More

On the front page of the New York Times of November 8 was an article headlined "Hollywood's Ready to Cast Clinton in Top Role." The article had to do with the next presidential election, which I normally wouldn't talk about because it is, after all, three years away. But this article was quite unusual in that it suggested a different way of understanding how Big Money corrupts politics. The article suggested that Big Money does not attempt to change the behavior of politicians. Rather, it suggested that Big Money invests in politicians.

The gist of the article appears in the fourth paragraph: "Conversations with a range of Hollywood figures suggest that there is widespread support for Mrs. Clinton should she decide to run for president in 2016, a stark contrast with 2008, and an important early indication of Mrs. Clinton's standing with some of the biggest donors in the Democratic Party." The rest of the article is about the split in the Hollywood upper-crust vote in 2008 between Hilary Clinton and Obama, blah blah blah. But a very important point was made in the pull-quote accompanying the article. ("Pull-quote" is the journalistic term for those little snippets that appear embedded in an article—in a different typeface or in a box—and that are intended to highlight some point or other in the article.) The quote, which never actually appears in the article, was: "Wealthy liberal donors pragmatically size up candidates."

And so they do. This is a tremendously important point, because this "sizing up," and the decisions about allocating money that follow from it, reflects how money affects the electoral system. It's not about corrupting people, it's about investing in people, which ends up having the effect of corrupting the overall electoral system. Systems vs Individuals; that's a crucial difference.

As I said in the previous article, most people base their understanding of political corruption on the Morality Theory, which says that money is powerful in politics because it erodes the moral integrity of politicians, getting them to do things for money that they would not otherwise do. That understanding puts the emphasis on the morality, or moral character, of individual politicians. It's based on the idea that we need to select leaders who will have the moral fortitude that will enable them to remain uncorrupted by the millions of dollars that will surely be dangled in front of them as they ascend the political ladder. The Clinton article, probably not intentionally, suggests an understanding based on what I call the Investment Theory.

To illustrate, let's go back and have a look at the four key excerpts from the article about funding the Minneapolis mayoral candidates I mentioned in the previous article:

Excerpt #1: "The three independent [campaign-funding] groups in the race can raise and spend unlimited amounts, but campaigns have no say over their operations."

Investment Theory says: It's the other way around: It's the funders who have the "say" over whose campaign gets the money, which is dictated by their assessment of who will best serve their interests.

Excerpt #2
: "In public life, you have to be able to take a contribution from someone and then be able to disagree with them."

Investment Theory says: True, but if you "disagree" too much, Big Money will "pragmatically size you up," the money will be withheld, and your candidacy will go from "major" to "minor" due to lack of funds.

Excerpt #3: "It's difficult for people who accept money from those doing business with the city not to appear like they have been influenced by it."

Investment Theory says: The important point is not that the behavior of politicians is influenced by the contributions—which they may be in some cases. Far more important is that the contributions are influenced by the behavior of politicians. Behavior doesn't follow money; money follows behavior.

Excerpt #4: "It's actually kind of offensive to think you give somebody a few hundred dollars and somehow they're going to vote for you."

Investment Theory says: It's the other way around: A pattern of "voting for you" precedes the giving, it doesn't follow the giving.

In a nutshell, the Investment Theory says that Big Money corrupts politics not by inducing people to act in ways they know (or should know) are wrong. Instead, says the Investment Theory, Big Money invests in politicians who have shown through word and deed that they can be relied on to act in the proper ways. And, by thus investing, Big Money selects for success the kinds of politicians who will act in their interests. Big Money holds the trump card here, because no candidate can succeed without massive amounts of cash. As the pull-quote says, "Wealthy liberal donors pragmatically size up candidates." And the "pragmatic" part is the part where donors predict which candidate is most likely to act in their interests.

We all do it. Anyone who chooses to invest in a candidate hopefully "sizes them up" before donating to the campaign. The difference is that the $25-$100 that most of us can afford to invest in candidates won't make them "viable" at anything beyond the local level. That is, unless we do it in an organized, grassroots way in accord with thousands or millions of others. Until we figure out how to effectively do that, it will remain true that success at the national, or even the statewide, level will require the support of Big Money. And that's why Big Money has worked so hard to liberate itself from any limits on its power. The ability of the wealthy to select electoral winners is enhanced when wealth is concentrated in a small number of hands. And recent Supreme Court decisions have paved the way for rapid growth in "independent" capital-pooling organizations, such as Political Action Committees and the advocacy groups known as "527 organizations," further liberating the king-making power of the wealthy.

It's not only politicians who are selected for success in this way, as we'll see in the following article.


The Corruption of the Public Debate

An article in the December 14th New York Times was headlined "Think Tank Plays Down Role of Donors," and it focused on "the left-leaning Center for American Progress," or CAP, which had just released the "first official tally of its corporate donors." No doubt the Times is correct when it reports that "Most of the major think tanks in Washington take corporate donations, in addition to contributions from foundations that sometimes have ties to corporations or to the executives associated with them." Note that it's the "major" think tanks that take the Big Money.

The Times reports that there is "a debate in Washington over whether such corporate donations to prominent research organizations result in academic-styled policy papers and newspaper opinion pieces that are designed to move corporate agendas." The CAP naturally denies that this might be the case: "Neera Tanden, president of the Center for American Progress, said the donations have no impact on its work. 'This is an institution that tries to find the right answers,' she said in an interview on Thursday. 'It does not answer to the agenda of any of its individual supporters or corporations.'"

Both Ms. Tanden and the Times interviewer reveal their reliance on the Morality Theory as the basis for their analysis of the propriety of their sources of support. For those utilizing the Investment Theory, we can get a hint of a very significant reality by basically turning the following Times paragraph upside down:

"The donors' list includes a particularly large number of donations from the health care sector, including America's Health Insurance Plans, an industry trade association, as well as Blue Cross Blue Shield Association, CVS Caremark and Eli Lilly, the drug maker. The donations have come at a time when the organization has been a strong advocate of President Obama's health insurance program."

The reality we glimpse here is that Obamacare is very much in line with the "corporate agenda," which would explain why Big Pharma and the insurance industry are investing in a think tank that "has been a strong advocate" of the policy. It's not difficult to find organizations that are strong advocates of single-payer, or even socialized, health care. But that's not on the corporate agenda (or rather, it is on the agenda, as a nightmare), so any think tanks with such crazy ideas will not become what the Times refers to as "major think tanks." In fact, they'll rarely be mentioned in the mass media, since they will lack the clout that comes with major funding.

One organization that is mentioned in the mass media quite a bit—including in this Times article—is a Washington-based research and advocacy group called Third Way. Third Way, "whose list of largest donors includes current and former Wall Street executives," is a big advocate of cutting Social Security, among other corporate-friendly policies. And the Times quotes a spokesman for Third Way, Sean Gibbons, who "rejected any suggestion that the group's work was distorted by the origin of its financing. 'No one—not our donors, our political allies or our friends—tells us what to think, write or say,' he said." True enough; if they had to be told what to say, corporate donations would be hard to come by.

I'm not suggesting in any way that the media stop reporting on who supplies the funding to think tanks, or to politicians (although the Center for American Progress voluntarily released its donor list, it wasn't uncovered by the media). Such information is not irrelevant. Actually, I think much more reportorial energy should go to discovering who is funding whom. Once we know who receives funding from a given Political Action Committee (PAC) or from one of the advocacy groups known as "527 organizations," then we know who has been judged worthy of investment by the people whose money is being donated. We can infer from this information just who it is that Big Money wants to succeed, and/or which ideas are the ones that Big Money has decided should receive wide distribution.

So, for example, when the Washington Post reported in 2011 that President Obama had raised "far more money this year from the financial and banking sector than Mitt Romney or any other Republican presidential candidate," it didn't necessarily tell us that the Obama administration was or would be corrupt. But it did tell us something about what we could expect from an Obama administration. Because we know that analysts in the financial sector "pragmatically size up" all of the candidates before deciding in which candidate to invest. Since they selected Mr. Obama, we can conclude that they had decided that an Obama administration would be quite likely to serve the interests of the financial sector. Which, arguably, it has.

As for the selection of ideas by Big Money, we can make similar inferences, as the Times article on the ("left-leaning") Center for American Progress reveals: "The donors' list [for the Center] includes a particularly large number of donations from the health care sector" and "The financial services sector is also widely represented..." So the ideas promoted by CAP can be expected to align, in large part, with the ideas preferred by those sectors. And, sure enough, CAP publications call the disastrous (but business-friendly) Trans-Pacific Partnership "a historic opportunity," and criticize "advocates of ... single-payer systems [that] put purism ahead of pragmatism."

Both of the above positions align with the positions of the Obama administration, and no wonder. The founder, former president, and now chairman of the executive committee of the Center for American Progress is John Podesta. And here are some points about Mr. Podesta that we find in the final four paragraphs of the Times article:

"The disclosure [of funding sources] by the Center comes as Mr. Podesta prepares to start a new assignment as a senior White House adviser to Mr. Obama. But the timing is largely a coincidence, [Center President Neera] Tanden said..."

"It was during Mr. Podesta's tenure as president, in 2007, that the organization created what it has called the American Progress Business Alliance, according to a brochure produced by the center. The alliance is described as a membership group for corporations that in return for donations would be granted access to the organization's top scholars as well as meetings it hosted with government officials in Washington, the brochure said." The article doesn't mention how access may be granted to the have-nots who can't donate large sums.

So What?

Why do I talk so much about "theory"? What's the difference, really, if politicians cynically change their votes for money, or if Big Money finds friendly politicians and helps them succeed in their quest for public office? It all ends up the same, doesn't it? I'll explain where and how the rubber meets the road in the next issue of Nygaard Notes.