The Peaceful Transition of Power and Conspiracy Theories
Economic elites and political elites can never be fully aligned
"Spanish Democracy by Disney" by PhotoLanda is licensed under CC BY-NC-SA 2.0.
The peaceful transition of power has been in the news over the summer. Former US President Donald Trump has finally been charged for trying to overturn a valid election result in 2021. Meanwhile, a commander of the army in Niger has seized power from the civilian president.
Regular readers of Sharpen Your Axe will know that institutions that embed the peaceful transition of power correlate in complex ways with successful societies. If the population can get rid of its leaders, it is harder to establish gangster capitalism.
Anyone who has ever tried to have a deep discussion with a conspiracy theorist will probably have mentioned the peaceful transition of power at some point. If you, as a voter, can play a small part in removing the government of the day, doesn’t that suggest that maybe everything isn’t scripted and pre-ordained by those in power?
In my experience, conspiracy theorists will just shrug and make some comment about the peaceful transition of power falling short of being real change. There are normally two elements to this remark. The deeper one will be about the way that economic power stands slightly apart from political power. The more superficial side of the comment is that it is just an excuse for conspiracy theorists to keep using one model to understand the world while ignoring inconvenient articles in the news media.
This column will engage with the deeper point. It should be obvious that economic power and political power are rarely perfectly aligned. If you look hard enough, this observation should help you understand just how difficult it is for the elite to perfectly execute conspiracies.
We have mentioned before that investors are significant stakeholders in liberal democracy in a globalized world. If they hate a policy, they will vote with their feet, with the bond market acting as an early indicator that something has gone wrong. The results of ignoring these signals are potentially catastrophic, as the citizens of Venezuela found out to their cost when the country’s elected officials held a slow-motion coup before destroying the country’s economy. Business leaders like Alberto Franceschi have been forced into exile along with many ordinary Venezuelans.
All politicians know that there is a potential conflict between crafting narratives that are likely to win elections and governing competently in ways that will keep investors happy. If you stay engaged with the news media, you can often spot articles about lobbying groups for economic elites pushing back against government policies. For example, the Confederation of British Industry (CBI), which speaks on behalf of 190,000 businesses in the UK, was lobbying for more immigration in December at a time that the government was talking about expelling asylum seekers to Rwanda.
It is worth mentioning that the CBI recently suspended all activity as a result of a scandal about sexual misconduct and now has an uncertain future. Conspiracy theorists might be tempted to see this as a sign that economic elites sit below political elites. However, that rather makes my argument about the importance of the peaceful transition of power for me!
Responsible politicians will try to keep investors and groups like the CBI mostly happy, although that doesn’t mean that the business elite will always support every decision made by elected officials. For example, the CBI lobbied against the introduction of the minimum wage in the UK in 1998 by Tony Blair’s New Labour government. The policy proved to be a success and by 2021 the CBI was lobbying for cautious increases to wages.
Brexit is another example of elite division. Conservative Prime Minister David Cameron promised an in/out vote on Britain’s membership of the European Union (EU) in January 2013. He saw it as a way of shutting up his party’s troublesome eurosceptic wing, but came to regret his approach after misjudging the mood in the county and losing the referendum in June 2016.
On the cusp of the vote, in March 2016, the CBI warned that Brexit would cost £100bn and result in the loss of nearly 1m jobs. However, the bosses failed to convince all the workers. The Leave campaign successfully branded warnings like this as being “Project Fear” and argued that people should ignore experts. Labour was led by amateur politician Jeremy Corbyn at the time and he failed to campaign properly against Brexit, tipping the odds the other way in a close vote.
Meanwhile, Cameron’s Conservative rival Boris Johnson used his personal charisma to secure a narrow victory for Leave. He infamously said “fuck business” in 2018, while he was Foreign Minister and struggling to implement Brexit. This remark should act as a massive clue to conspiracy theorists that elected officials can and do act against economic elites, at least some of the time.
Of course, economic elites are rarely as monolithic as conspiracy theorists imagine. Brexit revealed a deep split between productive capital and speculative capital (an idea we briefly discussed here) at the heart of the City of London. The former tended to support Remain, at least in public, while the latter tended to support Leave, largely because hedge funds love volatility. There were exceptions on both sides.
One of the big lessons I have learnt in my time as a financial journalist is how divided the elite really is. Conspiracy theorists might be surprised by just how much some members of the elite hate other members of the elite. Expecting them to come together and plot out incredibly convoluted scripts for current affairs without betraying each other is naive. There will always be conspiracies, but there will also be counter-conspiracies by other parties, as well as friction and treachery.
If you want to understand current affairs, the real story is a little more complex than conspiracy theorists imagine, as we discussed last week. First of all, the combination of liberal democracy, a market-based economy and a welfare state embeds contradictions that can never be fully resolved. Politicians want to win the next election and will make promises that they think will help. Meanwhile, members of the economic elite will lobby for certain policies that will help their businesses; while people who have dedicated their careers to the welfare state will often lobby for different policies.
Perfect alignment is impossible. Voters want great public services combined with low taxes, which is basically impossible. Business elites will often lobby for low taxes, even if it means that public services will be a little sub-standard. Lobbying organizations for medical professionals will push for great services, with high salaries for public employees, even if it means raising taxes across the board. How can anyone find a policy that will keep everyone happy?
Secondly, ideas matter. English nationalists saw Brexit as a way of gaining power and putting the UK on a new trajectory; and ran a populist campaign that went straight for voters’ hearts, if not their wallets. Finally, every act has unintended consequences, as we saw when Cameron misjudged a policy that he designed to consolidate his position in the Conservative Party while curbing its eurosceptic wing. He resigned after the referendum loss.
This framework of a divided elite can help conspiracy theorists understand the resignation of Richard Nixon as US President in 1974 - one of the most telling examples of the peaceful transition of power. Nixon had endorsed dirty tricks (or “ratfucking”) against his opponents as a way of consolidating his political power in the early 1970s. When a burglary was imperfectly executed in 1972, law enforcement began to pull on the loose threads. Investigators had incentives to get convictions.
The Washington Post famously got involved too, with deep investigations into the dirty tricks. Its incentives were to sell newspapers and win prestigious awards without losing any lawsuits for libel or defamation - a lesson that was lost on Fox News when it acted as a mouthpiece for Trump’s lies about the 2020 election.
In Nixon’s case, the different elements combined with each other in unexpected ways. The former president’s foot soldiers fell over themselves to sell out their bosses in return for lighter sentences; and law enforcement officials unofficially confirmed leads to reporters from the Washington Post. The most powerful man in the world at the time was forced to resign as a result of these complex dynamics.
The system that brought down Nixon can be difficult to understand, largely because it is based on extreme negativity. We know that power corrupts. The institutions that I have mentioned, like general elections, the rule of law and the free press, evolved to keep us safe from increasingly corrupt political leaders, who are not always aligned with the economic elite.
In short, liberal democracy provides brakes on our elected leaders, breaks up power, spreads it around and decentralizes it. One of the strangest lessons is that it provides a route for all of us to gain a little power. We just need to become floating voters. The comments are open. See you next week!
Further Reading
All the President’s Men by Bob Woodward and Carl Bernstein
How Democracy Ends by David Runciman
Suspicious Minds: Why We Believe Conspiracy Theories by Rob Brotherton
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