Originally published by The Trouble
For many, the New Deal is a shining example of what people power can accomplish. The standard narrative could hardly be more epic: in the midst of the Great Depression, everyday American citizens and labor unions organized huge protests and strikes that pushed the federal government to pass historic reforms. New laws and government agencies put the public back to work, established a social safety net, and stabilized the economy, saving the country from collapse. That era has drawn significant attention recently as climate activists use it as a blueprint for today’s struggle to pass a Green New Deal (GND) that addresses the full scale of the climate crisis. But some essential historical details are often omitted from the story. Many supporters of a GND might be surprised to learn, for example, that among the coalition of forces that delivered these New Deal reforms was Standard Oil of New Jersey—a firm that we know today as Exxon—and much of the rest of the oil industry. Details like this demand that activists take a closer look at the workings of power in our society. With little reason to expect the same sort of business support for a full-scale GND today, its fate (and ours) rests upon the climate movement’s ability to democratize society and wrest governing power from business interests.
A holistic view of the existential issues facing humanity reveals the need for a transformation of the economy that goes beyond a transition from fossil fuels to renewable energy. Wealthy societies must consume less, as I and others have argued elsewhere, and the economy must be restructured to do so while avoiding the ills of economic recession. Establishing a non-growing, steady state economy (SSE) could allow for the stability and equitable provisioning needed to rapidly reduce emissions and address the many issues driven by overwhelming human demands on our finite planet.
However, there is no one definitive GND policy platform, and no prominent version foregrounds the need to set limits on consumption and make other major institutional changes necessary to achieve a SSE. It remains to be seen whether the current popular support for a GND will endure and how opposition will grow when the depth of change demanded by our crises comes into greater focus. It’s vital that we think about these questions and consider how much power needs to be built to enact not just any one of the existing GND plans, but an explicitly post-growth GND.
Dispelling Illusions of Democracy
It's important to begin by establishing how much influence the public currently has over policy change. Research by political scientists Martin Gilens and Benjamin Page illustrates the extent to which democracy in the U.S. has yet to be realized. By comparing the policy preferences of citizens and interest groups at different levels of income to legislative outcomes, they have found that the opinions of economic elites and corporations determine government action. “Not only do ordinary citizens not have uniquely substantial power over policy decisions,” the researchers write, “they have little or no independent influence on policy at all.” However, their work suggests that a single group of well-organized citizens exerts about as much influence over policy as a single elite interest group, and that businesses tend to get what they want in part because, currently, about twice as many elite groups as citizen groups are focused on each issue. This finding suggests that with a large enough movement—perhaps involving 3.5% of the country’s population, according to Erica Chenoweth’s analysis—citizens can challenge economic elites for control of the government.
Studies in political science before these assumed the existence of American democracy because they found a close correspondence between broad public opinion and political decisions, but the link existed because average citizens and the wealthy happened to hold the same views on many issues. Since previous analysts couldn’t tease apart who the government caters to when these views diverge, they didn’t realize that true control of policy rested with economic elites. As a result, they described not a genuine democratic process but rather “democracy by coincidence.” This phenomenon occurs when the preferences of the rich and the majority of citizens are aligned. The convergence of elite interests and public interests has particular significance for activists who look to the past for guidance about contemporary struggles.
The Role of Business in the New Deal and WWII
Climate activists have recently looked towards two historical events to inform their sense of what is possible: the New Deal and the mobilization for World War II. With the principle of “democracy by coincidence” in mind, it’s important to look more deeply into these models to consider how a convergence of public and private interests helped to make them possible. Two of the most compelling analyses on this topic come from political scientist Thomas Ferguson and political sociologist Peter Swenson.
Thomas Ferguson’s work on campaign finance and exploration of the New Deal era is revealing. His Investment Theory of Political Parties suggests that political action requires a significant expenditure of time and money, thus the most important figures driving policy are not voters but major investors. If members of the public don’t organize to become significant investors in politics, then corporate elites monopolize control of the process. The crises of the 1930s saw average citizens gain significant political influence: “Not until the New Deal did any important segment of the mass population acquire much importance as political investors,” Ferguson writes. “Before that date, the major investors who defined the various American party systems consisted almost entirely of businessmen.” The Great Depression saw the emergence of major labor unrest as well as a fragmented business environment. About 1.5 million workers went on strike in 1934, shutting down entire cities.
In Ferguson’s account, capital-intensive and internationally oriented businesses, including certain investment and commercial banks, oil companies, and electrical machinery manufacturers, saw an opportunity to enter into a coalition with the labor movement in support of the Roosevelt administration. The source of a firm’s major expenses, either from paying workers (labor-intensive industry) or from things like technology and infrastructure (capital-intensive industry), tend to determine which particular party they support. Capital-intensive firms are better able to tolerate a political coalition with organized labor, since wage gains for workers don’t affect their profits as significantly. Meanwhile, businesses selling to domestic consumers want a party that will provide protectionist support for their products, while firms profiting from free trade will push for open markets with other countries. Ferguson’s analysis suggests that a bloc of capital-intensive and multinational companies did indeed donate to Roosevelt at disproportionately higher rates, though American business overall offered almost twice as much support to the Republican Party. Despite opposition to the New Deal’s reforms from a majority of wealthy elites, with labor as an ally these firms had enough political power to win their preferred policies and could withstand the gains that working people would make without a major blow to their profits. An alignment of public and private interests opened the door to a case of democracy by coincidence.
The Roosevelt administration delivered a slew of policies that served the members of this coalition. Some notable examples include the Glass-Steagall Act that separated investment and commercial banking, a policy sought by the Rockefeller-controlled Chase National Bank and other investment firms to upend J.P. Morgan’s banking empire; an oil price control scheme that ensured the oil industry’s profitability; and a package of lowered tariffs and trade treaties that served businesses with an advantage in international markets. Everyday people benefited as well. The Social Security Act provided a pension system for the elderly and unemployment insurance for workers, and the Fair Labor Standards Act established the 40-hour workweek and the minimum wage. The most radical labor policy, the Wagner Act, established the legal right of workers to form unions and bargain collectively, a significant shift in the power of the employed relative to their employers.
Peter Swenson has a somewhat different take on the role of private interests in the New Deal. In his view, Ferguson’s account describes a logrolling relationship between business and labor in which a group of wealthy elites got the industry-specific policies they wanted in exchange for worker-oriented legislation they didn’t want but could tolerate. But this leads to a critical question concerning business involvement in the New Deal: if the policies passed during the crisis didn’t enjoy any authentic business support, why did corporate elites not launch a massive counterattack to repeal them as soon as the depression ended? For Swenson, the reason is that these policies actually stabilized markets and promoted consumption, serving most firms well.
Businesses were facing serious problems even before the Great Depression. The advent of mass production in the 1920s resulted in a glut of goods that were not being consumed quickly enough, and many industries were disrupted as rival firms competed to offer the lowest price for their products. Labor standards were also significantly uneven, with some companies having experimented with “welfare capitalism,” providing work benefits to increase worker loyalty and productivity in the years before the crisis. The expense of higher wages, pensions, and other welfare capitalist benefits, typically covered by selling higher-priced goods, increasingly strained these businesses as the depression unfolded and many firms cut their prices (and wages) even further to pursue dwindling consumer spending. The competition became ruinous in essentially all sectors. Politicians looked for policy solutions to the economic crisis that would serve business interests and workers, forging a cross-class alliance in the process that would preserve the legislation when the downturn subsided.
Company executives sent signals to politicians about what sorts of reforms they could support. Their solution was a set of minimum labor standards and social benefits that would be applied to entire industries, so that costs previously borne only by welfare capitalists would now apply to their competitors. Higher wages and income stabilizers for workers would also stimulate consumer demand. New Deal reforms thus received genuine support from many companies that grew over time.
Swenson cites a 1939 Fortune magazine survey of companies that were asked about their opinion of the groundbreaking legislation. He recounts that “76.8 percent favored keeping or adjusting wage and hour regulation; 72.2 percent felt the same towards social insurance. A surprising 51.7 percent even accepted the new labor law protecting unions (the vast majority of those favoring modifications), and an amazing 80 percent actually regarded union efforts to raise standards and regulate or stabilize the labor market as a good thing.” Perhaps the best evidence of this business support is the fact that the Wagner Act, though later amended, was not repealed after mass strikes and voter mobilization waned.
New Deal reforms, passed between 1933 and 1939, did not end the depression, however. U.S. gross national product (GNP) in 1939 was essentially where it was in 1930 during the early stages of the crash, while the unemployment rate in 1940 was still around 15 percent. American entry into World War II took care of these issues. Government spending had grown during the New Deal but dramatically ramped up throughout the war, with annual federal expenditures rising about tenfold between 1939 and 1945. Factories that produced consumer goods were refashioned to manufacture wartime equipment, and the U.S. became the world’s foremost military power in a few short years. Unemployment plummeted to 1.2 percent while GNP more than doubled.
A partnership between the federal government and private industry allowed for an unprecedented economic mobilization. Though many commentators paint it as a moment of patriotic harmony, with business, government, and labor all working together towards a common goal, it’s crucial to recognize that this effort represented a profit bonanza for the wealthy. Corporate profits after taxes doubled during the war. Some, like General Motors and Ford, also saw lucrative opportunities in serving the fascist powers and lent their productive capacity to the Nazis. Any notions of harmony quickly dissolved as soon as the war ended, with corporate elites pushing for and winning the 1947 Taft-Hartley Act which cut those labor powers from the Wagner Act that they deemed threatening to management’s authority.
Aligned Interests: Power and Policy Change in the New Deal Era
This research offers important lessons for the struggle to pass a post-growth GND. For one thing, business opposition to the New Deal is often overstated today. Many employers welcomed the social and labor reforms that were passed, and a majority came to support them over time. If business opposition to the New Deal is exaggerated, then corporate power and elite control of politics is understated, while worker power during Roosevelt’s presidency is overstated. The labor movement organized historic strikes and likely did make the Roosevelt administration consider labor legislation, as it threatened the economic stability politicians were seeking. But according to a review of political models of the New Deal, “the conclusion that organized labor’s impact on New Deal policymaking was limited and indirect at best is probably inescapable.” Social movements of the period were not a dominant force that overrode united business opposition and achieved governing power, as some today may think; some level of business support was vital to these policy outcomes.
The New Deal was possible because there was economic space for policies that responded to the historic crisis of the Great Depression by benefiting both businesses and workers. A few factors are responsible for the existence of that economic space. One crucial factor was the development of mass production in the 1920s, a fundamental change to the structure of the economy that completely transformed businesses’ relationship with workers. With the issue of production solved, the new economic problem was stimulating enough consumption to absorb everything getting produced. Employers needed their employees to become consumers, and reversed their often violent opposition to the shorter workdays and increased wages that workers had long fought for.
Another indispensable factor that provided economic space for the New Deal was the capacity of global ecosystems to accommodate a growing human footprint. The reforms provided the working class with more income and more time to spend it, and businesses looked forward to higher profits. WWII inaugurated new levels of government spending, vastly increased the country’s productive capacity, delivered record corporate profits, and set the stage for a postwar consumer society. Scientists call the period that followed the Great Acceleration, because material and energy consumption soared to an unheard-of scale. This arrangement—sacrificing ecological stability for a reformist politics that made both businesses and workers richer—solved some serious problems, at least for a while.
Major elements of “democracy by coincidence” are observable when analyzing the New Deal and the economic mobilization for WWII. Because economic conditions allowed for an alignment of public and private interests, everyday people were served by the government’s actions. The crucial question now is whether the sort of GND we need can conceivably provide the same framework for a cross-class alliance.
Diverging Interests: The Fight for Democracy and the Fate of a Post-Growth GND
Does the GND represent the type of profitable investment that could win the support of a sizeable segment of the business community? The answer depends on the version being considered. If it refers mainly to a larger investment program in renewable energy, then it certainly could be profitable for certain sectors. But given that new renewable generation is typically tacked onto the overall energy supply rather than displacing fossil fuels, such a GND would be unlikely to preserve a livable climate and wouldn’t address the broader reality of ecological overshoot. A version that attempts to commit to our dwindling carbon budget, however, is a very different story. We would likely need to reduce fossil fuel use faster than we can replace it with renewable energy, thus overall energy use—and the economic activity it enables—would shrink. The need to stabilize the economy during the energy transition makes steady state policies an essential component of a full-scale GND.
An effective SSE would cap consumption according to what ecosystems can sustainably provide, ending the days when businesses could stimulate unbounded consumer desires in pursuit of limitless profits. It would also force us to establish a much narrower level of income and wealth inequality to avoid enshrining a permanent superrich ruling class with a vastly disproportionate share of the finite stock of resources. Whereas the New Deal was based on an alignment of public and private economic interests, our ecological issues call for a response in which they diverge. Hostility to a full-scale GND is likely to extend beyond the fossil fuel industry, and could unite big business in opposition.
An important detail in the New Deal saga was a foiled plot by a group of businessmen who wanted to overthrow the government and install a fascist dictatorship. Congressional investigations determined that “There is no question but that these attempts were discussed, were planned, and might have been placed in execution when and if the financial backers deemed it expedient.” We heard of similar musings from retired military figures during Obama’s presidency, and this threat should be taken much more seriously after the Capitol riot, which resulted from campaigns backed by many wealthy donors. Such an extreme tactic may be unlikely, but even so, every attempt will be made to prevent a post-growth GND from becoming politically viable.
Facing the likelihood of minimal business support and escalating opposition, a post-growth GND requires the public to develop substantial influence over the government’s policy decisions for the first time. In other words, we’ll need to replace plutocracy with democracy. Today’s activists and organizers must therefore build far more power than that possessed by workers during the New Deal, or any other previous social movement.
Achieving that goal requires action on several fronts. The reform and expansion of our democratic institutions must be a point of strategic emphasis. For instance, climate activists should increasingly direct their efforts towards changing the rules around elections. Perhaps the highest priority is working to establish publicly funded elections, which could dramatically rebalance the advantage the wealthy hold in financing campaigns and advance candidates who will prioritize public interests. Many political ideas cannot be expressed in elections today and many forward-thinking politicians cannot get elected because there is little appetite from major investors to finance these messages. Public financing would help make everyday people into significant investors. Also, given the ready-made media attention enjoyed by politicians and their ability to popularize previously fringe ideas, the process of running more movement-aligned candidates could significantly advance movements themselves. The For the People Act would establish a public financing system and provide many other basic facets of elections that are essential for a functioning democracy, like fair redistricting rules, simpler voter registration, and comprehensive use of paper ballots. If the climate movement saw this as a very climate-relevant bill and got behind it, conditions could perhaps be created for it to pass.
As the preferences of regular citizens become a greater factor in who gets elected and the policies that are enacted, activists must ensure that those preferences are informed by the existential issues we face. The public must understand that the changes we seek are necessary and feasible if we’re to elect and re-elect champions of a post-growth GND despite the uncertainty and adversity it may entail. Our information systems are therefore among the most important institutions to focus on. While it’s worth attempting to influence curricula in today’s schools, which already reach millions of people, activists should also establish movement-run education systems both online and in communities across the country. A transition curriculum should aim to provide a holistic analysis of our issues and initiate discussions that re-examine our cultural values. Such efforts could eventually reduce the movement’s reliance on mainstream media for frequent and positive coverage, defend the public against elites’ anti-transition propaganda, and help individuals and communities learn to embrace a different way of life.
Plutocratic governance sets hard limits on political possibility. Within these limits, the best that champions of social change can hope for is having far-sighted, less ideological business executives ascend in political power—a modern version of “enlightened absolutism.” This is unlikely to deliver us from our mounting existential crises. If no large segment of this class is likely to support serious climate action, then we must be prepared to break through its confines by building a much more democratic society. Only then will we be able to transition towards a sustainable society as quickly as we possibly can, and perhaps even get there.
Aaron Karp is an activist writing a book about why our ecological crises demand economic and cultural transformation, not just an energy transition, and how the climate movement can lay the groundwork for these changes. He writes at freedomsurvival.org and tweets @LimitsLiberate.
Originally published by The Trouble