Power to the People

Liberals have lost touch with their populist roots, which calls for a fresh articulation of a very old idea: anti-domination.

With the GOP empowered, Hillary Clinton defeated, and the Democratic bench looking remarkably thin, it is an open question what policies, politics, and politicians the Democratic Party will embrace. Thus far, their intraparty squabbles look likely to resemble those of the 2016 primary, riven by ideological and political differences about where to take the party and the country. Then, as now, Bernie Sanders offered a populist liberalism to the left of that expressed by many mainstream Democrats, including Hillary Clinton. This divide was especially clear in the candidates’ debates over bank regulation. Sanders memorably promised to “break up the big banks.” Clinton pledged to use the existing law, the Dodd-Frank Act, to police Wall Street. “I will appoint regulators who are tough enough and ready enough to break up any bank that fails the tests under Dodd-Frank,” she said in an April debate.

Democracy Against Domination K. Sabeel Rahman Oxford University Press, 256 pp.

Democracy Against Domination
K. Sabeel Rahman
Oxford University Press, 256 pp.

The tension between these two plans goes beyond pragmatism versus idealism. It is a political-philosophical divide that stretches back to 1912, if not even further, to 1783. On the whole it is a debate between those arguing that the government should decentralize power and those saying it should regulate it.

In his new book, Democracy Against Domination, K. Sabeel Rahman, assistant professor at Brooklyn Law School and a New America fellow, throws new light on this old question and offers a compelling case for where the Democrats ought to go post-Trump. The book serves as an answer to a political stalemate. Since at least the 1970s, an overwhelming portion of political theory has been occupied by a single debate: Should the state use its power to correct for the inequities and failures of markets? Or should the economy be allowed to function with minimal state involvement? Liberals argue in favor of the former position; on the other side are the libertarians, who claim that markets are inherently more fair when allowed to function without onerous regulations that bring corruption and inefficiency. This academic debate mirrors our political disputes over the last few decades about state action in the economy. Liberals talk inequality and market failure; libertarians talk property rights and inefficient regulation.

Rahman attempts to explode this dynamic by offering another vision: populism. He writes that efforts to split up the largest banks manifest a populist philosophy best articulated by activists and policy innovators during the Gilded Age who argued that too much power was concentrated in the hands of bankers, railroad magnates, and other assorted monopolists, including politicians, and the political bosses of their day. The populists aimed to split up these great concentrations and create and maintain competitive systems. Sanders’s call to break up the largest banks was of a piece with this tradition.

On the other hand, Dodd-Frank, Rahman argues, is more in line with the “managerial” philosophy of progressives like Teddy Roosevelt and the brain trusters who constructed the New Deal. The New Dealers saw the economy as unequal, inefficient, and prone to bubbles, and they determined that independent experts and agencies, insulated from popular politics, would help manage an economy that might better serve the public good. These progressives argued for the regulation and management of existing power, rather than seeking to break that power up. In the process, they grew the concentrated power of the government itself. The tests under Dodd-Frank—designed to analyze and prevent the system risk, fend off massive recessions, and prevent bailouts—embody this view, says Rahman.

Populism is Rahman’s favored choice between the two poles of libertarianism and managerialism. He argues that the populism of the Gilded Age—best articulated by Louis Brandeis, the Supreme Court justice, and John Dewey, the political reformer and philosopher—embodies anti-domination, an idea within political theory that has gained some popularity over the last several decades. Advocates of anti-domination analyze the world by focusing on the wielding of unaccountable power, in which a person is “dominated” if another person, group, or system holds arbitrary power over them. Discrete people and groups, like bosses and big banks, dominate people, Rahman writes, but so do larger systems—like an economy that creates “uncertainty, dislocation, and risks that individuals [are] incapable of overcoming by themselves.” It is this domination, not simply inequality or poverty, that is the central injustice of the modern economy. The way to curb it is to design policies that either weaken unaccountable power or give regular people tools to contest and fight back against it.

Rahman argues that the managerial response to economic injustice—regulation by experts—does not sufficiently answer the challenges posed by domination. He writes that managerial regulation is perilously vulnerable to right-wing attacks on state action. He makes a compelling case, though the distinction he draws between managerialism and populism is not so clear in reality, and we may not want to live in a world in which the latter completely replaced the former.

Anti-domination is not a new idea. Thomas Jefferson and Alexander Hamilton sparred over the threat of concentrated power at the beginning of the Republic. Jefferson argued forcefully against monopolies, a clear form of concentrated power, and against Hamilton’s national bank, all while fighting for land distribution to small farmers so that they would not be made subject to industrial bosses or agricultural lords. The election of 1912 tracked the same divide. Louis Brandeis, who advised Woodrow Wilson, argued—contra Teddy Roosevelt—that there was no such thing as a good monopoly and that the government ought to regulate competition, not monopoly.

Dewey, Brandeis, and their intellectual compatriots saw great value in unions, civic societies, and direct democracy innovations like the recall and referenda. They and other populists designed these systems to enhance the power of the people in the face of corrupt political bosses and big business. The populists advocated antitrust action to break up big companies and pushed utility regulation—often run by elected commissioners—to put socially vital enterprises under the control of democratic politics.

New Deal liberals, Rahman writes, effectively sidelined these views. When it swept into office in 1933, Franklin Delano Roosevelt’s administration embraced a managerial conception of economic regulation “focused on correcting market failures through technocratic expertise.” They envisioned a state composed of “specialized institutions where uniquely expert or talented policymakers can, through the judicious use of their knowledge and public-spiritedness, craft regulations so as to promote the public good.” These new experts would be separated from the corrupting influence of popular democratic politics via executive appointment, independent funding structures, and the like. From their independent perches, they could harness “the efficiencies and powers of big business (and scientific expertise) to promote economic growth and optimal market functioning.”

The New Dealers’ efforts to regulate Wall Street in the aftermath of the Great Depression embodied and established this view. Supporters of the Glass-Steagall Act argued that the law would help establish a banking system allowing for “greater coordination and expert oversight aimed at promoting economic growth.” The first leaders of the Securities and Exchange Commission “focused on the goals of economic efficiency, investor protections, and smoothing the functioning of the market.” The organization “cast itself as ‘a site for the production and application of economic knowledge.’ ” Later legislation and legal developments, like the passage of the Administrative Procedure Act in 1946—which established the federal government’s modern rule-making procedures—only further cemented this philosophy.

Rahman offers a persuasive and useful theory of the case here, but the New Deal was not quite so intellectually monolithic as he argues, even if it did ultimately cement managerialism. In addition to creating independent expert regulators, like the SEC and FCC, Roosevelt and his comrades in Congress also passed the Robinson-Patman Act of 1936 and the Miller-Tydings Act of 1937, populist-inspired legislation that sought to protect small businesses from the predations of big, powerful, and monopolistic chain stores. In the same spirit, Roosevelt’s Justice Department aggressively stepped up enforcement of antitrust laws, fighting monopolies, preserving competition, and distributing opportunity throughout the economy.

Nonetheless, to the modern liberal the New Deal emphasis on expert-driven government regulation sounds vastly more appealing than, say, laissez-faire conservatism. And in the age of Trump, insulation from popular politics likely holds its own appeal. But Rahman asks his readers to look beyond these current considerations and toward the benefits of populism and anti-domination.

He argues that managerialism is uniquely susceptible to right-wing and libertarian attacks on state action in the economy. Independent experts are prone to capture by the special interests they oversee, especially in the case of long-term, ongoing regulation in which one agency works with one set of companies, year after year. This system encourages regulators to “think like the regulated and in the process, lose their critical detachment,” Rahman writes. These weaknesses open up managerialism to attack by those who want the state’s hand out of the economy. Likewise, Rahman writes that managerialism has absorbed libertarian ideas about efficiency, risk, and markets. Because managerialism aims to make the market more efficient, conservative critics have a clear path to attack it. All they have to do is argue that unregulated, free markets are more efficient than regulated ones, and they have removed the need for regulation. This, in fact, is just what Ronald Reagan and his intellectual progenitors did to roll back the New Deal regulatory state.

Rahman argues for anti-domination as an alternative to managerialism in light of these weaknesses. First, anti-domination advocates and populists emphasize clear, discrete, actionable rules that mean less ongoing regulation and fewer opportunities for regulatory capture. Structural limits like the Volcker Rule, which separates the riskiest banking away from the rest of the financial system, and the FCC’s Net Neutrality ruling, which simply bans internet providers from discriminating against certain content, offer clear examples. Antitrust law was once a structural, rule-based system, until libertarians like Robert Bork rewrote the profession in the late 1970s. Before then, mergers were presumed illegal if they gave a company a 30 percent share of the market. In addition, anti-domination and populism focus on power and decentralization, not ideals of efficiency and risk management. Therefore, even the most efficient markets do not obviate the need to disperse power.

A central problem with Rahman’s analysis is that the divide between managerialist and populist policy is not as stark as he describes. Any given policy can, and often does, include tools and rules that may be populist and managerial. Glass-Steagall, for instance, created bureaucracies full of experts, but also employed the classic populist strategy of creating a simple, bright line—in this case, separating deposit-based banks that would enjoy federal insurance from commercial banks that would not. Similarly, the financial disclosure that SEC bureaucrats demanded from companies was meant to empower small investors with the information they needed not to be snookered. It may be more useful for Rahman’s readers to see the managerialist-populist divide as a provocation, not a taxonomy, and to understand it as a spectrum, not a binary choice.

For all of Rahman’s disparagement of managerialism, there’s a benefit to having highly trained government specialists insulated from direct political interference and guided by codes of professional conduct. We need capable, empowered experts overseeing drug safety and efficacy and writing the rules drug companies must operate under; analyzing plane crashes and adjusting airline safety regulations accordingly; and detecting disease outbreaks like influenza and Ebola and designing protocols for health care providers and first responders. These are not areas that can be easily handled by the preferred populist methods of bright line rules and disbursed power.

The same holds true for Rahman’s otherwise worthy desire to create more opportunities for democracy within the state as it exists. Under the system of “citizen juries,” for example, government officials gather a group of people, give them information about some policy issue, and have them debate and create policy guidelines for what the state ought to do. Rahman describes this as a “more institutionalized” and “participatory” version of the way in which regulators try to gauge stakeholders’ opinions. In the same vein, he discusses proxy advocates, who represent the interests of relevant stakeholders, like farmers or veterans, during regulatory decisionmaking.

As valuable as these innovations may be, citizens are susceptible to the same forces that sway independent regulators and experts. As this magazine has often noted, the data that forms the very basis of public decisionmaking is frequently controlled and disseminated in cherry-picked fashion by big corporations and other powerful players. Absent strong government authority to extract that proprietary data and robust staffs of experts to study and present it to citizen juries, lawmakers, the public, and others, any kind of democratic, non-dominationalist system will be vulnerable to the power of special interests and the informational asymmetries they create.

Rahman’s focus on managerialism’s weaknesses appears to blind him to the deficiencies of populism. Ballot measures, first designed and advocated by populists, have totally controlled California politics for decades, for example, and are too often just battles between the big money interests who have the resources to get initiatives on the ballot and ads on the air. Arizona offers another case in point. Public utility regulation in the U.S., another populist idea, has long been afflicted by corruption and self-dealing. Arizona’s elections for its public utility commissioners have turned into a festival of dark money, with dueling energy interests spending a great deal to elect and influence their favored candidates. The FBI even went to the state to investigate the dark money groups. All told, expanding the avenues of democracy does not always go as planned, and big business wields its influence throughout the country and state, not only in the halls of regulatory agencies.

These concerns aside, Rahman’s book is a meaningful piece of political theory. It blends policy analysis and history—a welcome addition considering how abstract political theory can seem. And, though the managerialism-populism divide is not as clear as Rahman suggests, his account is still useful for understanding and analyzing policy. Managerialism and populism do, truly, come from two different starting points. Advocates of the former seek to regulate existing power to improve the economy. Supporters of the latter want to break up and distribute power, to create a different, decentralized, and more competitive economy.

As the Democrats debate their future and consider various alternatives to Trumpism, Rahman’s book is timely and valuable. He offers a rehabilitation of an old debate for a new era, and one we desperately need.

Kevin Carty

Kevin Carty is a reporter/researcher with the Open Markets Program at New America.