Are Markets Democratic?

The pricing mechanism inherent in markets allows each consumer’s choices to influence the success of a product or company. Conservatives and liberals both assert that product boycotts and consumer activism are effective ways to have our voices heard. Liberals boycott companies associated with Trump’s business empire, while conservatives employ the same tactics in support of their own aims. Nobel prize winning economist Milton Friedman asserts that markets, unlike political channels, permit wide diversity through a system of proportional representation – “each man can vote, as it were, for the color of tie he wants and get it; he does not have to see what color the majority wants and then, if he is in the minority, submit.”


But just how democratic are markets?


As an example of a democratic system we can consider the Dutch House of Representatives, which has 150 members chosen through proportional representation. Each citizen is eligible to vote and each gets only one vote. Every citizen’s vote has the same value. After the votes are tallied, the seats are allocated to parties in proportion to the number of votes they received using a quota method. This gives a diverse representation of people’s views, from the People’s Party for Freedom and Democracy, supported by 21.3% of people in 2017 for 33 seats (or 22% of the total) right down to the Forum for Democracy, with 1.8% of the vote and 2 seats. The way in which each vote is counted varies between systems (for instance in Australia, where our votes go towards the winner of each geographical seat), but the central principle remains. We are all equal. We all get just one vote, regardless of status.


In the analogy of markets to democracies, each dollar is a vote. A consumer boycott campaign reduces a company’s profits in proportion to the number of dollars which aren’t spent. The simple number of people boycotting the company makes no difference. A support campaign acts similarly, increasing the company’s profits only in proportion to the additional dollar spend of the supporters. We can only continuously spend the money we earn, so both our ability to reward and punish companies in the market is tied directly to our income. A person’s disposable income determine’s the value of their vote and thus their voting power within the market.


In a perfectly equal society then, markets would then be democratic with each consumer having equal voting power. Unfortunately, our society doesn’t come close to this ideal. As a simple example, women in Australia earn 87% of what men do. So when voting in the market, on average a woman’s vote is worth only 0.87 male votes, as they have proportionally less dollars to spend. Consider a company which might take a sexist stance in their advertising. They could gain 1000 male customers and lose 1100 female customers, yet the market vote would deliver them more profits through the higher average incomes of men, even though more people disagree with the stance than support it.


The gender pay gap, though real, is small compared with the discrepancies which exist across other strata of society. Consider the income distribution in the USA: The top 10% of people have 47% of the income, while the bottom 50% of people have only 13%. This means that the average person in the top 10% has 18x the market voting power of their counterpart in the bottom 50%. A boycott by half the population could be cancelled out by the top 10% each increasing their spend by just under a third. Markets don’t care who the dollars come from, just that they keep flowing in. To correct Mr Friedman’s analogy, each man can indeed vote for the colour of tie he wants, but only the wealthy man gets it; the poor man with little market power can only hope that some rich men share his views.


Investments provide an even starker image, as a consumer’s voting power there is determined not by their income but by their wealth. The wealth distribution everywhere is more unequal than income, and again the US data is illustrative. The top 1% have 39% of the wealth, the next 9% (from 90-99% in the distribution) have 34%, while the bottom 50% of people have a combined net worth of zero. So the direction of investment is almost entirely determined by the top 10%, with the poorest 50% able to provide no input whatsoever. Is it any wonder that venture capital continues to demonstrate itself entirely out of touch with real people? Why tech entrepreneurs continue to ignore women, people of colour and the poor? In a society built around markets, those with no money have no say.


We do have a word for this kind of system, where a small elite has all the power. But that word isn’t democracy. It is an oligarchy.


The prospect of gambling brings to mind the glittering lights of Las Vegas, but its real home is a dingy RSL club in Western Sydney. Here, countless desperate folks see their only chance at escape within the tawdry reels of what is euphemistically called ‘gaming’. These dens of inequity ensnare the poor, the uneducated and pensioners with little to live for but the promise of riches through feedback specifically designed to trick players into taking just one more spin. Loyalty programs turn saps into VIPs and give them a free spin every visit to re-engage those gambling faculties and maintain the addiction cycle. Australia leads the world in gambling spend per person, thanks to these obiquitous poker machines. We spend $1,273 per adult each year on gambling in this country. More than half of this expenditure is taken up by the particularly loathsome category of poker machines.


Australia has the second highest number of poker machines in the world, 195,631 at last count which places us second only to the USA (but with a much higher number per capita). This makes one poker machine for every 95 adults. Of those machines, nearly half are in New South Wales, which records an abominable machine per 65 people. Consequently, the average New South Welsh adult loses $1,580 per year gambling(roughly 2/3 of that on the pokies), or about $30 every week. We lose $23.7B each year on a turnover of $204B to the gambling industry. To put these numbers in perspective, the agriculture industry earned profits before tax, depreciation, etc of $21.1B last year, while the construction industry earned $43.2B.


What these statistics conceal however is that not all of us gamble. The HILDA survey found that 8.1% of Australians play poker machines once or more a month. So neglecting the (likely only small) losses of irregular players, each poker machine player loses $8,023 a year on the pokies alone. Eight thousand bucks per person per year, so more than the average household spends on electricity, gas, clothing, footwear and telecommunications combined! Losses per player are likely higher within NSW alone, but HILDA doesn’t break down participation to state levels. Even worse, the HILDA survey asked gamblers how much they thought they spent on a monthly basis. Pokie players underreported their losses by a factor of six compared with the industry data, demonstrating how the tricks of the machines cause addicts to lose track of their spending.


HILDA does break down demographics, so we can see who these players are. Poker machine gamblers are disproportionately poorer, less educated, more likely to be indigenous, of lower socio-economic status, older and more likely to be on government assistance than the general population. So those who are compelled to throw their money away are also those who can least afford it. Pokies steal from the poor addicts and give to the rich owners of these suburban casinos, who are commonly professional sporting teams. This isn’t just a moral issue, but also one of social justice.


How have we got to the point where pokie addicts each sacrifice eight thousand dollars every year to these one armed bandits? Governments are well aware of the clear and present harm which they are doing to the community, with multiple studies undertaken and maverick NXT leader Nick Xenophon starting his career as a ‘No Pokies Independent‘. One major problem is that state governments have themselves become addicted to the taxes pokies bring in. Government revenue from gambling comes to $6B across the country, making up around 8% of taxation taken in by the governments of New South Wales, Victoria, Queensland, South Australia and Tasmania and 12% in the NT. Both major parties have also been given hefty donations from hotels and clubs, with $6.6M donated to Labor and $4.4M to the Liberal and National parties since 1998. This includes $3M just from Clubs NSW (split $1.2M to Labor and $1.8M to the LNP), the statewide representative group for the clubs which hold most of these machines. So there is quite an incentive to maintain the status quo.


Is it any wonder that the government’s committment to problem gamblers focuses entirely on overseas online sports betting, which accounts for only a small sliver of the gambling pie? Or that the most recent Productivity Commission report into gambling found that “people‚Äôs willingness to pay for gambling over alternative products reveals their underlying preferences” rather than addiction and so “gambling provides significant enjoyment for many Australians”, in a classic case of the economist’s ignorance of reality? Both governments and the parties who run them have been entirely captured by this callous industry which sells an illusion of glamour coating an exploitative core.

The Russia Excuse

The election of Donald Trump was the rebel yell of the forgotten seeking an alternative to the neoliberal status quo. Any alternative. He not only smashed the overton window, campaigning on policies which were outside the narrow acceptable margins, but his manner was also entirely outside the established norms. For a press which is more used to challenging politicians on procedural rather than policy grounds, these mannerisms were particularly offensive. Democratic pundits and pollsters refused to believe that such a man could win. When faced with the choice between four more years of status quo neoliberalism and a loose cannon promising to drain the swamp, the disenfranchised masses opted for the Trump, hoping for a wrecking ball.


The liberal press and democratic establishment still refused to believe it. An odious man who refused to hide his racism and sexism behind any of the obligatory smokescreens could not beat their golden girl, the pre-ordained first woman president. In the world of Red Brand versus Blue Brand, each occupying the sensible centre with a different sales pitch, such a result was unthinkable. So they rejected reality and substituted their own.


The conservative right understood that politics was a class war rather than a beauty pageant, as demonstrated by the rise of the Tea Party. The liberal media and political establishment instead had so thoroughly oriented themselves towards the market that even elections were understood as a marketplace of ideas, one where facts and reasonableness would outshine emotional appeals. Educated coastal elites saw Trump’s statements fact-checked and the charlatanry at the core of his being digested by the media. But desperate folks in the rust belt left behind by neoliberalism only saw a successful man promising that he alone could fix their problems. Whatever his faults, he offered the strugglers something different, the chance of something better. With the status quo offering only continued despair, these folks grabbed onto the only life-raft they were offered.


If America was already great, as the Clinton campaign asserted, then there would be no reason for these folks to make such a desperate choice. With Democrats having controlled the presidency for 16 of the past 24 years, the degredation of the rust belt couldn’t be palmed off as the fault of the conservatives. It was the direct result of neoliberalism; of the third way policies which liberals had espoused. Their governance, supposedly from the left, had driven the poor to such desperation that they were willing to burn it down and start again. This was understandably hard for the liberal establishment to accept.


But what if the people didn’t really vote for Trump? Then the illusion could be maintained, the crippling effects of neoliberalism on communities could be ignored again. America was already great so the electoral college couldn’t be blamed, nor the other absurdities of the voting system (Tuesday elections, first past the post, etc). The problem had to be international. ‘Fake News’ provided an initial suggestion – scammers from Macedonia were duping Americans with misinformation. But between the adoption of the term by Trump against those who criticised him and the generally dreadful quality of the US media, this couldn’t be sustained.


Who had they been trained from birth to fear? The Soviet Union. Nothing riles up Americans like a good old fashioned red scare. Despite the absence of anything remotely socialist in modern Russia (thanks in part to US support for Yeltsin selling off the state to his oligarchic mates), Putin’s KGB history provided enough connection to tap into a fear which has been built at a cultural level. So the spectre of Russian hacking was invoked, which went down a treat with the public. Throw in any past connections between Trump and Russia to demonstrate this, and you’ve got a media show which can go on for months. America is already great, our neoliberal policies are fine, but our nefarious enemies will do anything to stop us.


Updates on the Mueller investigation are given pride of place daily in the American media, with much of the remaining space for politics taken up with disgust at Trump’s Twitter feed for breaking political norms. This has effectively crowded out discussion of what the regime is actually doing, which is mostly the very same neoliberalism the Democrats support. The Trump administration sells weapons to Saudi Arabia to use in their war on Yemen. So did Obama. Trump gave a massive tax cut to business. Obama cut tax on business too. By moving the focus to Russian interference, the liberal and media establishment can avoid discussing the failures of neoliberalism which Trump continues to perpetuate. By avoiding policy, they starve the oxygen from other challenges to the status quo. Massive corporate donations to the Democrats would be lost without support for neoliberalism, while the media is increasingly owned by oligarchs who favour business interests.


Russia probably did try to influence the election. Anything which shows democracy as chaotic supports Putin’s autocratic rule at home, and a reality TV star as US President certainly fits in that category (as does Brexit). But to suppose that this is a calamitous injustice as the extent of coverage suggests is to be willfully ignorant of recent history. The Soviet Union didn’t just post fake tweets, it actively ran political parties promoting its interests overseas. But while the Soviet/Russian state interfered in 36 foreign elections between the end of World War 2 and 2000, one other country managed more than double that number, with 81. That other country? The United States of America.


US interference in the affairs of other nations goes far beyond just intervening in elections to support their interests. The American state apparatus has supported coup after coup, from Iran to Guatemala, Chile to Grenada and across the world. For the US establishment to suddenly consider Russian email hacking to be beyond the pale shows either complete ignorance or breathtaking hypocrisy. But when their media has continually downplayed the extent of US involvement in these actions, one can understand the American public playing along. The conflation of freedom and free markets has propagandised these folks to believe the US is the capital of democracy rather than of the unrepentent capitalism which has driven 13% of their population into poverty. So they swallow the line and wait with baited breath for each update on the Mueller investigation, hoping that this leak will be the one which sinks Trump. Then democracy and civility will be restored, as a less vulgar Republican continues with the policies which drive the shrinking middle class into destitution.

The Unexamined Lives

We are all free to choose our own purpose, our own values and to make our lives our own projects. In a world without godly codes, everything is permitted and it is up to us both as individuals and as members of the greater mankind to decide what is good and just. Our own choices and actions demonstrate what we see as good, and our society’s conception of ‘good’ is the sum of our individual choices. So far, so Jean-Paul Sartre. But most of the folks who make up our society don’t ever actually consider their values or examine their lives the way a bourgeois philosopher might. How many amongst us have ever really considered the meaning of their lives beyond simple surface level goals?


For most of us, our values aren’t defined by a heady contemplation of ethics – we muddle along and try to make the best of the limited information which is readily available. At best, our ethics are informed by looking at parents and role models, at worst by simple osmosis from the society in which we are immersed and only in the case of rare individuals through active contemplation. So if, as Sartre asserts, “everything happens to every man as if the entire human race was staring at him and measuring itself by what he does”, what happens when the bulk of people are not actively choosing, but merely being swept along in their unexamined lives?

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Marriage Equality Predictors

The ABS released the results of Australia’s survey into the legalisation of gay marriage today. The headline result was a win for the ‘Yes’ vote, with 61.6% of the vote which should translate into legislation in the near future. Thanks to the release of data per electorate, we can also use this to take a look at what sorts of communities were more supportive of the change. As a pure issue of social liberalism versus conservatism, this gives us the opportunity to consider positions of groups of people solely on an axis of social issues, rather than conflating them with economic issues as is the case in general elections. As the data is only detailed down to a per electorate basis however, we do need to consider that across an electrorate there may be substantial variation as well as a cacophony of variables acting in multiple ways, so these are certainly guides rather than anything genuinely scientific.

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Where Is The Australian Left?

Since the GFC and subsequent stagnation obliterated the established orthodoxies, we’ve seen a re-emergence of radicals on both the left and right worldwide. From Bernie Sanders to Donald Trump, Syriza to Golden Dawn and Jean-Luc Melechon to Marine Le Pen, the Overton Window has been blown out by charismatic firebrands on both sides of centre. If we are to build a better society, we need these folks for their ability to think outside the square and imagine alternatives to the status quo. Australia has the re-invigorated Pauline Hanson, onion-infused Tony Abbott and pure reactionary Cory Bernardi providing right wing alternatives, but where is our left?

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How Conservatives Became the Anti-Establishment

Our society isn’t working out well for ordinary people right now. Every politician wants to appear a saviour, a fount of fresh ideas which will solve those problems. Yet this rebellion against the establishment seems to be repeatedly turning towards figures from the top of that existing order. The Czech Republic turned to the ANO party in the weekend’s elections, yet this supposedly anti-establishment force is led by the country’s 2nd richest man, Andrej Babis. The United States famously elected billionaire and TV rich man Donald Trump as President last year, whose campaign was predicated on ‘draining the swamp’, and similar anti-establishment positions. France turned its back on their established parties by electing Emmanuel Macron as President and giving his new party a majority in the National Assembly, yet he had come from a background as a Rothschild investment banker and finance minister in government.

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Superheroes and the God Emperor – A Cry For Salvation

Superheroes are enjoying an extended renaissance in popular culture. Five of the top 20 grossing films of all time have been superhero movies released within the past five years. At the same time, populist politicians have garnered their own fandoms with promises of strong action and simple solutions. Donald Trump is the God Emperor. Jeremy Corbyn is The Absolute Boy. I posit that these two trends are linked as a societal cry for someone who can fix the world by their power alone.

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