NEW YORK SHARES

Within two days of its Initial Public Offering, the social network Facebook was worth more than US$100 billion – making it, at a stroke, more valuable than such iconic brands as online bookseller Amazon, banking giant Citigroup, and global fast-food empire McDonald’s. In other news, stock analysts speculated that Apple’s dominance of online music sales, smartphones and tablet computers, could make it the first company valued at a trillion dollars.

Meanwhile, the American economy struggles to recover jobs lost in the financial crisis. Surprisingly, there has been only a muted backlash against the cozy arrangements which hedge funds and private equity firms have with the US tax code, exploiting a loophole that allows them to report profits as “carried interest” and thus be taxed at 15 per cent (as capital gains) rather than the standard 35 per cent most Americans pay on their income. President Obama tried to highlight the resulting absurdities by citing the example of the billionaire Warren Buffett’s secretary bearing a tax burden that was, proportionally, double what her boss paid.  (Forbes subsequently estimated that the secretary earned a salary between $200-$500, 000 and so was not an ideal example of the American middle-class.)

The interaction between vast, lightly-taxed corporate wealth and American politics has become increasingly problematic, and not just for Americans. For one thing the rise of the internet has vastly expanded the impact of corporate decision-making, into countries with poor records on human rights and free expression. Rebecca MacKinnon, founder of the blogging network Global Voices, notes that “When citizens depend on online platforms like Google, Twitter, and Facebook … legislators and regulators in the world’s largest markets make decisions that ultimately shape global technical standards and business norms. Thus governments are exerting power over the freedoms and rights of people who did not vote for them, who do not live under their jurisdiction and have no meaningful way of holding them accountable.”

Control of American legislators and regulators now lies within the grasp of a handful of extremely wealthy corporations and individuals, few with agendas that clearly serve the public interest.  A case in point is the surge in use of the tax-exempt “Super Political Action Committee (PAC).”  Shielded by a Supreme Court decision that treats political donations as a form of free expression, Super PACs allow candidates to bypass former campaign finance restrictions with impunity, opening the floodgates to extravagant donations from wealthy citizens. The candidacy of Newt Gingrich, for example, was possible mainly because of the support of the Winning Our Future Super PAC financed by the Las Vegas casino magnate Sheldon Adelson and his wife Miriam, who donated $10 million. The money helped Gingrich remain in the Republican primaries long after he was a viable candidate.

With the general election looming, there is anxious speculation about the role of PACs funded by Charles and David Koch – reputedly worth $25 billion each – longtime backers of libertarian organizations. The Kochs have already lavished huge sums of money on the Tea Party movement and look set to increase their donations significantly in the forthcoming campaign. It may be worth recalling that Obama’s entire 2008 presidential campaign – which shattered all previous records – cost US$1 billion.  The funding mechanisms now available to both parties in the next campaign will likely dwarf this figure.

But concerns about the rise of well-funded right-wing groups in American politics miss the point. The whole system has been corrupted by money. US taxpayers have shouldered the burden of bailing out Wall Street and huge corporations like General Motors only to find themselves, effectively, sidelined in the political conversation. As for the citizens in other countries who must live with the consequences of decisions made at US companies like Facebook and Twitter, they have no say whatsoever.  Yet the US political system meanders along, tinkering with defunct campaign finance legislation, allowing the influx of ever larger sums of money into a process designed to produce leaders that will curb wasteful spending and mismanagement. This contradiction is central to much of what has gone wrong in US politics during the last two decades, and unless the root cause is confronted directly, there is little prospect of either political party delivering much hope or change in the next general election.