The “Business” model: representative democracy dependent on the people alone
The United States is a representative democracy. The easiest way to determine its “business” model is to go back to the origin and see why the American democracy happened. This will help deduce the rationale for it and how it can create and capture value.
The US broke off from the United Kingdom for several reasons, but mainly for the frequent abuses of power that the British Monarch perpetrated on his colony – violating, according to the writers of the Declaration of Independence, their natural “unalienable rights”. The mechanics of a democracy were for them essential to prevent future abuses of powers and align the government’s actions with the protection of rights: “To secure these rights, Governments are instituted among Men, deriving their just power from the consent of the governed”. The US is set up as a representative democracy “dependent upon the People alone”.
The “business” model of this democracy is to diffuse power in order to protect and foster the People’s natural rights. To function, representation needs to be dependent on the People alone; any other dependence would imply a dangerous concentration of power thus short-circuiting the system.
As we will see there is a misalignment between the operating system in place and the value that a representative democracy is supposed to generate.
The “Operating” model: the cash requirements of a heightened competitive landscape
The “operating model” is defined by (a) the mechanics that allow voters to translate their preferences into policy outcomes (electing); (b) the possibility of every voter to be elected. If a person were not allowed to be elected, then that very check on power would be void.
Simplistically, there are two parallel processes: (1) the process of voting that involves information gathering, formation of preferences, decision and actual voting by the agent; (2) the process of being elected that involves selecting a constituency, gathering funds, getting the message out, and letting people decide.
Currently, funding plays a key role in both processes. After 1976, when the Supreme Court struck down limits on campaign financing, and the 1994 Congressional race, when both Houses started being contested every term, competition in the system heavily increased. This meant that the ability of raising funds for either (a) influencing public opinion and (b) being elected, played an increasingly dominant role in the operations of the American democracy.
This view is supported by the following data: “between 1974 and 2008 the average amount it took to run for reelection to the House went from $56K to $1.3MN (significantly higher than inflation). In 1974 the total spent by all candidates for Congress was $77MN. By 1982 that number was $343MN. By 2010 it was $1.8BN.”
Are the two models aligned?
Alignment can be measured by whether the current system of representation matches the original “business” model of the American representative democracy: power dependent on the people alone.
Lawrence Lessig, in his Republic, Lost describes the current need for campaign cash as distractive. Congress, in his view, is not dependent on the people alone but on those that can contribute to the re-election of that Congress. There is a fundamental distortion: “the gap between what “the People” believe about an issue and what Congress does about that issue. Call this substantive distortion”.
Substantive distortion has been measures by Martin Gilens in his book Affluence and Influence. With a dataset composed of 1,923 survey questions asked between 1981 and 2002 Gilens finds that there is a “fairly strong association between policy outcomes and the preferences of the affluent” and “when less-well-off Americans hold preferences that diverge from those of the affluent, policy responsiveness to the well-off remains strong but responsiveness to the lower-income groups all but disappears”.
This distortion shows not only that the preference of voters are not mirrored in policy outcomes, but also that policy outcomes are de facto dependent on the most affluent constituencies rather than the People alone. At the same time, these distortions also imply that the likelihood of anyone being elected relies on the ability to attract campaign funding, usually not evenly distributed across the population.
This is a case of clear misalignment that results in operational under-performance of the American representative system in delivering its core “business” model. The operational system mostly depends on those that can fund campaigns, leading to the concentration of power in influencing policy outcomes in the hands of the few. In turn, this violates the requirement of power diffusion and dependence on the People alone that is fundamental to achieve the core mission: protecting people from abuse of power.
- Martin Gilens, Affluence & Influence – Economic Inequality and the Political Power in America, Princeton University Press, 2012
- Lawrence Lessig, Republic, Lost, Hachette, 2011
- US Declaration of Indipendence