Our Electoral Market System

05/25/2011 12:20 pm ET
  • Jay Mandle Professor of Economics, Colgate University

So far the primaries have had an old-fashioned, Norman Rockwell
quality -- a patina of retail politics as campaigners go door to door
and prompt record turnouts in small states. Even in the more urban
Michigan, where it wasn't exactly a horse race, at least it was
heartening to see a primary come off with very little campaign

But let us not kid ourselves. The role of big money in our election
process has hardly been eclipsed. Some candidates lavished tens of
millions in Iowa and New Hampshire, and the only reason spending was
so low in Michigan was that it was a no-contest primary boycotted by
many, conserving the big bucks for later races. The 2008 campaign will
be a record-breaking, cash-soaked process. Most estimates say it will
cost $1 billion; Fortune recently rasied its estimate to $3 billion.

To be successful in large states and the nation and to cement their
relationships with indispensable special interests, frontrunners will
need to raise nine-figure war chests. Recent disclosures show Hillary
Clinton and Barak Obama have already surpassed the $100 million mark.

As a result, the role of private money in politics is more central,
and private donors wield more influence, than ever. As a Task Force
of the American Political Science Association reported in 2004,
"campaign contributions give the affluent a means to express their
voice that is unavailable to most citizens."

Each of the major candidates has received large donations from the
banking, and securities and investment sectors -- the very sectors
whose irresponsible behavior in the sub-prime credit market has
wrought havoc throughout the economy. In the cases of Clinton,
Guiliani, Obama and Romney, Wall Street donations amount to many
millions each. So whoever becomes president is likely to be
circumspect, to say the least, in exposing and correcting abuses of
predator lenders and financial manipulators.

If you really want to make sense of the election process, ignore the
Norman Rockwell posters and egalitarian stump speeches and view it, as
economist Joseph Schumpeter did, as a straight market system. Parties,
like firms, supply the candidates and the positions they stand for.
The role of the electorate, like consumers, is confined to choosing
among those office-seekers on offer, something like choosing between
Coke and Pepsi.

It may sound cynical, but if anything, Schumpeter's analogy
understates the one-sidedness and inequality of our system. In a real
market, at least buyers can influence the production process and the
array of products brought to the market by "voting" with their
purchases. Without satisfying consumers, a firm will go under. But in
politics, voters don't provide the money that keeps campaigns in
"business" -- voluntary donations do that. Donors therefore have much
more influence over the choices offered in the political
"marketplace," and voters have much less control, than consumers do
over products.

That is why none of the candidates have had much to say about the
housing bust. Wall Street political funding have a loud voice in
framing the issue, and voters little or none, so the proposals
candidates offer fall far short of the reforms needed to prevent
future such debacles.

Behind the current financial crisis is the deeper question of whether
we really want our elections run as a market system distorted by big
moguls and disempowered consumers. Shouldn't it be a "public good" - a
service that the society requires but one that is not paid for by
private individuals? We pay for national security with tax revenues
because paying for it with private contributions would leave us
vulnerable. So it should be with democracy, which needs public
financing for candidates.

The Federal Elections Commission offers a $3 tax return checkoff for
public funding of presidential elections, but this is tokenism
compared to the huge contributions that Wall Street financiers bundle
together. If we can shift our election paradigm from the flawed market
analogy back to one of public good and public finance, we would have
a healthier democracy and a more stable economy.

Jay Mandle is the author of "Democracy, America,and the Age of