The Awkward Confluence of Capitalism and Democracy

California's Proposition 16, on the ballot for the June 8 election, provides an interesting case in point for a discussion of the merits of unfettered capitalism in a democratic nation that values free speech and extends that right to corporations.

Basically, this proposed "initiative constitutional amendment" would require, with a few exceptions, a 2/3 approval from voters in a selected geographical area before a governmental entity could start offering electric service to its constituents. It is being bankrolled primarily by PG&E, one of the largest investor-owned utilities in the state, which (so far, according to the LA Times 5/28/10, page AA3) has sunk $46 million into the "Yes on 16" campaign. The money is being used to purchase a mind-numbing number of TV ads, plus home mailers.

Aside from the veracity of the "Yes on 16" effort (see below), let's look first at the initiative itself. If a requirement were being imposed that mandated a vote of the people by a simple majority, I wouldn't be writing this post. But imposing a 2/3 requirement makes the motivation for the effort transparent, because everyone knows that a supermajority of that magnitude is almost impossible to achieve. For example, a presidential election is considered a "landslide" if one candidate gets about 55% or more of the vote. President Obama received about 53% of the popular vote in 2008. He won 28 states, not even close to 2/3 of them. Look how difficult it is for the U.S. Senate even to get 60 votes on controversial issues, much less the 67 that would be required to achieve 2/3 of 100.

Personally, I don't think that PG&E (plus a host of supporting Chambers of Commerce) is supporting Prop 16 to advance democratic principles (although that's what their commercials would lead you to believe). No, they are using their right to spend enormous amounts of money (from consumers of their product, of course) to advance public policy that will simply give them more control over their ability to take more money out of those same consumers' pockets (by reducing competition). Students of democracy, tell me where it says that people should be obligated to finance -- without a shareholder vote, of course!! -- the activities of corporations that are diametrically opposed to the best long-term interests of the people footing the bill!

If PG&E believes so strongly in democracy, shouldn't it let its shareholders vote on whether to support a campaign like this? Don't hold your breath. If capitalism thrives because it promotes market efficiency, what's wrong with letting governments operate utilities if they can do it better than private enterprise? (I don't know whether they can or not; it probably depends on individual circumstances. But throwing up insurmountable barriers is not an appropriate way to find out.) What's next -- shall we have a 2/3 vote before we can operate a publicly supported fire department?

Now look at the mailer I received at my house. Does it mention the 2/3 vote requirement? Is a triple fudge sundae good for you? What it says is that "Politicians throughout the state want to spend over $2.5 billion in public funds for government-run electricity -- and they don't want to let you vote on it." The graphic design experts put a big check on this mailer, payable to "local politicians," for "Gov't-run electricity," signed by the "California Taxpayer." Brilliant marketing -- it hits all the usual "hot buttons." Just unfortunately, it seems to omit one vital detail.

Here's the bottom line: most of us believe, to a greater or lesser degree, in the benefits of both democracy and capitalism. What do we do when one tries to destroy the other?