Populism of the Elites

Outside the New York Stock Exchange in 2015 (Carlo Allegri/Reuters)
At the Koch network’s gathering, CEOs warn that cronyism is eroding faith in America.

Indian Wells, Calif.

The elegant and massive Renaissance resort ballroom is hosting an American populist’s nightmare this Saturday morning: more than 600 wealthy donors and allies of Charles Koch, who collectively lead businesses employing 2 million people, finishing up breakfast and listening to three powerful executives discuss how the business world must further shape society: Daniel Lubetzky, the billionaire founder and executive chairman of Kind Snacks; Jason Ballard, the CEO of construction startup ICON, which envisions using 3-D printing and robots for home construction; and Chase Koch, Charles Koch’s son and the president of Koch Disruptive Technologies, the conglomerate’s venture-capital arm.

And yet the two main messages from the stage are ones that would probably leave quite a few populists nodding in agreement: Cronyism is destroying people’s faith in the systems they live in, and business has a responsibility to take care of people while creating profits — a philosophy that Lubetzky calls “not nonprofit, but ‘not-just-for-profit.’”

Cronyism is “deeply seeded in our culture,” Chase Koch laments.

Businesses are seeking handouts, and then you’ve got politicians that are constantly going out [and providing them], like it’s their business model. If you get one business that gets a goodie or a handout, and then all the competition comes along, saying, ‘If they get it, I want it too,’ it becomes this destructive cycle. There’s a terrible incentive here.

Washington and state capitals have always had difficulty distinguishing pro-free-market policies from pro-business policies, and almost any spending can be justified with a promise that it will create jobs in the future. The policies denounced as corporate welfare usually involve big announcements, high hopes, photo opportunities, holding shovels . . . and a public that rarely pays close attention again; if public attention returns, it’s usually too late.

Tim Phillips, president of Americans for Prosperity (AFP), sees cronyism, in the form of government policies designed to support particular interests and businesses, as something of a Rosetta Stone for the tensions of the current political moment.

“Government spending is the fuel for special-interest politics,” Phillips declared at a subsequent session. “Seventy percent say the economy is rigged to favor special interests, and 80 percent say government has too much influence over the economy.” AFP has launched a new campaign, “Unrig,” aiming to make it politically toxic for politicians to hand out money to particular special interests. With messages like “62 percent of Americans believe the economy is rigged against them — they’re right!” the rhetoric would not feel out of place in an Elizabeth Warren speech.

“Where we differ from an Elizabeth Warren is that she would say that this is proof that businesses are corrupt, that as a matter of their nature they just don’t operate in a way that looks out for the interests of people,” says Russ Latino, an AFP vice president focusing on economic opportunity. “We would look at it and say, ‘There are principled businesses all over this country that create massive opportunities for people and enrich people’s lives, but there is an element of business culture that had started to seek success based upon the relationship with government that they have, and that is harmful in a multitude of ways.’”

Special deals of tax cuts and incentives for corporate relocations are another example of crony capitalism, according to Chase Koch. He contended that the process almost always generated more losers than winners:

The existing businesses that have been there for decades, that didn’t get that deal, they’re not getting a level playing field. The taxpayer, because the money is coming out of their pocket to pay for it, and the business that takes that [deal] on, I think ultimately loses long-term as well. Because they’re moving to a location that may be not suited for their products or their services, or [for] the talent they need for their business.

He didn’t specifically mention Amazon’s HQ2 search, but that was the most high-profile example of localities fiercely trying to outbid one other to “win” a new corporate headquarters within city limits.

Koch also pointed to Enterprise Florida — a longtime foe of AFP’s Florida branch — as an example of a state “slush fund.” Founded in 1996 by Democratic governor Lawton Chiles to diversify the state’s economy, AFP found itself in a contentious fight with former Governor Rick Scott, usually an ally of the organization. Pressure from the group helped end Florida’s Quick Action Closing Fund and last year helped push through the repeal of Florida’s “certificate of need” approval process to build new hospitals.

“The strongest leaders against business handouts are business leaders who don’t want handouts,” Phillips said.

The other recurring focus of the Koch meeting attendees is to emphasize how businesses can help solve societal problems, and there are probably no missionaries for this faith in business who are more passionate than Ballard, whose company has created large-scale 3-D printers that can basically use quick-poured concrete to build whole houses and has unveiled its first 500-square-foot homes, in Tabasco, Mexico, created for impoverished families living on less than $3 per day.

Ballard’s mouth rapidly fires funny homespun aphorisms. After his company’s first model home was completed, the orders came in, and he was “busier than a one-legged man in a butt-kicking contest.” Confused housing regulators responded to him like “a cow staring at a shut gate.” Lamenting the slow pace of innovation in housing, he cries, “It’s 2020! Where’s Wakanda? Where’s Rivendell?”

But amid the one-liners, Ballard makes some key points about the accountability of the business world. “If you really care about outcomes and you want to get it done, business is held accountable by the market! Not to say anything bad about nonprofits, but if a nonprofit’s products and process aren’t working, you just go have another golf tournament and get more money!” (The audience really laughed at this one; some attendees probably attended plenty of charity golf tournaments and wondered how effectively their donations were being used.)

In business, Ballard continued, “you get up every day and make sure what you’re doing is delivering the outcomes you want, or you’re toast, you’re done! . . . If you succeed in business, you want to keep going — and profits put the gas back in the tank, you get to keep going.”

Ballard wore a distinctive white Stetson during his panel discussion and used it to make a point about how the private sector has an irreplaceable role in tackling big problems at the national and even the global level:

When you look at humanity’s most vexing challenges — curing cancer, curing neurodegenerative diseases like Alzheimer’s, finding ways to sustainably feed 7 billion and growing people, desalinating salt water so we have freshwater to drink — I’ll eat my hat if those problems aren’t solved by for-profit companies.

Despite a lot of ideas and discussion that would probably reassure populists that the top 1 percent — or, like some in the audience, the top 1 percent of the top 1 percent — is thinking about the same problems, that doesn’t mean that the Koch-meeting attendees are at peace with the populist currents running through American politics. When people feel despair, “the extremes swoop in, and that’s what’s happening today,” warned Brian Hooks, president of the Charles Koch Foundation. “Born of socialism, nationalism, and other failures of the past, they reject the very principle that everyone has something to contribute.”

Lubetzky was the most outspoken about the current wave of populism in American politics. “Both political parties have moved toward populism, and I think it has to do with how a lot of people feel left behind. . . . I think both [President] Trump and [Senator Bernie] Sanders are a response to this movement.”

Moments earlier, he had laid out how his family history fuels his wariness: “I was born in Mexico City, where the rule of law is not what it is in the United States, so I don’t take it for granted. I’m the son of a Holocaust survivor who was in the Dachau concentration camp and was liberated by American soldiers. I’ve seen through my father’s eyes what can befall people who lose democracy, and a sense of respect toward one another, and a sense of dignity to one another. I think the stakes are very, very high.”

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