John Robb has written a suggestive scenario on how the US could end up privatizing virtually everything over the next couple of decades. Even security could end up as privatized as health care is now. As I wrote to John this morning, I think his scenario can be extended by considering the parallel experience that the Russia went through as the Soviet Union collapsed in the face of a disastrous war of choice in the middle east.
The legal & economic dynamics of the Soviet collapse ensured that the most valuable assets of the Soviet economy (factories, mines, oil fields, etc) wound up in the hands of well-connected members of the old nomenklatura elite, while the mass of the Soviet population — both white collar workers and proletarians — experienced a catastrophic loss of income, personal status, and national pride. For the vast majority of Soviet citizens the obscene enrichment of former nomenklatura elites and black marketeers appeared as the essence of the new liberal capitalism vaunted by Yeltsin and his economic advisors such as Jeffrey Sachs. Only by understanding this historical context can one make sense of why post-Soviet Russia, despite having the formal aspect of a democracy, did not end up generating the sorts of political norms necessary to support liberal democracy. Instead, we ended up with Putinism, which indeed the majority of Russians rightly see as highly preferable to the kleptocratic chaos of the 1990s.
The political implications of the Russian case apply equally well to Robb's Club-for-Growth-wet-dream scenario of radical privatization of all government activity in the United States. If such a radical privatization takes place, cui bono? Can there be any doubt that those who will walk away with the assets will be the new class of hyper-wealthy financiers--hedge fundies and private equity types? The little guy (and by this I mean the bottom 99% of the population) will get nothing out of this process, except a more insecure, unstable existence.
What would such a restructuring of risk mean for American democracy? Modern democracy depends upon the allegiance of ordinary citizens who see opportunities for advancement, in both material and status terms, within the context of legal and electoral institutions. (This is why all modern democracies are obsessed with maintaining stable economic growth.) Where such opportunities are perceived to be stable and reliable, elites and voters alike will tend to defend the long-run integrity of democratic institutions when they are threatened, rather than opt to subvert them to gain short-term payoffs. On the other hand, political economies in which all gains go to a few well-placed elites and life is increasingly uncertain for the many, the norms of stability and fair play which are required for liberal democracy to function evaporate. Formal democratic institutions may survive as a legitimation mechanism, but they will command little respect or real power.
In short, Robb's scenario suggests the effective end of meaningful democracy in the United States. If that happens then Americans in 2025 will become as cynical about our political institutions as Russians today are about Western democratic ideals. And when that happens, the prospect for a fascist takeover of the United States, appropriately wrapped in the flag and carrying a cross, will be more than likely.