Democratizing Finance to Defeat the Far Right: Part One
Michael McCarthy and Quinn Slobodian in conversation
The Master’s Tools, cover (detail) by Jonathan Pelham.
This is the first installment of a two-part interview. Find part two here. The text has been edited from a Zoom conversation between Michael McCarthy and Quinn Slobodian, with contributions from Boston University seminar participants, held March 27, 2025.
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Quinn Slobodian: Your latest book, The Master’s Tools: How Finance Wrecked Democracy (and a Radical Plan to Rebuild It), has just been published by Verso Books. Why should we read it?
Michael McCarthy: Let me put this in stark terms: we’re facing a global investment crisis, not just in the U.S., but around the world. The things people desperately need – such as housing, green infrastructure, and community wealth – are not being invested in. These basics of life, which provide a good quality of life, are systematically underfunded because our financial system and capitalist structure prefer to invest in more profitable ventures.
If money is being diverted away from the things that truly make life flourish – and I believe it is – we need to identify democratic processes to resolve this problem. What I propose is using random selection to create decision-making bodies. Think of something like a jury system, where a group of randomly selected people would deliberate on critical decisions, such as what a public fund should invest in.
For example, they could decide whether the fund should prioritize green infrastructure, affordable housing, community health, or even seed funding for cooperatives. These are all questions that a randomly selected group of citizens could help answer. And crucially, this approach could help make democratic finance more viable by allowing ordinary people to make meaningful decisions about public investments.
QS: Has this approach been tried anywhere?
MM: Random selection in decision-making over public finance – in other words, lottocracy – is not widespread. However, there are some examples outside the United States. Take Costa Rica, for instance. The Banco Popular, the country's main public bank, is governed by a Worker’s Assembly of 290 members, all chosen from various occupational sectors. This board determines the strategic vision of the bank, shaping the programs the bank offers. That said, research and the historical record show that deliberative processes work best when there’s a clear set of issues for people to address. They don’t work as well when the question is too broad. For example, it would be too open-ended to simply gather 290 people in a room and ask them, “What should the bank do?” These processes need clear parameters to guide them.
We can think about workers establishing democratic control over their pension investments in a similar way. Though we often think of European countries as having large state-run retirement plans, like those in France or Italy, the Netherlands relies more heavily on employer-based pension plans, with one of the largest covering all retail workers. Recently, the retail workers' pension fund, the pensioenfonds detailhandel, which has nearly $35 billion in assets under management, decided to experiment with democratic governance. Even though this fund already follows progressive investment principles – such as avoiding investments in oil or weapons manufacturers – the beneficiaries, who include current and future retirees, came together over three separate days to deliberate on the fund’s investments. After a discussion, they decided to prioritize social good over maximizing returns.
The beneficiaries didn’t just care about financial returns; they saw their financial interests intertwined with the public good.
QS: What has prevented us from having a more productive conversation on these issues until now?
MM: The dominant debate in American discourse about investment and producing the goods we need, especially to have a good life, has been about the divide between the public and the private, markets versus the state. This political discourse has been stuck in this binary framework inherited directly from the Cold War. It’s the U.S. positioned as a market-liberal economy versus the Soviet Union as a state-run one. This framing confuses how politics and investments actually work.
In the U.S., the state is already undemocratic in the way it functions – it operates more like an oligarchy that is fused with capital. For that reason, shifting to the state as a solution to market problems isn’t democratically realistic. Focusing on the public-private divide is in fact a distraction from a more important issue. The real focus should be on empowering the demos – ordinary people. We need to shift decision-making about investments into the hands of the people, not just rely on private corporations or the state to make those calls. If the public is empowered to make investment decisions, it can create mandates and direct investments into the areas we need the most.
QS: The title of your first book, Dismantling Solidarity: Capitalist Politics and American Pensions since the New Deal, suggests that a certain kind of solidarity once existed but was later lost. What was that solidarity?
MM: Dismantling Solidarity examines the transformation of the U.S. pension system from the New Deal era through the 1990s. It’s a story of initial hope followed by eventual loss.
The initial hope emerged from the intense labor struggles of the 1930s and 1940s. During that period, a powerful social democratic movement was taking shape in the U.S., largely driven by major unions like the CIO, the United Auto Workers, the United Steelworkers, and the United Mine Workers. These unions, which gained strength in the 1930s, had ambitious goals – one of which was securing major advancements in social protections, including healthcare and retirement security.
We know that the Social Security Act was passed in 1935, laying the foundation for today’s system. But unions at the time wanted to expand it significantly, turning it into a universal program that wouldn’t require supplementation through private retirement savings.
This period, particularly in the 1930s and 1940s, was a critical juncture. My book focuses on retirement, but a similar story could be told about healthcare. Universal healthcare and an expanded retirement system were on the political agenda, with significant support from the Democratic Party’s New Deal coalition. Yet, that vision was never fully realized. Instead of achieving a system resembling the social democracies of Nordic countries, the U.S. ended up with a highly financialized, employer-based, fragmented, and deeply unequal retirement and healthcare system.
QS: What happened?
MM: By the 1940s, particularly during World War II, it became clear that workers wouldn’t be able to secure these major social protections through political channels alone. As a result, they shifted their strategy to collective bargaining, negotiating for retirement savings and healthcare benefits directly with employers. Before the war, collective bargaining primarily focused on wages and workplace conditions – fringe benefits were rarely part of the discussion. But during World War II, employer-sponsored retirement savings plans rapidly expanded, particularly for higher-paid workers.
After the war, during the great strike wave, collectively bargained pension plans became widespread among unionized workers. This marks the first step in the dismantling of solidarity. The focus shifted from building a broad, universal social safety net to one tied to employment status. From there, subsequent changes made these plans increasingly unstable, risky, and financialized. That shift – from a vision of universal security to an employer-dependent model – set the stage for the fragmented and unequal system we have today.
QS: The term financialization can feel abstract and hard to grasp – almost like a catchall term. It’s intimidating and can seem to encompass a lot. How do you define it?
MM: When I talk about financialization, I’m describing how pension funds – originally meant to secure workers’ futures – were absorbed into the logic of Wall Street, prioritizing returns above all else, even at the cost of the very workers they were supposed to support.
In the early days, unions weren’t just negotiating for these funds – they were also trying to control how they were invested. Before the passage of the Taft-Hartley Act in 1947, many unions, particularly the United Mine Workers, directly managed their pension funds. These funds were often invested in ways that had a pro-worker dimension – such as financing worker housing or other projects that benefited union members while still generating returns. Investments were also generally lower risk, with a heavier focus on bonds, since modern portfolio theory hadn’t yet taken hold. Over time, you can track how pension fund investments began aligning more and more with the strategies used by hedge funds and other large financial institutions.
At first glance, this shift might seem logical – after all, maximizing returns sounds like a reasonable goal. But in reality, it had serious consequences. Pension funds began chasing higher returns at the expense of worker interests, leading to investments in non-union companies, foreign firms that exploited cheap labor, and riskier financial instruments. This introduced more volatility, greater uncertainty, and, ultimately, a weakening of worker power.
QS: What has been the U.S. Right’s stance, and particularly the far right’s, toward the rise of this increasingly financialized benefits system?
MM: For much of the period I have studied – from the New Deal through the 1980s – there wasn’t a strong connection between the far right and these welfare programs. However, that began to change in the 1980s and 1990s, as these programs started to break down.
Take pensions, for example. The defined benefit plans that workers fought for in the 1940s guaranteed a steady income after retirement. But by the 1980s and 1990s, these were being replaced by defined contribution plans, where employers contribute a set amount, but workers are responsible for investment decisions. What they received in retirement depended entirely on how the market performed.
This shift marked the decline of the private welfare state – the system that had created a kind of uneasy alliance between unionized workers and big employers. Of course, this system had always excluded large segments of the population, but for those who had access, it provided a relatively stable middle-class life, even though it also exposed them to financial market risks.
When this system collapsed – which was always the inevitable outcome of privatization – it created fertile ground for reactionary populism. The workers who had once benefited from this arrangement, but were now left behind, became a key base for the resurgence of right-wing populism. In many ways, this breakdown helped fuel the Trump coalition, as elements of the labor movement shifted toward it.
When I was researching Dismantling Solidarity, I spent time in various business and labor archives. One of the most interesting was the National Association of Manufacturers (NAM). NAM was – and still is – one of the largest business associations for manufacturers in the U.S., though manufacturing itself has declined. In the 1940s, NAM was initially vehemently opposed to collective bargaining over pensions, healthcare, or any kind of worker benefits. But as I dug deeper into their internal memos, I found something fascinating: within NAM, some members argued that allowing these benefits in the short term could actually help undermine the state’s role in the long run.
Their thinking was strategic – if businesses took the lead in providing pensions and healthcare, it could weaken support for Social Security and universal healthcare, shifting responsibility away from the state. They saw privatization not as a concession, but as a kind of “poison pill” that would gradually erode public systems. I don’t want to sound conspiratorial, but looking at how pensions and healthcare in the U.S. have become increasingly privatized and market-driven, it’s hard not to see how that logic played out over time.
QS: The distinction between supply-side and demand-side factors is crucial when examining the rise of the Right. You've provided a perfect example of a demand-side reaction: people angry about losing certain benefits or guarantees look for ways to protest and express their resentment. On the supply side, we see what insurgent right-wing politicians offer.
This is where the NAM story comes in. The private welfare state of guaranteed benefits has evolved into a market-driven model, and now the proposed plan for Social Security is all about giving people the freedom to invest their benefits in the stock market. So the Right no longer seeks to accommodate the welfare state; instead, they aim to erode the public welfare system, mirroring what happened with the private one, as you describe. Would you agree?
MM: Absolutely. There’s a paper published by the Cato Institute in 1983 called “Achieving Social Security Reform: A ‘Leninist’ Strategy.” Its authors explore how to dismantle the system, drawing up a plan to slowly erode Social Security and people’s confidence in it before smashing it. They propose building a multi-decade strategy to undermine the program from within. It's an interesting read. Essentially, there's a logic to these systems – they create periods of relative liberal stability. But once they break down, they also set the stage for radicalization – and when the left isn’t able to harness that, they sometimes push people toward more overtly nativist politics.
This is the first installment of a two-part interview. Read part two here.
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Michael A. McCarthy is an Associate Professor of Sociology and Director of Community Studies at the University of California, Santa Cruz. He is the author of The Master’s Tools: How Finance Wrecked Democracy (and a Radical Plan to Rebuild It) (Verso, 2025). His book Dismantling Solidarity: Capitalist Politics and American Pensions since the New Deal (Cornell, 2017) was awarded the Paul Sweezy Book Award as well as an honorable mention for the Labor and Labor Movements Book Award. He has written for the Boston Review, Jacobin, Noema, and the Washington Post.
Quinn Slobodian is the Co-Director of the History & Political Economy Project. He is professor of international history at the Frederick S. Pardee School of Global Studies at Boston University. He is the author of Globalists: The End of Empire and the Birth of Neoliberalism (Harvard, 2018) and Crack-Up Capitalism: Market Radicals and the Dream of a World Without Democracy (Metropolitan Books, 2023). His most recent book is Hayek’s Bastards: Race, Gold, IQ, and the Capitalism of the Far Right (Zone Books, 2025).