Financial capital has increasingly undermined American democracy, shifting focus from long-term investment and innovation to short-term profits through speculation. This shift has prioritized shareholder value over workers' rights and sustainable growth, leading to crises that disproportionately affect ordinary citizens. Michael A. McCarthy, a sociologist at UC Santa Cruz, argues in his book The Master’s Tools: How Finance Wrecked Democracy (And a Radical Plan to Rebuild It) that the rise of Big Finance, fueled by deregulation and pro-wealthy policies, has allowed financial institutions to amass vast wealth and influence government policy. McCarthy proposes a radical plan involving inclusive financial institutions and democratic reforms to reclaim control over finance.

The Rise and Dominance of Big Finance

Big Finance emerged as a powerful force during the deregulatory era of the 1970s and 1980s. Financial institutions like JP Morgan and Goldman Sachs gained unprecedented influence over economic and political systems. These entities have shaped policy, influenced elections, and prioritized profits, often at the expense of workers and public welfare. The 2008 financial crisis highlighted the devastating impact of unchecked financial power on ordinary people, yet subsequent reforms failed to dismantle the key sources of this dominance.

McCarthy identifies three levers of financial power—engagement in policymaking, prominence in the economy, and entanglement with state institutions and nonfinancial corporations—that have embedded financial institutions deeply within American politics. Despite efforts like Occupy Wall Street, these levers remain intact, allowing financial elites to continue influencing critical decisions. McCarthy emphasizes that weakening the financial sector requires disrupting these levers, which was not achieved post-2008. He underscores how private equity firms profit by stripping assets, cutting jobs, and eroding labor protections, further exacerbating the crisis of finance capitalism.

A Path to Democratic Financial Reform

To address the crisis, McCarthy advocates for creating financial institutions that empower the public rather than deplete it. He envisions a system where finance funds essential public goods like green energy, social housing, and community development. Central to this vision is the concept of sortition, an ancient Greek practice of randomly selecting citizens for governance roles. McCarthy proposes modernizing this idea through minipublics—ordinary people chosen by lottery to deliberate on key issues—ensuring decisions reflect the voices of everyday citizens, not just elites.

This approach aims to democratize financial decision-making by engaging the public in meaningful ways. Sortition bypasses traditional democratic roadblocks such as elite dominance and self-selection bias, making governance accessible to everyone. McCarthy points out that experiments with citizen assemblies worldwide, including in Ireland and France, have demonstrated the effectiveness of diverse groups in producing high-quality outcomes. By applying this method to financial matters, he believes we can begin addressing our deep investment crisis while strengthening democracy. McCarthy's call for radical reform challenges us to reimagine how finance can serve the common good, urging a return to a more inclusive and participatory form of democracy.