The Eclipse of American Democracy, Part Nineteen: Income Inequality Leads to Oligarchy

"In every society known to man," wrote founding father John Adams, "an aristocracy has risen up in the course of time, consisting of a few rich and honorable families who have united with each other against both the people and the first magistrate." Or as Supreme Court Justice Louis Brandeis warned: "We may have democracy, or we may have wealth concentrated in the hands of a few, but we can’t have both." To state the obvious, in any society great wealth will tend to wield great political power, and democracy will weaken as wealth inequality becomes more acute.

Of course that might not be the case if, say, the very wealthy used their political power to reduce income inequality and improve democratic institutions. But that of course seldom happens; the super-rich Koch brothers for example have an enormous influence on the American political scene and are not only very conservative but openly contemptuous of democracy, much less on any checks on the power of wealth to shape national policy. Worse, inequality in the U.S. has risen to levels not seen since the 1920s. The top 1 percent pocket more than 20 percent of the nation's income, and the 400 richest people in the country own more wealth than everyone in the bottom 50 percent.

The power of lobbyists to shape legislation and even their own government oversight has grown to ridiculous levels; corporations commonly write their own laws. Following the Great Recession for example, the Democratic Congress passed the law commonly known as Dodd-Frank to overhaul the financial regulatory system. By 2018 Republicans were back in power, and they of course exempted dozens of U.S. banks from the Dodd–Frank Act's banking regulations. A 2013 article in the New York Times by Eric Lipton and Ben Protess describes how Republicans make a mockery of their responsibilities to conduct oversight and protect public interests:

"The House Financial Services Committee has been a natural target. Not only is it controlled by Republicans, who had opposed Dodd-Frank, but freshmen lawmakers are often appointed to the unusually large committee because it is seen as a helpful base from which they can raise campaign funds."

"One bill that sailed through the House Financial Services Committee this month — over the objections of the Treasury Department — was essentially Citigroup’s, according to e-mails reviewed by The New York Times. The bill would exempt broad swathes of trades from new regulation.

In a sign of Wall Street’s resurgent influence in Washington, Citigroup’s recommendations were reflected in more than 70 lines of the House committee’s 85-line bill. Two crucial paragraphs, prepared by Citigroup in conjunction with other Wall Street banks, were copied nearly word for word."

What to do? Matt Stoller of the think-tank the Open Markets Institute suggested in the Washington Post: "If we want to restore a democratic culture, we’re going to have to not just raise the pay of public servants, but reduce inequality dramatically. We must attack the problem of a two-tiered society. We must go after the concentration of corporate assets through strong competition and anti-monopoly policy so that we don’t have a society split between billionaires with rights and powerless peasants living with varying degrees of comfort. Basic public goods – quality education, health care, transportation, nutrition — must be available to all without the need to incur huge debts. Private sector CEOs perhaps should be able to have more lavish lifestyles than the rest of us, but it should be a matter of living a fancier version of the same life. No one should go broke if they have a medical problem, not just because that’s a problem in and of itself, but because that is a route to social corruption."

In other words, Stoller thinks the restoration of democracy would be a product of the re-introduction of basic New Deal-style liberalism, redistributing wealth and reining in big business and finance. I agree. For further thoughts on the subject, I'd like to quote at length former White House Press Secretary Bill Moyers writing in The Nation:

"The Greek historian Plutarch is said to have warned that “an imbalance between rich and poor is the oldest and most fatal ailment of a Republic.” Yet as the Washington Post pointed out recently, income inequality may be higher at this moment than at any time in the American past.

When I was a young man in Washington in the 1960s, most of the country’s growth accrued to the bottom 90% of households. From the end of World War II until the early 1970s, in fact, income grew at a slightly faster rate at the bottom and middle of American society than at the top. In 2009, economists Thomas Piketty and Emmanuel Saez explored decades of tax data and found that from 1950 through 1980 the average income of the bottom 90% of Americans had grown, from $ 17,719 to $ 30,941. That represented a 75% increase in 2008 dollars.

Since 1980, the economy has continued to grow impressively, but most of the benefits have migrated to the top. In these years, workers were more productive but received less of the wealth they were helping to create. In the late 1970s, the richest 1% received 9% of total income and held 19% of the nation’s wealth. The share of total income going to that 1% would then rise to more than 23% by 2007, while their share of total wealth would grow to 35%. And that was all before the economic meltdown of 2007-2008.

Even though everyone took a hit during the recession that followed, the top 10% now hold more than three-quarters of the country’s total family wealth.

I know, I know: statistics have a way of causing eyes to glaze over, but these statistics highlight an ugly truth about America: inequality matters. It slows economic growth, undermines health, erodes social cohesion and solidarity, and starves education. In their study The Spirit Level: Why Greater Equality Makes Societies Stronger, epidemiologists Richard Wilkinson and Kate Pickett found that the most consistent predictor of mental illness, infant mortality, low educational achievement, teenage births, homicides, and incarceration was economic inequality."

I encourage you to read Bill Moyers' article in its entirety. In my next post, this series on the eclipse of American democracy as orchestrated by conservatives and Republican officials comes to a close. Thanks for reading.

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