I started off the new year wanting to write something meaningful and provocative about the growing inequality of income and wealth in both the United States and the United Kingdom. The statistics pouring forth in the press at year’s end emphasized that a fraction of one per cent of the US population controlled about 90 per cent of the wealth creation in the U.S. I intended to focus my blog on this. The new challenge seemed to be that both of our economies were shifting towards a plutocracy in which a minute percentage of richest are increasingly controlling the national governance. Yes, there are still elections in which two parties in the U.S. can slug it out, but neither Democrats nor Republicans challenge the capitalist basis of the economic system and in the UK the parties tend to squabble about the degree of privatization vs. nationalization. Both the Republicans and the Tories rant against “Big” government and, being urged by the wealthy to do so, are attempting to reduce the sizes of their respective state sectors. Economic legislation, such as taxation, has been bought out by the truly rich in the US. Their tax rates are so different from that of the middle class and the poor that they only pay minimal sums to the government. For example, in 1944 the top marginal tax rate on taxpayers making more than a million dollars was 65 percent of their total income. By 2005 those making more than a million paid just 23 percent of such high incomes for federal taxes.1 Rather than make payments to the revenue they give vast sums to lobbyists and towards the campaigns of political representatives who will then pass or maintain legislation protecting their interests, Their wealth itself, much of it now in funds or investments based overseas, is kept under wraps.
So, after collating material from my files and pouring over my notes, I decided to look in the internet under “American Plutocracy.” There I came across a book by David C. Korten2 highlighting the thesis that the United States has always, since its inception, been a plutocracy! It exposed how the Founding Fathers from George Washington down to Thomas Jefferson were all wealthy land and slave owners. In fact, this small clique of mostly rich males controlled the direction of the new nation. Women, slaves (blacks), the poor (those without land or a house) and Native Americans had no voice in framing the Declaration of Independence, the Constitution, nor the Bill of Rights. The article them went on to contend that the wealthy made certain that their holdings and interests were protected by all of the laws enacted and that this legislated favoritism has continued to the present day!
These (to me) surprise revelations truly pulled the rug on my proposition that the United States was turning into a plutocracy! The question then arose: So what, if anything, could be done to correct this? Certainly not the appointment of yet another commission to study the problem nor public inquiries by a divided Congress. The statistics are all there: For better or for worse, parts of the government now have had access to all of the communications made by banks, money traders and launderers, investors and corporations. This surveillance could be invaluable information for the IRS. The banks were the first to be challenged in a modest way after the collapse of Lehman’s five years ago. Greater openness has now been demanded of them. However Investment Funds, brokerage houses, and the like have not been subjected to more transparent procedures. As a result, the transactions and evasions of the hyper-wealthy have not been open for examination. What is now required is legislation demanding openness on all substantial transactions by any individual, corporation or group. Of course the wealthy will do all in their power to assure such legislation would not be passed. Those who failed to declare or made false or incomplete declarations would be faced not with fines (which are easy to pay or write-off as losses) — but with jail terms and imprisonment. This would effect a massive change in the culture of tax evasion and corruption which has so undermined the democratic process in Washington. It is important to note that almost all American politicians who have run for office, are in office, or have left office in the 21st Century are now wealthy. Alas, the costs of running for office are so high that it is unreasonable to try running for office if one don’t have the money. However, if we compare their wealth entering office vs. their wealth upon leaving, the rise is massive. In effect, the legislators are part and parcel of the plutocracy.
The American plutocracy has been so effective for the rich because the electorate continues to believe that they hold power without in reality having a significant impact on the economy. Any resolution to this problem has become even more complex because plutocracy is no longer confined to one or two nations but has turned global. Chrystia Freeland a Canadian reporter, who has has written a new book on plutocracy3, makes the point that the super rich are, these days, largely stateless: They are becoming a trans-global community of peers who have more in common with one another than with their countrymen back home. Whether they maintain primary residences in New York, Hong Kong, Zurich, London, or Singapore today’s super-rich are increasingly escapist. This wealthy elite view themselves not as part of a plutocracy but as an independent grouping far above such parochial concerns as national identity, or devoting “their” taxes to paying down the budget deficits of their incidental countries of birth. Coping with the evasiveness of these billionaires is fast turning into a global challenge. Perhaps their threat is even more subversive for the trappings of our democracy than the thinly veiled plutocracy which was launched over 200 years ago.
1 The Nation, June 30, 2008.
2David C. Korten, The Great Turning. (2007). He noted that “The U.S. Constitution was written by white men predominantly of the propertied class. For their time, the steps they took were heroic and progressive. They brought an end to hereditary monarchy and introduced the separation of church and state to end theocracy — both exceptional accomplishments. The original Constitution, however, enshrined the power of white males of property in the institutions of a plutocracy… It specifically sanctioned slavery and gave no rights to women, Native Americans, or people of color.”
3Chrystia Freeland, Plutocrats: The Rise of the New Global Super-Rich, (2013).