How We Can Stop the Oligarchs' Onslaught to Take Control of Everything

Rising inequality seems to pose an insurmountable political problem. If the underlying causes are technological change and globalization, the forces appear to be unstoppable. Alternatively, if the causes are primarily political and involve the power of corporate and financial interests, the forces driving inequality may also appear to be overwhelming. Some people may conclude in despair that, for all practical purposes, nothing can be done.

That conclusion, however, is unjustified for two reasons—first, because things have been and can be done to check increased inequality even in the short term; and second, because limiting the political power of concentrated wealth is a cause with deep American roots and wide support that is a difficult but achievable long-term goal.

While economic inequality has risen since 1980, the trend has not been steady. As in previous decades, Democratic administrations have had a better record on equality as well as growth than Republican administrations. Moreover, Democratic presidents have been able to advance a wide range of liberal and egalitarian objectives during this period, and the support for stronger measures is growing. It would be a colossal error of judgment to believe that Democratic policies (and judicial appointments) make no difference.

The historical record in the United States is consistent with comparative evidence on other wealthy democracies, which also shows that public policies can limit inequality while promoting growth, even under the pressures of technological change and globalization. The most visible of those methods involve taxes, spending programs, and monetary policy, but just as important are all the ways in which government sets the rules of the market and thereby affects the incomes that people derive from it. These are the rules that shape labor relations, credit and debt, financial institutions, corporate structure, antitrust, international trade, intellectual property rights, liability, and other aspects of economic life. As Robert Reich argues elsewhere in this issue, changes in those rules during recent decades in the United States have been primary causes of rising inequality, and any hope of reversing that process depends on redressing the imbalance in political power that lies behind it.

Fifty years ago, to talk about inequality was to talk about the persistence of poverty in an affluent society. Now, inequality raises an additional challenge: stagnant incomes in the middle class and runaway gains among a small elite. Reducing poverty is an inherently tougher political problem because it involves asking the majority to agree to policies, including taxes, that benefit the poor and minorities. Rallying the majority of Americans on behalf of their own economic interests should, in principle, be easier.

Many critics have taken to calling our time a second Gilded Age, recalling Mark Twain’s term for the late 19th-century era when a veneer of refinement covered the brutal realities of industrial capitalism. The analogy should actually be encouraging. As daunting as the political challenges were at the time, the Gilded Age came to an end with the reforms of the Progressive era and the New Deal. Those years saw countless changes in the rules of economic life as well as new taxes and social spending that gave the great majority of Americans a better life. But behind the myriad of specific reforms was a common recognition—a collective revulsion against the privileges of great wealth allied with great power. The challenge now is to mobilize that kind of moral sentiment on behalf of a new age of reform.

America’s Slide Back Toward Oligarchy

Wealth and power often go together, but being observed in each other’s company has sometimes been a scandal. During the final week of the 1884 election campaign, the Republican presidential candidate James G. Blaine attended a lavish fundraising dinner with 200 of the nation’s economic elite at Delmonico’s Steakhouse in New York City. Among Blaine’s dinner companions was Jay Gould, the financier who controlled the Union Pacific Railroad, Western Union, and other companies. The next day, Joseph Pulitzer’s New York World carried a cartoon across the entire front page, titled “Royal Feast of Belshazzar Blaine and the Money Kings,” showing the candidate and the tycoons dining on such dishes as “lobby pudding,” “navy contract,” “monopoly soup,” and “patronage cake.” The New York Times commented, “Blaine’s political sagacity is impeached by his willingness to be seen in the company of these people and to take their money openly at Delmonico’s.” The explosion of disgust at the banquet, according to some historians, may have cost Blaine the election, which he lost to Grover Cleveland by a narrow margin.

Today, fundraising events like the one at Delmonico’s have become routine, and any sense of embarrassment about them seems to have vanished, at least among Republicans. (Democrats also take the money when they can get it, though they may be more sensitive about appearances.) In the “wealth primary” that has become the first step to national office, Republican candidates openly make pilgrimages to Sheldon Adelson, the Koch brothers, and other billionaires. No one is the least startled to read stories like the one that appeared in The New York Times on February 28, “G.O.P. Race Starts in Lavish Haunts of Rich Donors”:

In one resort town after another—Rancho Mirage, Calif.; Sea Island, Ga.; Las Vegas—the candidates are making their cases to exclusive gatherings of donors whose wealth, fully unleashed by the Supreme Court’s 2010 Citizens United decision, has granted them the kind of influence and convening power once held by urban political bosses and party chairmen.

The reference to “urban political bosses and party chairmen” in the Times makes it sound as though one unrepresentative group has merely followed another. But by assembling coalitions and candidates capable of winning majority support, party leaders perform work that’s essential in a democracy. There is no comparable democratic function performed by billionaires, even though they may sincerely believe their interests are no different from the majority’s.

The screening of presidential candidates by the super-rich is only one aspect of the heightened role of big money in politics that has provoked some political scientists to adopt an old word to characterize the new realities of power. That word is oligarchy, conceived as the political domination by the wealthy few and roughly similar to the term “plutocracy” (but with a deeper theoretical tradition, reaching back to Aristotle). Oligarchy aptly describes the direction of change in America during the past four decades. The idea is not that oligarchy has replaced democracy; rather, the two have become fused in a system where those at the pinnacle of the economy are able to tilt politics and law sharply in their own favor.

This is the argument developed by Jeffrey A. Winters in his 2011 book Oligarchy, which analyzes material wealth as a source of political domination in a wide range of societies from ancient Greece and Rome to the modern world. The United States, according to this analysis, is a “civil oligarchy,” where those in command of great wealth use it to shape policy but do not rule directly. On many issues such as abortion, gun rights, or the environment, the wealthy come down on different sides. They are far less likely to cancel each other out, however, on questions such as taxes that bear directly on their shared economic interests. In this interpretation, oligarchic dominance is specific to redistributive issues, and rather than being inherent in capitalism, depends on laws and policies that affect the concentration of wealth and the conversion of wealth into power.

This understanding of American politics is different from the view that capitalism always means control by a ruling class or that all societies are run by unrepresentative elites. During the past century, popular movements in the advanced democracies, including unions and political parties allied with them, enabled ordinary people to share in the gains of economic growth and to enjoy both more security and more freedom. Changes in legal doctrines subordinating property rights to the general welfare allowed for stronger regulation of the economy. These developments bore fruit in the three decades after World War II, when both prosperity and political power were widely shared in Western Europe and North America.

In the United States, the relatively balanced pluralism of the postwar decades has increasingly given way to a more polarized political economy. The long decline of unions has probably been the single most important factor in the slide toward greater inequality in power and economic rewards. Beginning in the 1970s, while business interests mobilized, the engagement of ordinary citizens in civic and political life atrophied. Rather than relying on local volunteers going door to door, political campaigns became increasingly dependent on paid media and consequently on financial donors. And since money is distributed less equally than time, the pursuit of office has increasingly sent candidates in pursuit of patronage by the affluent.

A series of empirical studies have demonstrated the consequences of these changes for political participation and government responsiveness. Union members accounted for 25 percent of political activity in 1967 but only 11 percent in 2006, according to an estimate by Kay Lehman Schlozman, Sidney Verba, and Henry E. Brady in The Unheavenly Chorus, a 2012 study of trends in participation. (The title is an allusion to a well-known line by E.E. Schattschneider: “The flaw in the pluralist heaven is that the heavenly chorus sings with a strong upper-class accent.”) Surveying the representation of group interests in Washington as of the early 2000s, Schlozman and her colleagues find those interests to be overwhelmingly weighted in favor of business.

An “upper-class accent” is an understatement of the bias of policy. In Affluence and Influence, also published in 2012, Martin Gilens uses data from nearly 2,000 questions in public opinion surveys about proposed policies from 1981 to 2002 to measure the government’s responsiveness to people at different income levels. The policies adopted, Gilens finds, were strongly related to the views of upper-income people, but not at all to the preferences of poor or even middle-income Americans. Expanding the analysis to include interest groups, Gilens and Benjamin I. Page find the same pattern of elite domination. Whether individually or through groups, average citizens had no independent effect on what government actually did.

This research, it should be stressed, concerns a period—1981 to 2002—when Republicans dominated national policy-making; Democrats had control of both the presidency and Congress for only two years (1993–1994). Even in regard to the “age of Reagan,” the findings do not prove Winters’s argument about oligarchy, which is about the influence of the .001 percent on policies that impinge on their fortunes. A recent study of the wealthy elite in the Chicago area confirms, however, that the truly wealthy are highly active in politics (often in direct touch with their senators and other political leaders) and that their views on key economic questions diverge markedly from those of the public at large.

As campaigns have made candidates increasingly hungry for contributions, the views of those who can satisfy that hunger gain importance. This is an era when not only the practical demands of politics but the rules of the game have changed. If the degree of oligarchical power depends on the concentration of wealth and rules governing the conversion of wealth into power, two developments in recent decades have pushed American politics in that direction: The gains from growth have gone overwhelmingly to the top, and the Supreme Court has effectively eliminated legal barriers to the use of money in political campaigns.

The resulting realities of campaign finance affect Democrats as well as Republicans. All politicians have to be what Schlozman and her co-authors call “rational prospectors” and go hunting where the ducks (and the bucks) are. But that does not mean their choices about policy are the same.

Checking Inequality in the Short Run

Despite the trends in power and inequality, it has made a difference in the United States which party is in power. The consistent pattern, even in recent decades, is that middle- and low-income people have fared better under Democratic administrations, and high-income people have fared better under Republicans. But the effects have not canceled out. Democrats have reduced inequality a little, while Republicans have increased it a lot.

The best evidence on the partisan effects on inequality comes from the work of Larry Bartels. In his 2008 book Unequal Democracy: The Political Economy of the New Gilded Age, Bartels estimates the effects on inequality of the administrations of the five Democratic and five Republican presidents from 1948 to 2005. Under the Democrats, incomes grew slightly faster for poor than for rich families, modestly reducing inequality. Under the Republicans, incomes grew much faster for the rich than for the poor, greatly increasing inequality. Families at the 95th percentile did equally well no matter which party was in office, but those at the 20th percentile saw their incomes grow three times faster under Democrats.

These findings are especially striking because they concern pre-tax income. For the entire period from 1948 to 2005, Bartels finds that the partisan differences in pre-tax income growth resulted chiefly from substantial differences in unemployment rates (30 percent lower on average under Democrats) and in GDP growth (60 percent higher under Democrats). Lower unemployment and higher growth rates under Democrats raised incomes far more for people near the bottom of the income distribution than for people near the top.

The period from 1980 to 2005, however, was significantly different from the period from 1948 to 1980 because rates of economic growth were lower. According to Bartels, the differences between Democratic and Republican administrations in inequality in pre-tax income growth disappeared, but the differences continued to show up in post-tax income growth. Low- and middle-income people again did better under Democrats. These were the years when taxes on the top income brackets were cut sharply under Ronald Reagan and raised modestly under Bill Clinton. 

Even with the unrelenting increase in inequality in recent years, Bartels has continued to find significant partisan differences in the effects of presidential administrations. Updating his analysis for the post-1980 period through 2012, Bartels acknowledges that the middle class and the poor “experienced somewhat lower growth rates” than the affluent, even under Democratic presidents. But, he finds, “they clearly fared much better under Democrats (Clinton and Obama) than under Republicans (Reagan, Bush, and Bush). The difference amounts to about 1.5 percent per year for poor families and 0.8 percent per year for middle-class families—substantial sums when they are compounded over decades.”

These statistics understate the differences between Democratic and Republican government because measures of income, even post-tax income, don’t capture all the distributive consequences of public policy. For example, they don’t include the value of non-cash benefits for low-income people, such as the value of Medicaid coverage, which, if taken into account, would show Democrats to have done more to reduce inequality at both the federal and state levels. The difference between red and blue states in expanding Medicaid under the Affordable Care Act is a perfect example of that pattern. Indeed, the ACA generally illustrates how Democrats have sought to advance egalitarian goals against Republican resistance.

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