The new American power structure

My friend Steve from Texas sent me a link to a good article calling attention to the connection between “woke-ism” and oligarchy.

I think the writer, David Samuels, is basically right in his contention, but there’s more to be said about it.  Here are highlights of his article, with my annotations and comments.  

America has transformed itself from a country in which most citizens proudly imagined themselves to be “middle class” into a bi-coastal oligarchy.

The hallmarks of this new republic’s politics are the sorts of pathologies that used to be associated with the countries to America’s south: a wildly unequal distribution of wealth, choking bureaucracy, paranoid mass politics, the weaponisation of the security apparatus, and the merger of monopoly capital and invasive state bureaucracies.

[snip]

At the top of the narrowing social pyramid is a tiny class of mega-billionaires who personally own and control a staggering percentage of the country’s wealth, resources, and power, and make their money from the globalised economy.

Then comes the professional class that services the billionaires, ranging from highly paid lawyers and investment bankers to chefs and fashion designers and real estate salesmen.

Below them is the servant class of bureaucrats, teachers and other lower-status employees whose salaries are paid by the state or non-governmental organisations and foundations, who funnel money back to their political patrons in the Democratic Party in the form of free campaign labour and contributions.

Finally, there are the working poor, many of whom formerly considered themselves “working class” or “middle class”, but who are now forced to rely on government programs and subsidies covering everything from rent, to school tuition, to health care, to food. 

The glue that holds this power vertical together is the Democratic Party, which now regularly outspends the Republican Party — an incoherent mix of Trumpists, Christians, and other socio-economic losers — by margins of three or four to one. 

In addition to being an oligarchy, the new American social pyramid is also a gerontocracy, in which both political power and wealth are wildly skewed in favour of people above the age of 60. Biden (79) and Nancy Pelosi (82) lead the Democrats, while Trump (76) and Mitch McConnell (80) lead the Republicans.

Where the average American over the age of 55 has a net worth of somewhere between $1.2 million and $1.5 million, the average American adult under the age of 35 is worth approximately $75,000, with the vast majority having no significant assets at all.

I don’t think most elderly Americans have millions in savings.  “Average” is calculated by dividing total wealth by the total number of people in the age groups.  That doesn’t account for inequality within the age groups.  “Average” is not typical.  Having said that, I think Samuels has a good point.

Understanding the new America as a decaying oligarchy run by old people is essential to understanding the increasingly bizarre mutations of Left and Right in American politics.

1971 – the year the USA started going downhill

I’ve posted versions of the chart above several times before.  It shows how American wages once grew along with growth in productivity, and how, around 1971 or so, wage-earners stopped benefitting from being more productive.  This fact about the U.S. economy explains a lot.

I saw an Internet post yesterday consisting of charts showing how many more kinds of things changed for the worse in 1971.  Economic inequality, the cost of living, inflation-adjusted wages—all got worse.

There are too many for me to copy and re-post, but here is a sample.

What happened in 1971?  The only major event I can think of is the Nixon administration’s decision to go off the gold standard.  From then, the U.S. dollar was redeemable not for gold or some other precious metal, but for U.S. Treasury bonds – in other words, IOUs.

Economist Michael Hudson has written books about how this decision allowed financiers and bankers to flourish and the U.S. military to finance its wars while the U.S. manufacturing economy faded away and living standards declined.

As much as I respect Hudson, it’s hard for me to believe that this one thing could have caused changes in so many different things so quickly.  Maybe it’s a tipping point caused by a lot of different things coming together at once.

Top tax rates under different administrations

Under the Reagan administration, there was a theory that cutting tax rates for the super-rich would stimulate investment and economic growth.  Judge for yourself whether this worked.  

The Biden Administration proposes raising the highest bracket tax rate from 37 percent back to 39.6 percent and also closing some tax loopholes.  If if his bill passes, which is doubtful, it will change little.

LINKS

At What Point Does a Billionaire’s Greed Hurt the Rest of Us? by Drummond Pike for the Institute for New Economic Thinking.  Source of the chart.

Biden proposes higher corporation tax rate, 20 percent billionaire minimum tax by Paul Bonner for the Journal of Accountancy.

How rich is Jeff Bezos? This rich

Compare and contrast.

Click to enlarge.

Hat tip to Jason Kottke.

Nine Ways to Imagine Jeff Bezos Wealth by Nina Chalabi for the New York Times Magazine.

At What Point Does a Billionaire’s Greed Hurt the Rest of Us? by Drummond Pike for the Institute for New Economic Thinking.  Reposted on Naked Capitalism.  [Added 05/06/2022]

Why Trump won in 2016 and lost in 2020

Donald Trump would have won the 2020 election if not for the Covid pandemic and the Black Lives Matter protests, according to political scientist Thomas Ferguson.

He explained why in an academic paper he co-wrote in November and an interview a couple of days ago on Paul Jay’s theAnalysis podcast.

Ferguson is known for his “investment theory of political parties.”  He sees American politic as a conflict between powerful economic interests, not between voting blocs.  The economic interests select and invest in candidates; the public gets to choose between the candidates the investors select.   

Trump was on the verge of losing in 2016 and was saved by a last-minute surge in campaign funding by wealthy donors who feared he would take the Republican Party down with him, Ferguson said.

Trump got campaign support from the oil and gas, coal mining, timber, agri-business industries, which he favored, The Koch brothers, for example, get their wealth from energy and other resources industries. 

I notice that these industries are based in parts of the USA in which states are over-represented in the Senate and Electoral College in proportion to their populations.  This was a big factor in 2020.

While Trump appealed to racial and nativist prejudice, Ferguson said this did not determine the outcome.

His protectionist trade policies were popular with industrial workers as well as manufacturing CEOs.  He got support from farmers because his administration compensated them for losses as a result of trade wars with China.  

All these things, together with the relatively good performance of the economy, put Trump in a good position to win in 2020, Ferguson said.

But his ineffective response to the Covid crisis cost him support from corporate executives and also college-educated Republicans who otherwise might have voted for him out of party loyalty.

The voters’ response to the 2020 strikes and protests movements is interesting and not easy to explain.  Usually, when there are civil disorders, there is a backlash in favor of the police and law-and-order.  This time was different.

Ferguson’s analysis showed that there was a correlation between counties in which there was an upsurge in Black Lives Matter, environmental and others kinds of protests, and counties in which there was strong support for Joe Biden.  The only exception to this were counties with large Hispanic populations.  Also, there was no correlation between Biden voting and wildcat labor strikes.

The point is that it is premature to count out Donald Trump and his followers.  President Biden and the Democrats need to do more than just be anti-Trump if they are to retain office.  They can’t afford to let the economy falter or Covid spread. [*]

###

Is the USA a democracy?

Paul Jay asked Ferguson whether he thinks the USA is a democracy.  Ferguson said democracy is an “honorific” term, not an analytical term.  No voting system, in and of itself, can empower the public to overcome the enormous concentration of wealth that exists in today’s USA, he said.

He said wage-earners in the USA and other rich Western countries do still have more rights than they do in Russia or China (although Ferguson acknowledged China’s economic achievements.)

And political disorder in the United States has not yet reached the point as it did in the late Weimar Republic, where political killings by para-military militias were an almost daily occurrence.

Inequality & politics: Links 11/24/2021

Michael Hudson on Truth Jihad Radio Discussing Super Imperialism, Rentierism and the American Political Duopoly.

Michael Hudson explains how the fact that the world economy operates in dollars gives the U.S. government the powers to assume debt that will not be repaid, to finance the world’s most expensive military, and to wage economic war on countries that oppose it, and why this cannot go on forever.

The  1% of Americans Have Taken $50 Trillion From the Bottom 90%—And That’s Made America Less Secure by Nick Hanauer and David M. Rolf for Time.

Can Hagerstown Kick Its Habit? by Ron Cassie and Lauren Larocca for Baltimore magazine.

I grew up around Hagerstown, Md., and spent the first 16 years of my working life there.  It was a nice place then, but it has been devastated by deindustrialization and the drug epidemic. (Hat tip to Bill Harvey)

Big Business Declares War on Lina Khan by Matt Stoller for BIG.

Lina Khan has been confirmed by the Senate as one of the two main anti-trust enforcers for the Federal Trade Commission, and it appears she means business.  The U.S. Chamber of Commerce has declared political war on her.  She has many opponents, including some in the FTC.  

But it appears she has support from some conservative Republicans as some liberal Democrats.  Not all of the U.S. business community feels its interests are served by the monopoly power of Amazon, Facebook and other giants.  It will be interesting to see how this plays out.

Too Big to Sail: How a Legal Revolution Clogged Our Ports by Matt Stoller for BIG.

Matt Stoller specializes in reporting on business monopoly and its consequences.  In this post, he reports on how economic concentration among ocean carriers and port terminal ownership has led to bottlenecks in the U.S. economic supply chains.

I’m a Twenty-Year Truck Driver, I Will Tell You Why America’s “Shipping Crisis” Will Not End by Ron Johnson.

The Big Money Behind the Big Lie by Jane Mayer for The New Yorker.

“Donald Trump’s attacks on democracy are being promoted by rich and powerful conservative groups that are determined to win at all costs.”

Only the Rich Can Play documents how a Republican program to help the poor didn’t by Albert Hunt for The Hill.

Democrats are pushing for tax breaks for the rich | They’ll cry when voters punish them by David Sirota for The Guardian.  (Hat tip to O)

The Vacancy and Cynicism at the Heart of “Mayor Pete” by Piper French for The Daily Poster.  (Hat tip to Steve from Texas)

Facebook’s Russian (Gangster) Money by Seth Hettena on his blog.  (Hat tip to O)

How Hunter Biden’s Firm Helped Secure Cobalt for the Chinese by Michael Forsythe, Eric Lipton and Dianne Searcy for The New York Times.  (Hat tip to O)

Tales of rich and poor: Links 11/17/2021

As America Falls Apart, Profits Soar by Matt Taibbi for TK News.

On the Duty to Obstruct: If conflict is the only route to a moral outcome, embrace it by Thomas Neuberger for God’s Spies.

How Wealth Inequality Fuels the Climate Emergency: George Monbriot & Scientist Keith Anderson on COP26 for Democracy Now!  Hat tip to Bill Harvey,

Make extreme wealth extinct: It’s the only way to avoid climate breakdown by George Monbriot for The Guardian.

The federal poverty line struggles to capture the economic hardship that half of Americans face by Celine-Marie Pascale for The Conversation.  Hat tip to Bill Harvey.

Over Half of Households Are Having Trouble Paying Their Bills by Doug Henwood for Jacobin.

Hope for Labor at the End of History by Steve Fraser and Joshua Freeman for Dissent Magazine.  Hat tip to Gene Zitver.

The global rich and global climate change

Click to enlarge.

Click to enlarge.

The great economic historian Adam Tooze wrote an eye-opening article about how the global rich (the richest 10%) are the chief drivers of climate change.  What he should have noted is that, at least in the immediate future, they will suffer the least from living on a hotter planet.

Tooze noted that their consumption causes nearly half of the world’s carbon emissions, and the global middle class (the next 40%) cause nearly all the rest.  The global poor (the bottom 50%) are responsible for hardly any, yet they will be the hardest hit.

He said we need to think less about which nations are the chief cause of the problem, and more about the different economic classes.  Global warming has been affected even more by the super-rich (the top 1%) in the OPEC nations and in China than the super-rich in North America.

China accounts for half the increase in global emissions from 1990 to 2015.  One-sixth of the total global increase comes from China’s rich and one third from China’s middle class. 

The betterment of material living standards in China during that period is one of the world’s great positive achievements.  But it also, according to Tooze, is a big contributor to what may be the world’s greatest problem.

It is not just that the richest 10 percent consume so much.  They are the ones who make the investment decisions.  This is true not only of private investment decisions, but of government investment, to the extent that it is financed by borrowing.

Add to that the fact that the richest 10 percent are the dominant political class in most countries.

Adam Tooze did not spell out the implications of this, but they are important.

The richest 10 percent, along with the global middle class, will try to meet the challenge of global warming by investing in alternative technologies that will maintain their material standard of living.

The problem is that making windmills, solar panels or electric vehicles is energy-intensive and uses up non-renewable resources.  Probably there is a net benefit at some point; I’m not qualified to say. The point is, you have to burn a lot of fossil fuels to create the alternatives to fossil fuels. 

What the global rich, and the global middle class, are not considering, is austerity for themselves.  Nobody that I know of advocates giving up air travel, for example. 

Meet the new boss, same as the old boss

A writer named Edward Curtin had a good article in OffGuardian about the basic similarity of the Democratic and Republican parties.

Both are willing to bail out monopoly businesses. Both are unwilling to do anything meaningful to help the poor, working people or the middle class.

Both are committed to perpetual war. Leaders of neither party are willing to pardon Julian Assange, Chelsea Manning or Edward Snowden for the crime of pointing out how Americans have been deceived by their government.

The truth is that both the Trump voters and the Biden voters have been taken for a ride.  It is a game, a show, a movie, a spectacle.  It hasn’t changed much since 1969; the rich have gotten richer and the poor, working, and middle classes have gotten poorer and more desperate.  Those who have profited have embraced the fraud.

The Institute for Policy Studies has just released a new analysis showing that since the start of the Covid-19 “pandemic” in mid-March and the subsequent transfer upwards of $5 trillion to the wealthy and largest corporations through the Cares Act, approved 96-0 in the US Senate, 650 US billionaires have gained over a trillion dollars in eight months as the American people have suffered an economic catastrophe.

This shift upward of massive wealth under Trump is similar to Obama’s massive 2009 bailout of the banks on the backs of American workers.  Both were justified through feats of legerdemain by both political parties, accomplices in the fleecing of regular people, many of whom continue to support the politicians that screw them while telling them they care.

If the Democrats and the Republicans are at war as is often claimed, it is only over who gets the larger part of the spoils.  [snip]

I am well aware that most people disagree with my analysis. It does seem as if I am wrong and that because the Democrats and their accomplices have spent years attempting to oust Trump through Russia-gate, impeachment, etc. that what seems true is true and Trump is simply a crazy aberration who somehow slipped through the net of establishment control to rule for four years.

To those 146+ million people who voted for Biden and Trump this seems self-evident. But if that is so, why, despite their superficial differences – and Obama’s, Hillary Clinton’s and George W. Bush’s for that matter – have the super-rich gotten richer and richer over the decades and the war on terror continued as the military budget has increased each year and the armament industries and the Wall Street crooks continued to rake in the money at the expense of everyone else?

Source: OffGuardian

It’s a good article, well worth reading in full.  As Curtin points out, the same thing is going on in Britain.  My only quarrel with him is his focus on the “white working class.”  The American wage-earning class is multi-racial, and with a higher percentage of African-Americans, Hispanics, immigrants and women than the general population.

This is important to point out, because so many self-described liberals ignore this reality and set up a false opposition between racial justice and economic justice.

It is not as if black wage-earners are forging ahead and white wage-earners are the only ones falling behind.  Neither Barack Obama nor Bill Clinton did anything special to raise up black working people, either as a special group or part of the overall body politick.  Neither did Donald Trump nor George W. Bush did anything meaningful for working people—white, black or otherwise.

LINK

The Past Lives On: The Elite Strategy to Divide and Conquer by Edward Curtin for OffGuardian.  (Hat tip to Steve from Texas)

A good time to be a billionaire

Hat tip to Daniel B.

Even an FDR would have tough going today

In 2017, the incoming administration inherited a bad system that needed to be reformed, but, as we know. it wasn’t.  In 2021, the incoming administration will face overlapping emergencies probably even worse than Franklin Roosevelt did in 1933. 

The USA and much of the rest of the world faces not only an economic crisis, but an ongoing series of weather-related crises and probably a continuation of the pandemic plus ongoing international crises.

FDR was sworn in with the economy in ruins, including Wall Street and the banking system.  The country was pretty much ready to accept any bold action that FDR might propose. 

Yesterday’s leader

There were a number of political currents much more radical than Roosevelt––the CIO, the Progressive Party in WIsconsin, the Farmer-Labor Party in Minnesota, Huey Long’s “Every man a king” movement.  The Communists and socialists didn’t have a mass following, but they were more influential than they ever were before or since and gave a lot of energy to the labor movement.

In the political spectrum of his time, Roosevelt was what we’d now call center-left.  The Democratic Party was never a true party. like the British Labor party or the French Communist Party, but labor unions had a place at the table, along with the oil industry, teh real estate industry adn so on..

The opposition to the New Deal didn’t coalesce until 1938, when the Republican-Dixiecrat alliiance blocked FDR’s attempt to pack the Supreme Court and FDR failed to purge the Democratic Party of his strongest opponents in the Senate.

Then, too, there was no military-industrial complex in the USA in the 1930s.  The U.S. had a smaller standing army than Portugal.  The military-industrial cpmplex as we know it today was a creation of the Democratic administrations of the 1940s and its main opponents were Republican isolationists, many of them progressives who remembered World War One

Lyndon Johnson’s Great Society was in some respects like the New Deal—a short period of radical reform terminated by a war. Johnson’s legacy is as a great civil rights president – the greatest since Lincoln and Grant.

But except for Medicare, none of the Great Society programs provided universal benefits to a wide public, and none of them except Medicare were broadly popular.

Tomorrow’s leader?

The incoming president in 2021 will face a different balance of forces than FDR did.  Wall Street and the Fortune 500 corporations are not in disarray. 

Policies put in place during the Obama administration allow the Federal Reserve to prop up the banking and financial system without legislation.  The bailouts enacted by Congress earlier this year primarily benefit big business.

It is hard to see how any program of progressive reform can be enacted without a drastic reduction in military commitments and war spending.  But millions of Americans depend on the war machine for their livelihoods—not just plutocrats, but working people and the middle class.

We need to replace the military-industrial complex with a Green New Deal.  But I don’t see any mass movement in favor of it, and even if there were, it would be a big challenge to bring about.

The strongest mass movement we have in the United States today is the Black Lives Matter protest movement.  It is the biggest U.S. mass movement in my adult lifetime.

But the leaders of this movement, unlike the New Dealers, see the main division in the United States as racist white people vs. African-Americans and their allies. They don;t see it as the common people of all races vs. a rich and powerful elite.

Of course racial prejudice and racial discrimination, including police abuse of minorities, are a great evil and it is good that there is a strong movement for change.

But seeing everything through a racial lens is perfectly compatible with plutocracy and the forever wars.  That’s why BLM gets support from big corporations and foundations. 

The goals of Black Lives Matter need to be part of a larger, more inclusive movement, and I don’t see one on the horizon.  Of course this could change overnight.  Maybe it already has changed and I don’t see it yet.

Adolph Reed Jr. on identity politics

This Bill Moyers interview with Adolph Reed Jr. was aired in 2014.

Adolph Reed Jr. is a retired professor of political science and a Marxist.  He thinks that what is called identity politics is a way of maintaining structure of inequality.  The purpose of this post is to call attention to his critique of identity politics and provide links to some of this work.

Identity politics is based on an analysis of how dominant groups oppress marginal groups.  Some examples:

• Whites > Blacks  [racism]
• Men > Women  [male chauvinism, mysogyny]
• Native-Born > Immigrants [xenophobia]
• Anglos > Hispanics [xenophobia]
• Straights > Gays [homophobia]
• Cisgendered > Transgendered [transphobia]

These are not made-up problems.  It is a fact that white job applicants or loan applicants get preference over equally-qualified or better-qualified black applicants.  It is a fact that shocking numbers of women are sexually harassed on the job.  No-one should be denied basic rights by reason of race, gender, national origin or LGBTQ identity.

The problem is when disparities between groups are used to distract from the structure of wealth and power in society as a whole.  According to economist Gabriel Zucman, one percent of Americans own 40 percent of the nation’s wealth, up from 28 percent in the 1990s.

Reed says that, within the multicultural framework, this would be okay if the upper one percent were 50 percent women, 15 percent black and the appropriate percentages Hispanic, GLBTQ and so on.

Ideas of equity can be used to promote inequality.  Ideas about oppression of minorities can be used to divert attention from exploitation of the majority by the minority.  The ideology of multiculturalism can be used as a technique to divide and rule.

Honoring diversity doesn’t bring about full employment, living wages, debt relief or an end to America’s forever wars

Honoring multiculturalism can leave members of all the different groups divided among themselves and equally exploited, along with straight white cisgender males, by employers, bankers, landlords and corrupt politicians..

LINKS

Public Thinker: Adolph Reed Jr. on Organizing, Race and Bernie Sanders, an interview for Public Books.

An interview with political scientist Adolph Reed Jr. on the New York Times’ 1619 Project on the World Socialist Web Site.

Nothing Left: the long, slow surrender of American liberals by Adolph Reed Jr. for Harper’s Magazine (2014)

Adolph Reed: Identity Politics Exposing Class Division in Democrats, from an interview on the Benjamin Dixon Show (2016)

The Trouble With Uplift by Adolph Reed Jr. for The Baffler (2018)

What Materialist Black Political History Actually Looks Like by Adolph Reed Jr. for nonsite.org.

The misleading ‘elephant curve’ graph

Click to enlarge.

This widely-circulated graph supposedly shows that the great growth in income of the world’s richest 1 percent is justified because the world’s poorest people also are making great gains under the present system.

The problems of poor and middle-class people in rich countries are supposedly a necessary sacrifice to make this happen.

What makes this chart misleading is that it deals with percentages rather than amounts (dollars, euros, etc.)  So a tiny gain in income for a poor person in, say, Bangladesh or Sudan is a large percentage, even though it is a small amount.

Annotations by the famous French economist Thomas Piketty, in his book, Capital and Ideology, show the true picture.  The poorest 50 percent of the world’s population got only a one-eighth share of the growth in world income over a 38-year period.

The next 49 percent, even though their proportionate gain was less, enjoyed more than sixth-tenths of the amount of the gain.  The world’s richest 1 percent got more than a quarter of the gain.  The richest 0.01 percent got the biggest proportionate gain of all.

The graph does show that the poorest 50 percent of the world’s population made some gains.  A lot of that consists of progress in just one country, China.  A lot of it may consist of people moving from a barter economy to a money economy, and from the “informal” off-the-books economy to the visible economy.

Many of the world’s poorest people may be slightly better off than they were 40 years ago. It’s possible. Even if this is so, there should be a better way to improve their lot than the trickle-down system illustrated by this chart.

LINKS

World Poverty Is NOT Decreasing by Ian Welsh.

No, the World Isn’t Getting Better for Everyone by Ian Welsh.

Worldwide inequality report shows gap between rich and poor by Sam Meredith for CNBC

Thomas Piketty on corporate co-determination

I’ve written a good bit about Thomas Piketty’s new book.  Click on the Capital and Ideology tag to read my previous posts about it.  In this post, I’m going to discuss his ideas on corporate governance.

Great corporations typically begin with an individual who has a vision—a Steve Jobs, a Walt Disney, a George Eastman, a Henry Ford, a Soichiro Honda or a Jack Ma.

The drive and creativity of the individuals make the companies what they are.  Over time, though, the companies devolve into authoritarian bureaucracies, little junior watered-down versions of the Soviet Union.

Click to enlarge.  Source: Oxford Law Faculty

The goal of reform would be how to prevent corporate abuse without stifling enterprise and beneficial innovation.  Piketty’s solution is to adopt German-Scandinavian co-determination, under which corporations of a certain size have to allow employees to choose a certain number of corporate directors.

In Germany, according to Piketty,  all firms with more than 2,000 employees must reserve half the seats on their oversight committees to worker representatives.  All firms with 500 to 1,999 employees must reserve a third of their oversight committee seats to worker representatives.  There also are factory committees with union representatives who have a say one work rules and training.

However, in Germany, the oversight committees only supervise day-to-day operations of companies.  Policy is set by directorates, on which workers have no representation.

Other countries reserve one-third of seats for workers on companies of a certain size.  In Sweden, the threshold is 35 employees; in Norway, 50 employees; in Austria, 500 employees.

In April 2018, according to Wikipedia, U.S. Senators Tammy Baldwin, Elizabeth Warren and Brian Schatz sponsored the Reward Work Act,  which would amend federal legislation to require all companies listed on national stock exchanges to have one-third board representation for workers.  Polls showed majority support among Americans for the measure.

In August 2018, Elizabeth Warren sponsored a new Accountable Capitalism Act that would require 40 percent of the board of directors be elected by employees in federal corporations with taxable incomes over $1 billion.

In Britain, the Bullock Report in 1977, during the Harold Wilson administration, called for co-determination in big businesses based on the formula 2x + y. In this, workers and stockholders would have equal representation on boards of directors, but there would be two government representatives to break a tie.  It never became reality.

In practice, even though workers have a voice, the final authority rests with the owners.  I think there still is a benefit to having worker representatives.

Employees usually know things about how companies operate that the top managers don’t.  This can be valuable in avoiding the Stupidity Paradox, in which layers of bureaucrats demand good news and truthful information doesn’t filter up.

It’s also good for employees, especially union representatives, to have access to the same information that top management has.  Of course all these desirable goals can be thwarted by a sufficiently cunning and authoritarian management.

Thomas Piketty on equality through taxation

Thomas Piketty’s Capital and Ideology is the most comprehensive study I know about the causes of economic inequality.  He gathered a vast amount of data and made sense of it.  To read my comments on his research, click on this, this, this and this.

In the last chapter, he outlined proposals for a “participatory socialism” to make society less unequal.  He saw three main ways to do this: (1) taxation, (2) reform of corporate governance and (3) educational reform.  This post will be about taxation.  I will take up the other two later.

His plan is based on steeply graduated income taxes, inheritance taxes and new taxes on wealth.  These were to be used to finance a wealth endowment of 60 percent of average wealth to every citizen at age 25 and a guaranteed income of 60 percent of average income.

He does not make absolute equality his goal, but he would allow a much narrower band of inequality than exists today.

I’ve long been indignant at the growing extremes of inequality in my country and the abuses of power of the very rich.  Reading Piketty forces me to think about just how much equality I want and how much I would give up to attain it.

∞

Piketty wrote in earlier chapters of Capital and Ideology about how higher taxes have often been the key to greater national power and wealth.

One of history’s mysteries is how it was that European nations could defeat great Asian empires, such as the Ottoman Empire, the Mughal Empire in India or the Manchu (Qing) Dynasty in China, when, prior to the Industrial Revolution, they were equal in wealth and technology to the European nations.  It was the Chinese, for example, who invented gunpowder.

Piketty’s answer is that the Europeans gained an advantage through a higher level of taxation.  Tax revenue across Europe and Asia prior to the modern era was roughly 1 to 2 percent of national income.  This gave a king or emperor enough revenue to reign, but not to exercise tight control over his realm.

This changed in Europe, during the wars of the 16th and 17th centuries, when military competition forced kings to increase their revenues to 8 to 10 percent of national income.

Click to enlarge

The greater revenue enabled kings to become absolute monarchs, exercising almost as much control over their citizens as a 20th century president or prime minister.  It also enabled them to put armies in the field that the Turks, Persians, Indians, Chinese and Japanese could not match.

Western governments’ revenue was bumped up again in the early 20th century, to 30 to 50 percent of national income.  This made possible the total wars of the early 20th century.  But it also gave governments enough money to pay for universal public education, old age pensions, public health and the other services of the welfare state.

This was only tolerable because the Western nations had grown rich enough that their people could give up a big fraction of their incomes to government and still enjoy a high material standard of living.

It would not have been possible in, say, France in the time of Louis XIV.  The taxes he levied to finance his wars reduced the peasantry to misery and, in some cases, starvation (because the nobles enjoyed most of the national income, but paid no taxes).

The same conditions may exist in poor African countries today.  But in rich Western countries, it is technologically and economically feasible to raise taxes revenues to 50 percent of national income, which is necessary for PIketty’s program.

Piketty’s stats and the problem with class conflict

The late Saul Alinsky used to say that politics is a struggle among the haves, the have-nots and the have-a-littles.  He said the outcome usually depends on which side the have-a-littles choose.

Reading Thomas Piketty’s big new book, Capital and Ideology,  reminded me I’d forgotten this important truth.

The USA and much of the rest of the world is governed in the interests of a political and economic elite and not a majority of the public.  I want a politics that represents the interests of the majority of the population.

But there are objective reasons why this is harder than it seems.  If you look at economic class in terms of a top 10 percent in income or wealth, a middle 40 percent and a bottom 50 percent, you see that there is a difference between the middle class (the have-a-littles) and the lower class (the have-nots)

I had come to think that the big problem of American politics is that so much of it is a conflict of the top 0.1 percent of income earners with the next 9.9 percent, leaving the rest of us behind.

The top 0.1 percent, in this interpretation, are the millionaires and billionaires that Bernie Sanders denounces.  The next 9.9 percent, very roughly speaking, are highly paid professionals, the “professional managerial class,” who tend to be more socially liberal, but whose economic interests are different from the majority.

Matthew Stewart wrote a good article about this in The Atlantic a couple of years ago.  The conclusion is that we the American majority have to stop thinking we have to choose between the plutocrats and the PMC and unite in our own interests.

That would make sense if economic inequality were the same as it was in Britain, France or Sweden around the turn of the previous century, as reflected in the chart above (taken from Piketty’s book)

But it’s not.  There is now a big middle class, in between the top 10 percent and the bottom 50 percent, as shown in the chart below (taken from an article co-authored by Piketty).

Click to enlarge.

In western Europe and the USA, the middle 40 percent aren’t doing too badly.  They’re open to the politics of a Margaret Thatcher or a Ronald Reagan.

Instead of claiming a larger share from the haves, they’re told they need to worry about the claims of the have-nots.  Even in parts of the world where economic inequality is greater than in Europe or the USA, there is a middle class with something to lose.

Thomas Piketty and the politics of inequality

Reasonable people differ on the amount of economic inequality that is tolerable.  But I think almost anyone would set some upper limit.

In today’s USA, a single individual, Bill Gates, is wealthy enough to buy the city of Boston for the assessed value of its property.  The size of Jeff Bezos’ wealth is almost unimaginable.

Meanwhile four in 10 Americans lack enough cash on hand to meet an unexpected $400 expense without going into debt.

Why is this acceptable?  I’ll describe the ideas of the great French economist Thomas Piketty in his new book, Capital and Ideology.  Then I’ll discuss some of the things Piketty left out.

Piketty said the fall of Communism in the Soviet bloc and China discredited egalitarianism and validated the market economy.  Leaders of Western capitalist countries felt they were in a position to tell the working class that there is no alternative.

Even before that, the economic stagnation of the late 1970s discredited the welfare state.  The USA had both high unemployment and high inflation, which was considered theoretically impossible.  One diagnosis was that the welfare state had reached its limit, that it was in a state of deadlock because of the inability to satisfy all claimants.  This had been predicted by Friedrich Hayek in The Road to Serfdom.  He said that only a fascist dictator would be able to break the deadlock.

Click to enlarge

Ronald Reagan and Margaret Thatcher presented a different answer.  Dial back to welfare state, cut upper-bracket tax rates and allow rich people and corporations to accumulate wealth.  They will invest that wealth and the workings of the free market will assure that this works for the benefit of all.

As Piketty pointed out, none of this worked out as promised.  Cuts in marginal tax rates did not result in job creation, economic growth or anything else that was promised.

So why do Reaganism and Thatcherism still prevail?

One reason is that the historic left-wing parties abandoned the working class.  The Democrats in the USA, the Labour Party in Britain and the French socialists came to represent an educated elite rather than laborers and wage-earners.

Politics in these countries has come to be a conflict of elites, between what Piketty called the Merchant Right and the Brahmin Left.  It is like the conflict between the nobility and the clergy in the European Middle Ages and the conflict between landowners and business owners in 19th century Britain.

In the USA, many progressives see today’s politics as a conflict between the plutocracy, whose power is based on wealth, and the professional-managerial class, whose power is based on their academic credentials and their positions in organizations.  Wage-earners are not represented.  Piketty showed that the same conflict exists in other countries.

Piketty on the sacredness of property rights

When English settlers first dealt with American Indians, there was a fundamental misunderstanding of the nature of property rights.

The Indians had no idea of buying the exclusive right to use a tract of land, keep everybody else off it and sell the land to someone else.

Thomas Piketty pointed out in his new book, Capital and Ideology, that, in fact, this was a fairly new idea even for the English and other Europeans.

The idea of absolute property rights did not exist in the European middle ages. Someone might have a hereditary right to grow crops on a certain tract of land, a second person the right to 10 percent of all crops grown on the land, a third person the right to grind grain produced on the land for a fixed fee, and so on.

Furthermore the right to land use was not so much bought and sold as inherited.

Medieval France was what Piketty called a “ternary” society—a society in which political power and property ownership were divided between a hereditary noble class who “fought for all” and a priestly class who “prayed for all,” leaving very little for a lower class who “worked for all.”

The “ternary” system existed in the Islamic world, India and many other parts of the world, and it casts its shadow over the present world.  Saudi Arabia and the Gulf states (mostly Sunni) are ruled by hereditary monarchs while Iran (mostly Shiite) is ruled by clerics.  In India, the descendants of Brahmins (priests) and Kshatriyas (warriors) are richer and more influential than the Vaishyas (farmers, craftsmen and traders) and Shudras (laborers).

In Europe, uniquely, priests were celibate.  They could not found dynasties.  This mean that the Roman Catholic institutions had to be corporations.  They had to have a continuing existence that was independent of who was in charge.  It’s not accidental that business corporations originated in Europe.

The French Revolution overthrew hereditary property rights and established what Piketty called “proprietarianism” or “the ownership society”—the idea that property rights were sacred, provided that the property was acquired through legitimate purchase.

The accepted story in France is that the revolutionaries divided up the aristocrats’ estates among the peasants and turned France into a nation of small landowners.  In fact, according to Piketty, the revolutionaries made arbitrary distinctions between land that was owned through hereditary privilege and land acquired through voluntary contract, and, in many areas,  property ownership remained almost as concentrated as before.

Piketty wrote that the revolution was one of history’s “switch points.”  He thinks it could have been more radically egalitarian than it was.

In fact, concentration of wealth in France at the beginning of the 20th century was even greater than at the time of the French Revolution.

Piketty’s new book on economic inequality

The French economist Thomas Piketty made a big splash with Capital in the 21st Century (published 2013, translated into English 2014).  He showed why, all other things being equal, the rich will get richer and the rest of us will get less.

In different countries in different historical periods, the rate of return on income-producing property exceeded the rate of economic growth.  This was true whether the income-producing property was real estate, government bonds, corporate stocks or something else.

What this meant was that, in the absence of revolution, war or something else that wiped out the value of their assets, the rich would get richer and everybody else would be left behind.

Piketty’s new book, CAPITAL AND IDEOLOGY  (published 2019, translated 2020), is more ambitious and complicated.  He thinks it is an even better book that its predecessor and I agree.  It is a great work.

He looked at all the forms that economic inequality has taken in the past few centuries and all the different ways that inequality has been rationalized.  While his earlier book was based mainly on data from France, Great Britain and the United States, the new book tries to be global in scope.

He said it is important to understand not only the forms of economic inequality, but the reasons why people accept them.

His book covers several kinds of “inequality regimes”:

• “Ternary” societies in which most wealth is controlled by hereditary kings and aristocrats and an established church or religious institution.
• “Ownership” societies in which property ownership is regarded as a sacred right, superseding everything else.
• Slave and colonial societies.
• “Social democratic” societies, which limit the rights of property owners.
• The hyper-capitalism of today, which is a backlash against social democracy and Communism.

The degree of inequality in any nation or society is not the result of impersonal economic law, he wrote; it is the result of choices that could have been different.  History does not consist of class struggles; it consists of a struggle of ideas and a struggle for justice.

To understand inequality, he wrote, it is necessary to understand the reasons for choices at various “switch points” of history—the French Revolution, the British constitutional crisis of 1911, privatization in Russia after the fall of Communism.

The progressives surrender to the plutocracy

Over the weekend Matt Stoller gave a blistering interview on the Jimmy Dore show blasting Bernie Sanders and other so-called progressive Democrats for voting for the so-called coronavirus economic stimulus bill.

In reality, it is a corporate bailout which gives only token assistance to ordinary Americans.  He went on to talk about the failure of the Democratic Party and the progressive movement to resist the plutocracy and the failure of the American political system as a whole.

The two of them had a lot to say that I haven’t seen or heard elsewhere.

The whole interview runs 42 minutes, which is long.  I strongly recommend you watch at least the first 10 or 15 minutes.  You may find Stoller’s impassioned, but well-informed, rant so compelling you will watch the whole thing.

Matt Stoller is a former analyst for the Senate budget committee, a fellow of something called the Open Markets Institute and author of a new book, GOLIATH: the 100-year war between monopoly power and democracy.  He has a deep understanding of economics and the legislative process.

Jimmy Dore is a stand-up comedian with no special expertise, but a willingness to make up his own mind about issues.  He ignores consensus opinion and points out obvious facts that the consensus opinion ignores.

Stoller is right to criticize the cult of personality that has grown up around Sanders.  I don’t think he gives Sanders enough credit for the movement he helped inspire, but I do think he is right to say that Sanders has been more interesting in gaining acceptance for himself and his ideas than wielding political power himself.

And I also think he is right about not pinning hopes on charismatic leaders.

Stollar thinks the Democratic Party is un-reformable as is the Republican Party.   But American election law is structured to discourage new political parties and, in any case, the greens, libertarians and other minor parties don’t have mass followings.

The only remaining option is to build a progressive movement, uniting grass-roots labor, community and civil rights groups, that will be so powerful that Democrats and Republicans will be forced to heed it.

But this could be the work of a generation, and the economic crisis, the climate crisis and the danger of nuclear war are already upon us.

So the outlook is grim.  But the future is unknowable and despair is a self-fulfilling prophecy.

As always, I invite comments, but I hope readers will watch the video before commenting.  What Matt Stoller and Jimmy Dore had to say is more interesting than my words.

LINKS

The Jimmy Dore Show – YouTube.

BIG by Matt Stoller.  His blog.

Bailouts for the Rich, the Virus for the Rest of Us by Rob Urie for Counterpunch.

The Coronavirus Stimulus Bill Is a $2 Trillion Slush Fund for Washington Cronies by Marshall Auerbach for the Independent Media Institute (via Naked Capitalism)

Sanders victory would spark a political crisis

Bernie Sanders

If Bernie Sanders actually were elected President in 2020, it would ignite a major and continuing political crisis.

Neither the Wall Street financial establishment nor the pro-war intelligence establishment (aka the “deep state”) would accept his victory as legitimate.

The Washington press corps would be against him.  Nor could he count on the support of leaders of his own party.  He threatens their sources of wealth and power by showing it is possible to be elected without big donations from rich and powerful interests.

We saw a taste of what could happen with the election of Donald Trump in 2016.  Democrats and liberals refused to accept his victory as legitimate.  A few of them proposed a silly plan to have the Electoral College disregard the instructions of voters.  I think we could expect a revival of this idea, this time on a bipartisan basis.

Then Democratic leaders and their sympathizers in the CIA put forth the idea that Trump’s victory was due to Russian agents hacking the Democratic National Committee and manipulating the voters via the Internet—the so-called Russiagate conspiracy.  Democrats still haven’t given up on using this to drive Trump from office.

(I think Donald Trump is a bad president, but I think he should be attacked for the things he actually did and I don’t think it is possible to undo the 2016 election.)

Some Russiagaters said the Russians also backed Bernie Sanders.  We’ll hear a lot more of this if Sanders ia nominated, and we’d probably get a new Russiagate investigation if he is elected.

The Wall Street banking establishment has their own method of dealing with populist presidents.  It is to “lose confidence” in the administration, which pushes up bond interest rates, which in turn pushes the federal government budget out of balance.

Bill Clinton complained about being subject to the will of bond traders.  His friend and adviser, James Carville, said that if he died, he would like to be reincarnated as the bond market, because he would be all powerful.

Going further back in American history, Nicholas Biddle, president of the then Bank of the United States, deliberately induced a financial crisis by tightening credit in order to discredit his enemy, President Andrew Jackson.

Barack Obama was thwarted in enacting his very moderate political program by the intransigent opposition of Republicans in Congress.  In a Sanders presidency, we could expect the same thing not only from Republicans, but also from pro-corporate Democrats.

Maybe you think I’m alarmist.  I hope I am.  But I’m not predicting anything that hasn’t happened before.

The big thing that Thomas Frank overlooks

Thomas Frank is one of my favorite writers.  I like his books.  I like his magazine articles.  I enjoy watching videos of his speeches and interviews.  But there is one thing he doesn’t quite get.

His basic idea is that the Democratic Party is losing because it has abandoned the American working class and the policies of Franklin D. Roosevelt’s New Deal.   The leaves them vulnerable to the fake populism of Donald Trump and the right wing of the Republican Party.

Democrats rely on African-Americans, Hispanics and educated professionals of all races reacting against President Trump’s appeal to prejudice against African-Americans and immigrants.

That’s not enough, Frank writes.  Democrats need to stand up for working people of all races—provide free college tuition and Medicare for all, enforce the anti-trust laws and renegotiate NAFTA and other pro-corporate trade treaties.

All this is true and important.

Frank’s mistake is to think that the reason top Democrats are pro-corporate is that they fail to understand their situation.

Shortly after the 36th minute in the video above. he says that the reason the Clintons and their allies have abandoned American labor is that the signature achievement of their generation was to their successful revolt against the New Deal, and nobody will disavow their generation’s signature achievement.

If they really don’t understand, it is because, as Upton Sinclair once put it, “it is hard to make a man understand something when his salary depends on his not understanding it.”

The wealth and power of the Clintons, like that of the Obamas, is based on their allegiance to Wall Street and the corporate elite.  If they had advocated breaking up the “too big to fail” banks or prosecuting financial fraud, they wouldn’t get six-figure lecture fees from bankers and hedge fund managers.

On a lower levels of government, there is the revolving door between Congress and regulatory agencies on the one hand and Washington lobbyists, law firms and regulated industries on the others.  Neil Barofsky, whose job was oversight of the TARP bailout program, was warned that if he did his job too zealously, he would lose the chance of a good post-government job.  He’s not the only one.

The Democratic Congressional Campaign Committee supports a whole ecology of fund-raisers, pollsters, media specialists and campaign consultants who depend on a system whereby candidates concentrate on raising money and spending it on designated funds.

So it’s not just a matter of waking up to what’s really going on.  It’s a matter of people knowing which side their bread is buttered on.  Or, as the Japanese might say, nobody willingly lets their rice bowl be broken.

Douglas Rushkoff on survival of the richest

Douglas Rushkoff

Futurist Douglas Rushkoff was offered half a year’s salary to give a talk on the future of technology.  To his surprise, he found his audience consisted of five persons from “the upper echelon of the hedge fund world.”  Their real interest was in Rushkoff’s thoughts on how to survive the coming collapse of civilization.

The CEO of a brokerage house explained that he had nearly completed building his own underground bunker system and asked, “How do I maintain authority over my security force after the event?”

For all their wealth and power, they don’t believe they can affect the future. The Event.  That was their euphemism for the environmental collapse, social unrest, nuclear explosion, unstoppable virus, or Mr. Robot hack that takes everything down.

This single question occupied us for the rest of the hour. They knew armed guards would be required to protect their compounds from the angry mobs. But how would they pay the guards once money was worthless? What would stop the guards from choosing their own leader?

The billionaires considered using special combination locks on the food supply that only they knew.  Or making guards wear disciplinary collars of some kind in return for their survival.  Or maybe building robots to serve as guards and workers — if that technology could be developed in time.

A new look at the secret hoards of the ultra-rich

Remember the Panama Papers?  That was a massive leak of documents from a Panama-based law firm called Mossack Fonsecka, revealing how the world’s richest and most powerful people hid billions of collars in investments from tax collectors and the public.

Now there is another big leak—called the Paradise Papers—from century-old Bermuda-based law firm called Appleby and its Singapore affiliate.

Like the Panama Papers, the anonymous leaker sent documents to a German newspaper called Süeddeutsche Zeitung, which teamed up with the International Consortium of Investigative Journalists, the Organized Crime and Corruption Reporting Project and some of the world’s other top newspapers, and spent a year going through 13.4 million files.

Some of the highlights of what was found:

• Queen Elizabeth II’s investment manager, the Duchy of Lancaster, invested millions of pounds in a Cayman Islands fund, whose investments included Bright House, a rent-to-own UK furniture company that charged interest rates of up to 99%

• Secretary of Commerce Wilbur Ross, who divested himself of ownership in 80 companies to avoid conflicts of interest, kept interests in nine offshore companies.  Four of them invested in a shipping company called Navigator Holdings, which did business with a Russian energy and chemical company called Sibur, whose key owners include Vladimir Putin’s son-in-law and a Russian oligarch under U.S. sanctions.

• Stephen Bronfman, a key fund-raiser for Canadian Prime Minister Justin Trudeau, teamed up with key Liberal Party figures to evade Canadian, U.S. and Isreali taxes.

Major companies shown to do business through tax havens are Apple, Nike, Uber Barclay’s Bank, Goldman Sachs, BNP Paribas and Glencore, the world’s largest commodity trader.

None of this is, in itself, illegal.  But hidden offshore investments provide a way for criminals to launder money and for individuals, companies and governments to evade economic sanctions by the U.S. and other governments.

As several people have remarked, the worst scandals are not how the law is broken, but what can be done that is perfectly legal.

For what it’s worth, I don’t think any of this is evidence that the Russian government or Russian interests manipulated the 2016 elections in favor of Donald Trump,

The trouble with democracy

The trouble with democracy is that a majority of the people can be misled as to what is in their best interests.

The trouble with the alternatives to democracy is that a ruling minority usually understands all too well what is in their best interests.