Inequality and the Feeble Hope of 2020
The two Roosevelts, Eisenhower, certainly Truman, and even Nixon understood that American democracy can’t abide a weak national government controlled by a very few very wealthy persons. It’s not entirely clear that Clinton or Obama troubled themselves about this, given their demonstrated deference to Wall Street. As Kevin Philips pointed out in a series of books that have been eclipsed by events, the Bushes came directly from Brown Brothers Harriman and Big Oil, and the Bush theory of the world, and their practice in governing, melded the national interest to the interests of a global petro-financial plutocracy of which they’d been members for three generations.
There are still some moronic conspiracy theorists writing about Rothschilds and such. The only Rothchilds anybody should care about are the winemakers; the real conspiracy is right in everybody’s face, not obscure or particularly Jewish at all, with the political defenders of the petroleum-finance complex spending their oily money on climate denialism, “free market” ideologists at universities and think-tanks, and directly, as the Koch brothers quick and dead have done, on suppressing the democratic expression of anybody who would disrupt or even question how it works. (The Kochs find self-described evangelical Christians particularly useful. Ditto the anti-Semites described by Timothy Snyder in The Road to Unfreedom.)
Just now, and for the next year and a bit, American democracy is engaged in figuring out what accommodation we’re going to make with this ruling paradigm. Returning Trump means that its power will proceed uninterrupted, with national borders existing mainly as message-framing devices to keep the various electorates agitated and distracted while the plunder persists. Electing any Democrat will mean more or less of a challenge, for a while, until the distracted electorate stays home and the agitated turn out in sufficient numbers to deliver Republicans to Congressional majorities, and along will the machine again hum.
So we do have, in 2020, some chance, however short-lived, to disrupt the trend toward what looks otherwise unstoppable—toward a repeat of the enduring structure of the world’s income and wealth, which has always been about a handful of plutocrats, a small aristocracy that has a taste of the big money that helps the lords play keep-away, and the rest of us.
The savage genius of Austrian-born historian Walter Scheidel’s 2017 book The Great Leveller is that he makes it all so depressingly inevitable.
Scheidel mines every nation’s data. From the ancient middle East to Greece and Rome and China and Aztec and Maya and Inca through the European Middle Ages and the French Revolution and the US and everywhere else up to now, he piles up evidence to prove that the biggest of the big stay big, and the rest of us small, until disaster levels everybody. And then when we recover, the plutocracy re-forms in short order.
It’s the nature of hominids, he says.
And it’s disaster, not politics, not policy, that disrupts the savage inequality that has recurred throughout human history. Not progressive taxation or universal health insurance or land reform haven’t worked, and won’t work. It takes hundreds of millions of innocents dying from plague, total war, Communist revolutions, or the utter collapse of well-established empires to bring about income equality, and to break up the concentrated power of concentrated income and wealth for a while before the concentration, the plutocracy, comes roaring back.
The book’s full title is The Great Leveller: Violence and the history of inequality from the stone age to the twenty-first century.
Scheidel is so far surpassing in erudition and in the sheer volume of his scholarship that it’s a foolish person to quibble, but here goes.
America the exception?
The American experience, since the first Roosevelt era back in the Progressive Era of the early 20th century, shows that greatly concentrated economic and political power can be, has been, and can again be disrupted without an actual shooting war in the United States proper.
We had one of those. It was the Civil War. Politics and the rule of law have otherwise functioned here fairly peacefully.
Elsewhere, not. Millions died in Stalin’s forcible collectivization of peasant agriculture, which the Communists characterized as a war against the “kulaks” but which was mainly a crushing of Ukrainian nationhood by starvation. Tens of millions died in Mao’s pogroms against landowners, almost half of Cambodians in the Khmer Rouge auto-genocide—and between a third and a half of Europe died during the Black Death of the 14th century—with the result that the wealthy did indeed lose, and the surviving masses were no longer alone in poverty. But the American experience has been different. Half a million soldiers died in the Civil War, undertaken by the victorious North specifically and emphatically to crush the power of the slave-owning Southern plutocracy and its political minions. But tens of millions? Not here.
Scheidel doubts that he’s wrong.
“Across the full sweep of history, he writes, “every single one of the major compressions of material inequality we can observe was driven by one or more” of what he calls the Four Horsemen. War, conquest, famine and plague are the four destroyers in the Book of Revelations: for Scheidel, the kind of war that changed income outcomes was the 20th century kind, the total societal commitment, with millions of soldiers and whole economies mobilized. Plague is plague and famine is famine; the 20th century also gave history the Communist version of regime-change, in which tens of millions of civilians were ground into dust expressly for the purpose of levelling.
US rebellions against plutocracy
After the Civil War, the first democratic action to limit the power of concentrated economic power was the enactment of the Sherman Anti-Trust Act in 1890.
But then came a more general elite rebellion against entrenched privilege. One of its leaders was Theodore Roosevelt, whose presidency lasted from 1901 to 1909. A predecessor to the corporate income tax was enacted in 1909 with a coalition of Democrats and progressive Republicans. Then the 16th Amendment was ratified in 1913 followed by the federal income and estate taxes. Their specific and emphatic intent was to break up the power of the economic elite—and even more specifically, to prevent multigenerational wealth from creating a permanent aristocracy.
The Progressives saw what had happened to the Old World aristocracies in the first decade of the 20th century.
This was the context that got Teddy Roosevelt, a very rich man from a very old very rich family, thinking about reining in the rich: the prospect of political instability rising up from the very sharp contrast between extreme and highly visible wealth extreme amidst widespread economic distress. There was no safety net when Theodore Roosevelt and the Progressives watched Old World monarchies and their insanely rich aristocracies tremble. The rich here shuddered: there were revolutions in 1905 and 1906 in Russia, China, the Ottoman Empire, Persia, an enormous surge of terrorist bombings all over—while rapidly-increasing fortunes in the US made near-monarchs out of Morgan, Rockefeller, and a few others. Roosevelt wanted and got the taxes, and then got the Federal Reserve, created in significant part to curb the personal power of the uber-banker JP Morgan. Roosevelt and the Progressives didn’t want levelling per se, but to rein in the plutocracy and prevent the richest from becoming targets of revolutionaries.
The rich in the US dodged the stiletto, even though they took a haircut. For as long as the estate tax existed (George W. Bush and the Republican majority in Congress pretty much ended it), the explicit purpose was achieved, namely, to prevent the rise of a multigenerational moneyed aristocracy.
That would seem to be great historical evidence that sound tax policy is a good way to lift the many while still leaving the rich quite rich.
Just now, there isn’t an aristocratic Roosevelt running for President. Elisabeth Warren worked for her millions rather than inheriting them; Joe Biden and Bernie Sanders penned and peddled books to become millionaires. They’re middle-class politicians explaining to skeptical middle-class voters that their newfound extra zeroes don’t matter.
Skepticism about politics
Toronto is bigger and richer in talent and in accumulated wealth, public and private, than smaller cities nearby. Ditto New York of course, and Silicon Valley, and Washington DC, and Houston, and a few other American giants. Big happens. We don’t pull cities apart because they succeed. But cities are not classes or persons. Large cities increase incomes for everybody in them: even the very conservative market-praising economist Edward Glaeser celebrates this reality in his book Triumph of the City: how our greatest invention makes us richer, smarter, greener, healthier, and happier.
But cities don’t exist in a policy vacuum.
There was indeed levelling after the Twentieth Century’s thirty years of war, from 1914 to 1945, to Scheidel’s main point: it was the totality of war, and its destructiveness, that made the Great Compression possible. And it was policy changes enacted in the US in the 1930s, and in Europe in the 1950s, that made that Great Compression into the golden decades of widespread new-income creation and distribution, and consequent middle-class empowerment.
The fear of war helped: after World War II, it was the fear of Communism’s political potential that led the Europeans, with the support of the American-funded Marshall Plan, to institute broad social safety-net programs that effectively and enduringly lifted working people into economic security and reduced the concentration of wealth. General Douglas MacArthur oversaw a thorough crushing of the economic power of the old Japanese aristocracy and of the industrial plutocracy as well, and did it quite intentionally—to prevent Communism. The “virtuous cycle” of the 1940s through the 1970s, which Robert Reich eloquently describes in his movie Inequality for All, was a signal achievement not only for the broad American middle class but for the middle class in Europe, Canada, the British Commonwealth, and in faraway, out-of-sight Latin America, too.
But then the old patterns of income and wealth concentration returned, indeed more rapidly in post-communist Russia and China than even here in the USA.
Scheidel undertook his global look at those patterns after writing his history of income and wealth concentration over the many centuries of the Roman Empire. The current picture is this: the richest American had about a million times what the median-income worker has. In ancient Rome, the top one-tenth of one percent controlled one-and-a-half million times as much. Before World War I, a tiny sliver of fewer than 1,000 aristocrats and capitalists owned 90% of all the wealth in Great Britain. The detailed and thorough scholarship of Scheidel and of the many other researchers he cites shows how the Aztec, the Chinese, the Ottoman, the various Europeans, and others accumulated and concentrated wealth and income. The pattern is so very well-documented that it ought to make us pause and recognize that there really isn’t anything new under the sun.
The discourse these days is that the post-War structure of reined-in rich and widespread worker wellness should be our norm, and that getting back to that norm needs to be our goal.
Scheidel’s evidence was that it was precisely the World Wars that disrupted the age-old pattern. Income and wealth polarization radically tumbled in both the countries that participated in the wars and in those that didn’t.
Cause for hope?
What Scheidel misses, though, is that the sensible reforms that helped the US recover from the Great Depression were already in place before World War II—and that the New Deal reforms were rooted in Roosevelt’s tax policies, and even deeper, in the enactments of limits on monopolies.
Banking regulation, control of Wall Street, progressive income taxation and the taxation of big inheritances, plus basic demand-side insurance like Social Security, Medicare, housing support—were beginning to empower a broad consumer sector everywhere. It’s certainly true that that process accelerated after the War was over.
But the problem is that in the 1970s, things started to change.
Nixon accelerated globalization with his opening to China.
Clinton accelerated the concentration of income and of wealth, probably inadvertently, by restricting the tax benefits for high corporate salaries—but he created a tax bonanza for corporations by allowing them to compensate executives with stock options, which accelerated the polarization of income. Clinton did even more damage when he and his Wall Street-based crew (Robert Rubin, Larry Summers, Tim Geithner, and others) dismantled the very last New Deal-era protections against financialization.
So we have very clear evidence of what worked in the US, and we also have great clarity on what did not work.
It wasn’t so much inevitability, or the inexorable turning of the screw. It was an intentional policy change.
So now the question is whether there is a political constituency for a neo-Rooseveltism.
What is to be done?
Setting aside Scheidel’s pessimism, note that the politics of inequality changed a while ago, but that neither American nor European politics has figured out how to change our trajectory. (Scheidel did not address the Clinton regulatory changes. Were they inevitable? Was Hyman Minsky’s Financial Instability Hypothesis a similar statement of the wheel just turning?)
President Barack Obama, in his 2013 State of the Union address, called rising inequality “a defining challenge.” Obama did a thing or two: Obamacare, Dodd-Frank, and the restoration of the 39% top income tax rate. But Wall Street malefactors skated while he complained about the plutocracy problem.
The chattering classes bought 1.5 million copies of Thomas Piketty’s 2013 doorstop Capital, and all intellectuals everywhere generally know what it says even though one expects that most buyers haven’t read its 1,300 pages. (His fellow French economist Emmanuel Saez reports data that tell the story in a couple of pages, for free. We have also extracted data from income tax returns and have reported how the insane income polarization of the last 30 years looks here in New York State and around here.
But we are living the experience of income polarization in a new way that is unnerving.
George Packer’s masterful, brilliant, sobering 2013 page-turner The Unwinding: An Inner History of the New America makes better reading than Professor Scheidel’s book, though you should just accept Scheidel’s core findings (that gross inequality has occurred almost everywhere and in every era of human history, and that it gets disrupted only when one or more of the Four Horsemen murder millions) and move on to consider the here and now—which means accepting that we have a thumbs-up or thumbs-down choice to make in 2020.
Here it is:
Should Americans try to disrupt the pattern by voting for political change, or should we just await the bloody violent end of the ruling class, which is bound to go the way of the Roman ruling class, the French, Russian, Ottoman, Ch’ing, Japanese, Habsburg and other aristocracies, who took millions of their countrymen with them into the dustbin of history.
Can we remake some version of the Progressive Era limits on plutocrats? Can we modernize our economy the way that FDR did in the 1930s? Can the US and the EU coordinate to prevent mass war, state collapse, apocalyptic plague, or some new Trump/Putin/Orban version of Stalinist or Maoist slaughter?
Why to try
George Packer invested hundreds of hours interviewing the couple of dozen people whose individual life stories are assembled in The Unwinding. It’s a very compelling book about actual American persons navigating changes in technology, politics, their companies, their hometowns, their specific subcultures, over about the past forty years.
Peter Thiel, the extraordinarily rich and talented investor who worked with Elon Musk on PayPal, who invested early in Facebook, thinks that he has a very clear idea of the big picture. The great achievement of George Packer is to let his subjects talk, unlike the reporting technique used by George Orwell in his justly famous 1937 portrait of the suffering British working class in The Road to Wigan Pier. The latter was a struggle to reread (we don’t urge you to do so), while only one reading of Packer is not enough.
Anyway, Thiel. Thiel knew, as of 2013 in Packer’s reporting, that income polarization was trouble. But Thiel also believed that over-regulation was trouble, that invention and innovation had essentially stopped except in computers and in finance. Without comment, reporter George Packer let this libertarian with his empowering billions of dollars persist in his fantasy that free individuals uninterrupted by meddling government, when it was meddling government that (out of fear of Communism?) sponsored the science, the math, the tech, the schooling, that made possible the tweaks and apps and tiny little increments of innovation that Thiel monetized. Rich, brilliant, clueless, but listened to by big audiences.
Another income-related story of the unwinding: the near-destitute Wal-Mart worker Danny Hartzell and his disabled, obese wife Ronelle, their precarious existence made moreso by their child’s bone cancer and by short-lived minimum-wage jobs.
Another: Elizabeth Warren. Read Packer’s portrait of how she figured out that everything she thought she knew about bankruptcy was wrong, and how what drives her is a keen sense of outrage at how screwed most of us are.
Packer interviewed a reporter, a lawyer, and an Indian immigrant hotelier who learned exactly what Warren learned about the foreclosure process in the great scam explosion we now know caused the financial meltdown of 2008.
It’s brilliant stuff.
Reading Packer will help you demand that the next President and the next Congress do what Obama and the Democrats failed to do in 2009—and that Trump beguiled people into believing he’d do after 2016.
But Scheidel’s grim history is there as a warning. The ruling classes didn’t go gently into the night. Scheidel’s concluding line: “be careful what you wish for.”
The Progressive Era: Teddy Roosevelt as an example
It’s tempting to think that the pattern of history is stamped, immutable, that the plutocracy of today is vastly more powerful, more technologically empowered than ever, because nation no longer matters to them, only money, and money? One of the people Packer profiles, over dozens of years of his life as college student, lawyer, Wall Street money-man, Joe Biden aide, and more, left Washington and Wall Street forever to write his own picture of what has happened to us, the 2012 book The Payoff: Why Wall Street Always Wins.
Kevin Phillips identified this as a political issue twenty-six years ago with his The Politics of Rich and Poor.
Kevin Phillips had actually begun his wake-up clamor as far back as 1990, when he had told Democrats that it took “the intelligence of a fried clam” to recognize that their electoral opportunity was sitting before them—to identify themselves as the political allies of the middle class, as the watchdogs protecting the commoners from the plutocrats.
But what the author of Richard Nixon’s Southern Strategy failed to reckon with was that Democrats, too, wanted a taste of what the plutocracy had. Their spoon was the Democratic Leadership Council, a Washington political operation founded by Buffalo millionaire and cellphone entrepreneur C. Victor Raiser after Walter Mondale’s disastrous 1984 presidential run. Alongside the DLC was a think-tank, the Progressive Policy Institute, which only reluctantly joined the campaign to raise the capital gains tax after George H.W. Bush cried ”read my lips, no new taxes.”
The DLC’s candidate was Bill Clinton, who enabled Wall Street more capably than anyone since Ronald Reagan, though George H.W. Bush was actually from Wall Street.
The American version of aristocracy was named Roosevelt, and it had many flaws but one saving grace: Teddy Roosevelt, and his nephew Franklin Delano Roosevelt, avoided bloody revolution by plucking their fellow aristocrats’ feathers, who had a credible fear of the alternative.
The problem at the moment is that nobody today can credibly put the plutocracy in fear.
Bruce Fisher teaches at SUNY Buffalo State and is director of the Center for Economic and Policy Studies. His latest book, Where the Streets Are Paved With Rust: Essays From America’s Broken Heartland (The Public Books/Foundling Press 2018) is available at Talking Leaves Books and at foundlingspress.com.