Thursday, 28 July 2011

Wealth and Democracy

"As the twenty-first century gets underway, the imbalance of wealth and democracy in the United States is unsustainable, at least by traditional yardsticks.  Market theology and unelected leadership have been displacing politics and elections.  Either democracy must be renewed, with politics brought back to life, or wealth is likely to cement a new and less democratic regime -- plutocracy by some other name."

This passage concludes Kevin Phillips' book Wealth and Democracy. Although it was written in 2002 -- a decade has passed and Bush has given way to Obama -- these observations are equally (and painfully) valid today.  Indeed, as many have argued, the situation is now much worse.  

As he documents in his book, immense personal wealth in the hands of the few has fatally corrupted the democratic process in America.

And, to be clear, this is more than a domestic US problem -- it matters to some of us living elsewhere in the world.  But, before we consider the international externalities, first a brief snapshot of how wealth is distributed in the United States, and a look at how the wealthiest few will ensure that their dominance finally becomes institutionalized.

Follow the Money  

Look for the source of wealth for the very richest Americans, and you will find the name of a large and successful corporation.  This is obvious enough -- yes, corporations are the source of rich peoples' wealth.  Got it.  So what.

The "so what" is that the elite have used their immense wealth and power, gained through their corporate entities, to game the system to ensure they continue to get an ever-increasing share.  It is the corporation that delivers the great wealth used by the elite to purchase the political process, which in turn furthers the interests of the corporation -- an infinite loop, leading to the plutocracy (or worse) of which Phillips so presciently warns.

The richest 1% 

America is awash in cash -- at least at the very top.  

The largest corporations report record-breaking profits, and their presiding CEOs receive record-breaking bonuses.  CEO compensation, including stock options and other benefits, has risen to as much as 500 times that of the average worker.  In the period from 1980 to 2006 the richest 1% of Americans tripled their after-tax percentage of the nation’s total income, while the bottom 90% saw their share drop more than 20%.  Between 2002 and 2006 an incredible three quarters of all the economy’s growth was captured by the top 1%.  And a 2009 report showed that the explosion of wealth for the 400 richest Americans brought their total combined wealth to $1.57 trillion, which is more than the combined net worth of 50% of the entire US population -- to emphasize the point, just 400 Americans have more wealth than 155 million (!) of their countrymen, combined!  

A growing literature shows in ever-starker terms that the rich are doing very well, indeed -- and that same literature shows they are doing so at the expense of the "other half". 

The struggling majority  

The pain is acute for a growing majority of Americans:
 - America has the highest poverty rate in the industrialized world.  Over 50 million Americans rely on food stamps, and as many as 50% of US children will do so at some point.  In 2009, one out of five US households didn’t have enough money to buy food and, in households with children, this number rose to 24%, as the hunger rate among US citizens has now reached an all-time high.
 - The Republican furor over Obamacare conveniently ignores the fact that Big Pharma, Insurance and the medical operators are flourishing at the expense of the general population.  Of the 1.4 million bankruptcies reported in 2009, medical bankruptcies were responsible for more than 60% of them, and over 75% of these were filed by people who have healthcare insurance.  Although America has the most expensive healthcare system in the world, and even though its citizens pay twice as much as any other country, the quality of care ranks only 37th in the world.
 - Since the economic crisis began, Americans have lost more than $5 trillion from their pensions and savings, and $13 trillion in the value of their homes.  Older workers have lost an average of 25% of their 401Ks, and personal debt has risen from 65% of income in 1980, to 125% today.  Over five million families have already lost their homes, and it is expected that by 2014 a total of 13 million will have lost theirs -- as it is, 25% of current mortgages are underwater.  Statistics show that there are over 3 million homeless Americans and, of that group, the fastest growing segment is single parents with children.
 - But prison is, at least, one place where more Americans are finding a home.  With an inmate population of 2.3 million people, the US warehouses more people than any other nation in the world.  The incarceration rate of 700 per 100,000 citizens far exceeds that of China (at 110 per 100,000), France (at 80 per 100,000) and Saudi Arabia (at 45 per 100,000).  And the prison industry represents a thriving -- and increasingly, corporatized -- growth sector.  A report titled Incarceration Nation revealed that “a new prison opens every week somewhere in America."
 - The US government understates the national unemployment rate, and has done so for many years.  The most recently publicized number for June -- 9.3% -- is highly deceptive.  Known as the U3 rate, it excludes those who have given up, the so-called "discouraged workers", as well as those part-time workers seeking full-time employment.  By this reckoning, the real unemployment rate -- known as U6 -- is over 20% for June.  But the government must hide the real numbers, since it has sanctioned the rush to off-shore American jobs by multi-national corporations, and the "hollowing-out" of American industry.  As Phillips wrote "some managements hoped to no longer process or manufacture anything in the United States, but merely to import and distribute goods, much like the ill-fated Enron transformation from producing company to financial trader."
 - And, most recently, the Pew Research Center reports that the median wealth of white households is 20 times that of black households, and 18 times that for Hispanic households.  This newly released information from the 2009 census also revealed that between 2005 and 2009 the inflation-adjusted median wealth in white households fell by 16%, compared to a 53% drop for Hispanic households, and a 66% drop for black households.

The disparity between rich and poor in America could hardly be more stark -- the ultra-wealthy with their enablers and courtiers, and the millions struggling in a system beyond their control and comprehension.  But, for the elite, the disparity can be widened, the limit has not yet been reached; this is a quest that demands the unassailable, unyielding and unrepentant devotion and belief of its corporatist adherents.  This is where Phillips' imbalance of wealth meets his democratic deficit, where market theology and unelected leadership vanquish participatory democracy.

The Gilded Age, then and now

It was Mark Twain in 1873 who coined the term, "Gilded Age".  And one of the first of his contemporaries to draw the line connecting excessive personal wealth with the power of the corporation and the flagrant corruption in politics was James B. Weaver, when he declared in 1880 that the nation's founders had imagined a system in which "the wealth of the country should diffuse itself among the people according to natural and beneficent laws.  They did not contemplate these corporations that are as real entities as are individuals."  

And so began the tensions between populist and corporatist forces in American politics that have raged, ebbed and flowed to the present day.

The populist messaging has remained remarkably consistent down through the years.  Theodore Roosevelt famously said, "There is absolutely nothing to be said for government by a plutocracy, for government by men very powerful in certain lines and gifted with a money touch, but with ideals which in their essence are merely those of so many glorified pawnbrokers."  Fast-forward to the near-present and in 1996 Senator Bill Bradley elaborates further, "Money not only determines who is elected, it determines who runs for office.  Congressmen will listen to the 900,000 who donate to their campaigns ahead of the 259,600,000 who don't."  And then, as Democratic presidential candidate in 2000, he described the corruption of the 1990s as "a story Americans have heard before.  Its the story of the late 19th century, the era of the spoils system and recurrent scandals, when politics became hostage to the money power of Wall Street financiers, railroads and industrialists, when each senator was virtually the property of whatever magnate had engineered his appointment."

Candidate McCain, in the Republican primaries of the same year, showed common cause when he too identified the monied influence in political life, "we know what the influence of this big money is on the legislative process and how its taken the government away from the American people and given it to the special interests...in 1907, Theodore Roosevelt, the great reformer, was able to get corporate contributions to American political campaigns outlawed, because the robber barons had taken over American politics."

The concentration of wealth, both then and now, was and is aided by the corruption of politics on the one hand and the general suasion of the of market idolatry and economic Darwinism on the other.  As Phillips notes, "No other nation has matched the United States for the overall centrality of private corporations (including banks) in its economic growth and political life." 

And today, the tensions between populist and corporatist forces have been played out, and corporatism is again (and perhaps finally) ascendent -- against all that was first imagined for America, markets have been turned into the vehicle for human governance.        

Unelected is Unaccountable  

The quiet gains and carefully implemented infrastructure of the right wing over the past 30 years are now coming to full fruition.  The much publicized success of the Brothers Koch in subverting the general welfare merely continues a long and distinguished tradition of right-wing patrons.  A network of think-tanks and journals, foundations, lobby groups, legislative councils and advisory groups have prepared the ground for one final assault.  And, with the Citizens United case, the Supreme Court justices, themselves unelected and unaccountable, have opened the door to untold sums for the final purchase of America's democracy. 

The largest transfer of wealth in the history of the world has set in place the final conditions necessary for the conservative transformation of government.  As the 2012 election cycle approaches, the wealthiest Americans will bring to bear the full weight of their own unelected and unaccountable power to seal the deal, in what will be the most expensive election in history.  And it doesn't matter who "wins"; as Chris Hedges has said, "the war is over, and they won".  And yet, it seems completely incomprehensible that so many could be delivered into penury while so few live at the very edge of imagined privilege. 

When victory does come, the unelected will be prominent in sharing the spoils -- the wealthy, the corporations, the PACs of all description, the Chamber of Commerce, the foreign interests, the think-tanks and pundits and lobbyists.  Even the Tea Party, a so-called populist movement, now vaingloriously holding the line in Congress against any taxation, is really a creation of corporate power that provides cover and misdirection as the monied interests affect their real agenda -- more useful idiots.  They are all the 21st century equivalent of TR's glorified pawnbrokers.  

And so too, hidden in plain view, are the politicians themselves.  It may be stretching the point, but they are perhaps as unelected as they are unaccountable.  Using Bradley's definition, incumbents who are bought and sold so openly can hardly be considered truly elected; and they have certainly ceased to reflect the will of their constituents, unless it is in the service of their major contributors.  Incumbents know that corporate funding and a fierce market theology are the keys to re-election, and this certainty allows them to ignore public sentiment.  It explains how lawmakers consistently refuse to acknowledge the will of the people, including their desire to see increased taxation of the rich and corporations, the protection of Medicare and Medicade, and a significant curb on military spending.

As Rob Johnson of The Roosevelt Institute said in a recent interview, "The politics of the United States in this crisis period does not represent the people -- it represents a very narrow segment of the population who does the fund-raising."

The Ripples Beyond America 

In his book Phillips likened US corporations to "latter-day English-speaking conquistadors".  And it is true, American economic growth was greatly facilitated by the intimate linkages between the business class and foreign policy -- global economic domination by America is based on these conquistadors (and the war machine to back them up; see Randolph Bourne's War is the Health of the State, and Smedley Butler's War is a Racket for some historical flavor).  This highly successful partnership traces an arc from the days of the United Fruit Company to the oil and mining concessions in Iraq and Afghanistan today -- indeed, almost every US foreign policy initiative can now be understood in terms of the benefits it delivers to American multi-national corporations.  This lesson is not lost on others. 

Political aspiration is cut from the same human cloth the world over.  While perhaps not the smartest bunch, politicians are generally well attuned to what works, and they will emulate the most proven path to acquiring and maintaining power.  Conservative Prime Minister Stephen Harper, for example, wants Canada to play a greater role in the world -- he has a vision.  Accordingly, he has sought to portray a more muscular foreign policy, even as he goes about the business of "selling" Canada.  He has linked foreign policy and business as part of a broader and harmonized international economic strategy, as was demonstrated by the G-20 Toronto Summit Declaration of last year.  At that meeting, the participating heads of state (lead by the US and Canada) committed as a unified group to reduce their deficits in half by 2013, and to stabilize government debt-to-GDP by 2016.  The austerity measures needed to meet these targets are playing out this very day in the US Congress in the debt ceiling/budget reduction trade-offs that Obama is trying to orchestrate; such austerity programs are clearly linked to a broader palate of corporatist policies that already favor the wealthy at the expense of the poor. 

So, here's the real worry about where corporatist democracies are headed -- as inequality mounts, as the wealthy solidify their control over government, and as an unelected elite inflicts more and more pain on the unrepresented majority, a last remaining avenue for real reform is all but lost -- it seems the state has developed a concerted strategy to eliminate public protest and dissent.

Public protest, as an important catalyst for social change, is fast disappearing.  Since 9/11, governments around the world (at the insistence of America) have committed enormous resources to their internal security services.  No country can hope to duplicate the massive US security infrastructure, but most emulate it as best they can.  We are soothed and assured that these are investments needed to counter the jihadists (!) in our midst.  But they also serve (by happy coincidence) as very useful platforms for coordinated response to domestic demonstration (showing the wisdom of Rahm Emanuel's dictum "you never want a serious crisis to go to waste", and the prescience of Naomi Klein's thesis in The Shock Doctrine).  In fact, this harmonized and highly integrated approach to quelling public protest is now regularly applied.

Let us turn to one recent example.  At the G20 conference in Toronto last year more than 1000 people were arrested outside while the attendees inside institutionalized the "urgent" need for austerity.  Many of the protesters were held without charge, only to be released after several days, with no recourse for the violation of their rights.  The government of Canada invoked "unlawful assembly" as justification for its actions.  It was clear that police and military planning had begun months in advance of the protests; the enforcement activities were coordinated across jurisdictions, agencies and geographic boundaries.  The police action had a chilling affect on those who participated -- it was intended to do so, it was intended to undercut mass protest.  The Ontario Ombudsman called this sordid affair "the most massive compromise of human rights in the history of Canada".  

Ralph Nadar recently asked, "What could start a popular resurgence in this country against the abuses of concentrated, avaricious corporatism?"  It seems government understands that austerity and economic hardship presents the most likely spark to protest, and has prepared accordingly. 

If it can happen in Canada, in this modest and generally amiable place, it can happen anywhere. 


In concluding Wealth and Democracy, Kevin Phillips warned that market theology and unelected leadership have lead to an imbalance in politics and elections in America.  It is an imbalance that -- if not soon corrected -- will shatter the last illusion of democracy.  And an America that openly frees itself from even this modest constraint validates the model that endangers us all.

Update.  Toward the end of this piece, I referred to the worry that the state has developed a concerted strategy to eliminate dissent and public protest.  The example to which I referred was the G20 Conference held in Toronto last year.  I would urge you to access more on this bit of constitutional over-reach by the Canadian government -- go to the "Videos" page of this blog, where you will find a large number of links in Item 4, all drawn from the RealNewsNetwork site and all relating to the enforcement activities that went well beyond what is allowed by the Canadian Constitution. 

By David.

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Your musical accompaniment for the day:  Bitches Brew, Miles Davis.  Enjoy.

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