The United States and the New Century

excerpted from the book

Wealth and Democracy

a political history of the American rich

by Kevin Phillips

Broadway Books, 2002, paper

p405
Lance Packard, The Ultra-Rich (1989)

The fact that free enterprise remains the most successful method of stimulating economic growth does not mean it requires a reward system that creates and sustains increasingly grotesque accumulations of family wealth... They have the potential of being hazardous politically. And in a democratic society, they are becoming inexcusable socially

p405
U.S. Senator Bill Bradley, 1996

Money not only determines who is elected, it determines who runs for office. Ultimately, it determines what government accomplishes-or fails to accomplish. Congress, except in unusual moments, will listen to the 900,000 Americans who give $200 or more to their campaigns ahead of the 259,600,000 who don't. Real reform of democracy, reform as radical as those of the Progressive era and deep enough to get government moving again, must begin by completely breaking the connection between money and politics.

p405
Lewis Lapham, Harper's (2001)

How else to describe the new (2001) administration's legislative agenda-elimination of the inheritance tax, revision of the bankruptcy laws, the repeal of safety regulations in the workplace, easing of restriction on monopoly, etc. except as an act of class warfare? Not the aggression that Karl Marx and maybe Ralph Nader had in mind, not the angry poor sacking the mansions of the rich, but the aggrieved rich burning down the huts of the presumptuous and troublemaking poor.

p411
Turn-of-the-millennium efforts by the U.S. economic and opinion- l molding elites to build a new global governmental and legal system pushed far beyond the previous high-water marks of transnationalism- the expansions resting on the maritime, naval, and colonial frameworks of the Spanish, Dutch, and British. Under the American flag, by contrast, corporations have been out in front because, since the nineteenth century, it has been their lot-as the ultimate vehicles of U.S. ingenuity and acquisitiveness-to play many of the expansionist roles previously associated with the Spanish church, the Dutch merchant marine, and the British navy. This may slight the quasi-governmental importance of the Dutch and British East India companies, but no other major nation has matched the United States for the overall centrality of private corporations (including banks) in its economic growth and political life.

p413
Corporate power retreated during the Progressive and New Deal eras ... and then again between the mid-1960s and late 1970s. The early twenty-first century should see another struggle because corporate aggrandizement in the 1980s and 1990s went beyond that of the Gilded Age-the parallels of political corruption and concentrated wealth-to frame issues of abandoning American workers, communities, and loyalties. It is not hard to imagine a twenty-first-century debate over a more sophisticated economic version of the old East German offense of republikflagt - flight from the nation.

The erosion within the United States of popular and national sovereignty, some of it tied to corporate behavior, also crystallized as a concern between 1995 and 2000. Public influence shrank as unelected experts became ever more prominent in national decision-making. Judges and the Federal Reserve Board enlarged their roles while corporate and bank influence over Congress and the White House climbed in tandem with the dollar totals of huge federal campaign contributions and lobbying outlays. Voters began to understand themselves to be on a seesaw-popular influence fell as that of the economic elites rose.

Loss of national sovereignty has become a popular concern. The small bits of jurisdiction given to international organizations before the 1990s never became a national issue, save to the political fringe. That changed between 1993 and 1995 as the enactment and implementation first of the North American Free Trade Agreement and then of the framework and mechanics of the World Trade Organization seemed to push democratic precepts aside ... the term "democratic deficit" emerged in scholarly articles and press coverage as the transnational deliberations of NAFTA, the WTO, and the European Union began to yield rulings that set aside local and national legislation and regulatory decisions from North America to Southeast Asia. In Washington the well-established Center for Strategic and International Studies questioned the full legitimacy of rules promulgated by elites "quite removed from the political process."

Rearranging layers of government to suit themselves, as U.S. corporations did during the Gilded Age, helped trigger the Progressive response and era. It confirmed how corporations, allowed to grow too big and powerful, could become what Henry Demarest Lloyd assailed in his book Wealth Against Commonwealth. A century later, corporate-keynoted globalization was becoming the new social Darwinism. Survival of the fittest had jumped onto an international stage. This time, global law and regulation, not domestic overinterpretation of the U.S. Constitution, was expected to favor the economic lions and suppress social and environmental priorities-a startling reenactment of the techniques damned a century earlier by Progressive critics.

Parallel late-1990s public arousal came as a shock just weeks before the century's end. The many trade officials and corporate executives gathering for the WTO "Millennial Round" of meetings in Seattle in December 1999 were stunned as thousands of activists blocked meeting hall entrances chanting, "We don't want you. We didn't elect you. And we don't want your rules."

p421
... the popular reactions in mid-eighteenth-century Holland and early-twentieth-century Britain against opulent aristocratic and financial elites raise a different possibility: the emergence during the first third of the twenty-first century of a U.S. radicalism seeded by economic and political pessimism. We have seen how a portion of the Dutch people, seeking a return to lost values, mounted a "Patriot Revolution." Major elements of the British population, seething against wealth and unfairness, used the new Labor Party to build a British welfare state-worker and lower-middle-income circumstances improved markedly-around the much higher tax rates imposed by war and politics on the upper and upper middle classes.

In Globalization and History, economists Kevin O'Rourke and Jeffrey Williamson make the point that pre-1914 globalization came to an end when "a political backlash developed in response to the actual or perceived distributional effects of globalization." A gathering trend toward capital controls, immigration restraints, tariffs, and abandonment of the gold standard, together with democratic enfranchisement and the rise of the welfare state, operated to tilt economics toward "deglobalization" and increased emphasis on equality for some three to four decades after 1918. Inequality did reverse in the rich nations, and the two men suggest that such forces may be building again: "The record suggests that unless politicians worry about who gains and who loses, they may be forced by the electorate to stop efforts to strengthen global economy links, and perhaps even to dismantle them."

Belief that Americans faced with the onset of decline would not be radical ignores both the polarization and wealth concentration of the eighties and nineties and the vein of recurring hostilities noted in chapter 10. The crash of 2000-2001 added a new layer of potential popular recrimination: that of individuals against corporations and the financial sector alike for insider dealings and false assurances, accompanied by a new politics of personal finance that demands recompense and regulatory safeguards. Abuses were identifiable well before the stock market implosion.

Beyond proposals for wealth taxes and curbs on corporate salaries ... potential radicalism could respond to several peculiarly American situations. To begin with, high taxes on the assets, incomes, or consumption patterns of the rich-or all three-could be used in the twenty-first century to fund the late-twentieth-century promises of entitlements like Social Security and Medicare. Inheritance taxation, rather than being ended, could be rearranged to diminish wealth concentration in a new way: by taxing individuals on their cumulative inheritances over a certain amount rather than collecting from decedents' estates. Some left-leaning groups have urged federal rather than state chartering of corporations as well as an end to interpretations that entitle corporations to the protection of individual persons under the U.S. Constitution. In Britain, changes that seemed impossible in 1902 or 1904 became serious discussions in 1909, law in 1913, and were supplanted by even tougher statutes in 1919 or 1938.

Economic nationalism, in turn, could be pursued to make the United States more self-sufficient again, imposing import duties to recapture the U.S. internal market for domestic producers and workers. Despite the poor prospects for long-term success, attempts could find reward at the ballot box. The United States, as a dominant continental power with a large and rich domestic market, is better placed to follow such a strategy than maritime-periphery nations like the Dutch and British ever were.

If economic trauma has stimulated radicalism, so has war, both directly and indirectly. The immediate effects have usually been to divert reform, to submerge divisions in patriotism and temporary unity. But at a certain point in each leading world economic power's history, as we have seen, some major war proves too burdensome, economic prospects and divisions worsen, and the politics of frustration takes a critical leap forward.

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. Over the coming decades, American exceptionalism may face its greatest test simply in convincing the American people to continue to believe in its comfort and reassurance.

Wealth and Democracy

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