The Fight Against Oligarchy: “Don’t Give Up Hope On This”

Recently a Republican candidate for the U.S. Senate in South Dakota (unfortunately Democrat Tim Johnson is retiring), a doctor of medicine for God’s sake, posted on her Facebook page the following viral image with a typical Tea Party message:

How hilarious. A real knee-slapper.

That a doctor, who says that “God is calling her to serve a higher purpose and to fight back against an intrusive federal government,” would subscribe to such stupidity—military families are increasingly using food stamps and 83% of the money spent on the food stamp program goes to households with “a child, an elderly person or a disabled person”—says either a lot about the God she worships or about the God she wants to worship or about how evangelical Christianity mixed with Republican politics can stain the mind with a glorious Technicolor of ungodliness.

Sadly, the idea behind that viral message is shared not only by a lot of Republican candidates and politicians holding office, but a lot of average folks, some of whom benefit from government programs, like the food stamp program, and some of whom will not walk but run to a polling place in November and gladly vote for people like this doctor-candidate in South Dakota.

Why is that?

Let’s start with Thomas Piketty, whose 700-page book, “Capital in the Twenty-First Century,” is all the rage. Piketty’s book, which essentially is a look at the changes in the concentration of wealth over time, has surprised a lot of people, including the venerable liberal economist Paul Krugman. Here’s what he said to Bill Moyers (I highly recommend watching or reading the entire interview):

BILL MOYERS: Inequality’s been on the table for a long time. You’ve written extensively, others have, too. I mean, it’s a familiar issue, but what explains that this book has now become a phenomenon?

PAUL KRUGMAN: Actually, a lot of what we know about inequality actually comes from him, because he’s been an invisible presence behind a lot. So when you talk about the 1 percent, you’re actually to a larger extent reflecting his prior work. But what he’s really done now is he said, “Even those of you who talk about the 1 percent, you don’t really get what’s going on. You’re living in the past. You’re living in the ’80s. You think that Gordon Gekko is the future.”

And Gordon Gekko is a bad guy, he’s a predator. But he’s a self-made predator. And right now, what we’re really talking about is we’re talking about Gordon Gekko’s son or daughter. We’re talking about inherited wealth playing an ever-growing role. So he’s telling us that we are on the road not just to a highly unequal society, but to a society of an oligarchy. A society of inherited wealth, “patrimonial capitalism.” And he does it with an enormous amount of documentation and it’s a revelation. I mean, even for someone like me, it’s a revelation.

BILL MOYERS: I was going to ask, what could– what has Paul Krugman had to learn from this book?

PAUL KRUGMAN: Even the title, the first word in the title, “capital.” We stopped talking about capital. Even people like me stopped talking about capital because we thought it was all about human capital. We thought it was all about earnings. We thought that the wealthy were people who one way or another found a way to make a lot of money.

And we knew that that wasn’t always true. We knew that in the Gilded Age or in the Belle Époque in Europe, which he prefers to talk about. That high incomes were mostly a result of having lots and lots of assets. But we sort of said, “Well, that’s not the way things work anymore.” And he says, “Oh yeah? It turns out that you’re wrong.” That’s true, that right now, a lot of high incomes in America are people who didn’t start out all that rich. But we’re rapidly moving towards a state where inherited wealth dominates. I didn’t know that. I really was– I should’ve known it. I should’ve thought about it, but I didn’t. And so then here comes this book with– I mean, it’s beautiful– absolutely analytically beautiful, if that makes any sense at all.

BILL MOYERS: As you know, I’m no economist, but I found this book, as I said in the opening, just very readable and suddenly there would be this moment of epiphany.

PAUL KRUGMAN: Yeah, it’s a real “eureka” book. You suddenly say, “Oh,
this is not– the world is not the way I saw it.” The world in fact has moved on a long way in the last 25 years and not in a direction you’re going to like because we are seeing not only great disparities in income and weakrugman on moyerslth, but we’re seeing them get entrenched. We’re seeing them become inequalities that will be transferred across generations. We are becoming very much the kind of society we imagine we’re nothing like.

BILL MOYERS: Here’s Piketty’s main point: capital tends to produce real returns of 4 to 5 percent, and economic growth is much slower. What’s the practical result of that?

PAUL KRUGMAN: What that means is that if you have a large fortune, or a family has a large fortune, they can — the inheritors of that large fortune — can live very, very well. They can live an extraordinary standard of living and still put a large fraction of the income from that fortune aside and the fortune will grow faster than the economy.

So the big dynastic fortunes tend to take an ever-growing share of total, national wealth. So once you– when you have a situation where the returns on capital are pretty high and the growth rate of the economy is not that high, you have a situation in which not only can people live well off inherited wealth, but they can actually pass on to the next generation even more, an even a higher share.

And so it’s all, in his terms, “r” the rate of return on capital, and “g” the rate of growth of the economy. And when you have a high r, low g economy [r > g], which is what we now have, then you’re talking not– you’re talking about a situation in which dynasties come increasingly to increasingly to dominate the top of the economic spectrum and a tiny fraction of the population ends up very dominant.

Not only does that “tiny fraction of the population” dominate the economic spectrum, but those same folks are dominating the media, with messages like the one spread by our Christian Republican candidate in South Dakota. Krugman says that,

…there’s a very effective apparatus of TV and print media and think tanks and so on who hammer against any suggestion of redistribution. It’s just, they’ve managed to convince a lot of people that it is somehow un-American.

Which actually, if you look at American history, that’s not all true. But they– it’s just been pushed very hard. I think also the United States, look, we have to admit, race is always lurking under almost everything in American life. And redistribution in the minds of a lot of people means taking money from people like me and giving it to people who don’t look like me…

That media “apparatus” is how a lot of people, who are either benefiting from government programs or who would benefit from an expansion of government programs, become sympathetic to that “don’t feed the humans because they’ll grow dependent on government” meme represented by that ridiculous viral image spread by a doctor who wants a seat in the U.S. Senate. Average folks are being manipulated by the moneyed class, a class of people who somehow feel oppressed:

BILL MOYERS: You wrote something the other day that’s hard to forget. You said, “We live in such an ugliness in America right now.”

PAUL KRUGMAN: Yeah. This is one of the things that puzzles me actually about my own country, which is it’s one thing to have disparities of income and wealth and to have differing views about what we should be doing about it. But there’s a level of harshness in our debates mostly coming from the people who are actually doing very well.

So, you know, we’ve had a parade of billionaires whining about being– you know, the incredible injustice that people are actually criticizing them. And then comparing anyone who criticizes them to the Nazis. You know, it’s almost a tic that they have. This is– this is very strange. And it’s kind of scary because, you know, it’s one thing if someone without a lot of power seems to be going off and into a rage for no good reason. But these are people who have a lot of influence because of the amount of money they control.

Influence. Money buys influence. It always has and, thanks to the Supreme Court, it can buy more influence than ever. Here is one definition of influence:

the capacity to have an effect on the character, development, or behavior of someone or something…

That is why we find so many average people supporting candidates who perpetuate such hateful nonsense about food stamps and government dependency—and who perpetuate the myth that we all can have the American Dream, if we’ll just keep working our asses off at two or three jobs and keep our heads down and our mouths shut. These average folks are actually doing the bidding of billionaires.

Obviously, if the rich have the means and the permission to buy tons of influence and thus effect the “character, development, or behavior” of people, the very idea of democracy is undermined. If what we see going on right before our eyes continues, we are just kidding ourselves that “we the people” actually rule.

But regular readers know that I try to find hope in and for the future and refuse to say that all of this depressing stuff dooms us forever. Refreshingly, Paul Krugman does the same:

BILL MOYERS: Given what you just said and given the fact that there’s this ugliness, what do you think it’s going to take? A mass uprising? Consistent demonstrations? Insurgent politics? How are we going to stem the tide that he says is taking us into oligarchy?

PAUL KRUGMAN: There’s a negative and there’s a positive take. Piketty argues — seems to argue through much of the book that we only escaped the old oligarchy for a while thanks to really disastrous events. Thanks to wars and depressions, which disrupted the system. That’s an argument you can make.

On the other hand, if you read histories of the New Deal, you know that it didn’t come– it didn’t spring out of nowhere. That we had a progressive movement and a lot of proto New Deal programs building for quite a long time.

There was, in fact, a move in America. There was an increasing political, philosophical readiness to take on inequality of wealth and power long before FDR moved into the White House. And so, I think there are better angels of our nature. That there is this ugliness which can be frightening. But there is also a redemptive streak in — here and in other places.

And that– don’t give up hope on this. That given consistent argumentation, given events, and perhaps you know, as people become more aware of what is actually going on, then there is a chance of changing things. Do we know that? No. But there’s nothing in what we know now that says you should give up hope of being able to change this even without a catastrophe.

If it is any consolation, and I admit it isn’t much, the doctor in South Dakota who posted that ignorance-inspired message on Facebook is losing in the polls. The problem is she is losing to a Republican man who will likely be the next U.S. Senator from South Dakota, former governor Mike Rounds, who right-wingers are accusing of being a RINO on repealing the Affordable Care Act, and who said in response,

Obamacare is bad for the country and I have always opposed it.

I didn’t say it would be easy to keep hoping.

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4 Comments

  1. ansonburlingame

     /  May 5, 2014

    Having spent time on local issues, I find it confounding to once again becoming reengaged in broader problems. There sure are no pat or easy solutions to real issues, the fundamental one being all about “equality” in America, somehow hoping for a way to make all Americans more equal in terms of ………?

    Would anyone care to fill in those dots?

    I mentioned in an earlier comment herein that I was attempting to read and absorb a book called The Examined Life, a series of essays written by Plato all the way up to Kant and many inbetween. The essential question raised by that book is “What is the good life?” Since men began to write words to express ideas that question remains unanswered, in my view.

    I read Plato’s Republic in college and liked it, a lot. The Socratic discussions, step by logical step, seemed enlightening and “true” as best I could tell, until the professor got a chance to challenge my rather naive thinking in class or grade a paper on related matters. Then read The Prince, wherein Machiavelli said, “if it works, do it” but always do it in a way to APPEARS to conform with ancient virtues, like justice, equality, etc. No “Prince” can sustain, even expand, any State without facing the realities of the “real world” where results count more than anything and the results must ultimately count with the “crowd”, meaning the mob in Machiavelli’s view. He makes his point by noting that no State has ever existed that conforms to the dictates of the earlier and “virtue” promoting ancients (or moderns if you like as well).

    I would as well suggest that no single human has ever achieved the Platonic vision of “justice and virtue” all rolled up in a “good life”.

    I was musing about such thoughts after reading a good column by Charles Buchann in today’s Globe, about the proposed tax cut and how unfair it was to “working people”. Sure everyone gets a cut but the rich get a much bigger one, according to Charles. He may be correct as well in terms of actual money saved in real dollars, $10 for one guy and $1000 for another for example. Left unknown to any of us however is how will the extra money be handled by each individual and how will society benefit (or flounder deeper into a hole of debt) if the tax cut gets enacted as proposed and now vetoed by the governor.

    Then I read this blog, another one about “equality”.at least in some attempt to gain material equity in everyone’s lives. No wonder Karl Marx considered religion (did he feel the same about Western Philosophy?) as the “opiate of the masses”. Marx at least called for real equality through communism using brute force, “workers of the world unite” and then…….?

    I note that has not worked very well either.

    Finally, at a family lunch yesterday, my grandson, graduating from HS this month, asked all to tell him their definiton of Freedom. I was the senior one present, down to a 13 year old and 5 others in between. Yep, an “argument” started or rather an interesting family discussion but without reaching any conclusion that made sense to all of us!

    Anson

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  2. That wealth inequality is increasing is undeniable, and the Great Recession has only amplified it. Dynasties are rising.

    When the GR hit in 2008 our investments were in low-fee mutual funds, half stock funds and half bond funds. Thanks to Social Security and a good military retirement indexed to inflation, we have not had to draw on our savings since then. I sold some stocks in the interim to maintain the asset-allocation (as Vanguard calls it) of 50/50, but that was just moving some to the bond funds. In the last 5 years our savings have increased 94%.

    I’m not saying that to brag. I didn’t do anything particularly clever to achieve this, and admittedly if I were to compare with pre-recession value, it would be less. But all I did was resist the urge to sell as the market tanked, and “stay the course”. Being retired, none of this capital appreciation came from any work I did that benefitted the economy. (I served as a voluntary tax-preparer for 3 years, but no money was involved.) Of the 94%, 73% was from market appreciation, 21% from interest and dividends, and 6% was contributions from money we didn’t spend.

    The tax laws are kind to this kind of wealth-building. The 73% hasn’t been taxed at all because the funds haven’t been sold. (The term used is “unrealized gains”.) But even if I were to sell them, they would be taxed at the capital gains rate which is much less than the rate at which earnings from work are taxed. Even the dividends are taxed at the capital gains rate because, for reasons unspecified in the code, they are mostly from U.S. corporations and are therefore defined as “qualified”. Nice.

    Don’t get me wrong, I’m personally grateful for all this kind treatment. Nor do I feel any guilt about my retirement pay and health care – we earned it. My wife and I both knew what a military life entailed as well as what was promised. We earned our way to retirement through 12 relocations and long family separations, and the country delivered on its promises. This financial security has enabled us to achieve the initial savings pot that powers the process.

    But the 1% and the 9% are benefitting from the same tax structure, and that is what Krugman and Paketty are talking about. There is no logical reason for it. The effect is real and if the tax code isn’t reformed, I do see it leading to dynasties and oligarchy. I wish I shared Duane’s optimism that it can change, but I don’t. The progressive reforms that followed the Gilded Age were enabled by stronger unions and workers on whom industry was more dependent than now. Now, workers have little bargaining power because of the global economy and third-world production efficiency. And not only that, the actual condition of the average family is not nearly as dire as it was a century ago. Maybe that’s why it’s so hard to get Democrats to the polls – complacence. In that, there may be a germ of truth in the SD candidate’s accusation of dependence on government aid. Clearly, more starvation and disease would improve the motivation of the hoi polloi.

    My descendants are likely to be among the lucky, provided some long-term-care disaster doesn’t eat our savings before we die, but I feel sorry for the majority who are living paycheck to paycheck. Americans deserve better than that. But as with the Republican SD senatorial candidate in Duane’s post, empathy seems mostly absent among the have’s. They can’t even stomach raising the ridiculously-low minimum wage, even as many of them stash earnings in foreign banks. Let ’em eat cake, I guess.

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  3. ansonburlingame

     /  May 6, 2014

    Perhaps unintentionally, Jim makes most of my points for me. His story, life story in terms of “wealth” is similar to mine. We both came from humble origins, made a career out of military service, earned our way every step of the way in that service and now live a life of comfort, not great wealth but certainly comfort.

    But Jim leads with the statement that wealth inequality is expanding, which I agree that such is the case. But I point out that by using the term wealth he means material goods (and of course money). But if anyone delves into the morass of “philosophy” (very heavy words and phrases for sure and hard as hell to read and understand) the “good life” is rarely defined in such terms.

    In my current perusal of Western Philosophy I recently read an essay by Rosseau (of French Revolution fame) discussing the origins of inequality among men. The first sentence in that essay reads as follows: “The first person who, having fenced off a plot of ground, took it into his head to say “this is mine” and found people simple enough to believe him, was the true founder of civil society.” He then goes on for pages to lament the formation of the concept of ownership of property as the foundation for all that is wrong with society. He even writes in admiration of “savages” (his term) that own no property and wander the earth as hunter/gatherers to live. He at least implies such is a better life than that of civil society in the late 1700’s. I certainly don’t agree with Rosseau, nor Marx as well and I doubt that Jim and Duane do either in such extremes.

    Jim makes a point, a great point, often overlooked by many liberals today. The plight of the poor and downtrodden in America today is certainly much better than it was 100 years ago. The safety net of civil society is much broader and “better” than ever before in the history of humans. Yet many clamor for more and more to meet their “needs”.

    Watch last Sunday’s clip on the BP payouts for oil damages, some $7.5 Billion and climbing, fast it seems. Because of technicalities in law people are applying for and receiving vast sums, hundreds of thousands of dollars for “damages” yet their loss of money had NOTHING to do with the oil spill. Yet such payouts are deemed “legal”, even appropriate by some, or so it seems to me.

    I submit that many “game the system” of welfare, foods stamps, medical assistance, etc. I don’t know the current figure of waste, fraud and abuse for Medicare alone but suspect it remains very high in real dollar value as well as percentage of the entire program. Liberals discount such arguments and come up with another anecdote of some poor soul floundering in “starvation” in America. Does anyone know of a single soul “starving to death” right in Joplin. I don’t know anyone in such a dire strait, here in Joplin. But when I used to observe some in local schools, I saw many “poor” kids that ate for free and ate a lot yet were obese. As well many of them had the behavior of “hoodlums”, while eating but more important in the classrooms. Yet can anyone imagine a supervisor in a school cafeterria, maybe a teacher, going up to a grossly overweight kid with a pile of french fries (free french fries) on his plate and telling him to take it back and get a “green salad” instead. It would be unheard of today in a public school with a free lunch program.

    Charles Murray, the author of The Bell Curve, coined the phrase “cognitive elite”, meaning those intelligent people that married other intelligent people and had intelligent kids that went on to ……. I have a grandson that will start at Yale in the coming fall and he certainly is in that category. But he is not (yet) a “fat cat” or a slob, or a “hoodlum” and my guess he will not be such if he completes four years at one of the best universities in the world. Should that “pursuit of happiness” be withheld from him or instead should a “poor kid” find a way to become “cognitively elite” enough to lead a prosperous “good life” based on his own efforts and diligence?

    It boils down to “teach a man to fish or give him a fish”. Jim and I learned to fish and so did Duane. What’s wrong with that? I repeat, we LEARNED to fish and the effort to do so was rather demanding and it took a long time. And I doubt that even in our dotage we, the three of us, have stopped learning as well. The only thing that should stop that process is death.

    Anson

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  4. Moyers rocks.

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