The Smart Money: Here come the plutocrats

Posted Tuesday, April 8, 2014 in Analysis

The Smart Money: Here come the plutocrats

by Gina Hamilton

With the recent Supreme Court ruling, doing away with with a major restriction on big-spending campaign donors, there is a real danger that the US again will soon become a government by and for the very wealthy.

Throughout human history, this has been considered almost universally a bad thing. The term “plutocracy”, which means rule by the wealthy, is a pejorative, and political thinkers as diverse as Winston Churchill and Noam Chomsky have condemned plutocrats for failing to live up to their social responsibility, causing income inequality and increasing poverty, and corrupting societies with greed.

Plutocracies create a more or less rigid class system. Those who are truly impoverished tend to stay impoverished, because the time-honored means to improve their stations – a quality education, or even a worker-advancement scheme such as apprenticeships, leading to journeymen and master, are often closed to the very poor. Even in a nation where universal K-12 public education is the rule, the goalposts are moved so that a bachelor's degree, or an advanced degree, is required for any job with upward mobility. Apprenticeships, which had been largely a function of trades unions, were discouraged along with the union sponsors.

The middle class, too, find themselves hamstrung in plutocracies. There are essentially three strands of middle class work life – entrepreneurship, civil service, and private employment. All are dependent on the plutocrats' goodwill for their own survival. Entrepreneurs require the direct support of the banking system – a field dominated by plutocrats – for the viability of their businesses. Civil servants are dependent on tax structures that can support a bureaucracy – something the plutocrats want to do away with. And those in private employment often work directly for plutocrats, and are tied to the system for their own well-being.

The US was essentially a plutocracy from about the end of the Civil War until the Great Depression. Large industries reached nearly monopolistic levels of market concentration, entered politics, and influenced public policy to an unhealthy degree – an example is William Randolph Hearst's and Joseph Pulitzer's campaign to bring the US into the Spanish American War in 1898.

Back then, it was possible because so many people couldn't or didn't vote. African Americans were fighting Jim Crow laws in the south even though they'd been granted the vote via the 15th amendment after the Civil War. Voting could easily mean being murdered, so many stayed away from the polls. Non-naturalized immigrants, who were making up an increasingly large percentage of the population, and women, couldn't vote. For those who could vote, vote buying was a widespread custom, and relatively easy to do.

Accordingly, universal suffrage was a means to keep plutocrats at bay. Another was the rise of thrifts. small community banks and credit unions, which prevented a full monopoly of large banks. And most importantly, unions and inexpensive access to higher education provided upward mobility among the working classes from the Depression-era through the 80s. 

Government programs also played a role in keeping people from true, grinding poverty. Social Security, a meaningful minimum wage, and child labor laws prevented some of the worst excesses of plutocracy.

Throughout the postwar period, a robust progressive tax structure also helped to keep income inequality low while improving American life for everyone. The highest marginal tax rate, just after the war, was 94 percent; throughout most of Eisenhower’s administration - an administration marked by strong veterans’ programs, a spate of new school and library and public space building and the remarkable interstate highway system, as well as our initial forays into space, in addition to the arms race - the marginal tax rate remained above 80 percent. It slowly receeded throughout the sixties and seventies, until now, the wealthiest taxpayers pay only 39 percent - and not until they’ve reached more than $400,000 per year in income.

However, with the rise of globalization and the marginalization of many social programs such as the minimum wage, the loss of unions, and the loss of many of the Depression-era programs that prevented the conflation of investment banks and commercial banks, prevented speculation in commodities and financial services, and other safeguards, plutocracy is making a major comeback in the US after a virtual absence of 60 years.

The Supreme Court's decision only hastens this eventuality. Congress should act now to begin the long process of stripping fictive corporate “persons” of rights only natural persons should possess – the right to free speech, the right to free worship – and create a sensible campaign finance amendment to the Constitution to prevent these incursions into republican democracy – small R, small D – ever again in the future.

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