Thoughts on Wealth and Democracy

By: Joel Dyar

The role of wealth in strengthening or subverting democratic systems has been of interest to scholars since Aristotle first broached the subject in the fourth century BCE. In today’s post-everything society, human beings have and continue to be subject to a historical process that is draining wealth from the many and reapportioning it in the hands of the few. A few facts shall confirm the existence of this process and give us context within which to consider its many implications:

• In 1774, the richest 1% of the populace owned 15% of all wealth. By 2001 the top 1% had consolidated control of more than 40% of all wealth (1).

• If we extend our consideration to the richest 20% of U.S. households, we find that in 2001, on the heels of a Skull v. Bones election for the Presidency and unprecedented political campaign spending nationwide, this demographic was in possession of 84.4% of all wealth (2).

• While living standards in the U.S. have improved since World War II, the “rising tide that lifts all boats” has carried a few boats quite far, and left the rest to float out to sea. 80% of Americans have had real wages stagnate or decline since 1973. An average worker earning $308.03 a week in 1973 earned $260.37 in constant dollars in 1991.

• At the same time the American middle class was experiencing declining real wages and the rising costs of inflation and exploding per-capita consumption, their government was helping them relieve the top 1% of its tax burden. Between 1977 and 1992, the effective federal tax rate for the richest one-percenters fell from 35.5% to 29.3% (1) The Bush II tax cuts have further exacerbated this gap while compassionately and conservatively driving the national debt into record territory.

• The federal government has spent $4.5 trillion on “Defense” since WWII, far more than accompanying investments in the kind of infrastructure relevant to the average worker. This spending has been primarily to the benefit of hi-tech and elite-dominated industries that employ only a minority of the populace and are demonstrably poor at re-circulating wealth.

The Role of Wealth in Democratic Political Theory

Aristotle, our first great democratic theorist, argued that a society with a large “middle” class would be well disposed to guard against the tyranny of the few and the potentially destabilizing demands of a large impoverished class. A large middle class would moderate and extend discourse, more efficiently use resources to translate mass interest into political action, and exist independent of coercion resulting from the concentration of wealth by elites. A powerful middle class would increase the likelihood that the laws and structures of government would favor the equal distribution of society’s riches; a goal enshrined in the U.S. Declaration of Independence. The solidarity and common experience of this demographic would also service the social bonds of cohesion, security and trust needed for a free and healthy society.

Jean-Jacques Rousseau, writing in 18^th century France, joined in Aristotle’s conclusion that economic conditions could impact the viability of democracy. His assertion that human beings must first be economically independent, and equal in both their degree of independence and their ability to translate resources into political action, concurs with Benjamin Franklin’s less repentant view that “no man ought to own more property than needed for his livelihood; the rest, by right, belonged to the state.” Ben Franklin was no utopianist or Communist, and neither was John Adams when he described the European experience: “economic power became concentrated in a few hands, then political power flowed to those possessors and away from the citizens, ultimately resulting in an oligarchy or tyranny.” Recognizing that not all poverty, and certainly not all wealth, resulted from the labors or failures of the individual, Thomas Paine suggested that a tax on inherited wealth could fund a social-security like program for those without the benefits of fortune.

The Political Economy of Inequality

Adam Smith provided us with an economic model where the narrow self-interest of producers and consumers could be harnessed for the benefit of society. He rightfully cautioned us that producers might rather collude than compete, and that their collusion would constitute a threat to the openness and equal playing field of the system. Collusion between producers would negate the presumed efficiency of Capitalism, and drive prices as high as could be gotten away with. Even worse, the “effective demand” of rational, monopolistic interests will subsume that of less powerful individuals, provided that the system does its job and goes where the money is. This analogy is relevant to our discussion of democracy. Government-market comparisons seem all the rage in this Era of Globalization, with government touted as the producer and the citizen the consumer. If an aggregate of interests in society can wield greater effective purchasing power in that society, say by copiously funding the campaigns of the highest officials, mobilizing groups in civil society and using their tremendous resources to “educate” the public, we should not be surprised when government responds with a product that reflects this. It is only when our concern for responsiveness and the needs of the many enters this equation that trouble arises. With this fundamental tenet of democratic governance in mind, we find that societies with a high degree of inequality are massively inefficient in their allocation of resources.

Caveats and Other Concerns

Concentrated centers of power in society, as symbolized by the modern corporation, have far greater resources with which to influence the product of government than those with less effective “purchasing” power, i.e. the citizen who must suffer the outcomes of this process. The modern corporation has refined the techniques of psychological manipulation to a degree unprecedented in human history. We call this the advertising industry, and the increasing reliance on its instruments to support campaigns from congressional elections to the Bush administration’s run-up to the invasion of Iraq should warrant great concern. No social contract can be said to exist without the free and independently considered consent of the governed, and that consideration must be free from manipulation in any form. So-called psy-ops, if legitimate at all, should be constrained to the realm of war and not imposed on domestic populations by any agent.

Additionally, the dilemma of state complicity in facilitating this imbalance in the distribution of wealth is serviced by a number of other factors:

• Low voter turnout, wedge or diversion issues (abortion, hollow anti-government rhetoric and the “three G’s” – god, guns and gays), disillusionment with corruption, and the phenomenon of “anti-politics” make this process far easier

• The nature of government in the modern era – remote, technocratic and just plain big, means that most citizens will be unable to engage and understand the full breadth of its activities

• A two-party system dominated by elites increases the chance that, whether the electorate favors the rhetoric of business or of populism in a particular election, policies will likely reflect the interests of those elites chosen for office

• The concentration of power in government and business readily facilitates the generation of additional wealth; we face a self-perpetuating dilemma

In the words of Jared Diamond, the renowned biogeographer and best-selling author of Guns, Germs and Steel and Collapse: How Societies Choose to Fail or Succeed:

“…some people may reason correctly that they can advance their own interests by behavior harmful to other people. Scientists term such behavior “rational” precisely because it employs correct reasoning, even though it may be morally reprehensible. The perpetrators know that they will often get away with their bad behavior, especially if there is no law against it or if the law isn’t effectively enforced. They feel safe because the perpetrators are typically concentrated (few in number) and highly motivated by the prospect of reaping big, certain, and immediate profits, while the losses are spread over large numbers of individuals. That gives the losers little motivation to go to the hassle of fighting back, because each loser loses only a little and would receive only small, uncertain, distant profits even from successfully undoing the minority’s grab (3).”

Conclusion

Clearly, this work only addresses the most superficial dimensions of the wealth-democracy dilemma. Readers interested in learning more are encouraged to pick up a copy of Keven Phillips’ Wealth and Democracy: A Political History of the American Rich.

Citations

(1) http://dwardmac.pitzer.edu/dward/classes/powpart/silentdepression.html

(2) http://www.faculty.fairfield.edu/faculty/hodgson/Courses/so11/stratification/income&wealth.htm

Joel Dyar is a Senior Political Science Major at Mesa State College in Grand Junction, Colorado. His scholarly interests include True Cost Economics, social justice in governance and globalization, corporatization, world politics and normative Buddhist political thought.

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