Suddenly it looks like we are seeing political victories for progressives, on LGBT rights, on issues important to Hispanics, even occasionally on issues important to women. At the same time, we lose every single battle over economic issues. How is it that when polls show that a huge majority oppose cuts to Social Security, Democratic politicians like President Obama and Senate Majority Leader Dick Durbin are all for it, as are the Republicans? How is it that when Obama gets elected on a pledge to hike taxes on incomes above $250K, with a huge majority and control of the Senate, and a legislative situation where all he has to do is nothing and it happens, and then it doesn’t? How is it that the same bill continued a bunch of disgusting loopholes for the richest Americans and the corporations they control, like the NASCAR loophole that essentially only benefits one enormously wealthy family? How is it that within days of hearings showing the incompetence of JPMorgan’s derivatives traders the House Agriculture Committee cleared legislation to inflict derivative losses on the FDIC?
To answer that question, we have to get outside of normal discourse in the US, and take up a new word: oligarchy. Even though our pundit class doesn’t seem to grasp the possibility, it’s easy to see that this single concept explains the apparent discrepancy between wins on social issues and utter defeat on all economic issues.
We think of the US as the Shining City on the Hill of Democracy. Maybe so. But as Jeffrey Winters and Benjamin Page say in their article Oligarchy in the United States?, kindly made available by the author, it is perfectly possible for an oligarchy to function quite nicely inside a democracy. In this paper, and this somewhat more accessible version, Winters and Page answer three questions: a) what is oligarchy? b) how can you have an oligarchy in what is ostensibly a democracy, and c) how can an oligarchy function when there is such a large number of hyper-wealthy people? As to the first, they define oligarchy to mean rule by the richest citizens, a definition that follows Aristotle. This is from Politics, IV, viii:
For polity or constitutional government may be described generally as a fusion of oligarchy and democracy; but the term is usually applied to those forms of government which incline towards democracy, and the term aristocracy to those which incline towards oligarchy, because birth and education are commonly the accompaniments of wealth.
It’s easy enough for an oligarchy to work inside a democracy. Historically, the richest citizens had to fight to protect their wealth and power, with expensive castles and armies and alliances with other oligarchs. As the nation state evolved, the rich struck a deal: the state would take on the burdens of protecting property from foreigners, peasants and other oligarchs, and the rich agreed at least in theory to abide by the same rules as everyone else in the state. Of course, the rich played an important role in determining how those rules would be established. Winters and Page point to a number of provisions in the US Constitution that wet things up for significant control by the rich. Not least is Art. I, Section 10, which prohibits states from passing laws that impair the obligation of contracts, and the Fifth Amendment, which prohibits taking property without due process and just compensation. The Constitution protected wealthy slavers, awarding them extra votes so they could insure control in their home states.
Throughout our history, the richest among us have used their wealth to secure favorable laws. The full extent of that influence is obvious in hindsight, even if at the time other motivations may have seemed important. Laws that restricted voting may have looked like ways to enforce racial prejudice, but they also applied to poor whites as well. Poll taxes, property requirements and other requirements were designed to insure that undesirables couldn’t vote.
Turning to the question of coordination among the oligarchs, how can they work together when there are so many of them. The answer is that all of these hyper-rich people share three important interests:
1. Protecting and preserving wealth
2. Insuring the unrestricted use of wealth
3. Acquiring more wealth.
They don’t have to conspire to protect their interests. They just have to shut up and let a few of them manage the specifics. As an example, consider the Estate Tax. Its function is partly to generate revenue, but its social role is to break up large fortunes. The Walton heirs, a group which has done nothing to deserve great wealth besides belonging to the lucky sperm club, provides leadership for the rest of the oligarchy on this issue. They spend vast sums of money to insure that their children do not suffer the indignity of living on less than billions and billions of dollars of inherited money. You can count the members of the oligarchy who oppose the Walton heirs on this issue, and they do not oppose changes with the kinds of money and influence that the Walton heirs bring, only by cheap talk.
The oligarchs have armies of professionals to influence economic policy; Winters calls them the Wealth Defense Industry. These people see themselves as independent professionals, but they need patronage to maintain their positions, and they get it by providing research and advocacy for the policies and facts that support the views of their controllers. Just watch those supposedly independent lawyers espouse laughable positions in courts, and then watch those indefensible positions win in supposedly independent courts. The same is true of economists and accountants and pretty much any profession you can name.
Winters and Page have some thoughts on the makeup of the oligarchy in the US, but their attempts rely on simple measures like income and wealth alone, and are not completely convincing. Part of the problem is that it is difficult to analyze the patterns of influence with a few raw numbers and simple measures of concentration of wealth and income. There is no obvious way to measure the power of working through corporations, foundations, think tanks, and even universities, which bring a deep range of pressures to bear on government officials. But even the raw numbers show that the power and influence of the rich is enormous, and much greater than any other segment of the population.
It’s only recently that the Oligarchy has lost interest in the bargain about following the rules. Entire industries are off limits for prosecution. Rules are randomly changed to favor the interests of the rich. And worst of all, democracy itself isn’t working. We used to operate under some general form of majority rule. That is not the case in either house. In the House, under the Hastert Rule, the Speaker, John Boehner, will not present a bill that doesn’t have the support of a majority of his party. That means that a minority of the House can prevent any bill from being heard. That minority comes from small states in the most conservative parts of the country.
The Senate operates under rules that allow a single Senator to stop a bill in its tracks. A minority can prevent discussion of any bill. That’s bad enough, but the same rule applies to appointment of judges and the officials in policy positions. These require the advice and consent of the Senate, but again, a minority can prevent consideration of even routine appointments for any reason or for no reason. That means that we do not have judges in many courts, and that the President cannot govern with the people he thinks best.
These matters are largely the fault of the Republicans, who are the party of the rich, the oligarchs. But at least in the Senate, the Democrats could change these rules. They refused to do so in the face of the bad faith of the Republicans. It’s at least as much the fault of Harry Reid as it is the fault of the party of the rich.
The primary impact of this leverage in the hands of the minority is on economic issues. The oligarchy is just as divided as the rest of the population on social issues, like immigration, LGBT rights, women’s issues and similar non-financial matters. It turns out that, for example, some of the oligarchs have family or friends or are themselves LGBT. Their interests in wars and other kinds of issues are also divided. Because of that, democracy could theoretically work on those issues. It’s only those economic issues where the rich are on the same team, and they always win those battles.
And that’s exactly how things are working out. On matters of direct interest to the oligarchy, they win. You can have your silly laws about marriage or abortion as long as they get their way on money. It’s a lousy bargain, and it doesn’t have to be that way.
Cross-posted and slightly revised from Naked Capitalism.