Greed and corporate power created American plutocracy

By: Robert Zaller

Posted: 5/23/08

Kevin Phillips' new book, "Bad Money," details what he calls the "financialization" of the American economy in the past generation, by which lending instruments, whose purpose is - or ought to be - to facilitate productive investment, became themselves the principal source of investment and profit in the economy.

Phillips can claim a considerable share of the credit for the disasters he now deplores. He was one of the chief ideologues of the Nixon and Reagan revolutions that systematically denuded the middle class, destroyed regulatory oversight of the economy and, manipulating the civil disorder and racial anxieties of the 1960s, persuaded the American working class to buy into social reaction, corporate tax exemption and the creation of a new "gilded age" of plutocracy, speculative frenzy and licensed criminality. It is good that Phillips now repents his former sins, and paints the devil in his true colors. But he has a lot to answer for.

Forty years ago, when the country elected Richard Nixon its president, the United States was already a declining power. If a society be judged, as Aristotle suggested long ago, on the size and strength of its middle class - that is, its relative egalitarianism - then the United States was headed full steam in the wrong direction.

The plutocratic revolution of the past 40 years, if we may give it its proper name, has stripped the gears of what was once the most powerful and in some ways the most hopeful society on earth. The size and so-called "productivity" of the American economy has grown, a natural consequence of population increase, technological change and the increased efficiency of worker exploitation (more hours worked at declining rates of compensation), but its nature has become more markedly predatory, as a narrower and narrower elite claims a greater and greater share of its wealth and the political power that goes with it.

A single statistic may serve to indicate how uphill the battle against corporate power was through much of the 20th century. In 1980, when Ronald Reagan was elected president, the relative income distribution in the United States was approximately the same as it had been in 1910, when champagne still flowed in the bathtubs of our first Gilded Age. In between, the 16th Amendment had created a progressive income tax, which reached a nominal rate of 91 percent on the super-rich during World War II and 50 percent on corporate earnings in the Eisenhower '50s. Social Security had underwritten the retirement and disability income of working Americans, employer-based health care had been written into the social contract, and Lyndon Johnson's "War on Poverty" had reduced the official poverty level in half, from 22 percent to 11 percent. In other words, the collective result of seventy years of progressive social policy, federal trust-busting and union activism had been to keep America exactly as inegalitarian as it had been when J. P. Morgan and John Rockefeller still ruled the land.

What would America have looked like in 1980 had there been no resistance to corporate aggrandizement? One only has to look at America in 2008. Blue- and white-collar jobs have vanished overseas, while private sector unionization stands at barely 7 percent of the workforce. The average American has a lower standard of living while working longer hours than 30 years ago; less health care at higher cost; less pension security.

The lifetime job at the plant or the office has disappeared, except for civil service bureaucrats or the vanishing breed of tenured academics your present author belongs to. The learned professions - law, medicine and teaching - have lost their autonomy, and much of their self-respect, as corporate imperatives have tightened the noose around them.

Meanwhile, the Food and Drug Administration no longer guarantees the safety of the food and drug supply, but openly abets big agriculture and big pharmaceutical companies. The Environmental Protection Agency no longer protects our air, water and wildlife, but turns a blind eye to polluters and extends a helping hand to developers. The Securities and Exchange Commission no longer polices our capital markets but blesses merger, monopoly and speculation. And, all the while, the appallingly rich become unspeakably richer: 550 percent richer in inflation-adjusted gross income alone since 1970.

Americans once prided themselves on being a can-do people, a nation of inventors, mechanics, tinkerers, fixers. Now we are defined by what we can't do, even though most other mature Western economies have found solutions to the problems we find intractable. We can't control violence because we have a gun culture. We can't have cost-effective, energy-efficient transit because we have a car culture. We can't have a rational, single-payer health care system because that would be socialist.

We didn't find ourselves in a daze by accident. For every unsolveable problem we face, there's an interest or an industry that prospers by keeping things the way they are. Our economy has enshrined a gospel of greed. Our society has become fearful and embittered. Our politics are ritualistic and symbolic, a mechanism for feeding antagonism and manipulating discontent, and accustoming us to worse and worse.

Democracies die, like every other kind of animal. It's not too late to rescue ours, but time is wasting, and our bad habits are increasingly set.

Robert Zaller is a professor of history. He can be reached at ed-op@thetriangle.org.