In the Midst of Plenty: American Plutocracy
September 19, 2012
In the lead up to the global financial collapse, America’s top 1 percent held nearly 35 percent of the nation’s wealth; a 275 percent increase over the past 30 years. Growing income inequality has been a concern for generations; however, the nation’s shift away from its traditional economic policies succeeded in silencing the most vocal critics. America’s transition into a service economy and subsequent push for market dominance has created an elite class that has superceded its predecessors in expanding enterprise and cementing personal advantages. The economic reforms that enabled the spread of ideas, innovation, and wealth also centralized power into the hands of a new plutocracy.
Concerns over income inequality seemed to have been lost in the 1990s, but a series of market collapses pulled back the curtain and began exposing the population to the true market system. Since 2008, the nation’s illusion of financial stability was replaced with the reality of wage stagnation and mounting household debts.
The fervor over the country’s income disparity manifested into grassroots movements seeking to reform the U.S. system, with Occupy Wall Street taking center stage. People chastising corporate greed and Washington corruption have been dubbed “stupid” and “amateur[ish]” by those that perceive the ultra-elite, particularly business leaders, as victims. Those that dismiss public outcries over income inequality perceive it, as Mitt Romney does, as “dangerous…class warfare” and willfully dismiss the people’s outrage.
For many, the concerns are not truly fixated on diminishing the wealth and power of those at the top, but at the profound institutional divide – in business, government, and judicial proceedings – that insures power is retained by those at the top while society continues to struggle with the concept of community. Attacking the wealthy is not an assault on wealth but a desire for equality and to ensure consequences are applied evenly.
Tensions mount between the rich and the rest when the more affluent overtly align their interest with those of their wealthy peers, rather than the nation. Allegiance to country has become skewed as a majority of the wealthy has cemented connections with others in the same class, further dislocating them from nation and state. This trend has led to the formation of stateless multinational corporations, which, with liquidity and maneuverability, have seen a significant financial recovery since 2008. Having the ability to shop around overseas for optimal business conditions has fostered growth for corporate leaders, while the remaining population remains stuck and their economy sluggish.
With the wealth gap continuing to widen, it is becoming apparent to the nation that there are two distinctly different economies driving the country. With the affluent’s economy rebounding and Dow Jones climbing to thirteen thousand, most Americans continue to struggle in a market undermined by schemes – such as sub-prime credit – which assisted in shielding American workers from their stagnated wages and the rising costs of goods and services.
A driving force behind the public’s outrage was not only the need to initiate a corporate bailout, but also the doling out of bonuses once the funds were received. Debates over contractual obligations reinforced the perception that, due to the lack of consequences for the bonuses, Washington acts solely in the interest of the wealthy few. The haphazard defense of handing out money to corporate leaders that nearly destroyed the world market illustrates that wealth and power had made most of the nation’s political and business leaders indifferent to the issues faced by a majority of the population. Two distinctly different economies furthered the dislocation as it became apparent how much the market of the majority was dependent upon the market of the affluent for stability.
“Voter ID, which is going to allow Governor Romney to win the state of Pennsylvania, done.”
– Pennsylvania House Republican Majority Leader Mike Turzai, regarding restricting people’s access to the polls
Many government officials and business leaders concerned over the public’s criticism have concocted a false debate to turn the people’s ire against itself. Amplifying rhetoric espousing the detriment of unions on society is designed to incite conflict amongst the masses. A divided populous is easier to control and diminishes contention amongst those holding positions of power and influence. Redirecting popular sentiment has the ability to stave off calls for reform, allowing the status quo to be maintained.
Democracies can fall victim to this tactic as easily as more autocratic countries, because the premises that underlie inter-societal conflict – moral dissolution from a minority population, failure to preserve traditional values, ideological indoctrination, etc. – feeds into the nation’s fears that their way of life will soon come to an end. Over time, fears harden into prejudices as individuals perceive general calls for reform as personal attacks, eventually leading to a collapse in civil discourse.
When the situation begins to reach a breaking point, the powerful and influential will enter the fray under the guise of intermediaries. Since they tend to be the cause of the initial breakdown in civility nothing substantial will come from their interventions, and the declarations of victimhood will further undermine social cohesion.
In perpetuating this charade, they are drawing from the philosophy of the Constitution’s architect: James Madison. Under Madisonian logic, it is important for power to be handed to “the more capable of men”, in order “to protect the minority of the opulent against the majority”. The class warfare derived from this manner of thinking has been heavily ingrained into the American system, for Madison’s beliefs have become the “guiding principle of the democratic system from its origins until today”. He was driven to create a system that would fragment society, protect the elites from “mischief”, and keep at bay those who “labor under all hardships of life and secretly sign for a more equal distribution of its benefits”
“Madisonian scholars” agree that to James Madison and the Founding Fathers “the Constitution” was an “intrinsically…aristocratic document designed to check the democratic tendencies of the period, delivering to a ‘better sort’ of people and excluding those who were not rich, well born, or prominent from exercising political power”. Since the affluent were the only authority to “discern the interest of the country”, Madison’s framework provided the necessary backdrop for capitalism’s rise and the positioning of corporate leaders into their prominent positions in society.
“The idea that a Congressman would be tainted by accepting money from private industry or private sources is essentially a socialist argument.”
– Newt Gingrich
James Madison’s defense of elitism has taken on a less than favorable tone with his contemporary supporters in the Tea Party Movement, particularly President “Obama’s Harvard and Yale elitist friends”. What remains firmly in place, however, is concern that social upheaval from the middle- and working classes can easily unravel the protections shielding those that “come from and represent the wealth of the nation”. Tea Party devotees reinforce this sentiment, even though the majority of them are not associated with the nation’s top 1 percent; many joined because the movement “is the only game in town” and people feel the need to do something, no matter how misguided it is.
Defending wealth to the detriment of one’s own interests illustrates how cliché-driven rationalizations – ‘pull yourself up by your bootstraps’ – has distorted society’s reality and skewed its outlook on the future. In a toss up between stupidity and willful ignorance, the middle- and working-class people who perceive the wealthiest Americans as victims illustrates an unwillingness to believe that they are misinformed about their country and that the system is rigged against them.
The growing inequality is indicative of a political and economic system that is interested in protecting the few at the top, while continuing to expose the masses to increased risks, leading to an unpredictable future. Many influential government and corporate leaders are participating in polarizing the nation, and the growing resentment between the haves and have nots has further distorted the political process, allowing money to become the voice of government.
During the recovery, sectors composed of white-collar positions rebounded more quickly than other sectors, leaving a majority of the population – reliant on unionized, production, and manufacturing industries – to continue to struggle. Three years on from when economists declared the recession over, unemployment rates are dropping, but a worker’s ability to reclaim a position held four years prior has become increasingly difficult. As time passes, it becomes more apparent that some blue-collar jobs will return, but many sectors will never fully recover what was lost in the collapse.
Outsourcing, automation, and streamlining have become the primary focus for many companies is transition; the recession has allowed for corporate restructuring to the detriment of the worker. American workers, devastated by a recession that has left their primary investment – housing – underwater, have seen the fastest decrease in real incomes in over 80 years and dropping below $50,000 for the first time since 1996.
“If you’re not rich, it’s your own fault.”
– Herman Cain, former Republican Presidential candidate
Economic conditions were not the only factors creating rampant inequality. Technological advancements have transformed society in a way that it has become a detriment to workers, while affording corporate leaders the ability to remain competitive. Problems came about for the middle- and working classes once everything began to evolve faster than the education system and training courses put in place to keep people current with market trends.
Globalization’s impact on national development has altered business policies and changed workers perception of corporate leadership. With companies relying upon automation and outsourcing to streamline costs, displaced workers are finding it more difficult to believe any business is functioning for the population’s best interests. Market shifts have fostered debates as to whether it is the nature of the system or directed market manipulation by business leaders. Regardless of origin, the consequences stemming from a globalizing economy is the private sector’s inability or unwillingness to innovate new business platforms to capitalize on the American workforce.
For as much as the domestic market has grown, technological advancement has transformed business models and placed an emphasis on intellectual ability over manual labor. Domestically, advancing societies have adhered to a technologic determinism that has provided opportunities for the more adept workers to take control while continuing to cutback and farm out lower-skilled positions. The global collapse has made the U.S.’s under- and un-employed more vulnerable to long-term issues, concerning debt and retirement, while placing them at a disadvantage in understanding the daily technological changes occurring throughout the private sector. A widespread fiscal contraction and a decimated housing market would have been difficult enough for Americans to overcome, but the current national environment (stagnant wages and rising prices) has been further hobbled by a stalled labor market, leaving the country with limited options.
“Investment bankers are doing God’s work.”
– Lloyd Blankfein, CEO – Goldman Sachs
For the past 40 years, Washington has incrementally lowered the percentage of taxes on high incomes earners, as well as diminished taxation on investments and capital gains, in a failed attempt to prove the effectiveness of supply-side economics. What was being integrated into society by political leaders reinforced the market transition that pushed the majority of overall gains to those at the top. Standing in the way of progress and shutting down the government when they could not get their way, Republican leaders ensured business regulations were weakened, opening the door for exorbitant executive pay, even if the economy was performing poorly.
Allowing companies to self-regulate during a period of amplifying world competition created a need for good businessmen who could not only develop new strategies for organizational progress, but also construct quick-fix solutions to strengthen a corporation’s position. In the United States, corporate leaders were enticed to join or remain with a business with lucrative benefits; however, since the global collapse the perception has changed. For the last twelve years, CEO tenure has decreased from 8.1 to 6.3 years, representing a shifting mindset in that individuals at the top are being perceived as replaceable.
Hoping the restructuring of executive tenure would resolve the problems plaguing the private sector, it will eventually be found that most companies are attempting to resolve the wrong issue. As tenure terms decrease, the excessive wages and benefits have remained in place. The possible impact is that individuals, knowing their time is limited, could potentially initiate short-term gambles, to maximize returns, at the detriment of the company’s long-term stability. Being replaced every six years also means that executives do not have their livelihoods tied up with the company; a luxury that escapes other employees.
By separating leadership from the company, businesses are not creating incentives for executives to do the correct thing and afford them the option to leave before problems arise. Companies have compensated for the rise in executive costs by accessing overseas labor markets and, for some, breaking labor unions. Simultaneously, American workers have missed out on the profitability of the changing economy with many finding their jobs and livelihoods undermined by the very forces that enriched the plutocracy.
“There are three things Americans don’t like: big unions, big government and big corporations. So Republicans go after big government and big unions, and only talk about small businesses.”
– Andy Stern
America’s elite have created so much distance between themselves and the domestic economy that they removed themselves from the concerns of the majority. With their economy thriving, it is no surprise they are disconnected from the remaining society and perceive any assistance to the remaining nation as a “necessary evil” for “flat-out lazy people”. A sentiment conceived from individuals that bear some responsibility to the country’s current state of affairs.
What seems to be the most surprising is that many public and business leaders had meager beginnings, which would lead one to believe they would be more compassionate to the plight of the people. Instead the country is being directed by many individuals with an over-inflated perception of self-importance. Reality undermines the perception of personal achievement; the well-crafted illusion many construct to describe success as resulting from their intelligence and determination.
A battle of contrasting views arose from President Obama’s remarks during a 13 July 2012 campaign event:
“If you were successful, somebody along the line gave you some help. There was a great teacher somewhere in your life. Somebody helped to create this unbelievable American system that we have that allowed you to thrive. Somebody invested in roads and bridges. If you’ve got a business — you didn’t build that. Somebody else made that happen. The Internet didn’t get invented on its own. Government research created the Internet so that all the companies could make money off the Internet.”
It was not the criticisms that should have garnered the media attention – political fodder stemming from a “you didn’t build that” quote taken out of context – but the context in which they were given. Individuals that found the quote unsettling seem to believe they were never assisted in their success, and any evidence to the contrary would be a damning indictment and a mar on their self-image. Being shrouded in self-deception has distanced many from the very neighborhoods and communities they rely on for success.
Self-aggrandizement tends to lead to an assault on those who have not been as lucky, while crying ‘victim’ when the government does not allow people to do whatever they want. This eventually devolves into an ‘us’ versus ‘them’ mentality, centering on the view that government is interfering with private sector growth. Government policies and investments have centered on strengthening national businesses, through research and development, for decades. Even Republican presidential nominee Mitt Romney has acknowledged the importance of government in building national infrastructure and vice-presidential nominee Paul Ryan’s family business’s reliance on government contracts.
“We have to tolerate the inequality as a way to achieve greater prosperity and opportunity for all.”
– Brian Griffiths, Vice Chairperson, Goldman Sachs International
The plutocrats and their sympathizers are painting a picture in which Washington’s shifting policies are designed to assault their way of life. Battleground America, to them, is nothing more then small businesses combating greedy bureaucrats who want to demonize the private sector in order to centralize the nation’s power. These ‘mom and pop’ companies – such as Bechtel and PriceWaterhouseCoopers – are struggling to fend off government intrusion: they are ‘doing God’s work’, so how can a corporation be the criminal?
Under assault by Washington and victims of a jealous society, the plutocrats are unraveling their sensibilities by donning their John Galt façade. No longer willing to suffer the indignities of the masses, many are ostracizing themselves from society, and all the while failing to understand how much they need the workers and consumers they loath for their success. It’s difficult to learn lessons when the illusions of infallibility weigh heavily on an individual’s self-perception.
Not all of the United States’ super-elite have reacted in this manner for even the anger toward the rich is selective; in the minds of the people Bill Gates, Warren Buffet, et al. are disassociated from the problems at hand. The fact they remain unscathed illustrates that what is occurring in America is not an assault on wealth, but is directed toward those who have achieved prosperity through questionable means.
Money will need to come from somewhere if the United States is to pay down its debt and get its fiscal house in order. It will eventually be done through budget cuts and taxing the country’s wealthiest households, which has led many of the super-rich to feel unfairly criticized and discriminated against. An influx of money will be the only thing that will be able to get the economy moving again, though most seem focused on preserving their wealth and uninterested in jump-starting the nation.
Why would they, though? As Mitt Romney stated in a 9 July 2012 fundraiser: the wealthy “by and large” are “doing just fine”.