Yet More Ominous Economic News
Awareness of our still growing income inequality has spread widely, and new accounts are accumulating weekly in the media. Last week, Oxfam issued a report, “Working for the Few,” and the economist Emanuel Saez just released a preliminary analysis of 2013 income figures showing: “so far all of the gains of the recovery have gone to the top 1 percent.”
Even the President, getting the message, referred to “middle class economics” in his SOTU speech.
But this growing consensus is now starting to obscure something even more ominous, the rise and influence of an oligarchy that has captured our political process to protect its outsized wealth. We’re not talking 1 percent, though. It’s more like .001 percent.
As Jeffrey Winter recently pointed out, in his extensively researched book Oligarchy, (published by the Cambridge University Press) oligarchs in the modern world do not exert control directly. Working though what he calls the “income defense industry,” they make sure that their wealth is protected by armies of lobbyists, lawyers, accountants, advisors and tax consultants who work on their behalf, protecting their wealth from taxation and inheritance levies.
In a modern democracy, Winters argues, oligarchs benefit from the legal power of the state, so they do not have to hire mercenaries to protect themselves and their wealth. Indeed, they virtually disappear among ordinary citizens and their well-established legal guarantees. That ensures their wealth will not be confiscated. And there are stable political processes they can manipulate to protect their interests. They do not have to be seen or, even, act on their own behalf. They seldom even run for office. Their money does all the work.
As Winters puts it: “Indeed, the absence of the more frontal and visible aspects of oligarchy leads to the mistaken impression that there are no longer any oligarchs.”
Moreover, in the west we have a very active celebrity culture that distracts the attention of the public and spares our oligarchs uncomfortable scrutiny. They do not have to play the role of nobility. To be sure, they get maximum attention when they endow hospitals, universities and concert halls. In fact, our society has come to feel dependent on their largess as public funds are increasingly unavailable to meet our large scale cultural and artistic needs.
We get to use these facilities and feel grateful of the donors’ largess, perhaps even admiring them for their generosity, usually unaware that the tax policies supporting them are also shifting the burden of essential services on to the middle class. What our oligarchs don’t pay in taxes to support new roads, medical care, law enforcement, defense, etc. etc. comes disproportionally out of middle class income.
Winters also makes the point that this arrangement is unlikely to change as our political process, underwritten by the campaign donations of our oligarchs, makes taxes unpopular. In fact, one might think that estate taxes that only affect the super rich could gain support among the many who are extremely unlikely to come close to ever having to pay them. But that has proven not to be the case.
Our oligarchs have done their job well, and it looks like they are here to stay.