Plutocracy and Politics

  • From: "Muslim-News" <editor_@xxxxxxxxxxxxxxx>
  • To: <submit@xxxxxxxxxxxxxxx>
  • Date: Mon, 17 Jun 2002 12:03:46 +0100

                        

Kevin Phillips's new book, "Wealth and Democracy," is a 422-page
doorstopper, but much of the book's message is contained in one stunning
table. That table, in the middle of a chapter titled "Millennial
Plutographics," reports the compensation of America's 10 most highly
paid C.E.O.'s in 1981, 1988 and 2000. 

In 1981 those captains of industry were paid an average of $3.5 million,
which seemed like a lot at the time. By 1988 the average had soared to
$19.3 million, which seemed outrageous. But by 2000 the average annual
pay of the top 10 was $154 million. It's true that wages of ordinary
workers roughly doubled over the same period, though the bulk of that
gain was eaten up by inflation. But earnings of top executives rose
4,300 percent. 

What are we to make of this astonishing development? Stealing (and
modifying) a line from Slate's Mickey Kaus, I'd say that an influential
body of opinion has reacted to global warming and the emergence of an
American plutocracy the same way: "It's not true, it's not true, it's
not true, nothing can be done about it." 

For many years there was a concerted effort by think tanks, politicians
and intellectuals to deny that inequality was increasing in this
country. Glenn Hubbard, now chairman of the Council of Economic
Advisers, is a highly competent economist; but he demonstrated his
fealty during the first Bush administration with a ludicrously rigged
study purporting to show that income distribution doesn't matter because
there is huge "income mobility" — that is, that this decade's poor are
likely to be next decade's rich and vice versa. 

They aren't, of course. Even across generations there is a lot less
income mobility than the folk wisdom about "shirt sleeves to shirt
sleeves in three generations" would have it. Mr. Phillips shows that
tales of downward mobility in once-wealthy families are greatly
exaggerated; the descendants of 19th-century robber barons are still
quite different from you and me. 

But the Gilded Age looked positively egalitarian compared with the
concentration of wealth now emerging in America. Pretty soon denial will
no longer be possible. What will the apologists say next? 

First we will hear that vast fortunes are justified because they are the
reward for vast achievement. Here's where that table comes in handy,
because it tells you what achievements actually get rewarded. Only one
of the 10, Tyco's Dennis Kozlowski, has actually been indicted. But of
the rest, three — four, if you count John Chambers of Cisco — were Andy
Warhol C.E.O.'s: their companies were famous for 15 minutes, just long
enough for the executives to cash in their stock options. The list also
includes Gerald Levin, who engineered Time Warner's merger with AOL at
the top of the Internet bubble; even at the time it seemed obvious that
he was trading half his original shareholders' birthright for a mess of
cyber-pottage. 

We'll also hear that in any case nothing can be done to limit the
accumulation and inheritance of vast wealth. We'll be told, for example,
that reinstating the estate tax would have devastating economic effects
— even though the great boom of the 1990's took place with a 55-percent
tax on the largest inheritances. I've even been assured by some
correspondents that inheritance taxes on the very rich are impractical,
that they will always be evaded — this in spite of the fact that in 1999
the estate tax raised about $15 billion from estates worth more than $5
million. 

But it's not just a matter of collecting taxes. Mr. Phillips, a lifelong
Republican, is most concerned not by economics per se but by the
political consequences of wealth concentration. He warns that "the
imbalance of wealth and democracy is unsustainable, at least by
traditional yardsticks." 

How will this imbalance be resolved? The economists Claudia Goldin and
Robert Margo have dubbed the narrowing of income gaps that took place
under F.D.R. the "Great Compression"; if I read Mr. Phillips right, he
thinks something like that will happen again. But he also offers a bleak
alternative: "Either democracy must be renewed, with politics brought
back to life, or wealth is likely to cement a new and less democratic
regime — plutocracy by some other name." 

Apocalyptic stuff. But Mr. Phillips has an impressive track record as a
political visionary. What if he's right? 

Source:  The New York Times
 

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