The coming backlash against the super-rich

Louis Proyect lnp3 at
Tue Jul 2 07:43:57 MDT 2002

The New York Review of Books
July 18, 2002

The Power of the Super-Rich
By Jeff Madrick
Wealth and Democracy: A Political History of the American Rich
by Kevin Phillips
Broadway Books, 473 pp., $29.95

The great hope of some reform-minded Americans is that there will be,
sooner or later, a political backlash against rising inequality in America.
Kevin Phillips, a former Republican adviser, is one of these. A principal
aim of his wise if sprawling new book, Wealth and Democracy, is to show
that the growth of private wealth in the 1990s was analogous to the rise of
private wealth in previous eras, especially the Gilded Age of the late
nineteenth century and the 1920s.

In all these periods, Phillips argues, great fortunes had the effect of
undermining democratic values and creating difficult economic times for
many and perhaps even most other Americans. In the past, the nation always
seemed to alternate between the domination of private and of public
interests, and it is possible that it will do so again. The Gilded Age of
Vanderbilt, Rockefeller, Carnegie, Astor, and Morgan was followed by new
regulations on business and commerce, progressive income taxes, and the
establishment of the Federal Reserve under Presidents Theodore Roosevelt
and Woodrow Wilson. The 1920s of the Fords, Mellons, duPonts, and Joseph
Kennedy, among others, were followed by Franklin D. Roosevelt's New Deal,
which adopted further serious restrictions on business, established Social
Security and unemployment insurance, created a minimum wage, and raised
income taxes. Joseph Kennedy himself was the effective first chairman of
the newly created Securities and Exchange Commission. "The early
twenty-first century should see another struggle because corporate
aggrandizement in the 1980s and 1990s went beyond that of the Gilded Age,"
Phillips writes.

But why hasn't it happened yet? To the contrary, between 1979 and 1995,
American workers accepted widening inequalities in income and wealth and
rapidly rising corporate profits with equanimity and even, it seemed,
self-reproach. There was surely voter frustration in this period of slow
economic growth, but it generally favored Republican tax-cutters like
Ronald Reagan or centrist Democrats like Bill Clinton, and it was channeled
toward re- straining government rather than business. Most Americans seemed
to take satisfaction from breaking up unions, such as the air traffic
controllers' union, and from reforming welfare, although it saved the
federal government much less than 1 percent of the Gross Domestic Product a
year, and from cutting taxes, mostly for the rich. There were hardly any
serious attempts to regulate business. Even conservative populists like
Patrick Buchanan or Ross Perot could not attract a wide following. The
expansion of the earned income tax credit, which has helped countless
low-income workers, seemed almost to sneak in under the radar.

The economic boom of the late 1990s, in turn, suppressed almost completely
any lingering concerns about the power of the rich as wages, after
stagnating for two decades, rose for all income levels. Unemployment rates
fell to 4 percent and the soaring stock market, though it still
significantly benefited only a small percentage of the population, became
the national sport. The 1997 and 1998 international financial crises, the
bursting of the stock market bubble in 2000, and even the recent Enron
scandal have produced as yet only modest proposals for financial reform and
have not appreciably diminished political support for further tax cuts for
the well-to-do. The recent campaign finance reform legislation is arguably
the one exception but few are enthusiastic about how effective it will be.

For those who feel that a shift toward a more egalitarian politics has now
become impossible, Phillips points out that the backlash of the early 1900s
took decades to develop; pro-business attitudes dominated the nation for
three decades after the Civil War. The broad reforms of the Progressive
period and the New Deal were also prompted by a severe crisis. In 1893, the
nation had the worst depression in US history, leading to populist
agitation that set the stage for the more moderate Progressives almost a
decade later. The New Deal was of course a response to the market crash of
1929 and the Great Depression of the 1930s. If the nation again requires
such severe suffering to produce effective reforms, however, it is hardly
solace for critics. The price would be high, and indeed reforms may never
come. Rather than sudden crisis, the nation may struggle through another
couple of decades of historically slow growth whose consequences may be
harsh but too gradual to provoke serious political change.


Louis Proyect
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