As a civilization, perhaps even a species, we currently face certain existential threats. The first is a return of an old curse ... climate change. This is a challenge the earth (and its inhabitants) has experienced before. Still, not since the last ice age finally ended some 11,000 or so years ago has the species been so challenged by dramatic environmental change which, for the first time, is largely driven by human folly.
A second threat is associated with the emergence of Artificial Intelligence (AI). Technological change is always disruptive but this transition likely is on a wholly different scale. A dozen years ago, in my final official talk at the University, I warned the audience about the coming dislocation from a digitized, robotocized world on economic well-being and future opportunities. The ultimate impacts are yet incalculable but likely will reorder civilization in transformative ways. The very meaning of 'work' will be upended along with the core usefulness of human contributions to society. As a species, we risk becoming obsolete.
The third existential threat is one we might be inclined to overlook. Yet, it remains as potentially insidious as the other two. I am talking about the corrosive reality of a hyper-inequality based oligarchy on our civic and political culture. In short the egregious accumulation of wealth and power into the hands of a few risks the final extinction of the fledgling experiments in democracy, including our efforts to facilitate broad political inclusion. A mature democracy is something that we have gradually introduced and mostly cherished over the past two centuries or so. But it is not guaranteed to future generations. In short, money and power may well replace law and principles as the foundation of our public life.
What is deceiving about this last threat is its seeming familiarity. Through most of history, elites have ruled over society, from Maharajahs in India, to the Samurai in Japan, to the Czars and Monarchs in Europe, to the Caliphates in Islamic nations and the religious potentates in meso-America. We easily think of the Pharoahs erecting huge pyramids in their memories as thousands of workers hauled tons of stone over the desert. Mansa Musa I, head of the Mali empire in the 14th century, oft has been considered the richest person in history ... worth hundreds of billions when most lived in abject poverty. Wealth and power inequalities seemed the natural order of things.
But, toward the end of the 18th century, new thoughts challenged the encrusted assumptions of intrinsic social hierarchy and inequality. In the American colonies, and then in France, the first blushes of social and political equality took root. This revolution, fragile and incomplete at first, expanded in fits and starts. At its core, all white men (and later women and minority males) were equal before God and, more importantly, before the State. All (white males) would have an equal opportunity to succeed, at least in theory. Yet, finally having found fertile land in which to take root, could such ideas endure when entitled elites fought to regain hegemony?
The American experiment in self government was incomplete from the start. Women, indigenous peoples, slaves, and even most property-less males were excluded from political participation. Our southern states, in particular, pursued a neo- feudal model of society based on a plantation economy and rule by a small, entitled elite of wealthy patricians who controlled both land and enslaved humans. That model was smashed in the nation's horrific civil conflict in the mid-19th century (though it would be largely reestablished by the 1890s through Jim Crow laws).
Entrenched notions of racial hierarchy were not the only threat to an inclusive society. The post-civil war era of industrial expansion reordered America's economy in ways that aggregated the ever increasing national wealth from capital into the hands of a select few industrial and finance titans. President Grover Cleveland put it this way:
"As we view the achievements if aggregated capital, we discover the existence of trusts, combinations, and monopolies, while the citizen is struggling far in the rear or is trampled to death beneath iron-heel corporations, which should be the carefully restrained creatures of the law and the servants of the people, are fast becoming the people's masters."
The Gilded Age marked by unfettered capitalism saw the accumulation of great wealth by the few such as Rockefeller (oil), Carnegie (steel), Morgan (finance), Ford (autos), and Hill (railroads). When capital and labor fought for power, the state typically sided with those that had the most resources. As the old saying goes, he who possesses the gold, rules! President Teddy Roosevelt called these economic titans the "invisible government " His 5th cousin and future President, Franklin Delano Roosevelt called them 'economic royalists.'
Fast forward to the post World War II period in America when government regulation was high, when the rich finally paid their fair share for the public good, when poverty was declining rapidly, and when the vaunted American middle class was expanding rapidy. It was the brief period in time when a family could thrive on one paycheck and a working class kid like myself could easily obtain a first-class education (with only nominal debt).
Still, a Republican President, Dwight D. Eisenhower realized that public policy and economic well-being were intimately connected. Even in these halcyon days when each income quintile prospered as the nation's productivity and wealth grew, Ike realized that future progress depended on which policy directions the country pursued. In 1953, he offered the following warning: "Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and not clothed." These were strong sentiments coming from a man who spent most of his life in the military.
While a Republican President endorsed liberal ideas growing out of the depression's New Deal agenda, a small group of conservative intellectuals began to strike back at their loss of political hegemony they saw coming out of the Great Depression. Richard Weaver, in a 1948 book entitled "Ideas Have Consequences," helped generate an intellectual backlash to the postwar Keynsian, collective security consensus that prevailed at the time.
Weaver argued that long-standing truths would be ignored at our peril. He suggested that underlying any civic society stood natural laws that must be preserved ... personal liberty and free markets being foremost among them. Slowly, other intellectuals joined the a growing chorus of dissent including William Buckley (the New Republic, 1955), Milton Friedman, Friedrick von Hayek, Ludwig von Mises, the Chicago School, and many more. They created pockets of doubt that the political consensus of the New Deal was sacrosanct. When President Richard Nixon declared that we are all Keynsians now, little did he realize he was playing taps over a movement that soon would be subject to a well coordinated and well funded conservative attack.
As many have noted, that attack was officially launched by future Supreme Court justice Lewis Powell. In 1971, he wrote a memo to the U.S. Chamber of Commerce titled "Attack on the American Free Enterprise System." On one level, it was an anti- Communist screed that painted the New Deal legacy as little more than a quasi-Bolshevik plot. More importantly, it laid out a strategy by which the economic elite could once again wrest control of events in the political arena. The elite, or the next generation at least, that believed FDR had been a traitor to his class would seek their revenge.
To start, Powell called for major businesses to invest 10 percent of their advertising budgets in a propoganda campaign that would promote the ideals of free markets, lower taxes, and limited government. In addition, he laid out a framework for reassuming control over civic society's essential institutions such as the media, the courts, the bureacracy, the educational system, the justice system, and so forth. In a few years, a variety of new Think Tanks were developed (Heritage Foundation, Cato Institute, the Business Roundtable, the Manhattan Institute, etc) which directly challenged the prevailing political and economic consensus. Within a decade, Goldwater's dramatic Presidential defeat in 1964 had been turned into a resounding 1980 victory for Ronald Reagan, supply-side economics, and a new conservative movement.
By 1994, Newt Gingrich used his position as Speaker of the House to tear down the remaining glue that held America's Constitution together ... the unstated norms of mutual tolerance and institutional forbearance. These were consensus norms that ensured civility in the political arena and a reluctance to employ arbitrary power against one's political opponents. Those norms which, except for the run-up to our Civil War, had generally prevailed were cast aside by the new Republican revolutionaries. As Gingrich told his fellow Republicans during his rise to power, "You're fighting a war. It is a war for power." The other side was the enemy. There would be no compromise considered, no quarter given.
The Gingrich revolution led to the era of hyper-polarization and political dysfunction we've seen for some three decades now. But, when you cast political conflict in terms of all out war, and then demonize the other side as hideous enemies in the process, you put yourself in a corner. Defeat can no longer be tolerated, your base will not accept such. Power, once secured, must be retained by any means imaginable. A final assault on what remained of our democratic protocols was necessary. U.S. politics had become an battle to the death.
That apocalyptic position come from Russell Vought and his colleagues at the Heritage Foundation. It was articulated in a document known as the 2025 Agenda which attempts the final assault on our democratic institutions first articulated in Powell's 1971 memo. It is designed to perpetuate indefinitely one-party rule in America. When you erase traditional norms (mutual tolerance, institutional forbearance) you cannot permit the other side to regain power. The economic elite, those who thirst for power at least, must retain control no matter the consequences.
Concerns about the 'new' econic royalty.
Is hyper-inequality necessarily a bad thing? Or is it merely a reflection of natural outcomes in the marketplace, the legitimate outcome of talent and hard work? Does it necessarily lead to the pursuit of a kind of permanent usurpation of power we have seen during the Trump era? In part, yes. On the one hand, Warren Buffet and Bill Gates (as with many others) built their own fortunes and retained admirable personal values. They seem to be decent human beings, nor have they lost their better human sentiments.
For others, the issue is less clear. Mary Trump described Fred Trump Sr. (Donald's father and the man who staked his heir to a $400 plus million start in life) as a "high functioning socio-path." During his own era, he taught his son and protégé that there can be only one winner and everyone else is a loser. He taught that favored son, Donald, that kindness is a form of weakness. Mary's assessment of her uncle, our President, is that Donald is an 'insatiable black hole of need created by extreme childhood emotional deprivation.' Since, professionally, she is a clinical psychologist, her assessment carries some weight.
The same might be said of Elon Musk. In those moments when he has reflected on his youth, he bitterly describes a tyrannical father who alternated between neglect and abuse, leaving his offspring with a great monetary treasure but a bankrupt psyche. Psychologists observe the frequency of this pattern and have created a label for it ... the dark triad. Many hyper- successful parents bequeeth to their heirs three counter- productive traits: narcissism, Machiavellianism, and psychopathy.
The sons (and perhaps daughters) seek parental approval by replicating, if not surpassing, the glaring sins and deficiencies of their dominant parent. Ponder the following: what might happen if even a few of the economic elite start out as psychologically crippled while possessing unimaginable fortunes.
The negative possibilities are frightening.
A note on global inequality!
One thing we know for sure is that income and wealth are highly unequal in their distribution. Moreover, hyper-inequality is not just an American phenomenon. We see it worldwide 🌐. Globally, the richest 0.001% now own three times more wealth than the poorest half of humanity. That is, some 60,000 billionaires (or nearly so) possess a highly disproportionate share of the estimated $471 trillion in global wealth. The richest 10% around the globe own 75% of all this treasure.
Here is another way of looking at our unequal distribution of the economic pie. Globally, there are 2,900 true billionaires with total worth of $15.8 trillion. On the other hand, 3.7 billion (45%) live on less than $8.30 per day. Using Harvard's John Rawl's conceptual exercise, would you choose a world with such an unequal set of outcome probabilities if you didn't know into which family you would be born? That is, would you prefer a more equitable world if you didn't know whether you would be one of the few winners or, much more likely, one of the many losers.
Rare is the country where the bottom half command more than 5 percent of the total economic pie. Since the 1990s, billionaires and multi-millionaires have enjoyed 8% annual real gains. Recently, 1.6 percent of the total adilt population (3.8 billion) control almost half of the world's treasure, about $230 trillion. On the other hand, 41% (1.6 billion) struggle to get by with net worths of less than $10,000, many of them laboring in negative figures.
American inequality ... an example of perverse policies!
Inequality is not a happenstance outcome. While talent and effort can matter, so do the economic rules of society set by politicians. One of the key researchers studying inequality, Jayati Gosh, put it this way: "These patterns are not the accidents of markets. They reflect the legacy of history and the functioning of institutions, regulations, and policies... all of which are related to unequal power relations that have yet to be rebalanced."
Let us take a crude look at U.S. tax policies over time. In 1918, to pay for WWI, the top marginal income tax rate on this relatively recent method (at that time) for paying our public expenses reached a high of 77%. Then came the 'normalcy' of the Republican- dominated roaring 1920s where top public officials asserted that the 'business of America is business.' Andrew Mellon, the wealthy Secretary of the Treasury during this decade, believed that government's prime responsibility was to support the holders of capital while dismissing the concerns of labor.
The top tax rate fell to 24%, business and banking went unregulated. Equity markets were left to their own devices (and sins like buying stocks on margin). While some expressed concerns about equity prices that seemed divorced from underlying value, it was assumed that market forces always resulted in efficient prices. One savvy investor, Joseph Kennedy (father of President Kennedy) bailed out of the market just before the collapse. His epiphany that speculation had reached the tipping point came when the shoeshine boy working on his footwear started talking about his own investments. The experts claiming markets would continue to rise were wrong, tragically so. Eventually, greed and speculation met their expected end and it all crashed in October of 1929.
With an infusion of Keynsian evonomic concepts and a world war to equip and publicly finance, America climbed out if its economic abyss with a new perspective about the role of government in the affairs of the common man (and woman). The top tax rate was back up to 94% by the end of WWII. Banking would now be regulated with government taking a more active role in the general economy. Labor, for a change, was protected by law. For the next three decades, economic want diminished dramatically, the middle class grew, and inequality fell. For example, between 1947 and 1979 the real income of the bottom 5th (quintile) rose by 122%. This period later was labeled by economists as 'the great compression,' a period where inequality fell dramatically, where every quintile in the income distribution prospered.
In 1980, Reagonomics burst on the scene. The top marginal tax rate would be slashed from 70% to 38% in a mere seven years. The rules of the game were changed to favor those at the top of the pyramid. From 1980 to 2009, the income of top 1% rose by 270% while remaining relatively stagnant for most American workers. As productivity gains were reallocated from labor to capital, the historic link between working smarter (or harder) and worker pay was severed.
Top tax rates, of course, tell only part of the story. The tax system is rigged in so many other ways. For ecample, Tesla earned $10.8 billion recently and paid $48 million in U S. Federal taxes. That's an 0.4% rate. The bottom half of all Americans, on the other hand, pay 3.8%. You might say that's not much but they don't have that much to begin with. Still, that is proportionally 10 times as much as some of our most profitable firms. Members of the economic royalty like Musk, Zuckerberg, and other titans often take $1 dollar in salary from the firms they control yet their net worth increases by billions annually due to improvements in their equity positions.
They don't take salaries simply to avoid the taxes that their workers must pay. Rather, they borrow to meet living expenses, a resource that also is not taxed, using yheir equity positions as collateral. In effect, most high earners get paid in ways that are taxed at lower rates, like deferred interest payments and stock options, that are taxed at half the rate you and I would nominally pay, if that much. When conservatives argue that the top 1% pays 40% of all income taxes, they typically exclude the economic royalty who often can avoid taxable sources of income. On paper, those titans have low nominal salaries.
Between 1979 and 2020, real income gains of top 1% grew by 326% while the middle class saw their fortunes stagnate. The top 1% holds 31% of the wealth pie ($52 trillion) which recently increased by $4 trillion in 1 year. Meanwhile, the bottom half of all Americans enjoy a mere 2.5% of the wealth pie. The share of income going to the top one-percent was 24% in 1929, less than 10% in 1979, and back to about 25 % in 2019. America is back to that level of hyper- inequality that preceded the greatest economic crash in history.
In America, what might be considered our new economic royalty saw their wealth increase by 18% in just one year to $6.9 Trillion. Meanwhile, the median net worth of American families is stagnant at about $124,000. Is the growth of such unequal outcomes sustainable?
Musk ($480b); Ellison ($383b); Zuckerberg ($264b); and Bezos ($252 b) control wealth worth $1.38 trillion. The GDP of Spain is only $1.41 trillion. The bottom half of all Americans possess $85.4 billion. Again, he who has the gold rules. The question is, when power shifts to an incredibly wealthy oligarchy, how might they rule?
In general, power seeks to sustain their privileges. Why would it not when that is how one might control the rules of the economic game. Not surprisingly, political contributions from top 100 families have jumped some 140 times since the year 2000, with 1 in every 23 dollars coming from this billionaire class. They now own most of the media outlets and thus exercise an outsized role in framing the political narrative. The Citizens United Supreme Court ruling permits unlimited resources into our elections. And who controls most of the money, not you or me?
It is not merely the fact that inequality in America is back at levels not seen since the great crash of 1929. The greater fear is that these distortions in economic outcomes might be permanent. In the 1990s, Republicans pushed hard to overturn our inheritance tax laws, permitting the wealthy to pass on a disproportionate share of what they had accumulated. I recall a prominent D.C. based Republican telling me that GOP Congressional representatives were fined by their party if they did not refer to the hated inheritance tax as the 'death tax.' Greed and semantics were everything, not logic nor good public policy.
Not surprisingly, we now have what is called the great wealth transfer. In the U.S., some $2.8 trillion will be passed on to the next generation in the coming years. This has all the marks of creating a more or less permanent aristocracy. Think about who sat in the most favored seats at Trump’s 2025 inaugural ... the economic titans in control of the wealth-generating technology sector.
We had such moments in our past. At the dawn of the 20th century, so-called robber barrons had amassed great personal wealth. There was no income tax nor any substantive inheritance taxes to inhibit or slow the future accumulation of treasure. But we then entered a period of reform ... anti-trust legislation, early labor protections, a constitutional amendment to introduce an income tax. In Wisconsin, the state and the university collaborated on a number of reforms benefitting the common people ... a notion that became known as 'the Wisconsin idea.'
A generation later, the great depression facilitated another set of reforms that further redefined the relationship between the federal government and the people. It was known as 'the New Deal.' Fast forward another generation or so. We then had yet another flurry of progressive legislation. It was known as the 'Great Society' and aimed to eliminate poverty and open up opportunity to all Americans.
That proved to be the last substantive reform impulse. The Reagan revolution has persisted for two full generations now. It is possible, just possible, that those controlling the bulk of our economic treasure can both retain and, in fact, expand the reach of their oligarchic rule. What countervaling forces are strong enough to diminish their advantages.
Consider the following. The holders of capital have always needed labor. They could not generate profits without the efforts of workers. We are now on the cusp of that age where human labor is redundant, if not totally replaceable, as the AI revolution matures. When workers no longer bring any significant utility to the workplace, what might be their fate? Aristocracies have not been kind to those they have ruled in the past. Read about the 'clearings' in 19th century Scotland where tens of thousands of tenant farmers were forced off their holdings when landowners discovered that raising sheep was more profitable. Or consider the fate of the millions of Irish that emigrated or perished during the potato famine. There were plenty of other crops being raised on the Emerald Isle. But the English landlords put them on ships for export to maximize profits as Irish peasants collapsed and died on country lanes. Why would today's elite act differently now?
Just something to consider.
Source: Oligarchy on steroids!
