- The Washington Times - Sunday, July 21, 2002

One main point Kevin Phillips makes in this book, "Wealth and Democracy: A Political History of the American Rich," will come as no surprise to anyone aware of the trajectory of the economy in recent years: The rich-poor gap, and even the rich-middle class gap, is widening beyond belief. One of the figures we watch with growing interest is the ratio of the pay a CEO makes versus that earned by a factory worker. In the late 1960s, it was 25 to 1 and as recently as 1980 it was 42 to 1. By 1999 it had risen to a whopping 419 to 1.
In this remarkable historical synthesis, political analyst Mr. Phillips and author of the bestselling "Politics of Rich and Poor," examines the trajectory of wealth-getting in this country and finds it severely wanting. Mr. Phillips' piercing study, which rests on a solid foundation of research in everything from economic data to works of history, shows that the course we have allowed markets to take has brought us to the brink of disaster. Further, the disaster he has in mind is of such a degree that the recent record one-year stock market decline and the bursting of the Internet bubble will end up looking like a minor blip on the radar screen.
While the CEO salary figures might ring familiar, the notion that we are a nation in such dire trouble will strike many as an exaggeration. Those who have adopted unquestioningly the arguments in favor of what Mr. Phillips calls the "aggressive" capitalism undergirding the shift away from manufacturing to finance in the last 20 years still appear largely to believe in the essential beneficence of the market. But Mr. Phillips' book should raise grave doubts even for true believers.
Part of a small but growing group of critics, Mr. Phillips points to the truly stunning growth in the power of elites in recent years and to the massive disparities in wealth that have resulted. Data of all kinds such as the share of wealth controlled by the wealthiest one percent of the population, which went from 50 percent in 1890 to 29 percent in 1960 back up to 40 percent in 1989 suggest that we have entered a second Gilded Age.
That era, taking place from the 1870s to the 1890s, was known for the ravages of the "robber barons," Fifth Avenue mansions, opulent gatherings with such excesses as human goldfish swimming in man-made ponds and diamond party favors, bloody labor-capital confrontations, and immense poverty and deprivation. And until recently, it was thought to be a thing of the past.
The Progressive Era reforms of the early decades of the 20th century and the New Deal under Franklin Roosevelt battled the worst excesses of unfettered capitalism through taxes, regulation, and social welfare programs. Mr. Phillips shows that the period from the 1930s to the 1970s, partly as a result of these reforms as well as the industrial base of the economy, brought a "great compression" or relative equalizing of wealth holdings. He sees this era, with its critics of corporate self-aggrandizement, as a "zenith of egalitarianism."
The period from the 1970s to the present, however, has brought soaring social inequality. The wealth of the top one-tenth of one percent has increased so dramatically that even the word millionaire was redefined by some to mean those who have an income of over a million rather than assets worth that much. The largest fortunes in America today are around $100 billion, which is astronomical compared both to those of earlier times, to say nothing of those of hard-working average Americans. While the 1980s and 1990s brought an unprecedented increase in the wealth of those already wealthy, that period saw a decline in the net worth of the bottom 60 percent.
While the rich saw their lives orbit into the stratosphere, most Americans felt increasingly pinched in time, money, and patience. Middle-class Americans experienced a rise in their debt loads, downsizing of jobs, and a higher tax bracket than millionaires as a result of 1980s changes in the tax code. Quality of life indicators, such as the Fordham University Index of Social Health and San Francisco's Genuine Progress Indicator, showed that many measures of social health went down. Indexes of everything from child poverty, health care coverage, and youth homicide to the cost of entertainment and services suggested that the middle class was experiencing worsening conditions.
Compared to the other industrialized Western nations, U.S. workers usually fare worse in matters such as health care coverage, overwork, stress and hypertension, vacation time, length of maternity leaves, and average notice of termination time. A huge number of women entered the work force after the Sixties to make up for declining fortunes and only through their efforts kept the median family's economic share from plummeting. To Mr. Phillips this has created a "hidden tax" on American families.
While other writers on social decline of late have emphasized moral issues, they tend to focus on the waning sense of moral accountability on the part of citizens. Robert Putnam and others have called attention to the decline of social trust and the rending of the social contract. Others show the decline of moral obligation to one another that is apparent in the dissolution of families and relationships. But it is a rare account of moral decline that turns the same intensity of moral inquiry to participants in the market. Mr. Phillips does a great service in directing our attention to the moral decline that has undergirded the recent "financialization of America."
In the last two decades in this country, Mr. Phillips argues, a whole "money culture" worked to rationalize Americans' capitulation to the casino-like lure of "easy money" through finance speculation away from the "hum drum" activities of the "real economy." Defenders of a so-called free market unencumbered by government supervision or regulation though, as Mr. Phillips rightly points out, all too willing to accept special government assistance to business helped promulgate market idolatry and "heyday psychologies." Such "new era" thinking, which crops up repeatedly throughout history to underwrite speculative enthusiasms and technology manias, proclaims that, this time "everything's gonna be different," as the Bob Dylan song goes: The boom will never end.
Drawing on other social critics like Robert Frank, Mr. Phillips passionately assails the thinking of the Chicago School of Economics, Public Choice, and Law and Economics movements for their "vice-into-civic virtue theology." In this view, markets become the sole desirable social force, greed and self-interest are recast as goods, and rules and laws seen as obstacles to the natural and inevitable progress of market forces.
Mr. Phillips theorizes that such thinking arises to justify and spread an ethos that is directly beneficial to those closest to the new pursuits of high finance. He theorizes that a common political cycle occurs, whereby conservative thought begins with more reasonable politics rooted in middle-class concerns and the imperatives of "national unity" but devolves, in speculative boom times, into pure free-market ideology. In turn, he thinks that Democrats usually act as a corrective by restoring a focus on justice and equality, but they often "lose their bearings" during Republican-led boom times and embrace the market with equally blind ardor.
Ultimately, Mr. Phillips turns to this dialectic between conservatives and liberals for hope. Both parties are prone to destructive, totalistic visions. The left errs when it embraces a utopian view of justice and equality and the right when it embraces a utopianism of the unencumbered market and mistakes it for democracy. Clearly, Mr. Phillips thinks the major threat at present comes from the free-market right.
The only way out of this late-stage situation, in which nothing short of national decline is imminent, lies in a set of measures traditionally associated with liberals: "wealth taxes and curbs on corporate salaries"; higher taxes on the rich to fund social programs such as Social Security; inheritance taxes; enforcement of laws to curb corporate excesses; a form of economic nationalism.
While Mr. Phillips has made a convincing case that these kinds of measures demand serious consideration, his own portrait of recent history suggests that this task is more complicated than a matter of another swing of the political pendulum. The arguments he makes so persuasively suggest that the cost of waiting for a new political correction either during a time of excessive welfare state liberalism or a time of excessive market ravages has often been enormous. And in his book he shows that much of the Democratic Party is as little prone to criticize corporate behavior at present as anyone else.
Yet, across the political spectrum one can find those who reject the abdication of moral responsibility, not just of individuals in relation to their families but also of corporations in relation to their workers and communities. The task before us is to find this common ground. Until we do, the admirable invocation of the regulatory function of government as opposed to untamed markets or the myopia and bureaucracy of purely welfare-oriented liberalism leaves all of the crucial questions facing us in a world dominated by huge multinational corporations unanswered. If business can always flee the country, no taming of the corporations is possible.
And even before globalization, in what Mr. Phillips sees as the golden age of manufacturing, corporate lack of accountability on such issues as wages, pollution, and safety, was endemic.
Mr. Phillips is right that we need to question the thinking that allows the market to masquerade for democracy, replacing customary and much-needed rules and laws. Yet, free-marketers might also be right that, unless something changes, the populace is just as apt to express its preference through markets not by nature but because markets have successfully overcome nearly all other cultural traditions. Americans have come to define themselves as consumers, not citizens.
Only if we can recover a realm of life that cannot become subjugated to the logic of the market will we be able to recover a viable democracy and, Mr. Phillips shows, a viable market. It is an open question whether the marketplace will respond to any other imperative than the unencumbered, and excessive pursuit of profit ungrounded in "real market" considerations like creation of some tangible better yet, socially desirable product. Until it does, we will continue on the path toward polarization and decline. Both democracy and the market rely on a moral culture that would do what Mr. Phillips wants: restore markets to a proper place in our lives. That moral culture has all but faded from memory.

Elisabeth Lasch-Quinn is professor of history in the Maxwell School of Citizenship and Public Affairs at Syracuse University and author of "Race Experts: How Racial Etiquette, Sensitivity Training, and New Age Therapy Hijacked the Civil Rights Revolution."

Sign up for Daily Newsletters

Manage Newsletters

Copyright © 2020 The Washington Times, LLC. Click here for reprint permission.

Please read our comment policy before commenting.


Click to Read More and View Comments

Click to Hide