Tag Archives: oligarchy

Capitalism? Or Corporatism?

Inequality has become the topic du jour–and as with so many other topics Americans debate, what anyone means by “unequal” and if and why inequality matters depends on one’s perspective.

In a capitalist system, some people will do better than others. There is nothing wrong with that; the promise of a bigger reward for building a better mousetrap spurs innovation and benefits us all. It’s only when the disparity in rewards becomes disproportionate and  especially when those rewards become disconnected from actual economic productivity that things get seriously out of whack.

When what people make is a reflection of their connections and/or the success of their lobbyists, it’s time to consider whether we still have a capitalist system, or whether what America  currently has is corporatism–a system where power is exercised through large organizations in pursuit of their own economic agendas, to the detriment of the common good.

Capitalism creates opportunity; corporatism keeps it “all in the family,” exacerbating inequality. Consider the following statistics and draw your own conclusions:

Between 1947 and 1972, the average hourly wage, adjusted for inflation, rose 76%. Since 1972, it has risen 4%.

In 2011, the poverty rate for female-headed families with children was 40.9%

In 2009, CEOs of major corporations were paid a wage that was 269 times the average compensation of American workers.

Between 1979 and 2007, wages for the top 1% rose ten times as fast as those for the bottom 90%–156.2% versus 16.7%.

There’s much more, but you get the picture.

The question is, how do we return to a system where the market actually decides the winners and losers, rather than the oligarchs?

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Welcome to the Oligarchy

A study that will appear in the Fall 2014 issue of Perspectives on Politics, a very highly regarded academic journal, concludes that the U.S. is no longer a democracy. Instead, we have become an oligarchy, and a pretty corrupt one at that.

“Despite the seemingly strong empirical support in previous studies for theories of majoritarian democracy, our analyses suggest that majorities of the American public actually have little influence over the policies our government adopts.”

The study provides pretty conclusive evidence that the US government does not represent the interests of the majority of our country’s citizens, but is instead ruled by the rich and powerful. As the Telegraph reports:

After sifting through nearly 1,800 US policies enacted in that period and comparing them to the expressed preferences of average Americans (50th percentile of income), affluent Americans (90th percentile) and large special interests groups, researchers concluded that the United States is dominated by its economic elite.  

That domination helps to explain another recent study, this one by French Economist Gabriel Zucman.  Zucman looked at international data on what economists call investment positions (each country reports its assets abroad and foreign-owned assets at home). He found that the numbers don’t add up: globally, according to the reports, liabilities substantially outnumbered assets. But that’s mathematically impossible.

Zucman investigated further; He eventually concluded that the only way to explain such a result is if a lot of money is run through offshore havens, and the ownership doesn’t show up in any country’s national statistics. 

Zucman estimates that the world’s wealthy are using tax havens, including Swiss banks, to hide at least $4.5 trillion but more likely $6 trillion from the tax collectors. That’s $6,000,000,000,000—close to six percent of the entire world’s gross economic output for one year. In other words, as one pundit noted, not chickenfeed.

Not only are we being governed by wealthy oligarchs, for all intents and purposes–they aren’t even beneficent oligarchs. What’s ours is theirs, what’s theirs is theirs–and they aren’t sharing.

Welcome to our brave new global economy. The American republic was nice while it lasted.

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