Sunday, November 06, 2005

Signs of a New Gilded Age

Since the dawn of the American Republic, the United States has intermittently struggled with the problem of combining political democracy with some kind of economic justice. Any success has inevitably been limited. As Communist nations have now proven, states cannot level the economic playing field for more than a generation, and the costs of even attempting to do so are too high. But during certain eras of American history we have attempted to moderate extremes of wealth and poverty and give everyone the promise of a better life. In the early Republic, expansion into the Midwest offered new land that could increase the numbers of small farmers. In the Jacksonian era, the Democratic party began, ineptly to be sure, to grapple with the power of organized finance. (Ironically, while Jackson at the time claimed to be helping the common man by killing the United States bank, and while subsequent historians blamed the panic of 1837 on him, a relatively recent book by Peter Temin showed that neither Jackson nor the Bank had much to do with that panic.) By the 1850s rising industrialization was creating new extremes of wealth and poverty, but as it turned out, the country spent decades of accumulated moral energy upon the Civil War, and did not have enough left to make emancipation and Reconstruction work, much less tackle new and more complicated issues, when the war was over. The Progressive Era put economic issues back in the forefront of political life, but the First World War killed them once again, and by 1928 corporate America seemed more securely in the saddle than ever.

Only the complete breakdown of our agricultural and industrial economy from 1929 through 1933 forced the government to take a much greater part. Franklin Roosevelt was no ideologue and did not campaign in 1932 for a vastly increased government role, but circumstances forced him to insure the national banking system, attempt to plan both agriculture (in the AAA) and industry (the NRA), and regulate the stock market with the SEC. The TVA put the government in charge of taming a great river and distributing the electric power it could generate. Meanwhile, the hardship of the depression--which struck both the working and middle classes very hard--created a constituency for wages and hours laws and social security. Most importantly of all, militant labor managed to organize the country's basic industries, laying the foundation for a prosperous working class in the postwar period. One cannot be at all sure how long any of this would have lasted, however, without the Second World War.

Ten million men were mobilized to fight that war--a figure that today staggers the imagination. Several hundred thousand of them never returned, and well over a million were wounded. Rare indeed were families untouched by this crisis. And the veterans returned home with aspirations for a good job, a new home, and a wife and healthy, well-educated children that simply could not be denied. In the late 1940s Democrats and Republicans competed to provide the veterans with new homes and 4% mortgages. The tax code treated young families with children (and the average number of children was about 2.5) very generously, and marginal tax rates for higher incomes reached 90%. (That is not a typo.) Those rates lasted until 1964, when a Democratic Administration began to roll them back on Keynesian grounds. John Kenneth Galbraith was virtually the only dissenter. Here is a table of tax rates for married couples during the 1950s:

Individual Income Tax Parameters
Married Filing Jointly

Taxable Income Rate
$0 - $4,000 20.0%
$4,000 - $8,000 22.0%
$8,000 -$12,000 26.0%
$12,000 - $16,000 30.0%
$16,000 - $20,000 34.0%
$20,000 - $24,000 38.0%
$24,000 - $28,000 43.0%
$28,000 - $32,000 47.0%
$32,000 - $36,000 50.0%
$36,000 - $40,000 53.0%
$40,000 - $44,000 56.0%
$44,000 - $52,000 59.0%
$52,000 - $64,000 62.0%
$64,000 - $76,000 65.0%
$76,000 - $88,000 69.0%
$88,000 - $100,000 72.0%
$100,000 - $120,000 75.0%
$120,000 - $140,000 78.0%
$140,000 - $160,000 81.0%
$160,000 - $180,000 84.0%
$180,000 - $200,000 87.0%
$200,000 -$300,000 89.0%
$300,000 -$400,000 90.0%
$400,000 - and over 91.0%

I have wanted to dig up those figures for many months, and now that I have, even I am stunned. Let us keep one thing in mind--these are marginal rates, not overall rates--the same system still in effect. Some controls are also in order. Since 1962 prices have increased more than sixfold, and the 22% rate at the bottom of the table applied, therefore, to incomes equivalent to $25-50,000 in today's dollars. The payroll tax was also much lower. Still, these figures are staggering. Were equivalent rates in effect today, the IRS would start picking up half our income when it reached $200,000 a year. And suppose that today $.90 of every dollar of Alex Rodriguez' salary over $2.5 million went to the federal government? Without getting too personal, on the other hand, I myself seem to be paying only slightly less than I would have then, at constant dollars. Having gotten this far, I now plan a much more detailed analysis, but I'll stop here for now.

Those who feel as I do that that era was a more economically just one--and who also remember that economic growth was probably MORE robust then, despite the supposedly negative impact of high upper-income tax rates--must ask themselves what it would take to return to a system like that one. Historically, I am afraid, the answer seems to be that nothing short of another huge war with extraordinary sacrifices would do the trick. Since today casualties are about 1% of what they were then and we have no draft, that seems most unlikely. Nor would I personally favor the drafting of 5-10 million men to try to occupy a large swathe of the Muslim world, which would be their most likely use right now. Still, if an analysis did show that overall, the middle classes were paying taxes just as high as they paid in the 1950s while the upper classes are paying perhaps 1/2 as much, one could perhaps get some political capital out of that finding.

In any case--where are we going today? A few news items have caught my eye.

The Times, to begin with, carries a long piece about Tuesday's New York mayoralty election, in which financial magnate Mayor Michael Bloomberg is expected easily to defeat Democrat Fernando Ferrer. The main reason, apparently, is that Bloomberg, who can rely on his private fortune (a tactic legalized about thirty years ago by the Supreme Court), has outspent his Democratic challenger 8 to 1, about $72 million t0 $8 million--a television advantage which no amount of party loyalty or ward and precinct organizing, evidently, can any longer overcome. Money, in short, rules politics as surely as it did in the 1890s, and the consequences are apparent all over the country.

On another front, another Times story last week discussed the rebuildling of the Gulf Coast. I noted last week, I believe, that pressure had forced the Administration to back away from its attempt to suspend the Davis-Bacon Act, mandating customary local wage rates for reconstruction work. The victory for Gulf coast labor was more apparent than real. The contractors cleaning up the mess are using imported workers, many of them illegal immigrants. I certainly wonder whether they are indeed receiving prevailing wages--much less any benefits. I doubt it. The Republican Congress, meanwhile, continues using the fiscal crisis occasioned by the Bush tax cuts, the Iraq war, and Katrina to cut more from Medicaid, legal services, student loans, food stamps, and various other programs designed to help the poor and middle class.

And lastly there is the matter of education. New Orleans Catholic schools are re-opening; New Orleans public schools have not. Already in wretched shape, they may now receive a death blow from conservative "reformers" who will not want to replace the existing structure at all. This, meanwhile, is part of a much larger struggle by the Republicans to make public education essentially vocational education under the rubric of No Child Left Behind. The new educational reforms, as I am informed by young people on the front lines--that is, teaching in schools in the Mississippi Delta--are designed to produce citizens who can simply read and count, but who will lack much educational curiosity, knowledge of recent history, or sense of control over their own destiny. Increasingly teachers attempting to introduce anything more challenging into the curriculum are warned that they must concentrate on the skills necessary to pass the dreaded tests. We are abandoning the dream of giving everyone a liberal education.

"Men fight best on death ground," the Chinese military theorist Sun Tzu wrote. This essential principle of human life can be observed, as I have written elsewhere, on athletic fields, but also in history. Alas, nearly all the great historical achievements which we celebrate, from the American Revolution to the civil rights movement, from Gettysburg to Normandy, and in all the great movements for social and economic justice, occurred in response to adversity and catastrophe. Those Americans nearing 60 have been lucky to live in a relatively comfortable world--or have they?

1 comment:

Anonymous said...

When I was young, I was very conservative, a big supporter of the Moral Majority and a Cold Warrior who voted for Ronald Reagan.It wasn't any one thing in particular that changed my mind and caused me to move left. I read Howard Zinn's book, PEOPLE'S HISTORY OF THE UNITED STATES, which really opened my eyes and told me things about this society that I'd never heard before. Then there was a two-month visit in Mexico City, where I saw the vast slums and extreme poverty that I had never imagined existed, and heard about how the International Monetary Fund was imposing 'austerity measures' on the country.

At that time, I also began to have great misgivings about US foreign policy in Central America, backing these brutalitarian regimes in places like El Salvador. I heard from guys in the Special Forces just what kind of war the US was fighting down there, with torture and execution of prisoners. It was then I began to seriously study the whole American Empire from a new point of view, and undertand that this Central American War was just like Vietnam and many other places over the years.More or less, I decided to drop out of the whole system. I lived on a commune in Missouri for a year and a half, then I worked for the Intercommunity Justice and Peace Center for a year before moving to Des Moines to direct the Catholic Peace Ministry.

It was in Des Moines that I got the idea for my book, THE SECOND GILDED AGE. During the stike against Bridgestone-Firestone in 1995, all the union members were fired and 'permanently replaced'. Of course, I'd heard about this type of thing for years, but now I had a chance to see it firsthand. No one on the state or federal level would lift a finger to help these people who had basically been fired for going on strike.It was then I realized that 1995 was really a lot like 1895 and that the Gilded Age was repeating itself. I had long known about the conservative-reform cycles in US history, thanks to Pete Forcey at the State University of New York, but I realized that the Gilded Ages were about double the length of 'normal' conservative eras like 1919-32, for example or 1946-62. I also thing the backlash against the previous reforms was more severe than in other conservative cycles. In these periods, the state is openly allied with the very wealthy and big business interests, which was obvious with presidents like Reagan, but also with Clinton and his support of NAFTA and the WTO, indifference to working class problems and so on.I left the US in 1995 and did not return for 11 years, but I spent that time writing THE SECOND GILDED AGE. I was angered but not surprised by the corrupt election of 2000, which was really a 'selection' by five conservative justices of the Supreme Court. I was shocked by 9-11, to be sure, but I also understood that the US had done a great deal to create this whole monster when it spent billions arming the holy warriors in Afghanistan. They were indeed very anti-communist, but then it turned out that they hated the West as well.I regard the war in Iraq as just another episode in the long history of the US trying to maintain control of the oil resources in the Middle East--installing 'friendly' governments there that will follow its instructions. As with Vietnam, though, it's not working out as well as they planned. It all part of a very familiar pattern in the Third World, depressingly familiar, but the rulers of America are trying to impose the same system everywhere and have been since World War II.They don't always succeed, however.

In this book, you can read about the American aristocracy and how it controls the "democratic" political system with big money, and manipulates and diverts the masses with flag waving, Bible thumping, racism and general fear and paranoia.

Imagine an oligarchy that controls just about all the wealth and power in the American Empire, especially so in periods like the Gilded Ages? How does it maintain its position all out of proportion to its numbers?

Naturally, it uses old-fashioned methods like the military, police, prisons, and the death penalty. Indeed, it spends vast amounts of money on these coercive methods. In the 1945-73 period, a common assumption was that these would fall by the wayside in favor of more postmodern, postindustrial methods of social control, such as the social welfare state, drugs, and the whole therapeutic culture. This did not happen, and in fact, the welfare state was actually weakened during the Second Gilded Age, although not abolished totally.

In addition, this system also uses propaganda and near-monopoly control of information, particularly through television and the mass media. It feeds people a steady diet of consumerism, family values, nationalism, and fear. t also uses religion, as most regimes have throughout history, although fundamentalists have been very effective at adopting their message to the mass media, too and politicians use them all the time.

Then there is the massive power it exerts through economic controls--more or less the power over people's food, clothing and shelter. There is very little challenge to this elite control over the workplace and working life in general. From the New Deal up to the 1970s, labor unions and their allies in the state apparatus somewhat mitigated this elite control over economic activity, but that is no longer the case today. People who have a family and requite two incomes to maintain an adequate level of consumption are particularly trapped by the system in this way.

Naturally, the ruling elite also use money to straight out buy and bribe politicians; it happens every day. These days, it can cost a billion dollars or more to buy an election cycle, plus all that money for lawyers and lobbyists. They buy men like Reagan and Bush, who mouth cliches about God, country, freedom and apple pie,etc. to manipulate the voters. There are many issues that they use to divert attention away from social class and the fact that a narrow elite owns nearly everything in this society, such as hostility to minorities, abortion, homosexuality, crime, law and order and so on.

All in all, it is a highly effective system of control, and has kept wealth and income more unequally divided than in any other Western country. It also maintains rule over most of the power nations in the world, although there have been some failures, such as Vietnam or Iraq. Its the same system all over the world, but more brutal in places like Africa, South America, eastern Europe and the former Soviet Union.


In 2005, columnist Ted Rall asked the question: “Why do the poor and the middle class, who get screwed by Republican policies, vote for them anyway?” One important answer was that, “they were willing to take an economic hit for their heartfelt beliefs” on cultural, religious and national security issues, although another would be that they had little choice or suffer from what Karl Marx called ‘false consciousness’. For whatever reason, America had no class parties, and in 2000, 46% of people making $100,000 or more voted for Al Gore, while millions blue-collar whites voted Republican. One of the most important questions this book will try to answer in the following chapters is why, “millions of Democrats and Republicans alike routinely cast votes that work against their narrowly defined economic self-interest.” But are either motivated by non-economic issues or do not vote at all.