by Ted Wachtel
Democratic capitalism finds itself facing an ominous challenge. Will democracies throughout the world truly represent all their citizens, or will they continue to favor the wealthy and powerful minority, who can influence elections and government regulations to their own benefit? Will free market capitalism share its gains in productivity with everyone…or not?
In the early 20th century, U.S. Supreme Court Justice Louis Brandeis warned us in plain language:
“We must make our choice. We may have democracy, or we may have wealth concentrated in the hands of a few, but we can’t have both.”
We have not heeded his warning. I was shocked by a 2014 analysis of historic economic data, which reveals a frightening shift in the concentration of wealth in my lifetime.
- In 1949, when I was three years old, the top one percent of the richest Americans owned 21 percent of the nation’s wealth.
- Now, when I am in my early seventies, the top one percent of the richest Americans own 43 percent—doubling their share of the nation’s wealth in less than one lifetime.
That fact should be a huge red flag alert for all of us who are concerned about our loved ones in coming generations.
Globally, inequality is worse: The wealthiest one percent own more than 50 percent of the world’s wealth, and their share is growing rapidly.
Free Market vs. Oligarchy
As a free market capitalist, I don’t begrudge anyone the right to make a lot of money. The incentive to earn money is a fundamental motivator in a free enterprise system, and a basic economic right that must be protected. But is it also a basic economic right that many wealthy families pay lower income tax rates than most white or blue collar taxpayers? Or that wealthy families find ways to pass almost all of their accumulated wealth on to their heirs?
This cumulative concentration of inherited wealth has created an American aristocracy of extraordinarily affluent people, many of whom are related to each other by family or business ties, or both. Even the least affluent members of America’s aristocratic families have access to wealth, power and opportunity passed from generation to generation; based not on merit, but by accident of birth. And their relational networks have a huge and disproportionate influence on government and the economy.
The Rich and the Super Rich
In 1802, E. I. DuPont—fleeing religious and political persecution during the French revolution—established a gunpowder factory near Wilmington, Delaware. By the time of the American Civil War, the DuPont family business was supplying half the black powder used by the Union Army.
DuPont grew by leaps and bounds:
- branching into chemical products such as paint, plastics, dynamite and dyes
- investing heavily in General Motors
- and developing successful new products, such as nylon, Kevlar and Teflon.
Two centuries after DuPont built his first factory, his 3500 descendants share a family fortune worth $14.3 billion.
The DuPonts are one of America’s 60 Families, identified in journalist Ferdinand Lundberg’s 1949 blockbuster book, which exposed the elite plutocracy of inherited wealth that allegedly rules America. In his subsequent 1968 bestseller, The Rich and the Super-Rich, Lundberg made an even stronger case for the existence of an American aristocracy. He had access to new economic data, including information from three Congressional hearings, so he could offer “a systematic study of the entire wealthy class and its familial structure.”
Both books were “written for the layman, to awaken the reader to the real and little-known situation…These families have all the old levers of power…plus a whole host of new ones created for them during the intervening decades by the politicians, lawyers and judges who serve them.”
Aristocracy Trumps Democracy
As if to prove that point, in its 2010 “Citizens United” decision, the increasingly partisan U.S. Supreme Court eliminated any barriers to campaign spending by corporations — declaring that such restraints violate freedom of speech — that a corporation had the same right to freedom of speech as a person. In doing so, the Court wiped out the remaining constraints on corporate campaign spending that had been established by earlier legislation and Supreme Court decisions.
The startling consequences of that decision were revealed in an investigation by The New York Times into political contributions leading up to the selection of presidential nominees by each party in the summer of 2016: Merely 158 families—and the companies they control—contributed almost half the total donations for all of the primary presidential campaigns.*
These are some of the reasons that we advocate choosing our government leaders using sortition as a strong foundation for Building A New Reality. In such a system, mechanisms such as those described above for perverting True Representation of the people, by the people, and for the people become irrelevant and powerless.
*Cohen, S., Confessore, N. & Yourish, K. (October 10, 2015) The Families Funding the 2016 Presidential Election. New York Times.