McCutcheon Took Us Back In Time, But It Might Just Birth the Next Occupy

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The Guardian/UK

McCutcheon Took Us Back In Time, But It Might Just Birth the Next Occupy

The conservative supreme court thinks it can build a gilded age for the era of income inequality. They won't know what hit 'em

(Photo: Flickr / cc / duncan c)

The supreme court is composed of five justices appointed by Republican presidents, and four appointed by Democratic ones. In the McCutcheon v FEC case decided on Wednesday, the five Republican appointees interpreted the first amendment to protect the right of individuals to pour as much as $3.6m into a political party or $800,000 into a political campaign.

The decision by those justices allows individual donors to buy – and federal officeholders to solicit – unparalleled personal influence in Washington. McCutcheon drowns out the voices of ordinary citizens.

Presumably, the individuals who were of concern to the majority of the court have incomes larger than the median US family income of roughly $50,000 a year and wealth in excess of the median American family's wealth of approximately $70,000. It is very likely that these individuals have huge incomes and enormous wealth.

The decision rests on the court's dubious finding that such spending does not give rise to corruption. That's baloney, as anyone who has the faintest familiarity with contemporary American politics well knows. As Justice Stephen Breyer noted in his dissenting opinion: "where enough money calls the tune, the general public will not be heard".

The majority's decision to open the floodgates to big money would be less important if the distribution of income and wealth in America were more equal. But it has become extraordinarily unequal. Together, the richest 400 Americans now possess more wealth than the bottom half of the American population. A handful of billionaires are, at this moment, deciding on whom to place their multi-million dollar bets in the 2014 midterm election. The McCutcheon decision makes it easier for them to do so than ever before. They don't need to go through political action committees or so-called "social welfare" organizations. The rich can now make their bets directly.

We have returned to the gilded age of the late 19th century, when the lackeys of robber barons placed sacks of money on the desks of pliant legislators. If this is not corruption, what is?

The McCutcheon decision coincides with the publication in English of an important book by French economist Thomas Piketty, Capital in the 21st Century. Piketty sees the United States, Britain and most of the rest of the world returning to the vast inequalities of wealth that were taken for granted as late as the end of the 1800s. He writes:

It is almost inevitable that inherited wealth will dominate wealth amassed from a lifetime's labor by a wide margin, and the concentration of capital will attain extremely high levels – levels potentially incompatible with the meritocratic values and principles of social justice fundamental to modern democratic societies.

With an extraordinary sweep of history backed by remarkably detailed data and analysis, Piketty shows that, for several centuries leading up to World War I, the financial returns to the owners of capital exceeded the rate of growth of modern economies, creating a wide divergence between incomes and wealth – and, with that divergence, widening inequality between those owners and people who worked for a living.

That divergence was reversed in the 20th century's brutal wars and the Great Depression. But the widening gaps in income and wealth that have characterized the US, the UK and most other advanced economies since the 1970s, combined with his historic view, give Piketty reason to believe that the older pattern is reasserting itself. While admitting that such divergence is not inevitable, he finds that "the possibilities are not heartening" and the actual responses to the problem will in practice be "far more modest and less effective" than needed.

Piketty's economic analysis and historical proofs are breathtaking. But even as he counsels economists to break out of their narrow habitats and understand the profound influence of politics on economics (and vice versa), he has remarkably little to say about politics. He notes that "politics is ubiquitous and ... economic and political changes are inextricably intertwined and must be studied together." But, oddly, Piketty doesn't really put them together.

He notes that a "conservative revolution" swept the US and UK starting with the elections of Ronald Reagan and Margaret Thatcher, but he never explains what that revolution had to do with the economic forces he catalogues elsewhere.

One obvious connection is this: as wealth began to re-accumulate at the top in the 1970s, so did political power. That led to the indirect financing of political campaigns and the establishment of an army of lobbyists, researchers, denizens of think tanks and media experts – all of which eventually enabled the wealthy to lower their marginal taxes, summon bailouts and subsidies for their businesses, and remove regulations that otherwise reduced their profits.

The "conservative revolution" thereby marked a return to the politics of the late 19th century, in which dynastic fortunes were so interwoven into government that the "ruling class" could ensure that laws maintained both its wealth and its power to rule.

In this sense, then, the McCutcheon decision by the five Republican-appointed members of the supreme court is but another step toward restoring dynastic rule.

Nonetheless, I think Piketty is way too pessimistic. He disregards the political upheavals and reforms that such wealth concentrations have inspired in the past – such as America's populist revolts of the 1890s followed by the progressive era before World War I, or the German socialist movement in the 1870s followed by Otto von Bismarck’s creation of the world's first welfare state.

Even now, at a particular dark hour for democratic capitalism, we can see evidence of a resurgent populism and progressivism in the United States. The so-called Tea Party movement is in large sense a populist revolt against large corporations, Wall Street and the Republican Party establishment. But for every Tea Party, there's an Occupy.

And there may be something of a balance wheel inherent in democratic capitalism that Karl Marx failed to comprehend – indeed, that even Thomas Piketty too readily discounts: a public that refuses to cede control to concentrated economic power. In the America of the late 19th century, the great jurist Louis Brandeis noted that the nation had a choice:

We may have democracy, or we may have wealth concentrated in the hands of a few, but we can't have both.

Soon thereafter, America made the choice. Public outrage gave birth to the nation's first campaign finance laws, along with the first progressive income tax. The trusts were broken up and regulations imposed to bar impure food and drugs. Several states enacted America's first labor protections, including the 40-hour workweek.

The supreme court's McCutcheon decision may make it easier for today's robber barons to take over American democracy in the short term. But by inviting them to do this so brazenly, McCutcheon may also fuel a popular backlash and a new era of democratic reform. It has happened before. Let's make it happen again.

Robert Reich

Robert Reich, one of the nation’s leading experts on work and the economy, is Chancellor’s Professor of Public Policy at the Goldman School of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. Time Magazine has named him one of the ten most effective cabinet secretaries of the last century. He has written thirteen books, including his latest best-seller, Aftershock: The Next Economy and America’s Future; The Work of Nations; Locked in the Cabinet; Supercapitalism; and his newest, Beyond Outrage. His syndicated columns, television appearances, and public radio commentaries reach millions of people each week. He is also a founding editor of the American Prospect magazine, and Chairman of the citizen’s group Common Cause. His widely-read blog can be found at www.robertreich.org.

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