… The inequality in the contemporary period is almost unprecedented. If you look at total inequality, it ranks amongst the worse periods of American history. However, if you look at inequality more closely, you see that it comes from wealth that is in the hands of a tiny sector of the population. There were periods of American history, such as during the Gilded Age in the 1920s and the roaring 1990s, when something similar was going on. But the current period is extreme because inequality comes from super wealth. Literally, the top one-tenth of a percent are just super wealthy. This is not only extremely unjust in itself, but represents a development that has corrosive effects on democracy and on the vision of a decent society. …
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So, yes, in that sense capitalism actually works to undermine democracy. But what has just been described — that is, the vicious cycle of concentration of power and wealth — is so traditional that it is even described by Adam Smith in 1776. He says in his famous Wealth of Nations that, in England, the people who own society, in his days the merchants and the manufacturers, are “the principal architects of policy.” And they make sure that their interests are very well cared for, however grievous the impact of the policies they advocate and implement through government is on the people of England or others.
Now, it’s not merchants and manufacturers who own society and dictate policy. It is financial institutions and multinational corporations. Today they are the groups that Adam Smith called the masters of mankind. And they are following the same vile maxim that he formulated: All for ourselves and nothing for anyone else. They will pursue policies that benefit them and harm everyone else because capitalist interests dictate that they do so. It’s in the nature of the system. And in the absence of a general, popular reaction, that’s pretty much all you will get.
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Recall that Aristotle had said something similar in his Politics. Of all political systems, he felt that democracy was the best. But he saw the same problem that Madison saw in a true democracy, which is that the poor might organize to take away the property of the rich. The solution that he proposed, however, was something like a welfare state with the aim of reducing economic inequality. The other alternative, pursued by the “founding fathers,” is to reduce democracy.
Now, the so-called American Dream was always based partly in myth and partly in reality. From the early 19th century onward and up until fairly recently, working-class people, including immigrants, had expectations that their lives would improve in American society through hard work. And that was partly true, although it did not apply for the most part to African Americans and women until much later. This no longer seems to be the case. Stagnating incomes, declining living standards, outrageous student debt levels, and hard-to-come-by decent-paying jobs have created a sense of hopelessness among many Americans, who are beginning to look with certain nostalgia toward the past. This explains, to a great extent, the rise of the likes of Donald Trump and the appeal among the youth of the political message of someone like Bernie Sanders.
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