"As the twenty-first century gets underway, the imbalance of wealth and democracy in the United States is unsustainable, at least by traditional yardsticks. Market theology and unelected leadership have been displacing politics and elections. Either democracy must be renewed, with politics brought back to life, or wealth is likely to cement a new and less democratic regime -- plutocracy by some other name."
This passage concludes Kevin Phillips' book Wealth and Democracy. Although it was written in 2002 -- a decade has passed and Bush has given way to Obama -- these observations are equally (and painfully) valid today. Indeed, as many have argued, the situation is now much worse.
As he documents in his book, immense personal wealth in the hands of the few has fatally corrupted the democratic process in America.
And, to be clear, this is more than a domestic US problem. It matters to some of us living elsewhere in the world. But, before we consider the international externalities, first a brief snapshot of how wealth is distributed in the United States and a look at how the wealthiest few will ensure that their dominance finally becomes institutionalized.
Follow the Money
Look for the source of wealth for the very richest Americans, and you will find the name of a large and successful corporation. This is obvious enough; yes, corporations are the source of rich peoples' wealth. Got it. So what.
The "so what" is that the elite have used their immense wealth and power, gained through their corporate entities, to game the system to ensure they continue to get an ever-increasing share. It is the corporation that delivers the great wealth used by the elite to purchase the political process, which in turn furthers the interests of the corporation, fulfilling a cycle that then repeats, leading to the plutocracy (or worse) of which Phillips so presciently warns.
The richest 1%
America is awash in cash -- at least at the very top.
The largest corporations report record-breaking profits, and their presiding CEOs receive record-breaking bonuses. CEO compensation, including stock options and other benefits, has risen to as much as 500 times that of the average worker. In the period from 1980 to 2006, the richest 1% of Americans tripled their after-tax percentage of the nation's total income, while the bottom 90% saw their share drop more than 20%. Between 2002 and 2006 an incredible three quarters of all the economy's growth was captured by the top 1%. A 2009 report showed that the explosion of wealth for the 400 richest Americans brought their total combined wealth to $1.57 trillion, which is more than the combined net worth of 50% of the entire US population. To emphasize the point, just 400 Americans have more wealth than 155 million of their countrymen, combined.
A growing literature shows in ever-starker terms that the rich are doing very well, indeed; and that same literature shows they are doing so at the expense of the "other half.
The struggling majority
The pain is acute for a growing majority of Americans:
- America has the highest poverty rate in the industrialized world. Over 50 million Americans rely on food stamps, and as many as 50% of US children will do so at some point. In 2009, one out of five US households didn't have enough money to buy food, and, in households with children, this number rose to 24% as the hunger rate among US citizens has now reached an all-time high.
- The Republican furor over Obamacare conveniently ignores the fact that Big Pharma, Insurance and the medical operators are flourishing at the expense of the general population. Of the 1.4 million bankruptcies reported in 2009, medical bankruptcies were responsible for more than 60% of them, and over 75% of these were filed by people who have healthcare insurance. Although America has the most expensive healthcare system in the world, and even though its citizens pay twice as much as any other country, the quality of care ranks only 37th in the world.
- Since the economic crisis began, Americans have lost more than $5 trillion from their pensions and savings and $13 trillion in the value of their homes. Older workers have lost an average of 25% of their 401Ks, and personal debt has risen from 65% of income in 1980 to 125% today. Over five million families have already lost their homes, and it is expected that by 2014 a total of 13 million will have lost theirs. As it is, 25% of current mortgages are underwater. Statistics show that there are over 3 million homeless Americans and, of that group, the fastest growing segment is single parents with children.