Oligarchy Is as Dangerous as the Soviets

Looking at Our Political Dysfunction Through an Economic Lens

Oligarchy
Protest sign at Trump inauguration 2017. Photo credit: Joe Flood / Flickr (CC BY-NC-ND 2.0)
Reading Time: 18 minutes

During the Cold War the United States fought to defend its political system against the threat of Communism. But times have changed. Does the US now have to defend its republic and its democracy against the threat of a new Gilded Age of oligarchs and the dangerous consequences of deep income inequality?  

Vanderbilt law professor and former Senate staffer Ganesh Sitaraman argues that, in a political system like that of the US, which was designed to be class-blind, widening the economic divide can actually bring down the system. He tells WhoWhatWhy’s Jeff Schechtman in this week’s podcast that political democracy cannot survive amid economic inequality.

Sitaraman explains how the founding generation thought about the role of the middle class in keeping democracy healthy. He says the constitutional system devised by the founders, while devoid of overt checks and balances on class, had enough flexibility to help counter inequality until the Industrial Revolution in the 19th century. The excesses of the Gilded Age gave rise to the Progressive Era as a corrective.

He further argues that the period after the Great Depression of the 1930s led to additional government actions and programs that helped to temper further economic disparity, and as a result reflected the true benefits of workers, government, and business acting collectively. He contrasts all of this to what’s going on today, and argues that economics, more than anything else, explains the US’s current political dysfunction.

Ganesh Sitaraman is the author of The Crisis of the Middle-Class Constitution: Why Economic Inequality Threatens Our Republic (Knopf, March 14, 2017).


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Jeff Schechtman: Welcome to Radio WhoWhatWhy, I’m Jeff Schechtman. I don’t think we’d find much disagreement that we’re going through a time that’s a true test of our republic and of our constitution. But when I say that, the assumption is that I’m talking about the political and social pressures on both. But what about the economic pressures? Is there a nexus between our political system and our economic system? Certainly during the Cold War we fought to defend our political system against the economic threat of communism. So does it work the other way? Do we also have to defend our republic and our democracy against the threat of a new Gilded Age, of oligarchs, and of deep income inequality?
The way in which these political and economic ideas are related is the basis of some original work by my guest Ganesh Sitaraman. Games Sitaraman has worked for Senator Elizabeth Warren, he served as a policy director, speech writer, and senior counsel. Currently he’s a professor of law at Vanderbilt Law School and a senior fellow at the Center for American Progress. He’s a graduate of Harvard Law School, and he was an editor on the Harvard Law Review. And it is my pleasure to welcome him here to Radio WhoWhatWhy to talk about The Crisis of the Middle Class Constitution, Why Economic Inequality Threatens Our Republic. Ganesh, thanks so much for joining us.
Ganesh Sitaraman: Thanks so much for having me.
Jeff Schechtman: When we talk about income inequality and all the things that it portends, we tend to think of it and tend to focus on it as an economic problem. One of the things that you do is expand this idea and really bring it into the realm of politics and more specifically the realm of what the founders intended with respect to the constitution.
Ganesh Sitaraman: That’s exactly right. You know, a lot of the debates that we have today about economic inequality focus on the consequences of inequality for our economy, for economic growth, for the distribution of wealth, or they focus on moral questions about what people are due, and what kind of society we want to live in as an ethical matter. What they don’t really talk as much about is how important economic equality is actually to our constitutional system, and my argument is that it’s critical, that economic inequality is one of the underlying assumptions, it’s a background condition under which our constitutional system was designed, and that our constitutional system requires for it to continue and persist.
Jeff Schechtman: And talk a little bit about why you believe that, why, in fact, if we look at the work of the founders and what they did with respect to the constitution, that it becomes clearer that this concern about economic equality was an important part of how the republic was designed.
Ganesh Sitaraman: So one of the most important things we can do is to go back and try to figure out what the founding generation was doing. And to do that, we also have to know what came before them. And so, for most of the history of western political and constitutional thought, from the ancient Greeks and Romans all the way up until the founding, people were very worried about the problem of economic inequality. They worried that if the society was divided into a rich and a poor, the rich would oppress the poor or the poor would try to confiscate the wealth of the rich, and the result would be strife, violence, and revolution.
And so the answer to that problem for much of history was to try to build class conflict directly into the structure of government. So in ancient Rome, there’s a patrician senate for the wealthy, and there’s a tribune of the plebs, the plebeians, for the ordinary people of Rome. In England, there’s a House of Lords for the wealthy, and there’s a House of Commons for the commoners, for everybody else. And the idea between this, between both of these systems, is that each class, rich and everyone else, have a share in governing, but also a check on the other, and that’s what’s going to create stability and prevent strife and oppression and revolution.
And what’s very striking about our constitution is that we don’t have a tribune of the plebs, and we don’t have a House of Lords, we have no structural checks and balances built into our constitution that are a function of checking class power of the rich or the poor. That is a radical change in the history of constitutional thinking, and it’s something that is critical to our document, but that you won’t really notice unless you’re comparing it to what came before.
Jeff Schechtman: And to what extent did this come about, by design, or simply because the founding generation didn’t imagine anything like the economic inequality that we see today?
Ganesh Sitaraman: So it was a combination of the two in an important way. The founders knew about these kind of class warfare constitutions where class was built right into the structure of government, and they actually debated whether the new country should have one of those kinds of systems, and they rejected that choice. They did not make the choice to do that, even though they were well aware of it and discussed it.
The reason why, though, is a combination of things, partly, and I think one of the very important parts of this is that they knew that the American people would not accept a government like that, and the reason why is because people at the time believed that America was the most equal country in the history of the world. And I know that might sound shocking or even kind of baffling today, but if you go back and imagine yourself in the 1770s and 1780s in America, what’s different about America from Europe and from the history books they’re reading is there’s no feudalism in America. There’s no hereditary aristocracy in America, and America appears to have these vast lands to the west, which means that any white man, it was limited to white men at the time, could become a property owner, and property was the main form of wealth at the time. And so, under their worldview and in their conditions, and in their time, they seem to themselves to be shockingly equal, and to have this unique opportunity to create a government that is unlike anything the world has ever seen, and that’s what they do. And that’s why they do it.
Jeff Schechtman: And yet the inequality as it related to women and African Americans, was an issue and an issue that has been part of the American experiment for 250 years.
Ganesh Sitaraman: That’s exactly right. You know, so the tradition I trace in the book, I call the middle class constitutional tradition which says that to have a middle class constitution, a constitution like ours that assumes relatively low inequality, assumes a large middle class, you have to have a middle class among the members of the political community. But it leaves open a question of who’s in the political community? And that’s a question that’s been contested including violently over our history, and we can also see a tradition of inclusion that’s emerged over much of our history in which we’ve expanded our political community over time to include women, to include minorities. And I think what’s really important is what happens when these two traditions intersect. You know, if you have an expansive political community, you now have to ensure that every member of that political community is, can join the middle class.
And this is something that people throughout our history understood. So if you go back to Reconstruction after the Civil War, for example, the Republicans in the north who were working on the constitutional amendments after the Civil War, they weren’t just fighting for political rights for the freed slaves of the south. They were also fighting for economic justice, and so this is the era where we get the phrase, “40 acres and a mule,” because the radical idea, the idea of these Reconstruction Republicans was that we had to ensure that people in the south had not just political freedom, but also had land. Because you couldn’t have a landed aristocracy or a landless class of people, and still have a republic, and that’s what they were fighting for. So there was an understanding of this throughout our history.
Jeff Schechtman: That fight for economic justice also became part of the Civil Rights Movement in the ’60s.
Ganesh Sitaraman: Absolutely, and we often forget this about the Civil Rights Era, but when Martin Luther King gives his, “I Have a Dream,” speech in Washington at the Lincoln Memorial, that march is not just the March on Washington, it was officially titled The March for Jobs and Freedom, which is both about economic justice and also about political and civil rights. You know, Martin Luther King also spent the last years of his life working on the Poor Peoples’ Campaign, and this was a question of economic justice, not just civil and political rights, and the reason why is because these things are intertwined, and have always been intertwined.
Jeff Schechtman: With respect though to the founders, to what extent was it a chicken or the egg proposition in that the founders designed the constitution in such a way that they thought it would promote a middle class and promote this kind of equality, and what mechanism, if any, was structured to deal with that lack of inequality and how the government might act in that circumstance?
Ganesh Sitaraman: So I think the biggest things that we have to think about is the context of the late 18th century in America, 1780s and 1790s. And the biggest thing that is hard for us to really grapple with is that this is a pre-industrial society. There’s no corporations as we understand them today, there aren’t factories and machines as we understand them today, there’s nothing like that going on, so the nature of the economy is very, very different then. But, the founders give the central government, the federal government, significant powers, including the power to regulate commerce, which is significant over the economy. The power to levy tariffs, and taxes, and to regulate a variety of economic issues, all part of congress’ powers in the first article of the constitution. So they give the government the ability to make these changes, to adapt over time, and what I think is the most striking thing is actually what happens after the founding, which is as you have massive shifts in the economy in the 19th century: industrialization, transportation revolution, the communications revolution, the closing of the frontier, the shift from artisanal and agricultural work to wage labor in factories, the rise of the corporation and then trusts and monopolies.
As all of that happens, by the mid-19th century and into the late 19th century, people are very worried that the economic conditions around them can no longer sustain our constitutional system, are no longer the kind of economy that we need to have a republic. And so they argue for reforms in order to try to fix that, and so in the Gilded Age and the Progressive Era, what you get are the exercise of these constitutional powers and the creation of new constitutional powers in order to try to preserve the spirit of our constitutional democracy. So the Progressives and the Populists at that time period create the first antitrust laws in order to break up big concentrations of economic power. They advocate for minimum wages and for a 40-hour work week, and equal pay for women. They advocate for labor rights. They do all of this in the economic sphere in addition to pushing forward a constitutional amendment to have an income tax, so that the wealthiest pay more, and they do this because they understand that inequality is a big problem for our constitutional system.
Jeff Schechtman: And not only-
Ganesh Sitaraman: And at the same time, they try to attack politics as well and the kind of influence the wealthiest people have over politics, and so we get the first campaign finance regulations in this era, and a shift in how senators are elected to be democratically elected by the people.
Jeff Schechtman: There was also the fear, not only of the economic concern but that that would produce instability, and there was real fear about that, talk about that.
Ganesh Sitaraman: Yeah, there was real worry throughout much of our history that economic inequality would lead to instability, and in the late 19th century, after each panic and recession and depression, economically, there are strike waves, there’s in some cases extreme violence. It’s a serious concern, and people are very worried about it and that’s one of the things that pushes for reform is that there’s a mobilized set of people out there who are protesting the conditions under which they’re working, and they’re protesting the policies of the government that have created those conditions.
Jeff Schechtman: Talk a little bit about other historical periods where we’ve seen this shift towards a much more unequal situation similar to what we have today, maybe not quite as dramatic, and how we’ve gotten through those.
Ganesh Sitaraman: Yeah, so I think the progressive era really is the great example of this in our history. It’s not too far back, it’s in our own context, and a lot of the tools that the progressives came up with are still tools that are available to us today, things like antitrust, taxes, regulations, worker and labor union power and support. So a lot of those tools are still there. I think one of the really striking things that happens in that era is we push for those things, and the New Dealers continue pushing for a lot of these kinds of reforms and they try a lot of different things. Franklin Roosevelt wants “bold, persistent experimentation,” and that’s what the New Dealers do to try to get the economy out of the Great Depression.
What I think is so striking, though, is how we’ve forgotten about the fact that we need to create that kind of economy, and that it’s something that we actively do through public policy and through our democracy. I mean I think that happened in the mid-20th century for a few reasons.
The first is that we went through a period of extraordinary economic success. The economy was growing, the middle class was growing, everyone seemed to be doing better. At different rates, yes, but doing better, and that was something that pushed us away from it. I think the second big shift in that period is that we started … We stopped thinking about these issues as having constitutional significance, and that was partly because the New Deal was so successful. New Dealers convinced the courts and others that the Congress should have the power to regulate the economy as it wants to, and that this was a constitutional power that Congress had. So a lot of the debate left that arena.
And then the third thing you alluded to already, which was the Cold War. You know, this was an era in which communism was fighting capitalism, and that’s a very different kind of framing of the problem than democracy fighting against aristocracies and oligarchies, and I know that sounds kind of ancient history, but what’s important to remember is that the founding generation fought a revolution against a monarchy and an aristocracy in England. And pretty much every successive wave of immigrants that were coming from Europe or elsewhere in the 19th century were fleeing aristocracies, they were fleeing feudalism in order to come to a republic. That was a meaningful distinction for people throughout much of our history.
Jeff Schechtman: Talk about the impact of both the Depression, and you made reference to the New Deal before, and particularly the post-World War II period, where we seem to be much more focused on this rise in the middle class.
Ganesh Sitaraman: So one of the really important things that happens in the Depression and afterwards is that we actually built the middle class, it’s not something that spontaneously happened out of nowhere. It was that our democracy came together and made the choice to build, and to invest, and to create something, and that was a prosperous society for all of us. And so what that meant was that we did a couple of things. The first is, we put some real regulations in place to prevent speculation, and to prevent some of the more predatory and negative aspects of capitalism that had caused the Depression. So, we created the Securities and Exchange Commission to regulate financial sector. We had the Glass-Stegall Act, which broke up the banks into depository banks that are separate from investment banking, and that made banking much more boring and stable. So we had these kind of rules in place, we created FDIC insurance, is another version, another set of rules in this area.
At the same time we actually invested in the kinds of things that would build the middle class. The GI Bill sends a generation of people to college, we have investments in the highway system which create jobs but also make it more possible for commerce to operate throughout the country. These were investments that we were making as a people. And over time we continued to make those kinds of investments both to lift up the poorest people, and so things like Social Security for the elderly, Medicare, Medicaid, HeadStart, also contributed to the declining inequality of this era. And so we were actually very successful at actively building a middle class, and that was one of the great triumphs of the postwar system of public policy.
Jeff Schechtman: And when we look at what the pushback was, even during the New Deal period to some of these programs, do we see kind of a model for the way these tensions are playing out today, the way these forces are opposing each other today?
Ganesh Sitaraman: Yeah, so throughout this period there were people who were opposed, but I think what’s actually more striking is how much agreement there was. Even businesses agreed that it was important to have labor unions and that they were committed to working with labor unions, and to rising wages, and to improving benefits, and to using part of their gains from growth and productivity and using their profits to make sure that all the stakeholders in society were doing better. What I think is more striking is what happens later, which is that this covenant that business, and government, and workers have together in the postwar era breaks down, and instead what happens is we see deregulation of a lot of the kinds of rules that had created a more stable financial sector. We see a tax on unions and the successful attempt to really break unions in a lot of different places, and then the decline of the labor movement in a lot of places as a result, and a lack of protections for workers and other people in addition to far lower tax rates on the wealthiest people, less antitrust enforcement, and more mergers and consolidation of businesses. So it’s really almost a total reversal of the system that helped build the middle class and the successful economy in the mid-20th century.
Jeff Schechtman: And what does history tell us, and what do some of these other constitutional examples tell us about a system that we have now where this level of inequality exists, and is not brought into balance?
Ganesh Sitaraman: So I think the real worry that we should have here is that because relative equality is a precondition for our system, we don’t have the kinds of checks and balances to prevent the rich from oppressing the poor, or the poor from kind of Populist uprising that overthrows the rich and replaces oligarchy with demagogues or tyrants. We don’t have something like that, and that means we are at risk. We are at serious risk of two different kinds of things. The first is an oligarchy. That just means the government by the few, but usually those few tend to be very wealthy, and so it’s a government by a small number of wealthy people who use the government then to serve their own interests, and that’s a serious risk on the one side.
But you know, people aren’t stupid, they recognize when that’s happening and they recognize that they don’t like it, and so what happens is people protest that. They object to it, and the way that usually happens, commentators throughout history have suggested, is not through anarchy. It happens by people finding someone, a leader, who’s usually a demagogue, who captures their interests, and then takes power in government, and you know, Alexander Hamilton worries, for example, in the Federalist Papers that what happens in that kind of situation is demagogues turn into tyrants. And so you’re left with the futures of oligarchy or tyranny, both of which are pretty undesirable. And so that’s the risk of not doing something about the kind of underlying inequality problem.
Jeff Schechtman: And is there a point where the political system shifts so much, as maybe it has already, that it’s impossible to change this within the context of the existing political system?
Ganesh Sitaraman: Well I think there’s challenges here. The first, is it’s really hard to know. One of the things that happens, and that commentators throughout history make clear is that you don’t shift from a republic, or a democracy to an oligarchy by having a constitutional convention and everyone declaring, “We want to be an oligarchy now.” That’s not how it works. The way it works is it very slowly happens. It happens through the passage of a new kind of laws, and then one day you wake up and it turns out everything is really different, and this was not the kind of society that you wanted to happen, that you wanted to have. So it’s a very slow process, and so it’s hard to know when it happens and that’s a real challenge of how we figure it out. But I do think change is still possible through the system, and part of the reason why is we fundamentally do still have a democratic system, at least still right now, in which the people can vote and can change who our elected officials are, and can protest that, and can bring about a change in policy as a result. So I do think there’s opportunity, but it requires massive numbers of people to really get active as citizens, to participate, and to vote to change the system.
Jeff Schechtman: Of course, the counter overlay to that is the degree to which money and politics have become so synonymous today.
Ganesh Sitaraman: Absolutely. So the challenge is that at the same time we have a system in which the government is increasingly responsive to the wealthiest people and corporations, and those people in corporations, as they get wealthier, have the resources and tools to be able to influence the government, and so it creates this kind of vicious cycle, and that is the big challenge. And so I think part of how we need to think about the world today, and the world of politics today, is if you want to reclaim our republic and save our constitution and our constitutional system, you have to be invested in fighting against the influence of money and in politics, and that’s not just on the campaign finance side in elections, but that’s on lobbying, that’s on the revolving door of people going in and out of industry into government. There’s people who go from industry directly into jobs as regulators, regulating their old industry, and there’s a lot of conflicts of interest that can emerge from that kind of thing. That kind of thing has to be part of our conversation, not just campaign finance reform.
Jeff Schechtman: And is there something though from an economic perspective, is there something inherent in the way the economy is changing today, not unlike what we went through in the Industrial Revolution but as we move into this digital, further and further, into this digital economy, and the nature of work changes, the nature of so much in the economy changes that makes this kind of inequality almost baked into the system?
Ganesh Sitaraman: So I think one of the big changes that’s happened that’s similar to about a hundred years ago in the Gilded Age and Progressive Era, is the consolidation of economic power into a small number of firms. And so if you look in almost any sector of the economy, there’s a smaller and smaller number of companies that dominates. We actually have comparatively little competition actually going on in a lot of sectors of the economy, and we have lots of consolidation, and that’s a problem. It’s a problem because it means that within those sectors there’s less innovation, there’s less competition, there’s more of an opportunity to squeeze startups and small businesses. But it also means that the kind of big entities have greater ability to influence government and to lobby for certain kinds of things and to get rules that benefit them and prevent any future competition. So I think that is a similarity, and this is partly why a bit more than a hundred years ago, the Populists and Progressives invented antitrust law, and really pushed for it strongly. And those are laws that are still on the books, and that we could aggressively enforce, and I think would have a big impact on our economy right now.
The other thing that I’ll just say is that we shouldn’t think of the changes in the economy, whether it’s technology, or consolidation, or anything else as something that’s God-given or that comes from nature, or that springs forth organically from nowhere. These are all shaped and created by laws, and we have the power to be able to shape their future direction. I’ll just give you a quick example of a technology, the television. If you were to turn on the T.V. in the middle of the day, you will not find bad language, you will not find nudity, and that’s because we’ve chosen to regulate that, and to say, “We don’t want children to be able to see that during the day, we’re not going to put it on.” That’s a choice, that’s a choice that a democracy makes, and so for all the new technologies or other things that are out there, we can make choices about how we want to live as a society and what kinds of things we want those technologies to be used for, or not to be used for.
Jeff Schechtman: And finally, do you have reason for optimism in all of this?
Ganesh Sitaraman: I do, I think the biggest thing that makes me optimistic is when you look out at people, even though we are very, very divided today, pretty much a lot of people on both sides of the political spectrum agree that our system is deeply broken, and they think the system is rigged, and they think it is rigged because it is. And that’s, I think, a shared foundation, at least, whether you’re a Bernie Sanders supporter, or a Donald Trump supporter, that the general sense that our system is deeply broken in this way, and the recognition that we have to have fundamental change to fix that. That is something that we share in common, and that is something that we can build upon as a recognition of one of the problems for how we really get back to saving our constitution and supporting our democracy.
Jeff Schechtman: Ganesh Sitaraman, The Crisis of the Middle Class Constitution. Ganesh, I thank you so much for spending time with us here on Radio WhoWhatWhy.
Ganesh Sitaraman: Thank you.
Jeff Schechtman: Appreciate it.
And thank you for listening and for joining us here on Radio WhoWhatWhy. I hope you join us next week for another Radio WhoWhatWhy podcast. I’m Jeff Schechtman. If you liked this podcast, please feel free to share and help others find it, by rating and reviewing it on iTunes. You can also support this podcast and all the work we do by going to whowhatwhy.org/donate.

Related front page panorama photo credit: Adapted by WhoWhatWhy from Bosses of the Senate (US Senate / Wikimedia).

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