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America’s Wealth Gap

America's Wealth Gap

Will 2012 go down in history as the year money took over politics? Both parties will have spent more than a billion dollars electing the next president. More and more of that money comes from a handful of the wealthiest Americans and the corporations they run. On the Democratic side, Jeffrey Katzenberg of DreamWorks, telecommunications pioneer Irwin Mark Jacobs, and hedge fund manager James Simons have donated millions to re-elect the president, but the amount of money the Democrats have received from deep-pocketed supporters pales in comparison to what Republicans have received. A single billionaire, business magnate Sheldon Adelson, had by August spent more than $41 million and promised to spend up to $100 million defeating President Obama and other Democrats. All told, the top .07 percent of donors give more money than the bottom 86 percent. And it pays off. Candidates spend ever more time courting the super rich and then, once in office, try to keep them happy. This summer, for example, Mitt Romney held two fundraisers at which he raised almost $10 million from the oil and gas industry and then announced that as president he would end more than 100 years of federal restraint of oil and gas drilling on public lands. Things like that happen on both sides. How did we get into such a situation? What is to be done about it? Is it threatening our democracy? And doesn’t it go against everything the founding fathers stood for?

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Those are big questions. The last one is the easiest to answer. Control of government by the richest wouldn’t have bothered the founders at all. It was just what they believed in. John Jay, the first Chief Justice, put it most directly: “The people who own the country ought to govern it.”

Many of the founders, including George Washington and Thomas Jefferson, were themselves among the wealthiest people in the country. They felt their prosperity made them obliged to serve their nation at the highest level. Yes, they declared independence and fought a Revolution to escape the tyranny of English monarchy and might, but they expected to replace aristocracy of birth with aristocracy of accomplishment, rule by elites who had created their wealth and influence, not inherited it. That was why they wrote a Constitution that stated the president was to be elected not by the people but by an elite Electoral College, and the Senate was to be chosen not by the people but by state legislatures. And that was why in most states only men who had money and property were allowed to vote at all.

It didn’t take long for the 99 percent of the day to rebel against that status quo. The notion of true democracy, rule by ordinary people, grew popular in the early 19th century. It was spearheaded by President Andrew Jackson, who hated bankers and banks, especially the national bank that had been founded by Alexander Hamilton. He destroyed the bank, partly to counter the power of the richest Americans. At the same time, a new generation of wealthiest Americans emerged, and they were a breed that had never existed in Europe—industrious, self-made men of humble origins, such as John Jacob Astor, a German immigrant who began working in a menial job for a fur merchant but came to dominate the trade in furs from the West, and Cornelius Vanderbilt, who rose from ferryboat captain to steamboat owner and then railroad baron. In 19th century America, the wealthiest really did have something in common with the common man.

Or at least that was true in the American North. The elite of the South were a breed apart. They grew fantastically rich and powerful from growing rice and cotton with all the hardest labor done by slaves. Seven of the first 12 presidents were from Virginia, the most prosperous part of the South. When the Civil War came, it was a fight not only over slavery but between the power of new Northern industry and urban wealth and the spoils of the Southern slave economy as well.

As extreme as the power of the wealthiest is today, it pales before that of the rich in the pre-Civil War South, for they could own human beings who had no rights whatsoever. Slave owners had such full support of the law that the Constitution originally counted each slave as three-fifths of a man for voting purposes, not so that slaves themselves could vote, but to add to the headcounts on which Congressional districts were based, giving their owners even more political and electoral power than anyone who didn’t keep slaves. Slavery was by far the highest point of the tyranny of the wealthiest in the United States.

But the kind of abuse of power that’s more familiar to us today took off after the Civil War, when four years of bloodshed costing more than a million lives left the South crippled and the North as a new industrial world power. That power corrupted, as it always does. The Gilded Age—which lasted from the end of the Civil War to 1900—was a festival of power grabs among the wealthiest. For instance, to build the Transcontinental Railroad, the owners of the Union Pacific Railroad set up a construction firm called Credit Mobilier to wildly overcharge for the work it did, just so they could bleed their own company and bondholders. Then, to make sure Congress didn’t complain, they gave assorted Congressmen both cash bribes and stock that paid huge dividends. The scam got exposed in 1872. It was estimated to have stolen $42 million in government and bondholder money, and it led to the disgrace of public figures as high up as the vice president, Schuyler Colfax.

By the 1880s the Senate was dominated by millionaires. And by 1892, wealth-fed scandal had become so commonplace that opposition to it gave rise to a new political party, the Populists, whose platform announced, “We meet in the midst of a nation brought to the verge of moral, political, and material ruin. Corruption dominates the ballot-box, the Legislatures, the Congress, and touches even the ermine of the bench. … The fruits of the toil of millions are boldly stolen to build up colossal fortunes for a few. … From the same prolific womb of governmental injustice we breed the two great classes—tramps and millionaires.”

When Theodore Roosevelt became president in 1901, he ushered in the Progressive Era­­, one of two major periods in U.S. history when the political tide turned strongly away from the wealthiest—the other was during the presidency of his distant cousin Franklin Roosevelt. Roosevelt railed against what he called “malefactors of great wealth” and the “criminal rich,” and he pushed through reforms like strengthened railroad regulations and the creation of the Department of Labor. A decade later, President Woodrow Wilson cemented Roosevelt’s accomplishments by establishing the federal income tax and the direct election of senators.

We know now that Government by organized money is just as dangerous as Government by organized mob.

Though none of that prevented the wild financial bubble fed by coziness between the wealthy and the government in the 1920s. So in the wake of the Great Crash that followed, Franklin Roosevelt took office in 1933 as a rich New Yorker determined to look out for the common man. He wrote to a friend, “The real truth of the matter is, as you and I know, that a financial element in the larger centers has owned the Government since the days of Andrew Jackson. … The country is going through a repetition of Jackson’s fight with the Bank of the United States—only on a far bigger and broader basis.” He raised taxes on the rich and used much of the money that came in to put the unemployed poor back to work. In 1936 he wrote: “We know now that Government by organized money is just as dangerous as Government by organized mob. … I should like to have it said of my first Administration that in it, the forces of selfishness and lust for power met their match. I should like to have it said of my second Administration that in it these forces met their master.”

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  • Mike

    One word – Fascism

    When fascism comes to America, it will be wrapped in the flag and carrying the cross.”

    - Sinclair Lewis

    The Traits of Fascism

    Here are the defining characteristics of fascism, as evidenced by political analyst Dr. Lawrence Britt, who has studied this doctrine in the case of Germany, Italy, Spain, Indonesia and Chile. See for yourselves how many of them apply to the United States right now.

    1. Powerful and continuing nationalism
    2. Disdain for the recognition of human rights/usurping human rights
    3. Identification of enemies/scapegoats as unifying causes for the population
    4. Supremacy of the military (or mercenary groups in the case of the modern US)
    5. controlled mass-media
    6. Obsession with national security
    7. Religion and government are intertwined
    8. Corporate power is protected
    9. The government is male dominated (sexism)
    10. Labor power and unions are suppressed
    11. Disdain for the intellectuals and the arts
    12. Obsession with crimes and punishment
    13. Rampant cronyism and corruption (most leaders are related to each other)
    14. Fraudulent elections (made easier by electronic voting machines, the Supreme Court and new Jim Crow laws-voter ID)

    While some of these traits can easily be identified in the United States today, some require a bit of explaining. The first three points are clear enough, but the fourth is a little tricky. To get the main idea, know that there are currently mercenaries in Afghanistan, all working alongside the US military, and sometimes even offering protection for its commanders. These groups operate outside of military law, and are run by private corporations, such as Backwater USA. The media is not as much controlled, as it rallies to the stated objectives of the government. In the US, there is a long history of the media having ties with the establishment, for the simple reason that the major newspaper and TV owners have a lot of high-placed friends. No one would want to have their friends talk badly about them, and the same holds true here. Independent media is hard to come by these days, mostly because many sites and stations advocate wild conspiracy theories. Therefore, most free media is discredited, and people really believe when large networks ridicule some people’s honest attempts at making some things public. Point’s six to fourteen are also clear, and there are many people in the US, especially those in ultra-conservative, White, highly religious, and far-right groups who believe that this is the way things are supposed to be. They are currently lobbying for a greater influence of religion in the way America is run, which is naturally troublesome. The freedom of belief is stomped on, as these individuals believe they know what is best for everyone under their own beliefs.
    Let me end this by quoting Benito Mussolini, the leader of the Italian Fascist Party in World War II. He said that fascism was, “the merger of corporate and government powers.” Now, what is the difference between what this implies, and the Republican-promoted K Street Project?

  • jeri

    Wow! How left-leaning can Mr. Allen be and how unfair!!! Quoting Mr. Allen: “This summer, for example, Mitt Romney held two fundraisers at which he raised almost $10 million from the oil and gas industry and then announced that as president he would end more that 100 years of federal restraint of oil and gas drilling on public lands.” Mr. Allen, why didn’t you mention that Pres. Obama forced thru without any Republican votes, his Obamacare, which will bankrupt our nation and our citizens PLUS he immediately gave WAIVERS for Obamacare to all the unions that complained!!!! Unions will be SURE to vote for Pres. Obama now, won’t they? Talk about buying votes!!!!! Unfair, Mr. Allen, unfair!!!!

  • Jan

    George Washington and the other founders of our American Republic gave every citizen the opportunity to achieve his or her individual dream be whatever it was or is. To criticize and chastise those who developed and implemented their talents and skills to achieve those dreams is an insult to the founders, their principles and our system of government. Many wealthy supporters of Obama and Romney share similar backgrounds as the rest of the American citizenry. What we do with our talent and skills rests solely with us. I used and still use my talent and skills to further my dream. I am not entitled to success. I am entitled to work to achieve success. I am not rich monetarily by any means but feel I am the wealthiest person alive because I am an American.

  • Richard Niell Donovan

    This is one of the great issues of our day. Social Darwinians promise that Trickle-Down Economics works–that the wealthy invest in businesses that provide jobs and raise all the boats.

    However, as this article notes, more and more wealth is concentrated in a few hands. I would say “fewer hands” but that isn’t quite true. The number of wealthy people is growing rather than shrinking. But the number of people who are struggling financially is growing even faster.

    So my question is, “How is that working for you?” If you happen to be one of the lucky rich ones, you will probably say, “Just fine, thank you!” However, it isn’t working just fine for most Americans. We have record numbers of people out of work. We have way too few jobs for young people graduating from high school and college. The median household income has fallen precipitously. The enormous wealth of the very rich has done little to raise any boats other than their own.

    However, we need to be careful about expecting the government to remedy the situation. Massive federal spending during the current administration has saved the big guys, but has done very little for the rest of us. Truly shameful! The government often creates more problems than it solves–and it never does anything efficiently.

    With reference to campaign financing, we might modify Lord Acton’s “Power corrupts; absolute power corrupts absolutely” to say “Money (which is one form of power) corrupts; great wealth corrupts absolutely.” There is no doubt that our current form of campaign financing has made political people little better than prostitutes-selling that which is precious for that which is not.

    Are the politicians at fault? Absolutely! They have helped to design the system that keeps them slaves to the fundraising machine–and keeps the rest of us slaves to the increasingly unfair system.

    However, we are all at fault. We need to rise up and demand a change. A constitutional amendment would probably be required to really fix our problems–and I can’t imagine that politicians would support an amendment that would threaten their hold on power.

    But the alternative is that the growing number of have-nots could turn violent in an attempt to make things better for themselves–or just to vent their anger. I would much prefer that the American people would get a handle on our economic and political problems before that happens.