But what if those halcyon days were an aberration, and not the inevitable product of the genius of capitalism, married with the American Way of democracy? And what if our systems and our policies are leading us away from that peculiar form of meritocracy, to a more 'natural' state of stratification, low social mobility and an entrenched, self-reinforcing oligarchy?
That's the thesis of French economist Thomas Pinketty's recent book "Capital in the 21st Century." His exhaustive research documents that those 'natural' conditions were thelaissez-faire outcomes in the late 19th-century US and Europe – the so-called Gilded Age here, and the Belle Epoch across the pond. It leads him to conclude that such is the natural order of unfettered capitalistic systems in general, and the one to which we're returning, in particular.
Mid-20th century America was an accidental product of catastrophe and progressive legislation, he contends. World Wars left most non-US-based industrial capacity in ruins, and income tax rates, as one example, were steeply progressive on the top end. Much of the overall legal effect has been attenuated by our governmental policies since that time, notably tax cuts applicable to the upper end of the income spectrum, tepid and rolled-back regulation and privatization in various forms. Absent some new global catastrophe that destroys other whole nations' economies, we are very likely headed into an extended period of world-wide slow-growth – the kind that typified the Gilded Age era.
In slow-growth periods, economists explain that the return on capital exceeds the return on labor by a considerable margin. Such has been the case over the most recent thirty years of our history. And that gives rise to income inequity between the 'working' class and the 'investing' class. Relative after-tax returns on investments are increased further by the lower tax rates and other sheltering sanctuaries enjoyed by capital gains. The effect in Europe was and is more pronounced, even, than it has been here – perhaps that history helps account for that culture's stronger class identities?
Thus, if you have been fortunate to choose your parents well, the chance of maintaining your lavish lifestyle is excellent. Conversely, and perversely for American Dreamers – if you were not born into a top-end dynasty, your opportunity to prosper is an illusion. The earlier edition of this paradigm spawned the Vanderbilts, Rockefellers, DuPonts and Carnegies – family fortunes built by patriarchs and passed-down through many generations of heirs whose primary "merits" involved coupon redemption. If Piketty is right, that's also our future. Of course, it's not all family dynasties – the danger here is the de facto segregation of the society into two very separate Americas.
The so-called patrimonial capitalist system, according to Pinketty, fixes the game – and that's even before the Oligarchs bend and shape it to their particular service. The concomitant rise of fabulous fortunes and the removal of restrictions on any-but-the-most-blatant bribes of public officials results in a government that responds-to and furthers the interests of its patrons. That's dangerous for the political system that claims to be "OF the People, BY the People and FOR the People."
As an aside -- while it is true that the super-rich have never had much success seeking elective office directly (Meg Whitman being a recent example), that phenomenon should not be confused with a lack of influence. A majority of Congresspeople, after all, are now (mere) millionaires. If you are inclined to disagree on the 'influence' point, kindly take a stroll through the book "This Town" before complaining.
The rebuttal to this populist manifesto from conservative circles has been tepid, at best. It has consisted of quibbling over potentially better stats that might mildly weaken the demonstrated effects. The book has also spawned the predictable spate of name-calling, which is a favorite pastime of the Right regarding most things French, anyway.
As yet, nobody has laid a glove on the book's central thesis (see David Brooks' latest awful effort, for example). Even Bill Kristol (who, if he wasn't the inspiration for Batman's Joker, should have been) found himself in expressly awkward agreement with liberal Nobel laureate Krugman on the Sunday Talkies.
That's surprising, because implications of Piketty's work for public policy are legion.
They give the lie to many right-wing mythologies, about celebrating the 1% as "job creators" or even the late Jackie Kemp's joyful refrain "a rising tide lifts all ships." Except that 'they' don't, and 'it' doesn't. The book gives intellectual heft to the Progressive call for reforms that promote a more egalitarian – which is not to say equivalent-outcomes America. To use an overworked phrase – it really is a "game changer."
Now, whether the majority Party is really still interested, and has a truly liberal wing potent enough to ride this stallion, very much remains to be seen. Where have you gone, Teddy Roosevelt* – is there a populist champion who can harness this energy? More on that point in future columns, but the foundation has been set. Every few centuries, it seems, it takes a Frenchman to reveal us to ourselves.
* Yes, I am aware that Teddy Roosevelt was a Republican, before he wasn't one. Me, too. Lincoln also, before the GOP sold its soul to the highest bidder and canonized avarice as a defining cardinal virtue.
