Sunday, April 15, 2012

the wealth defense industry

alternet | In 2005, Citigroup offered its high net-worth clients in the United States a concise statement of the threats they and their money faced.

The report told them they were the leaders of a “plutonomy,” an economy driven by the spending of its ultra-rich citizens. “At the heart of plutonomy is income inequality,” which is made possible by “capitalist-friendly governments and tax regimes.”

The danger, according to Citigroup’s analysts, is that “personal taxation rates could rise – dividends, capital gains, and inheritance taxes would hurt the plutonomy.”

But the ultra-rich already knew that. In fact, even as America’s income distribution has skewed to favor the upper classes, the very richest have successfully managed to reduce their overall tax burden. Look no further than Republican presidential contender Mitt Romney, who in 2010 paid 13.9 percent of his $21.6 million income in taxes that year, the same tax rate as an individual who earned a mere $8,500 to $34,500.

How is that possible? How can a country make so much progress toward equality on other fronts – race, gender, sexual orientation and disability – but run the opposite way in its policy on taxing the rich?

In 2004, the American Political Science Association (APSA) tried to answer that very question. The explanation they came up with viewed the problem as a classic case of democratic participation: While the poor have overwhelming numbers, the wealthy have higher rates of political participation, more advanced skills and greater access to resources and information. In short, APSA said, the wealthy use their social capital to offset their minority status at the ballot box.

But this explanation has one major flaw. Regardless of the Occupy movement’s rhetoric, most of the growth in the wealth gap has actually gone to a tiny sliver of the 1% – one-tenth of it, or even one-one-hundredth.

Even more shockingly, that 1 percent of the 1% has shifted its tax burden not to the middle class or poor, but to rich households in the 85th to 99th percentile range. In 2007, the effective income tax rate for the richest 400 Americans was below 17 percent, while the “mass affluent” 1% paid nearly 24 percent. Disparities in Social Security taxes were even greater, with the merely rich paying 12.4 percent of their income, while the super-rich paid only one-one-thousandth of a percent.

It’s one thing for the poor to lose the democratic participation game, but APSA has no explanation for why the majority of the upper class – which has no shortage of government-influencing social capital – should fall so far behind the very top earners. (Of course, relative to middle- and lower-class earners, they’ve done just fine.)

For a better explanation, we need to look more closely at the relationship between wealth and political power. I propose an updated theory of “oligarchy,” the same lens developed by Plato and Aristotle when they studied the same problem in their own times.

A quick review

First, let’s review what we think we know about power in America.

We begin with a theory of “democratic pluralism,” which posits that democracy is basically a tug-of-war with different interest groups trying to pull government policy toward an outcome. In this framework, the rich are just one group among many competing “special interests.”

Of course, it’s hard not to notice that some groups can tug better than others. So in the 1950s, social scientists, like C. Wright Mills, author of The Power Elite, developed another theory of “elites” – those who wield more pull thanks to factors like education, social networks and ethnicity. In this view, wealth is just one of many factors that might help someone become the leader of a major business or gain a government position, thereby joining the elite.

But neither theory explains how the super-rich are turning public policy to their benefit even at the expense of the moderately rich. The mass affluent vastly outnumber the super-rich, and the super-rich aren’t necessarily better-educated, more skilled or more able to participate in politics; nor do the super-rich dominate the top posts of American government – our representatives tend to be among the slightly lower rungs of the upper class who are losing the tax battle.

Also, neither theory takes into account the unique power that comes with enormous wealth – the kind found in that one-tenth of the 1%. Whether or not the super-rich hold any official position in business or government, they remain powerful.

Only when we separate wealth from all other kinds of power can we begin to understand why our tax system looks the way it does – and, by extension, how the top one-tenth of 1% of the income distribution has distorted American democracy.

Enormous wealth is the heart of oligarchy.

So what’s an oligarchy?

Across all political spectrums, oligarchs are people (never corporations or other organizations) who command massive concentrations of material resources (that is, wealth) that can be deployed to defend or enhance their own property and interests, even if they don’t own those resources personally. Without this massive concentration of wealth, there are no oligarchs.

In any society, of course, an extremely unequal wealth distribution provokes conflict. Oligarchy is the politics of the defense of this wealth, propagated by the richest members of society.

Wealth defense can take many forms. In ancient Greece and Rome, the wealthiest citizens cooperated to run institutionalized states that defended their property rights. In Suharto’s Indonesia, a single oligarch led a despotic regime that mostly used state power to support other oligarchs. In medieval Europe, the rich built castles and raised private armies to defend themselves against each other and deter peasants tempted by their masters’ vaults. In all of these cases oligarchs are directly engaged in rule. They literally embody the law and play an active role in coercion as part of their wealth defense strategy.

Contemporary America (along with other capitalist states) instead houses a kind of “civil oligarchy.” The big difference is that property rights are now guaranteed by the impersonal laws of an armed state. Even oligarchs, who can be disarmed for the first time in history and no longer need to rule directly, must submit to the rule of law for this modern “civil” arrangement to work. When oligarchs do enter government, it is more for vanity than to rule as or for oligarchs. Good examples are New York City Mayor Michael Bloomberg, former presidential candidate Ross Perot and former Massachusetts Governor Mitt Romney.

Another feature of American oligarchy is that it allows oligarchs to hire skilled professionals, middle- and upper-class worker bees, to labor year-round as salaried, full-time political advocates and defenders of the oligarchy. Unlike those backing ordinary politicians, the oligarchs’ professional forces require no ideological invigoration to keep going. In other words, they function as a very well-paid mercenary army.

Whatever views and interests may divide the very rich, they are united in being materially focused and materially empowered. The social and political tensions associated with extreme wealth bond oligarchs together even if they never meet, and sets in motion the complex dynamics of wealth defense. Oligarchs do overlap with each other in certain social circles that theorists of the elite worked hard to map. But such networks are not vital to their power and effectiveness. Oligarchic theory requires no conspiracies or backroom deals. It is the minions oligarchs hire who provide structure and continuity to America’s civil oligarchy.

24 comments:

Big Don said...

Do you think these SuperRichFolks are that much happier than the rest of us?  Steve Jobs said on his deathbed that raising a family was 10,000 times better than anything else he had done.  BD would like to hear Bill Gates and Warren Buffett on that issue when their Time comes...
http://www.benzinga.com/news/11/10/1972429/steve-jobs-having-kids-was-10-000-times-better-than-anything-ive-ever-done 

CNu said...

Serious question BDE, if you had Koch's billions to do with as you see fit, what specific things might you direct your attention and those resources toward in order to obtain the greatest possible personal satisfaction? 

Big Don said...

At this stage of the game, BD would, for openers, get foolproof Preps, a T1 connection right in our home, first-class home theater, upgrade our satellite service(s) and security (24/7 armed guards), a billion in Gold Eagles in a monster safe, and get top-of-the line service at the Mayo Clinic.  Wouldn't donate a fkg dime anywhere. We'd get us Boy(s) to go run all the errands/shopping  and put All The Rest in trust, and hire CNu (everyone has a price) and a few others as co-trustees/advisors (with certain BD-specified constraints) to see that the kids/grandkids/great-grandkids have the best shot.  Probably a few hobby equipment  upgrades. Don't travel, Paradise is the ability to totally stay home. We don't even want a Corvette, Lambo, or Learjet anymore.  Not even a fkg smartPhone...

Something along those lines...

Re:- Maybe before y'all'a time, Howard Hughes ( a prior day Gates/Buffett) in his waning years sat in his pajamas all day in his Vegas penthouse watching old movies on a 16mm Bell&Howell projector (this was before VCRs and DVDs)....

John Kurman said...

So, a quick and easy solution would involve a colony-collapse disorder of the plutonomy's worker bees. Spread the pesticide into the pollen source, and all those lawyers and accountants fail to make it back to the hive at the end of the day. Question is, what social form of pesticide do we use on them?

Gee Chee Vision said...

I'm sure close tabs are kept on the affairs of the mega-rich that get a little too secretive for their own britches. Especially if you're finding constructive envestments that may some where down the line disrupt the natural coarse of exploitation.

John Kurman said...

...pretty much what your average IQ 75 loozer would wish for... no imagination what-so-ever

Big Don said...

In case your IQ-76  reduced cognizance didn't detect it, what we would be doing is actually not that much different than what we *are* doing right now.  Would only be doing it in more style and with more security.  

We explain the wealthy IQ-75 LOOZer: 
An IQ-75 LOOZer would screw 15 porn star babes, trashing his career, and then LOOZe half of his wealth (and future relationship with his kids) in a subsequent resulting divorce (Tiger Woods).  Or get arrested for pedophilia and die of a drug overdose in the care of an IQ-75 affirmative action physician (Michael Jackson).  Or contract AIDS (Magic Johnson).  Or get away with murdering his wife and her boyfriend, and then get tossed in prison for armed robbery (OJ Simpson).  Or blow his signing bonus in an unsuccessful attempt to escape a murder conviction for killing his knocked-up girl friend (Rae Carruth).  Not to mention the epitome of IQ-75 LOOZing found in a multitude of wealthy convicted and/or murdered  Rapperz (P.Diddy, Notorious B.I.G., Tupac Shakur, et. al.).....

I'd bet BD is much happier content and more fulfilled than any of 'em.... (and more alive).  BTW, BD is not concerned with being recognized 1000 years from now as a latter-day Leonardo Da Vinci...

Dale Asberry said...

You better be careful in these parts Donnie. An intellectual cripple like yourself won't even see what hit ya...

Tom said...

Re Woods, Jackson, Johnson or Simpson ... which of 'em did you feel were 75 IQ?     

I haven't seen test results, but I'd be shocked out of my gourd if lack of IQ was the source of whatever problems they've had.   At a guess their problems are more closely related to whatever killed Marilyn Monroe and James Dean.

Gee Chee Vision said...

Narrator: Meanwhile back at Don's Den...

BD: Insolent burly-headed nigra dolts!  I'll place them on the defense by taking them to account for the actions of every single nigra within the accursed Hamitic race. Using inexhaustible case by case material I'll keep them so preoccupied they wouldn't dare consider info such as 80% of the entire Earth is consumed by 16% none of which being camel jockeys or jungle bunnies.

Narrator: The diabolical Don Quijote then proceeds to sort through his collection of King Magazine swimsuit issues. Solely for the purpose of confirming tabloid P. Diddy stories of coarse.

John Kurman said...

So, what your telling me, if you continue your fucking useless existence as is, then you would be useless times a billion. 
Actually, I take that back. Kurman's Law states that no one is worthless. You can always be used as a bad example. Maybe they'll call you up for Shark Tank.

Big Don said...

Actually, technology has just taken a giant leap forward in precisely nailing down what PRR test data has been telling us conclusively for years, i.e., IQ is genetic: Specific genes are now linked to big brains and intelligence ----> 
http://www.foxnews.com/scitech/2012/04/16/specific-genes-linked-to-big-brains-and-intelligence/

Read it and weep. Simple matter now to just run off the group genome averages and see, For Real, how various identifiable groups stack up in the IQ department...

Dale Asberry said...

Donnie, I have always known that I've got it all with TWO big heads. Maybe if you undergo genetic retroviral therapies you could end up with one big head! (Although I doubt you're man enough to know how to use it)

BTW, if you weren't such a dumbass, you'd actually RTFR and notice that it is only a weak link with other factors playing considerably bigger roles. It also, unequivocally, DOES NOT LINK (the social measure) IQ TO GENETICS.

Tom said...

BD, that has nothing to do with what I said.  

But ok. Let's get subducted into your one-track rut.

BD, what you don't get is virtually nobody is saying genes don't influence intelligence.    (Though there's parenting x genes, and that's not very untangle-able.)

 The question is, does what we're pleased to call race have anything to do with intelligence.  OK?  OK?    Don't let the team down (yet again) by failing (yet again) to keep your eye on that ball.    Times are tough and I won't have you throwing away vital Aryan IQ points.    

You know that genetic variation within each continent is 10x as large as the systematic genetic variation between continents, OK?  You know that, right?    

 So showing that there's genetic influence is not only obvious (humans for example are smarter than goldfish) but irrelevant to the question you can't seem to pull your nose out of. 

Correcting for how badly the kids are emotionally abused for society is my own biggest concern on these so-called "IQ data."

One experiment I'd like to do is take 200 kids, all the same ethnic group (and "genetic whatever" too if you like), and give them IQ tests.  For one month before the test, half the kids get told that they shouldn't really be taking it, they're not expected to do well, it's a waste of money to even try to teach them.  The other half get told that they're teh awesome--the future leaders of the Free Wolrd or whatever. 

Then see what the difference in test scores is, from just that one month.

Dale Asberry said...


One experiment I'd like to do is take 200 kids, all the same ethnic group (and "genetic whatever" too if you like), and give them IQ tests.  For one month before the test, half the kids get told that they shouldn't really be taking it, they're not expected to do well, it's a waste of money to even try to teach them.  The other half get told that they're teh awesome--the future leaders of the Free Wolrd or whatever.


That research has been done with the exactly the results you would expect, Tom. Of course being so brutal about it would be considered unethical so they instead "primed" them with subtle messages. Even subtle messages of inadequacy are significant determinants. Unfortunately, I don't remember where I saw that research. Sorry.

Big Don said...

You folks need to view that video on the neurological roots of denial of an utterly obvious situation -  the guy in the green short sleeve shirt at the top today's Subrealism page.  One totally awesome lecturer and topic. 

Dale Asberry said...

ROTFLMAOTIPMP

un-self-conscious

CNu said...

LOL, I've gotta hand it to you BD. You're like dynamite! Couple sticks of your wit and wisdom is all that's required to blow up a thread!  http://youtu.be/pR30knJs4Xk?t=1m21s no matter what the original topic was....,

Gee Chee Vision said...

I'm telling you Big D is one diabolical King magazine booty palm'n posing villain. 

http://1.bp.blogspot.com/-iVv9kB7NxXc/T4xXzgptnmI/AAAAAAAAABg/iHG9n_kZsn4/s1600/Big+D.jpg

Dale Asberry said...

He's BD or Big Don. NOT Big D... that's me :-)

Gee Chee Vision said...

Big Don I mean

Big Don said...

@BlownThread --- Hold on a sec,  CNu, you're the one that started it by asking what BD would do with the Heavy Bread...

CNu said...

lol, c'mon magne, "wealth defense" and "heavy bread" go together like "big nipples" and "heavy breasts" - now how you manage to segue from these natural convergences to the nutty fringe of PRR, scans, genes, and HBD, well, that's your own inadmissable conjunction of faith and evidential speculation....,

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