A stagnant economy has undoubtedly put a lot of financial
stress on the middle class. And that is bumming out America’s 1
percenters. “Our country is rapidly becoming less a capitalist society
and more a feudal society,” entrepreneur Nick Hanauer
wrote recently in Politico, in an open letter to “my fellow zillionaires.”
Hanauer — an early investor in Amazon (
AMZN)
who says he has been involved with more than 30 startups — cites the
well-documented rise in income inequality during the past 30 years as
the ultimate cause of a Mad Maxian dystopia he envisions. "If we don’t
do something to fix the glaring inequities in this economy, the
pitchforks are going to come for us," he writes. "One day, somebody sets
himself on fire, then thousands of people are in the streets, and
before you know it, the country is burning. And then there's no time for
us to get to the airport and jump on our Gulfstream Vs and fly to New
Zealand."
He’s not the only wealthy worrier. Venture capitalist
Tom Perkins complained earlier this year about the “persecution” of the
rich through high taxes, while magnates such as Sam Zell, Wilbur Ross
and John Mack
have griped of late about the unschooled masses scapegoating America’s moneyed elite.
Chill out, rich folks
The
rich ought to chill out. While the masses may envy their wealth,
there’s no evidence of a revolution brewing, or even a well-behaved
civil disturbance. Americans are clearly dismayed at the
direction the country seems to be heading,
but they are also docile in the face of decline and confused about
possible solutions. Hanauer fears mobs heading for the castles of
Greenwich and Palo Alto, but America’s disaffected these days are more
likely to vent their rage behind closed doors as they shake their fists
at Fox News or MSNBC and leave cranky comments on websites such as this
one. If there’s a populist threat to the plutocrats, it’s years or even
decades away.
Here’s the
proof: Before the pitchforks, there will be higher taxes on the wealthy —
yet there’s meager support for more redistribution of wealth. Polls
show that slightly more than half of Americans
favor raising taxes
on the wealthy for specific causes such as helping reduce poverty,
which makes it sound like tax hikes have widespread support and are
inevitable. But here’s the catch: An even higher portion of Americans
are
disgusted with the government,
with little trust that it spends tax money wisely. That’s why
Republicans can consistently block tax hikes on the wealthy with little
payback at the voting booth.
If
there’s simmering outrage at this state of affairs, it’s not evident in
the public square. The “Occupy” movement against the financial elite
enjoyed a moment in 2011 but has largely fizzled. Hanauer argues that
the occupiers helped sharpen the focus on income inequality, but The Tea
Party is probably a more lasting phenomenon. And the Tea Party's gripes
about the wealthy are limited to corporate welfare and crony capitalism
that puts government bureaucracy at the service of the rich. As for
wealth and income inequality, the Tea Party generally takes a
laissez-faire, free-market view: Those who can get rich, should.
Labor
unions have represented the workingman’s concerns for a century, but
they’re on the wane, too. Union membership has been in steady decline
for at least 30 years, with no rebound on the horizon. The United Auto
Workers couldn’t unionize a Volkswagen plant in Tennessee earlier this
year, even with the tacit support of the company itself. Michigan became
a “right to work” state in 2013, diminishing the power of unions in
their own backyard.
More power for the wealthy
The
Supreme Court, meanwhile, has enhanced the power of the rich through
two decisions during the past several years that have eviscerated limits
on campaign donations to political causes and candidates, which favors
those with millions to spend to influence election outcomes. Two
well-regarded academics, Martin Gilens of Princeton University and
Benjamin I. Page of Northwestern University,
argued in a recent paper that economic elites have gained so much power that “America’s claims to being a democratic society are seriously threatened.”
Hanauer
sounds more like President Obama than a self-important plutocrat when
he suggests ways to even out the wealth and income gaps. He favors a
minimum wage of $15 per hour and chides wealthy business owners who feel
they, rather than their customers, make the economy hum. "We rich
people ... have convinced ourselves that we are the main job creators,"
he writes. "It's simply not true. There can never be enough superrich
Americans to power a great economy."
Most
economists would agree with that, but Hanauer risks hyping the
consequences of a growing wealth gap when he warns that “revolutions,
like bankruptcies, come gradually, and then suddenly.” That may be true
in repressed states that don’t allow ordinary people to express their
frustrations. But in functioning democracies (and even in the United
States), there’s plenty of warning when social unrest is percolating.
These days, all you have to do is read the blogs and follow the right
Twitter (
TWTR) accounts. If you do, you’ll encounter plenty of angst — but not much revolutionary zeal.
The
economic trends Hanauer identifies are, in fact, real problems. America
as a whole will suffer if the fortunes of the middle class don’t
improve. There are solutions, however, and they’ll probably materialize
in the usual American way — right before disaster strikes. It’s nearly
inevitable there will be government spending cuts and, yes, tax hikes,
when the government’s finances become unsustainable, which could take a
decade or more. When it happens, the politicians in Washington will find
ways to spread the pain around and America will muddle through. The
rich will have to pay more, but they’ll still be rich. And they still
won't have to worry about pitchforks.
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