How America’s oligarchy has paved the road to fascism (Why American capitalism is so rotten, Part 7)

Concentrated wealth and power are undermining democracy. Here’s what Joe Biden ought to be saying and doing about it.

Friends,

Last week, I pointed out that America has twice before successfully readapted the rules of the political economy to constrain the political power of wealthy minorities at the top, and can do so again.

But we will do so only if Americans understand the stakes and the true choice we now face: between making the system truly fair and democratic by reducing the power over it of large corporations, Wall Street, and the ultra-wealthy, or losing our democracy to a neofascist dictatorship.

Today I want to continue that discussion by examining the new American oligarchy — why it poses a threat to democracy, what we can learn from America’s two preceding eras of oligarchy, how this third oligarchy has led to Trump, and what Biden (with the backing of the rest of us) needs to do now.

1. The New American Oligarchy

A HALF-CENTURY AGO, when America had a large and growing middle class, people on the “left” wanted stronger social safety nets and more public investment in schools, roads, and research. Those on the “right” sought greater reliance on the so-called free market.

But as power and wealth have moved to the top, the real divide is no longer between left and right as we used to define them. It’s between democracy and fascistic oligarchy.

In the 2020 presidential election cycle, more than $14 billion went to federal candidates, party committees, and super PACs — double the $7 billion doled out in the 2016 cycle. Total giving in 2024 is going to be much higher.

That money is not supporting American democracy. It is contributing to Trumpist neofascism.

As more and more wealth concentrates at the top, the moneyed interests fear that majorities will take it away through higher taxes, stricter regulations (on everything from trade to climate change), enforcement of anti-monopoly laws, pro-union initiatives, and price controls.

So they’re sinking ever more of their wealth into anti-democracy candidates, like Donald Trump and his lap dogs.

Trump is going full fascist these days and gaining the backing of prominent billionaires. While Trump’s base is making small contributions, the big money is coming from some of the richest people in the U.S.

Multiple billionaires have donated to the Trump-aligned Make America Great Again, Inc. super PAC:

Phil Ruffin (net worth of $3.4 billion), the 88-year-old casino and hotel mogul, has given multiple $1 million donations.

Charles Kushner (family net worth of $1.8 billion), the real estate mogul and father of Jared, who received a late-term pardon from Trump in December 2020, has contributed at least $1 million.

Robert “Woody” Johnson (net worth of $3.7 billion), Trump’s former ambassador to the United Kingdom and co-owner of the New York Jets, has donated at least $1 million.

Other top Trump donors include Home Depot co-founder Bernie Marcus; Robert Bigelow, owner of the Budget Suites of America and founder of Bigelow Aerospace; South Carolina hedge fund manager Scott Bessent; and California businessman Howard Groff.

While the Trump campaign’s fourth quarter totals aren’t yet available, during the third quarter, Trump hauled in a whopping $45.5 million, with over $37.5 million in his campaign coffers as of the end of September.

Several other major Republican donors have supported Trump’s rivals for the GOP nomination but are expected to shift to Trump as rivals drop out. These include shipping magnate Richard Uihlein and his wife, Elizabeth; Warren Stephens, CEO of Stephens Inc.; oil and gas magnate Harold Hamm; pipeline mogul Kelcy Warren; Midland Energy Inc. CEO Syed Javaid Anwar; billionaire energy executive Jeffery Hildebrand; Arkansas businessman Ronald Cameron; and Americans for Prosperity, the political network founded by the billionaire industrialist brothers Charles and David Koch.

2. America’s Two Preceding Oligarchies

THE WORD “OLIGARCHY” comes from the Greek word oligarkhes, meaning “few to rule or command.” It refers to a government of and by a few exceedingly rich people or families who control the major institutions of society, and therefore have the most power over other people’s lives.

Oligarchs may try to hide their power behind those institutions, or justify their power with platitudes about the public good, or excuse their power through philanthropy and “corporate social responsibility.” But no one should be fooled. Oligarchs wield power for their own benefit. 

Modern-day Russia is an oligarchy. A handful of billionaires there control most major industries and dominate politics and the economy.

Even a system that calls itself a democracy can become an oligarchy if power becomes concentrated in the hands of a corporate and financial elite. Their power and wealth increase over time as they make laws that favor themselves, manipulate financial markets to their advantage, and create or exploit economic monopolies that put even more wealth into their pockets.

As I’ve noted, America has experienced oligarchy before. Many of the men who founded America were slaveholding white oligarchs. At the time, the United States did not have much of a middle class. Most white people were farmers, indentured servants, farm hands, traders, day laborers, and artisans. Black people comprised a fifth of the population, almost all enslaved.

A century later, a second oligarchy emerged comprised of men who amassed fortunes through their railroad, steel, oil, and financial empires — men such as J. Pierpont Morgan, John D. Rockefeller, Andrew Carnegie, Cornelius Vanderbilt, and Andrew Mellon. They ushered the nation into an industrial revolution that vastly expanded economic output.

They also corrupted government, brutally suppressed wages, generated unprecedented levels of inequality and urban poverty, pillaged rivals, shut down competitors, and made out like bandits — which is why they earned the sobriquet “robber barons.”

The Progressive Era that began with the presidency of Teddy Roosevelt in 1901 undertook a series of reforms to erode the power of the robber barons. World War I and the Great Depression of the 1930s sapped much of the robber barons’ wealth. And beginning in 1933, after the elections of Teddy Roosevelt’s fifth cousin, Franklin D. Roosevelt, coupled with Democratic majorities in the House and Senate, most of their power was eliminated.

For the next half-century, the gains from economic growth were more widely shared. Democracy became more responsive to the needs and aspirations of average Americans. During these years, America created the largest middle class the world had ever seen.

There was still much to do — civil rights and voting rights for Black Americans, wider economic opportunities for them and for women and Latinos, protection of the environment. Yet by almost every measure the nation was making progress.

3. How America’s Third Oligarchy has led to Trump

STARTING AROUND 1980, A THIRD AMERICAN OLIGARCHY EMERGED. It is even less principled and more willing to subvert democracy than the second.

Since 1980, the share of the nation’s wealth owned by the richest 400 Americans has quadrupled — from less than 1 percent to 3.5 percent —while the share owned by the entire bottom half of America has dropped to 1.3 percent, according to an analysis by my Berkeley colleagues Emmanuel Saez and Gabriel Zucman.

The richest 130,000 American families now own nearly as much wealth as the bottom 90 percent — 117 million families — combined.

The three richest Americans own as much as the entire bottom half of the population.

The only other country with similarly high levels of wealth concentration is Russia.

This has been accompanied by a dramatic increase in the political power of the super-wealthy and an equally dramatic decline in the political influence of everyone else.

Two of America’s most respected political scientists — Professors Martin Gilens of Princeton and Benjamin Page of Northwestern University — analyzed 1,799 policy issues and found that “the preferences of the average American appear to have only a miniscule, near-zero, statistically non-significant impact upon public policy.”

Instead, they found that American lawmakers respond to the demands of wealthy individuals (typically corporate executives and Wall Street moguls) and big corporations — those with the most lobbying prowess and deepest pockets to bankroll campaigns. And “when a majority of citizens disagrees with economic elites or with organized interests, they generally lose.”

Notably, Gilens and Page’s research was based on data gathered between 1981 and 2002 — before the Supreme Court opened the floodgates to big money in Citizens United v. Federal Election Commission (2010) and McCutcheon v. Federal Election Commission (2014). If the preferences of average Americans stood little chance against the demands of economic elites before these cases were decided, they stand even less chance today.

Note that big money was already moving into American politics courtesy of two prior Supreme Court decisions — Buckley v. Valeo (1976) and First National Bank of Boston v. Bellotti (1978) — ruling that it was not criminal bribery for billionaires and corporations to buy off politicians, and giving corporate “persons” the right to pour unlimited amounts of “dark money” into political campaigns. (Lewis Powell himself — author of the infamous 1971 memo to the U.S. Chamber of Commerce calling for more corporate money in American politics — wrote the Bellotti decision.)

UNLIKE INCOME OR WEALTH, power is a zero-sum game. The more of it at the top, the less of it anywhere else.

In the election cycle of 2016 — which delivered the White House to Trump — the richest one hundredth of one percent of Americans accounted for a record-breaking 40 percent of all campaign contributions. (By contrast, in 1980, the top 0.01 percent accounted for only 15 percent of all contributions.)

Not all wealthy people are culpable, of course. The abuse has occurred at the nexus of wealth and power — where those with great wealth use it to gain power and then utilize that power to accumulate more wealth. The so-called “free market” has been taken over by crony capitalism, corporate bailouts, and corporate welfare.

This is how oligarchy destroys democracy. And how oligarchy leads to neofascism.

As oligarchs fill the coffers of political candidates and deploy platoons of lobbyists and public relations flacks, they buy off democracy.

Oligarchs know that politicians won’t bite the hands that feed them. There will be no bold response to the failure of most people’s paychecks to rise, nor to climate change, nor to systemic racism, nor to the soaring costs of health insurance, pharmaceuticals, college, and housing. These are not the main concerns of the oligarchy.

As long as they control the purse strings, the oligarchs know there will be no substantial tax increases on them. Instead, their taxes will fall.

There will be no antitrust enforcement to puncture the power of their giant corporations. Instead, their corporations will grow larger.

There will be no meaningful constraint on Wall Street’s dangerous gambling addiction. The gambling will grow.

There will be no limits to the pay of CEOs, Wall Street traders, hedge fund and private equity managers. Their pay will continue to soar.

Government will dole out even more corporate subsidies, bailouts, and loan guarantees to big corporations and Wall Street. It will reduce or eliminate protections for consumers, workers, and the environment. It will become a government for, of, and by the oligarchy.

When Trump describes opponents as “vermin,” stokes racial resentments, fuels hatred of immigrants, and spreads fears of communists and socialists — almost exactly the strategy employed by Adolf Hitler and the Nazis in Germany in the 1930s and 1940s — he gives the oligarchy freer rein.

Trump thereby distracts Americans from how the oligarchy is looting the nation — buying off politicians and silencing critics.

He causes Americans to distrust and fight each other, rather than look upward and see where the wealth and power have really gone.

4. What Biden Must Do

JOE BIDEN HAS SPOKEN FORCEFULLY ABOUT the importance of protecting American democracy from Trump’s neofascism.

Now is the time for Biden to go a step further and promise that if elected for a second term, he will commit to getting big money out of politics — even if this requires a constitutional amendment.

His second-term pro-democracy agenda should also focus on strengthening voting rights, ending voter suppression, busting up monopolies, and passing a progressive wealth tax on large concentrations of wealth.

Such a strong pro-democracy agenda is neither “right” nor “left.” It is the bedrock for everything else America must do.

Next week, I’ll discuss how the American oligarchy has shrunk the middle class and suppressed the working class, and recommend what should be done to reverse course.

Thank you for joining me. Please add your comments, take part in our discussion, and share with others.

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