Solution: Democracy’s Immune System

Your weekly excerpt from one of my books. This week: "The Hidden History of Monopolies: How Big Business Destroyed the American Dream"

How Big Business conquered America. Over the next few months the entire book will be here, new chapters posted every Sunday, for subscribers to read at no cost. If you want to get a physical book to mark up or share with others, just click on the picture above, visit your local bookstore, or check your favorite online seller.

Solution: Democracy’s Immune System

If the continuous accumulation of wealth and the political power associated with it is a cancer in our economic, political, and social system, then the immune system that can take it on is an empowered middle class.

A middle class that outnumbers both the rich and poor combined is a uniquely American invention. At our nation’s founding, the middle class made up the majority of free Americans, in part because land stolen from the Indians was so cheap, and free slave labor helped produce a general prosperity for white people.

While the source of the American middle class in the 18th century may have been pernicious, the lesson for us today is how it produced a general economic, political, and social stability. Fully two-thirds of white people in America at the time of the American Revolution owned land and thus were largely self-sufficient. Meanwhile, in England only a fifth of the population owned land or had any control over their own economic destiny. The middle class of that era was a very small group of shopkeepers, doctors, lawyers, and small businessmen (like Charles Dickens’s Ebenezer Scrooge, who had a one-office company with a single employee).

Wealth and land were highly concentrated in the England of 1776, as was the political power that flowed from that wealth. To keep the middle class from expanding, England even had “maximum wage” laws, punishing employers who paid workers too much. The rest of Europe was in a similar situation, a remnant of feudal times.

In America in 1776, the top 1% of Americans received only around 8.5% of the income, with the rest of it widely distributed among working people. Today, the top 1% get around 20% of all income, leaving far less for the rest. This has gutted today’s middle class. While almost two-thirds of Americans were middle class in the decade before Reaganomics, today it’s slipped below the 50% danger-mark threshold.

The loss of economic power by America’s working people has paralleled a loss of political power. Prior to Reaganomics, labor unions effectively balanced the economic and political power of big business and its lobbyists, so much so that a mere $200 million was spent on lobbying per year in the first years of Reagan’s administration. Today, with Reaganomics firmly entrenched and labor unions decimated, corporate and billionaire spending on lobbying runs well over $3 billion a year.

This rupturing of working Americans’ economic and political power has not just produced anxiety and despair; it’s also caused Americans to disengage from politics because they rightly view the political system as hopelessly corrupt and only beholden to the billionaires and the corporations that made them rich.

Next Sunday: Solution: Replace the “Consumer Welfare” Framework