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The New Oligarchy

With state and federal incumbents dependent on wealthy donors, it is unrealistic to think that they will pass legislation to reverse economic inequality. Their patrons will look unfavorably upon such initiatives.
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Hundred dollar bills with the words fresh start.
Hundred dollar bills with the words fresh start.

The march to economic and political oligarchy in the United States is picking up speed.

In a recently published paper, Adam Bonica and his associates have estimated that 0.01 percent of American households (one hundredth of one percent) contributed more than 40 percent of campaign contributions in 2012. This level is far higher than had been the case in recent years. In 1990 for example only about 10 percent of donations came from this small segment of the population. However, even the 40 percent figure represents an under-estimate. It does not include contributions to organizations that were not required to disclose their donors. Were they to be included, the figure would be even higher.

The rise of a political oligarchy has changed the funding base of the Democratic Party more than the Republican. Since the New Deal, wealth has always favored Republican candidates. But as late as the 1980s and early 1990s, organized labor matched the amount that Democrats received from the very rich. By 2012 however, labor's status as an equal source of funds for Democrats had dramatically declined. In that year highly affluent donors contributed four times more money to Democrats than did unions. The result, as Bonica and his fellow authors put it in their careful academic language, is "while it is difficult to gauge the effect of the Democrat's reliance on contributions from the wealthy, it does likely preclude a strong focus on redistributive policies." In short the Democrats cannot any longer be considered a bulwark against the power of wealth.

With that power unchecked, income inequality has run riot. The most recent estimate for the United States indicates that between 2009 and 2012 -- years of economic "recovery" -- the incomes of the bottom 99 percent of households failed to grow at all. To be more precise, they increased by an all but invisible 0.4 percent. In contrast the incomes of the top 1 percent grew by almost one-third (31.4 percent). What this means is that virtually all (95 percent) of the additional income generated by the economy in these years went to those at the very top of the income pyramid.

No economic theory can explain, let alone justify, a concentration of income growth in so few hands. What is at work here is a vicious circle. The fortunes obtained by economic oligarchs result from pro-oligarchy policies that are legislated by office-holders who are dependent on the oligarchy to pay for their election campaigns.

We do not know when the American people will rebel against this vicious cycle. But the Occupy Wall Street Movement revealed that the limits of tolerance have already been tested. Occupy provided an outlet for deeply felt frustrations. But because of its programmatic weaknesses -- it was steadfastly apolitical -- it failed to have a legislative or policy impact. Occupy acted as if it did not believe that legislation is required to reverse the inequality for which government policies are responsible. As a result that movement did not leave a legacy of specific unfulfilled policy demands that could constitute a starting point for the next round of activism.

The resulting void means that now is the time to start preparing for the next insurgency. Two tasks have to be addressed. The first concerns the new insurgency's politics, and the second concerns its structure.

With state and federal incumbents dependent on wealthy donors, it is unrealistic to think that they will pass legislation to reverse economic inequality. Their patrons will look unfavorably upon such initiatives. New politicians, who are not beholden to wealth, need to be elected before economic inequality can be reversed. That means that the next movement will have to demand a way for candidates to run for office using public instead of private funds. Publicly-financed politicians, once in office, will not face the conflict of interest that privately-funded office holders do when they consider legislation that limits the privileges of their donors. The politics of the next movement for greater equality will need to center on passing legislation to permit candidates to run for office with public campaign funding.

The next wave of political activism will also have to create its own organizational structures or join existing ones. The struggle against inequality will not be won quickly or easily. Activists will require a structured home in order to be effective and to persevere. In that home, decision-making rules will have to be agreed upon to set the movement's political course and to adjust to changing circumstances. Even Occupy moved in this direction, albeit reluctantly, devising processes to make policy choices and to regulate speech.

We do not know when a new activism will develop. But precisely because such a movement could appear at any moment, and because the stakes involved are so high, we must begin to prepare now.

1. Adam Bonica, Nolan McCarty, Keith T. Poole and Howard Rosenthal, "Why Hasn't Democracy Slowed Rising Inequality," Journal of Economic Perspectives, Vol. 27, Number 3 (Summer 2013) p. 112.
2. Ibid., p. 113
3. Emmanuel Saez, "Striking it Richer: The Evolution of Top Incomes in the United States (Updated with 2012 preliminary estimates)" September 3, 2013, Table 1,

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