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“Of all forms of tyranny, the least attractive and the most vulgar is the tyranny of mere wealth, the tyranny of a plutocracy.”
President Theodore Roosevelt, from his autobiography
A plutocracy refers to a political system in which the rich rule. This control does not have to be overt or explicit, and can ultimately result in legislative and regulatory capture. The rich mold the system itself to benefit themselves, as well as their business interests, often at the expense of most citizens.
Plutocracies date all the way back to Ancient civilizations, such as the Roman Empire. The aristocracy (i.e. nobles, royalty, typically wealthy) held most of the positions in the Roman Senate. Aristocratic senators unsurprisingly listened to and favored their own class disproportionately. This obvious bias in the government further empowered aristocrats, resulting in a society that grossly favored the ‘haves’ and not the ‘have-nots.’
While plutocracies may have roots in millenia past, they still exist today. A nation that’s touted as a democracy may not, in practice, prove as fair as its officials claim. This claim, perhaps, unsettlingly applies to the U.S.
The Zero Theft Movement, along with our growing community, works to eliminate the rigged parts of the U.S. economy in order to keep the healthy, ethical parts thriving. For you, the public, and the economy. If the corrupt among the corporations and wealthy hold control over our government, we cannot expect to get the value we produce, the value that’s making billions for a few.
In this article, we ask the question: is the U.S. a plutocracy?
Does the U.S. have a Plutocratic Track Record?
Tracing the country’s potential plutocratic history really begins after the U.S. managed to break away from British rule. Thus, we begin with the document of the U.S.: the Constitution.
The Founding Fathers & the Constitution
The Constitution came into effect in 1789. It famously made substantial progress by ending hereditary monarchy, as well as separating the church and state. While laudable in many ways, the hallowed document definitely had its flaws. Some of which the Founding Fathers arguably should have realized, and others which might have taken great foresight to address.
It’s hard not to realize that white men, predominantly from the propertied class, created the Constitution. Women and people of color faced extreme prejudice and had to fight for years to gain suffrage. Slavery still thrived, with many of the Founding Fathers owning slaves themselves.
In many ways, the system was rigged against these people, and has arguably set them back to this day. In the case of the Consitution, we can see what happens when the law is controlled by a single class (as well as sex and race).
It does bear mentioning that economists have argued that the income distribution was quite equal during those times. Economists Peter LIndert and Jeffrey Williiamson, in their book Unequal Gains: American Growth and Inequality since 1700, claim that “incomes were more equally distributed in colonial America than in any other place that can be measured.”
Income distribution is, of course, only one metric that determines whether the rich rule. That being said, many of the Founding Fathers actually believed in profit sharing and broad-based employee ownership. What must be remembered, though, is that (1) a plutocratic government won’t necessarily act exclusively to benefit the rich, and (2) the many historical inequities to women and minority racial groups simply cannot be denied.
The Progressive Era
Plutocracies often come part and parcel with corporatocracy, governments under corporate control.
The rich often own or serve as an executive of one of these corporate behemoths.
Concerns of economic monopolies started to emerge right around the end of the 19th century, when a few oil and railroad companies had achieved significant market capitalization in their respective industries. This period between 1870-1900 was known as the Gilded Age.
In gold did plutocrats frolick, and in grime the rest.
The government addressed growing monopolies and concentrated wealth by enacting the Sherman Antitrust Act of 1890, the first law designed to prohibit monopolistic business practices. But it was too vague to actually do much. Congress passed the Income Tax Act of 1894, which would have imposed a 2% tax on income exceeding $4,000. Would have, as the Supreme Court ruled it unconstitutional a year later.
Inequality.org writes, “U.S. senators back then never had to stand before voters. State legislatures, not average Americans, decided who served in the Senate, and the state lawmakers who filled these legislatures often considered corporate giants their only constituents who mattered.”
It’s no wonder that the rich had a better chance of making the government into a plutocracy.
But as the U.S. moved into the 20th century, the legislative and regulatory landscape began to slightly change. Antitrust regulations further tightened after Theodore Roosevelt ushered in the Progressive Era. In reality though, economic inequality would not get much better until after World War II.
After World War II
The great pain and suffering of World War II made it impossible for citizens to return to the status quo. During the post-World War II boom, the lower class started to experience serious and consistent increases in wages, and the country’s Gross Domestic Product, for the most part, grew as well.
From the Economic Policy Institute
Tax laws had become more stringent than ever. Throughout the 50s and much of the 80s, the statutory corporate tax rate was around 50%. Sometimes getting close to 60%. WWII proved to be the great leveler, as you can also see in the chart below. The top 1% held around 8% of the nation’s wealth, down from 16% 40 years prior.
The U.S. Plutocracy, from the 70s to the Present
But if economic inequality had continued trending positively to now, you probably would not be reading this article. It appears the plutocracy reigns once again.
From An Economic Sense
Right around the end of the Bretton Woods Agreement in the 70s, the real median weekly earnings of full-time workers have stagnated, while real GDP per capita has continued its rise.
According to Americans for Tax Fairness, “Corporate share of federal tax revenue has dropped by two-thirds in 60 years—from 32% in 1952 to 10% in 2013.” That makes sense when you hear the news that some multinational corporations have managed to find a way to pay a grand total of $0 in federal taxes.
We can also look at another indicator of plutocratic reign: wealth concentration.
In their landmark 2014 study, economists Emmanuel Saez and Gabriel Zucman took the income data from tax returns to calculate how much wealth each economic class holds. Saez and Zucman found that the share of the total wealth of the top 1% has increased considerably, growing from below 25% in 1978 to 42% in 2012. The share of the total wealth of the top 0.1 percent has just about tripled, and the share of the 0.01% has more than quintupled.”
The question is: how can such great economic inequality come to be?
How Plutocrats Might be Gaming the System
Kevin Phillips, a political commentator who worked for President Richard Nixon, authored Wealth and Democracy—a book investigating whether the U.S., in reality, operates as a plutocracy. In a 2002 interview with PBS, Phillips stated “What you get is money gaining a momentum that produces a kind of corruption. Part of its financial corruption, which we’re starting to see unfolding; part of its political corruption, which is that money moves in and corrupts the political system; and part of it, actually, is ideological–that money rules, that those who have money are entitled. And this actually corrodes American democracy. And those who don’t make it get discouraged, and they think it’s unfair, and they’re right.”
That ‘political corruption’ Phillips speaks of is the important piece of how a plutocracy comes to be and why it can be so damaging. By definition, the plutocracy operates as a political system, a form of government. That means, if the U.S. government truly functions plutocratically, the legislators and regulators are meant to protect the public instead of prioritizing the interests of corporations and their wealthy owners/executives.
Because what does it really come down to at the end of the day? Who has the kind of money to meet the needs of rent-seeking governmental officials who want to run again in future elections? Wouldn’t that be multibillion-dollar companies and the 0.01%?
Money is, perhaps, the plutocrat’s most potent tool.
Government officials seek out campaign financing, and companies in various industries oblige with the help of proxies, or lobbyists. Lobbyists are usually ex-government employees who can draw on their extensive political network to make sure officials know exactly what will benefit their employer.
Favorable legislation, tax breaks, grants, you name it.
We’ve already gone over evidence of how taxes and wages might be rigged against the majority, but does it extend beyond there?
A Potential Example of the Plutocracy
Let’s take a look at one economic sector where plutocratic reign would have significant consequences: the health industry.
R&D vs Existing Drugs
According to research investigating drug pricing between 2008-2016, “The costs of oral and injectable brand-name drugs increased annually by 9.2 percent and 15.1 percent, respectively, largely driven by existing drugs.”
However, the typical defense offered by advocates of the pharmaceutical industry often comes down to the high costs of research and development. That pharma is in the innovation business, and that it takes a great deal of money to develop new medicines. And without a doubt, it does.
“Research and development is only about 17 percent of total spending in most large drug companies…Once a drug has been approved by the FDA, there are minimal additional research and development costs so drug companies cannot justify price increases by claiming research and development costs.”
A particularly famous example of healthcare lobbying emerged with the Medicare Modernization Act of 2003. One infamous Congressman, according to The Hill, “successfully shepherd[ed] through Congress the bill limiting the government’s ability to bargain for better drug prices [for Medicare Part D].” After doing so, he went on to take a job at PhRMA, one of the biggest pharmaceutical lobbying firms around.
Beyond the political spending, political watchdog ProPublica alleges that the pharmaceutical industry has found $1.2 billion worth of ways to promote its drugs to physicians and hospitals. The organization has called this ‘Dollars for Docs.’ Turns out, pharmaceutical giants might just be inviting physicians to all kinds of special events.
How Does this Harm Society?
Imagine you, your loved one, or a friend needs to consistently take brand name medication in order to function (e.g. Insulin). Generics have been postponed due to pay for delay deals, unfairly extending the brand name manufacturer’s monopoly. Anybody who needs the medication is a repeat victim of price gouging every single time they purchase that medication.
They actually have no other treatment options. No affordable alternative. This is for a medication whose patent has ended ages ago. Innovation, at least for this case, has nothing to do with it anymore. But the drug keeps on increasing in price, and the plutocrats keep on profiting.
Does this sound like a fair government, a healthy economy?
Fight the Plutocracy with the Zero Theft Movement
The healthcare/pharma industry is but one of many sectors that could be rigged by the plutocracy.
We at the Zero Theft Movement, along with our growing community, work together to calculate the best estimate for the monetary costs of corruption in the U.S. Corporate, political, and everything in between.
We have built a safe and independent platform where you and your fellow citizens work together to investigate and debate potentially rigged areas across the economy. Through blockchain voting, the way to make all your work permanent, public, and unchangeable, you decide whether (1) theft is or isn’t occurring in a specific area of the economy, and (2) how much is being stolen or possibly saved. Through direct democracy, we can collectively decide where the problem areas are and start working on addressing them systematically.
The ZTM community knows that many wealthy individuals and big corporations act ethically. We are trying to hold the bad actors accountable. The corrupt corporations, executives, lobbyists, and government officials. That way, good people and businesses can properly thrive and enjoy the piece of the pie we’re all due.
The Zero Theft Movement does not have any interest in partisan politics/competition or attacking/defending one side. We seek to eradicate theft from the U.S economy. In other words, how the wealthy and powerful rig the system to steal money from us, the everyday citizen. We need to collectively fight against crony capitalism in order for us to all profit from an ethical economy.
Terms like ‘steal,’ ‘theft,’ and ‘crime’ will frequently appear throughout the article. Zero Theft will NOT adhere strictly to the legal definitions of these terms (since congress sells out). We have broadly and openly defined terms like ‘steal’ and ‘theft’ to refer to the rigged economy and other debated unethical acts that can cause citizens to lose out on money they deserve to keep.