Wealth and Democracy : A Political History of the American Rich

Rating:
Summary: Important Issues indeed!
Review: "Laissez-faire is a pretense," writes post-conservative pundit Phillips (The Cousins' Wars, 1999, etc.). "Government power and preferment have been used by the rich, not shunned." In other words, in this country, the rich not only get richer, they also get more privileged. As a polity, Americans tend to indulge the affluent, imagining that somehow their wealth will trickle down to the less fortunate. The reality is, notes Phillips, "painful disparities-working to the detriment of ordinary people who rarely understand what is happening or why-have been the historical rule, and not the unfortunate exception." American politicians traditionally have been more than indulgent, allowing the rich to accrue all sorts of political favors, evade taxes and duties, and live at a far remove from the rest of society: witness recent giveaways in the current administration's tax reforms. Politicians and commoners alike have been deluded by a false sense of participation in the system and the false promise of a level playing field, but the fact that 48 percent of Americans held some stock in the year 2000 speaks less, Phillips argues, than the fact that 90 percent of the earnings growth in the last two decades has gone into the pockets of the top 1 percent of our society. His sense of moral outrage over this fundamentally undemocratic gulf, a potential seedbed for true class warfare, is well placed and effective, though it may surprise readers who remember him as a conservative advisor to the Nixon administration. Even more valuable, however, is Phillips's careful analysis of the political boom-and-bust cycles in American history whereby Republican administrations help send aloft speculative bubbles that upon bursting, as all bubbles must, prompt spurts of progressive reform that curb-if only briefly-the power and public appetites of the wealthy. Sturdy economic history with a heavy dash of social criticism-and, as many conservative critics have said before of Phillips, excellent ammunition for liberals.

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Summary: Even The Affluent Are Falling Behind!?
Review: "Wealth And Democracy" is a comprehensive, academic book about the history of wealth and of the rich in America. Parts of the book are rather dry reading, but if you're looking for facts and statistics, you'll find them.

America has the richest people in the world. We learn that Bill Gates, Paul Allen, and Warren Buffet had a 1999 combined worth greater than the combined Gross Domestic Product (GDP) of the 41 poorest countries and their 550 million people. We're told wealth is becoming more concentrated among the top tenth of one percent of the population in America.

Then came the year 2000 let down, and Bill Gates lost $12 billion in one day (let's all just pause for a microsecond of sympathy). He's still rich at about $54 billion.

While the rich are getting richer, we learn that median U.S. household wealth actually declined between 1989 and 1995, as households acquired more debt. We learn that "Between 1992 and the decade's end, mortgage debts grew some 60 percent faster than income, so that homeowner's equity in their houses in 2000 declined to the lowest level in half a century."

I wonder to what extent homeowner's equity declined due to lower mortgage rates and due to many people buying their first homes. While Phillips seems to be using the statistic to argue that the middle class are getting behind, implying that people are invading equity to make ends meet, it might actually mean the opposite, that more people are buying homes (many new homeowners would lower the median homeowner's equity). However, we learn credit card debt is also rising rapidly. So, median real wealth might not be increasing.

Further, Phillips tells us the average American is working harder for less. Compared to Europeans, Phillips says the average American works nine weeks more per year. Further, the U.S. has one of the highest death rates due to hypertension, apparently related to workplace stress.

We also learn that larger corporations aren't creating jobs for U.S. citizens. Between 1980 and 1999, the 500 largest corporations eliminated five million jobs. And, many larger companies are moving operations overseas or moving foreign workers to the U.S. with H1-B visas. For example, 45% of Cisco's workforce in non-citizen.

Phillips argues true Laissez-Faire doesn't exist. Rather, large corporations and wealthy individuals use wealth to buy political influence to create conditions that allow them to grow their wealth. And, Phillips says much potential wealth, developed at taxpayer expense, finds its way into the hands of the already rich.

For example, Phillips points to the savings and loan bailouts of 1989 to 1992. Phillips writes: "The rescue was financed by floating hundreds of billions of dollars' worth of U.S. Bonds, to be paid for by the public over forty years. Not all of the rescue was necessary. Big depositors were completely paid off in disregard of the $100,000 ceiling of federal depositor insurance, and many of the assets [from the bankrupt banks] were sold in attractive packages to the politically well connected, sometimes with agreed-upon federal subsidies to sweeten the pie."

Other examples of bail-outs are given, where the government used taxpayer dollars to protect the financial interests of foreign-bond investors. Rather than forcing wealthy individuals who take excessive risks to suffer the consequences of Laissez-Faire markets, Phillips argues that the government absorbs the risks, encouraging wealthy individuals to take financial risks at the taxpayer's expense. And, he says, the government adopts this policy, because the rich have undue influence upon government.

Phillips also discusses the development of the Internet. Rather than being developed by private industry, Phillips argues the real heart of the Internet was developed at taxpayer expense by the military and academia. Phillips writes: "The Internet was not culturally Republican." (I didn't know it voted.)

Phillips writes: "great technological revolutions-...the age of the microchip and Internet-worked initially, for several generations, to favor those with capital, skills, and education at the expense of the masses, increasing economic inequality rather than easing it."

That's true. But, technological evolution is hardly a conspiracy of the rich. As we become a more technological-information-focused society, the value of physical labor declines. People who remain industrial workers will see their incomes fall. Those who wish to keep up financially must move to informational-based work or become entrepreneurs.

While Phillips seems to imply that there is a conflict between the high concentration of wealth in the hands of a few and democracy, I feel, in a true democracy, you're entitled to the fruits of whatever you produce. If you choose to work for yourself and are very successful, the financial benefit of whatever you create should go to you. Who else has more right to it? So, a certain level of inequity will be inherent to a democracy.

Incidentally, Phillips tells us there are about 270,000 households with a wealth above $10 million; about 3,000-5,000 households with a worth of $100 million or more. And, Phillips takes a shot at Thomas Stanley, author of the bestselling "The Millionaire Next Door," saying Stanley's portrayal of wealth in the U.S. is misleading.

Phillips writes: "Tomes of the late 1990s like the Millionaire Next Door dwelt upon a different and someone misleading face of U.S. wealth: the unchic owner of a chain of small dry cleaners, a Coca-Cola distributorship, or a 4 percent of a minor technology IPO. His or her net worth might be $2.6, $4.1 million, or even $7.9 million, but the family taste, residence, and cars were middle-class. True enough, but in a late-1990s United States with 274,000 decamillionaires, including some 5,000 centimillionaires, and 40,000 with at least $25 million, second-rank entrepreneurs with $2, $4, or $8 million could hardly be called rich."

Peter Hupalo, Author of "Thinking Like An Entrepreneur."

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Summary: A combination of History and Economics!
Review: Good but, --

I appreciate Phillips presentation of U.S. history, however, I was unfamiliar with his analysis of economics. Below are some of my conclusion......

It is commonly understood that less government involvement in affairs of the market means individual pocketbooks are better off. this is because taxes, regulation, and bureaucracy are all decreased.

Phillips attempts to demonstrate that less government involvement is not what is best by presenting numerous historical accounts regarding how people have 'benefited' from government involvement. However, the people who benefited were an elite group made up of the ultra-rich and it was these aristocrats who were able to use the government as a tool to provide an advantage in the marketplace.

There are numerous counter-examples which Phillips could have dealt with. In the countries which do have a large degree of government control, why are the economic conditions no better than those in the USA?

Rating:
Summary: Phillips Hits It Out of The Park
Review: Kevin Phillips has simply hit the ball out the park with "Wealth and Democracy". The analytical basis for "The Cousins' Wars" shows clearly, as does Mr. Phillips clarity of analysis and expression. Now will come the misguided minions of the right, religious and apostate, to attack him in lengthy and generally idiotic pieces. The think tanks and academic hiding places, think of them as roach motels, funded by wealthy right wing foundations will disgorge a multitude of these so-called thinkers who will produce scads of worthless, nitpicking screed in print and in the electronic media calling for Phillips' head. Ignore them. They are idiots who can't find other work. And if you want a more direct, blunt, caustic review of the "world as it is" now, read "Stupid White Men" by Michael Moore. Phillips tells us how we got there and why we NOW have an opportunity to roll back the corporations and the rich to the benefit of the middle and lower classes. Yes, there has been "class warfare" and as Mr. Phillips observed, the middle and lower ranks have lost totally to money, unaccountable courts and administrations who pander to the rich. To the barricades. The Marseilles, please.

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Summary: Hydrodynamics of the money river
Review: Liberals hoping to find in this book a rousing trumpet call to tear down the bastions of entrenched privilege will be disappointed. There is more sober description on offer here than prescription. Conservatives remembering Kevin Phillip's prescient 1969 advice ("The Emerging Republican Majority") on how the GOP could dominate the rest of the century will be even more disappointed; Phillips sees the time as ripe for a progressive realignment that will bring nothing but pain to the Lott/Armey axis.

The book recounts, at two different scales, the history of wealth and the elites to which it has accumulated. The shorter scale is that of American political cycles, with revolving eras of conservative wealth concentration and progressive wealth distribution. The longer scale concerns the cycle of rise and fall of the four great economic empires of modern history: Spain in the 17th century, Holland in the 18th, Britain in the 19th, and the U.S. in the 20th. He returns to each series of cycles repeatedly, with an emphasis on different aspects of the cycles: the roles of technology, of wars, of speculative bubbles, of fashions in legislation and ideology. The repetition occasionally threatens tedium, but fresh details rise up to relieve it. Along the way, he provides a feast of specifics and statistics, in easily accessible charts which the reader will find useful whether or not he agrees with Phillips' conclusions.

The message he gleans from the shorter scale is a familiar one, if something of a minority report in the current era. Money flows. In hard times, it trickles; in boom times, it roars in cataracts. At no time, as he richly documents, has its motion ever been determined primarily by "market forces." It has always been pumped from pocket to pocket by the grace of government.

And money has proven to be a highly compressible fluid. During each of America's great wars - the Revolution, the Civil War, and the two World Wars - profits have been compressed and pooled among a few suppliers of loans and materiel, creating new moneyed elites. In those eras which have exalted "the market" - the Gilded Age, the roaring twenties, and our current period - government has pumped the refreshing liquid from the middle class to those elites; in eras exalting reform and democracy - the political realignments of Jefferson, Jackson, Lincoln, and the two Roosevelts - the direction has been reversed, though never to the point of actually dismantling the old fortunes.

Inequality of wealth in the U.S. has now reached the highest levels we've enjoyed since 1929, with the top 1% owning 44% of the goodies. And of course, the primary purpose and effect of the Bush tax cuts is to pump a still higher percentage to the same elite. The inequality peak may not yet be in sight, the figure at the height of the Gilded Age having been about 60%; but history informs us that ultimately these levels of inequality aren't sustainable. Phillips doesn't venture to say how long it will be until the next realignment; but each time it has happened, the suddenness and vehemence of middle class anger has taken the rich elite by surprise.

On the broader scale of national fall and rise, the message is more somber: Phillips believes we are on the cusp of a fall. He lists ten characteristics shared by Spain, Holland, and England on the brink of decline (most notably, growing income disparity, export of manufacturing with profits coming largely from the financial sector, and vigorous rejection of tarriffs), all of which are plainly rampant in the present U.S. economy.

It's difficult to walk away from this book with a sound bite summary. Our author is examining complex interlocked patterns across centuries. What you'll walk away with is an enlarged perspective, and perhaps a worried mind.

Rating:
Summary: Misleading Information/Poor Economics
Review: Like many invectives against so-called Reaganomics, this book's statistics are a little off. While Phillips notes that real wages had peaked right before the 1970s, what he fails to note is that non-wage compensation (e.g., health insurance, vacation, other various perks that workers prefer because they are not taxed by the government)has increased to more than make up for this seeming 'wage deficit'. When this is factored in, real compensation for American workers has increased by about 20% in the period in question. Also, one might wonder why the income tax paid by the top 1% of Americans went from around 20% in 1980 to around 27% in 1988. Dropping the marginal tax rate from 70% to 27% actually helped bring in more tax revenue, because wealthier Americans had less incentive to play lawyer and accounting tricks (which is just a waste of money). The flatter the tax rate is, the less incentive people have to play such tricks, the less inefficiency, the more tax revenue. Certainly there's nothing wrong with that?

And, if the problem is that people don't have enough access to financial markets, here's a simple solution: privatize social security.

Social security is one of the most regressive tax schemes on earth; it makes it so poor people can't invest their money, while rich people can. This is due to the fact that the 15% tax paid on wage income has a cap, making it so higher-income Americans don't pay as much Social Security tax as a proportion of their income. The benefits of privatizing social security would be enormous, as can be seen from the example of Chile. In 1981, Chile privatized their social security system. Prior to the change, retirement pensions stood at 40 percent of pre-retirement income (this is similar to the US system's current ratio of 42 percent). After the change in system, the Chileans now boast an 80 percent ratio of pre-retirement income to retirement income! So, the solution to market apartheid is not keeping people from participating in the market, but making each and every American a capitalist; we are already a good way down this road (as 40+ million Americans own stock directly, even more if mutual and other index funds are counted). The returns on the stock market (even if measured by the tame historical rate of 7%, minus inflation) far exceed those on US treasury bonds (which is less than 2%, minus inflation).

And certainly, the recent tech bubble has nothing to do with financial market manipulation. Bill Gates made his money via a product; how does Mr. Phillips explain that one? While it is true that the dotcom fiasco should have been apparent to a great many people, many people lost their shirts (not just the common man, but a lot of institutional investors as well). Hardly a case similar to Carnegie or Rockefeller. Arguing that the 'financialization' of America is a bad thing is ridiculous; it merely makes starting up new businesses (and increasing the number of products, jobs, and money in the economy) easier to accomplish. Certainly there's nothing wrong with that?

Rating:
Summary: He's got it right!
Review: This is the best explanation yet of why the distribution of wealth in the United States has become more unequal under the Clinton and Bush II administrations. We need well-paid workers who come up with innovative ways to do things, not third rate mutual fund managers who dominate the economic landscape. When the Dutch and British went through "financialization" they stopped creating new products and let their versions of Wall Street take over, as Phillips rightly points out. An other book that just came out "The Great 401(k) Hoax", shows how the inequality of wealth has hurt the retirement prospects of the American family. It also tells the family how to protect itself.

Rating:
Summary: he's got it right!
Review: Kevin Phillips is right on. It is the best explanation yet of why the concentration of wealth has increased in recent years. The fact is that business is a system of power rather than a pure outcome of the market mechanisim. Under both the Clinton and Bush II administrations the influnce of business has increased in Washington. One consequence of this is that the average American family has a hard time building its wealth, as an other book that just came out, The Great 401(k)Hoax, clearly shows.

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Summary: The Next Great Historical Masterpiece
Review: Kevin Phillips is the kind of writer the Bushies and their "socialism for the rich" toadies mortally fear. He began as a master strategist in Richard Nixon's winning 1968 presidential campaign. Accordingly, he understands Republican politics as an insider. What brings chills to the master lobbyists and rightist new wealth yuppies is that Phillips understands the game they are playing, and the hypocrisy behind "getting the government off of people's backs" as the Reagan phrase went while bloating themselves on tax cuts and assorted bailouts and government boondoggles which steaily increase their wealth exponentially.

Phillips correctly defines America's current economic status as a plutocracy in which median wealth crested in the sixties and has been declining ever since. The seas became increasingly rocky in the wake of the Reagan-mandated tax cuts passed by Congress in the eighties, increasing precipitously the gap between the "haves" and "have nots." Economist Lester Thurow sounded a dangerous warning several years ago when he noted that the disparity between rich and poor had reached revolutionary stages. The situation has magnified since then and Phillips uses historical examples and numerous graphs to make his points with captivating lucidity. His conclusions parallel those of Greg Palast, who has punctured the balloon of the World Trade Organization and its Siamese twin of the World Bank, whose pernicious actions resulted in the frightening burgeoning of Third World debt and poverty. All the while, American manufacturers increase profits by utilizing slave labor in China and child labor in India and Bangladesh. American workers are laid off as labor costs diminish through the use of unprincipled, scandalous profiteering through a cheap labor market by those who so frequently maintain themselves to be devoted churchgoers.

Let the spinmeisters of the Rupert Murdoch-Roger Ailes school attempt to refute the points scrupulously made by meticulous researcher and brilliant author Kevin Phillips. His presentation and conclusions are enough to leave even the loquacious Rush Limbaugh speechless.

As Phillips noted in a recent interview with Bill Moyers on PBS: It is time for Americans to awaken before it its too late. The stranglehold of the monopolist-super lobbyist axis threatens to choke democracy to death if vigilant steps are not taken by a properly outraged citizenry.

Rating:
Summary: Interesting opinion - but not based on any facts
Review: Phillips does know something about marketing. Write a book attacking the rich and appeal to the 95% who are in the low to middle and class and don't re alize that what little they do have is because of the rich who provide them with J-O-B's. These poor souls will spend grocery money to buy this junk and they encourage their broke friends to do the same.

Remember Phillips was closely associated with Nixon. If this is who you want to take your advice from....then God help you!