Like the majority of Americans, I did not expect Donald J. Trump to be elected president of the USA. No more than many in Britain expected Brexit to win the approval of British voters. Yet, like many others, I could also see the possibility that both Brexit and Trump would be triumphant. It did not take great insight or foresight to see that the press, the media generally, many politicians, and virtually all major political parties on both sides of the Atlantic were missing massive populist revolts that seemed all but invisible to the parade of public commentators.
Even while there was much talk of economic recovery, the rate of poverty in the USA reached 17% in 2016. A percentage roughly double that had been in poverty at some point between 2010 and 2013: the same was true for the UK. The official rate of unemployment may have been reduced to below 5% in the US and almost as low in the UK by 2017, but these calculations were badly flawed. If part-time employment was not counted as being in-work, if people were not counted as working when they were nominally “self-employed,” then the rate of “official” unemployment doubled or worse, in the USA and the UK.
In both countries, wages have remained stagnant for the middle classes and have been so for decades. The working classes practically have become invisible in both countries—at least prior to Brexit and the election of Donald Trump —as both nations have abandoned manufacturing, arguing that blue-collar industrial jobs were best done in low-wage countries. The irony is that for many, the UK and the USA have become low-wage countries themselves. But it is worse than that. The middle classes on both sides of the Atlantic have been struggling for decades, facing stagnating incomes at best, or long-term unemployment as many so-called middle-class jobs have either evaporated or been exported abroad.
Conservatives on both sides of the Atlantic point out that this was the inevitable result of globalization and automation. Some say it is because of poor decisions made by the less successful, the impoverished and the uneducated: they failed to get the right skills, or education, their productivity was low, and American and British workers were not competitive. Moreover, Republicans and Tories have argued for decades that labor unions are greedy, practice class conflict, and advocate unreasonable wage hikes that raise prices, lead to inflation, and make products more and more unaffordable. Inevitably, as jobs have disappeared, as wages have stagnated, as millions have failed to participate in so-called recovery, as unions have been eviscerated, and as political parties have failed to respond to the suffering that they have not acknowledged, or simply could not see, the mass parties of the past began to fragment, unsure of who or where their constituencies were.
Constituencies themselves have become more complex, divided by identity politics, regional attachments, social and class divisions, and polarized further by immigration and population movements as both the USA and the UK became less Western, less Christian, and less white. Identity politics have proved especially nettlesome, as gender identity has become more amorphous and ill-defined, and as marriage has become something other than between a man and a woman, challenging traditional white populations already threatened as their neighbors and countries became less Christian and less white. And as whites, particularly the traditional bread-winning male populations, have become more threatened, as their jobs have been eviscerated or exported, as more and more have been displaced, and as they have had to compete with low-wage workers in far-flung countries, Conservatives everywhere have successfully argued that their problems were the result of Big Government: too many taxes, too much support of illegal immigrants, too much protection of trees and certain animal species, too little concern for workers who had nothing to look forward too.
In the midst of these problems, liberals seemed unable to articulate a vision for the future. They became too cozy with Wall Street in the USA and the City in Britain. They became part of the establishment, more and more distant and increasingly unaware of or insensitive toward the suffering of their traditional constituents. On both sides of the Atlantic, the major parties moved to the right, Democrats embracing compromise with Republicans as a way to acquire power, and Tony Blair and Labor doing the same in Britain to accommodate the Tories . For decades, in both the USA and the UK, major political parties accepted the viewpoints of Big Business: keep taxes low, government regulation at a minimum, low or no tariffs at the border, minimal if any carbon tax, weak unions, and strong currencies.
Blind belief in the market as an adjudicator in almost all human affairs, irrational reliance on the rationality of market participants, disdain for the state as expressed in the myth of “big government,” and the uniform application of the economic recipes of the Washington Consensus. 2
Ther’s thesis was intended to apply to the bungled attempt to transform the former Communist countries of Europe into Western-style capitalist liberal democracies. Yet his thesis uncannily intones some of the notes of the UK and the USA. Both countries are after all the progenitors of neoliberalism and its liberalizing, deregulating, and privatizing progeny, and it is these tenets that have created the mischief that now threatens the very fabric of the social contract in both the UK and the USA, moving both nations toward unintended and unanticipated historical reversions. The social problem, once thought resolved, has returned with a vengeance, revealing that history may be reversible and that some of the worst riddles of the past have remained—just below the surface.
Which is precisely the argument of Monopoly Restored: How the Super-Rich Robbed Main Street. The super-rich—the 1 (or 0.1)% in current lingo—have gotten immensely rich not through sheer ingenuity, or inordinate intellectual ability, but by extracting wealth from the real economy where most of us live and work. Historically, much of the wealth of the ultra-wealthy has been based on inheritance, tax evasion, political influence, or just plain theft. In the last four decades, the menu has expanded. The owners of wealth, whether financial, intellectual, or physical, have largely succeeded in destroying competitive markets and deregulating large parts of the economy, creating large “rents” for themselves. They have forged virtual monopolies in telecommunications and energy, producing outsized profits or “rents” for them. They have insisted that banks retain the right to speculate on derivatives, ensured that credit card companies not be bothered by pesky usury laws, expanded the shadow banking system so that hedge funds and private equity firms remain unregulated and virtually invisible. Their credit card companies have suppressed usury laws limiting interest rates. They have successfully resisted more efficient, less expensive, and fairer single-payer healthcare systems (in the USA), while defending for-profit health insurance that is unaffordable and inequitable for many millions, producing vast rents for their health insurance companies. The super-rich have been granted patents on drugs, even when their drugs are no better than those already on the market. They have won undeserved subsidies for themselves in agribusiness. Their seed companies have established near monopolies over the genetically modified seed market, using political leverage to limit or to eliminate competition. The super-rich who control corporations have practiced wage theft , fought minimum wage laws, weakened unions, outsourced jobs, resorted to temps and contract labor, and preached free trade so the commodities they produce in China and elsewhere can be brought to the USA with minimal duties. The super-rich have lowered (or escaped) inheritance taxes, shifting much of their income to lower-taxed capital gains. They have created tax havens where trillions of dollars remain untaxed and invisible. And multinational corporations have transferred profits of their intellectual and financial property to subsidiaries in low-tax regimes, where they often remain permanently untaxed.
As Chapter 2, “Democracy Corrupted,” explains, the super-rich have accumulated great wealth for themselves by corrupting democracy. They have done this by establishing think tanks that masquerade as neutral and scientific. They have poured large and virtually unlimited funds into political campaigns, promoting and helping to elect candidates who support a neoliberal paradigm that has shredded the social contract. In the USA, in 2010, this has been enabled by a majority decision of the Supreme Court in Citizens United v. Federal Election Commission, granting deep-pocketed corporations the right to spend whatever they wanted on political election campaigns. 3 The UK has much more restrictive campaign finance laws, but that has hardly prevented the City of London from having lopsided influence over number 10 Downing Street.
By influencing and even controlling political parties through campaign contributions, by ownership of large segments of the print and electronic media, where they run disinformation campaigns that confuse truth and propaganda, by the establishment of so-called disinterested think tanks, by employing armies of lobbyists, the super-rich have established a rentier economy that rewards capital while regulating and diminishing labor.
Corrupting democracy has allowed the corporate super-rich to privatize public assets, to limit government oversight on the financial and banking industry and to build new monopolies in everything from telecommunications to (patented) drugs. The super-rich have used political leverage to create “rents” by obtaining undeserved “subsidies” in everything from healthcare to agribusiness, and then used government to reduce taxes on those rents.
Less than a decade after Citizens United , plutocracies in the USA and UK have produced a kind of “extreme” capitalism that has helped transfer considerable financial and political power to Wall Street and the City of London. As is detailed in Chapter 3, “The Rise and Rise of Wall Street and the City of London,” the gravitational pull of Wall Street and the City has given the banking and financial sectors continued leverage to make predatory sub-prime loans, to prevent the restoration of usury laws limiting interest rate charges, and to increase debt to capital ratios once thought dangerous and even lethal. Even post-Dodd–Frank , there is no firewall between investment and commercial banks, hedge funds and private equity firms remain unregulated and can legally access pension funds, and derivatives are again widely traded despite the meltdown they caused during the crash of 2007–2008. Meanwhile, banks have gotten even bigger than they were when they were too big to fail, avoiding antitrust laws that might have prevented the crises of 2007–2008 had they only been invoked.
For every additional dollar generated by the economy, some economists, such as Thomas Piketty and Anthony Atkinson , argue that more than 90% goes to the 1%. Chapter 4, “The Ascendancy of the Corporate Elite,” explains how this happens. During the “golden age,” for several decades following WW II, American and British executives were paid modestly, with rare (and sometimes deserved) exceptions. Beginning with the Reagan and Thatcher eras, executive pay mushroomed while the income of corporate employees stagnated at best. Rising executive compensation was taken as an entitlement: greed was good for the overall health of a firm and the American economy. Corporate executives grew profits—and their personal income—by shifting to short-termism : encouraging employee layoffs, moving companies to low-wage states or countries, evading corporate taxes in the name of greater profitability, acquiring other companies to raise market share and corporate revenues, and using share buybacks to (artificially) raise share value, which was then linked to executive compensation. By packing corporate boards with cronies who were well paid for their services—subsequently raising their own wages completely out of synch with executive performance—and by moving employees into short-term or part-time work, or simply calling them self-employed, the wealth of the corporate 1% was vastly enhanced, much of it at the direct expense of their employees. Corporations also repressed the wages of workers by shifting production—in the USA—to right-to-work states, which are difficult to organize, or by shifting production abroad, made easier by trade agreements mostly favorable to corporations, which in fact help to write those agreements.
The more that the corporate rich take for themselves, the less there is for everybody else: that is what extracting wealth from the real economy means. Chapter 5, “The Decline of Main Street and the Middle Class,” examines how corporations have replaced defined-benefit with defined-contribution pensions , shifting much more of the burden of retirement onto employees and away from employers. The super-rich at the helm of the corporate world have resisted pay increases, dropped health insurance —or modified it so it is “cost-effective.” They have downsized, outsourced, sub-contracted, moved production abroad, and utilized endless schemes to employ temporary workers who can be hired seasonally, or simply part-time, or as independent contractors who are not called employees—the better to evade employee benefits, anything to avoid fixed employee costs and payment of decent wages with comparable benefits. Companies have used their economic and political leverage to restrict unionization or to bypass unions altogether by shifting operations to right-to-work -states or abroad. They have opposed raising the minimum wage , which remains much lower in the USA than in the UK: in 2017, the minimum wage in the USA has not advanced in real terms for four decades. The result is that workers have less economic security than they had in the 1970s: even middle-class employees have seen their standards of living stagnate at best. And for the most vulnerable workers, corporations have widely practiced wage theft , or deliberately misclassified workers as independents not entitled to healthcare and other benefits.
Not all countries employ the kind of class struggle race-to-the-bottom so characteristic of the USA and the UK. German workers are paid decent wages, enjoy good working conditions, universal healthcare, pensions (that provide as much as 67% of an employee’s income when in employment), extensive maternity leave, and more or less permanent employment or training provided by employers or the state. To get these benefits, Germany protects its unions and supports works councils —shop floor groups including workers—that negotiate work conditions and even job classification, and democratic boards of directors on which half the sitting members are workers. Unlike the USA and the UK, in Germany industrial unions are regarded as partners, not adversaries. The result is that German auto—and all industrial—workers rarely use the right to strike for the simple reason that they do not need to. The German model contradicts the wisdom of neoliberals who argue that the labor force has to be flexible, accept low wages to remain competitive, and that government must keep unions weak or else they will distort the market and irrationally drive wages above their “natural” limit.
The tax system in the USA and the UK levies the poor, the middle class and the upper middle class to subsidize the ultra rich. The tax system in both countries, contrary to what the super-rich themselves say, redistributes income toward the top. How the 1% accomplishes this is the topic of Chapter 6, “The Politics of Taxes.” The super-rich, over decades, have lowered their income taxes, increasingly shifting the tax burden to regressive sales and value-added taxes. They have successfully reduced inheritance taxes and prevented serious consideration of wealth taxes. Corporate executives have aggressively moved more of their income into stock options , which means lower-taxed capital gains taxes for the super-rich and growing tax burdens for everybody else. And the super-rich, in their capacity as corporate managers, have established subsidiaries globally, many of them in tax havens , avoiding corporate taxes altogether or delaying their payment until they can obtain a tax holiday from a friendly government administration. Corporations have routinely used transfer pricing to shift profits to low-tax regimes, and losses to high tax regimes, allowing them to reduce or eliminate domestic taxes altogether. And some companies have even declared that they have no tax home, and therefore minimal if any tax liabilities because their profits are held somewhere in virtual space.
Tax dodging may help the balance sheet for corporations and improve the value of company shares, but it is costly to the average taxpayer who is subsidizing the tax breaks of multinationals. Every year up to $111 billion in corporate tax revenues in the USA are lost because of tax evasion, meaning less money available for investment in education, infrastructure, research and development (R&D), less revenue to create jobs or to put into poverty reduction programs. It also means regressive taxes to replace revenues lost to corporate tax dodging, and this in turn means higher taxes on the dwindling means of middle-class families, and especially on the poor, who also have to pay escalating sales taxes—caught in the vice of company tax evasion.
Chapter 7, “The Business of Healthcare,” shows what happens when healthcare becomes a casino game. According to all legitimate studies, a business model of healthcare such as in the USA is ineffective, unfair, costly, and punitive for those who can least afford healthcare. In a word, a private (competitive) healthcare system is unhealthy. The USA spends at least twice what the UK and France pay for healthcare per capita, yet the USA has the highest morbidity rates among developed nations. In terms of longevity, access, affordability, and geographic uniformity of medical services, the USA ranks last, leading only in cost. Every year about 100,000 people die prematurely in the USA because they lack basic medical care: not because they did not seek care, but because they were denied the care they needed or were afraid to seek because of the expense. Medical bankruptcy still accounts for a majority of individual bankruptcies in the USA a half-decade after adoption of the Affordable Care Act . A Commonwealth study in 2014 ranked the UK healthcare system the best among the twelve nations it studied: but it also found that as the coalition government has privatized some of the corners of the National Health Service (NHS) , it has diminished its effectiveness.
Chapter 7 explains that American healthcare is lagging because it has become a massive subsidy of Big Business. Supporting the 1% controlling the healthcare industry has become unsustainable and unhealthy for many if not most of us. Using for-profit health insurers instead of relying on nonprofits, such as France and Germany, and refusing single-payer systems in which the state insures the entire population, such as in Denmark , Norway , Sweden , and the UK is costing America about a half trillion dollars or more annually. Medicare , which is a government program, provides universal coverage for people aged 65 and over, is cost-effective, and is the most efficient and fairest healthcare program in the USA. That is because it has taken profit out of medicine.
Nobody doubts that patenting drugs based on genuine innovation deserves legal protection, otherwise the incentive to innovate might be minimal, especially when large investments are needed to develop new products. But it is not a given that patenting drugs—patents are essentially monopolies—will produce new drugs that are affordable and better than those coming off patent. Drug companies have routinely used the patent system to limit competition, not to innovate. And most innovative drugs by far have been based on government or government-funded research, begging the question of whether government research funded by the taxpayer should be patented by so-called free enterprise.
Chapter 8, “Big and Bigger Agribusiness: Farm to Table,” focuses on the super-rich in agribusiness, who benefit from subsidies to corporate farms to protection for the sugar industry to subsidies for the giant seed company, Monsanto , allowing it, for example, to dump cheap corn on foreign markets like Mexico , undercutting and displacing Mexican farmers. Monsanto has used its considerable market power for decades to carve out a near monopoly in certain seed sectors, most notably genetically modified corn. It has been able to do this because of the revolving door syndrome between government and industry. The net effect has been a gigantic welfare scheme favoring Monsanto . It has bought rival seed companies, won the right to patent “life” by convincing lawmakers that anything concocted in a laboratory should be patentable, and has even won legal battles over the labeling of food products containing genetically modified ingredients: in the USA, labels do not have to identify foods containing genetically modified organisms (GMOs) . Even though Monsanto controls up to 90% of the USA (genetically modified) corn market, dramatically reducing corn diversity, there has been little or no antitrust actions taken by the USA government.
The Farm Agricultural Act of 2014 was the reform act that was not. Taxpayers were still liable for a significant share of payments that went to producers if they should suffer a “loss” of either revenue or yield. Moreover, under the new law, farmers could actually do better if widespread crop failure occurs, or there is a loss of revenue from price decline (or collapse), since they are fully insured by government subsidy programs. The more that farmers “lose” from drops in yield or price, the greater the cost to the taxpayer. But the taxpayer also is liable when crop prices rose. That is because land values rise with the price of farm commodities, and that means that insurance premiums, largely paid by the federal government, go up.
The British landed elite are also fully subsidized. All they have to do to get their subsidy checks is to own land. They don’t have to farm one whit, or at least they didn’t. Now they do have to produce at least 5% of their income by farming, but that is a low hurdle, not a real obstacle. Meanwhile, the British landed class does not have to worry about inheritance taxes, they can continue to hold their land as a kind of sinecure, and the checks from Brussels will be in the mail, at least up until Brexit actually occurs. Until it does, the citizens of England will continue to subsidize the super-rich landed quasi-nobility: that is because the average English household annually sends £250 to Brussels in taxes, some of which then gets rerouted to the genteel estates back in England.
In both the USA and the UK, whether considering the financial and banking sector, the tax structure, compensation of “work,” healthcare, or agribusiness and the food market, the 1%, the super-rich, have become too expensive to maintain. The so-called free market is a myth, covering the larger truth that much of the wealth of the super-rich is really just an unearned and undeserved subsidy unwittingly supported by taxpayers who are ill-served by their governments.
Chapter 9 “What Can Be Done?” argues that much can be done to restore fairness and social equality. What is lacking is the political will, or a political party that has the will to represent the vast majority of people and not just the privileged few.
Not lacking are precarious populations. They suffer from precarious jobs, precarious education, precarious healthcare, precarious housing, precarious income, and precarious futures. They are the alienated ones. The voiceless. They have no political party. They are on the outside looking in. They believe they have no control over their own lives.
But the precarious populations are not content to fade away. They are defiant. They are the primitive rebels . They are the refuseniks. The occupiers of Wall Street. The angry ones, the indignados in Spain, the rebels in Greece.
These primitive rebels share similar narratives of hardship and deprivation, similar voices and grievances, similar rejection of institutions that preach austerity and that preserve inequality. They insist that there are alternatives to radical inequality, to unequal healthcare, and to unequal education. They instinctively assert that rentier capitalism, that perpetual privilege, that eternal subsidies for the very rich, and that untaxed inheritances are unfair and undeserved. They intuitively know that de-industrialization and globalization do not explain the kinds of inequalities that are unprecedented.
That is why they look for (and form) new political parties to represent them, to fight for the economic and social rights they deserve. They are Syriza in Greece, Podemos in Spain, the Scottish National Party , progressive Labor led by Jeremy Corbyn in the UK, progressive Democrats led by Bernie Sanders in the USA.
Chapter 9 demonstrates what “primitive rebels ,” organized as a political party, can accomplish. Start by insisting on higher inheritance taxes: much higher. Prevent or abolish inheritance tax loopholes. Make earned income taxes much more progressive. Add a wealth tax . This would sop up a lot of unproductive capital, and it would make us much more equal. Count capital gains as earned income: why should the 1% pay less than others? Don’t lower corporate taxes, raise them. Don’t defer corporate taxes on earnings kept abroad. Better yet, tax corporations where their profits are made, in domestic markets. Finally, impose heavier taxes on energy production: subsidize renewable energy with taxes on dirty energy.
Regulate the banks. Break them up if necessary. Let them fail. If they do, nationalize them and make them whole again, as Sweden once did. Regulate derivatives. Severely regulate or ban sub-prime loans. Don’t give banks access to pension funds. Don’t give investment banks access to the Treasury window. Prevent this by rebuilding the firewall between investment and commercial banks. Finally, bring back usury laws.
Democratize corporations. Do this by putting workers on the boards of directors. Democratic boards make corporations more responsible to workers and the communities where companies are located. Establish works councils as they do in Europe: this establishes solidarity and equalizes stakeholders.
Privatized healthcare does not work. It is expensive, inefficient, and unfair. Embrace single payer as they do in Scandinavia and the UK. In single payer , virtually all outcomes are better and all people are insured throughout their lives.
Regulate drugs. Single payer makes this feasible and realistic. Force drug companies to share profits if their products are based on government or government-supported research. Don’t allow drug companies to patent life. Don’t grant patents for “me-too” (copycat) drugs : they are not innovations.
Based on higher tax revenues, establish sovereign wealth funds that can be used for the benefit of entire nations, such as is done in Norway . Establish a Basic Income for all citizens, a minimum that would be paid from birth and that would help people escape the poverty trap. It would also enable workers to reject unsuitable employment. They would, however, have an income floor that might make it possible to accept some jobs as supplemental income. Leave it up to them.
Combining universal healthcare, Basic Income, a more equitable tax system, a more democratic work environment, would raise human dignity and the quality of life for virtually everybody.
Notes
- 1.
Timothy Garton Ash, “Is Europe Disintegrating?” The New York Review of Books 64, no. 1 (January 19, 2017): 24.
- 2.
Philipp Ther, Europe Since 1989: A History, trans. Charlotte Hughes-Kreutzmüller (Princeton, NJ: Princeton University Press, 2016), x.
- 3.
Robert B. Reich, Saving Capitalism: For the Many, Not the Few (New York: Alfred A. Knopf, 2015), 11.