The Power Elite

It is a truth universally acknowledged that as individuals become more successful, more established and older, they generally become more attached to a socio-economic order that rewards success. It is unusual and extraordinary, therefore, for an individual, while living comfortably, to grow increasingly critical of the existing order.

Such is the case with Kevin Phillips, who has been one of the most distinguished and thought-provoking commentators on the American political scene for more than 30 years. With roots firmly anchored in the Republican Party, Phillips became a young chief political analyst during the 1968 presidential campaign, which culminated in Richard Nixon’s victory. In light of that campaign, he wrote his first major work, “The Emerging Republican Majority” in 1969, a daring book that peered through the tumults of radical protest, the women’s movement, human-rights campaigns and antiwar feelings to see that the Democratic party was losing much of its traditional base and that the South and West could fall increasingly into the Republicans’ lap.

Twenty-one years and four books later, a different sort of Phillips emerged in the form of “The Politics of Rich and Poor.” The title itself was a giveaway: In some Republican circles, the mere mention of “the poor” is bad form, but here was Phillips discussing the socioeconomic clefts that had emerged by the end of the Reagan era and raising the issue of fairness. This did not cause the already rich and successful to pause, nor did those who frantically endeavored to emulate them during the Wall Street boom of the 1990s lose their eagerness to become rich. It did, however, make Phillips something of a maverick and a doomsayer. One critic called him a Nostradamus. Cassandra might have been better.

If that book made the defenders of great riches and low taxes irritable, “Wealth and Democracy” will give them apoplexy. Phillips’ new book is subtitled “A Political History of the American Rich,” and so it ranges back to the late 18th century, chronicling the growth of the great family fortunes, like those of the Vanderbilts, the Astors, the Rockefellers and the Morgans through the hurly-burly of gaining and spending wealth in the last century. The reading is wide but not exhaustive, and the narrative is complex because it is more thematic than chronological. There are lively chapters on political influence, corruption and speculative bubbles, others on the role of technology and the sources of wealth. But this is no mere social history of the wealthy in America. It comes with a punch.

At one level, what Phillips says is predictable. It follows “The Politics of Rich and Poor” but with even more power and more statistics, drawing upon census figures and other data that point to the ever-increasing unevenness of American incomes as the 1990s unfolded. The broad trends are well known, though they are presented in withering detail here.

Top executives, who in general were content with earning around 40 times their workers’ average pay a quarter-century ago, were in many cases pocketing more than 200 times by the end of the last decade. Successful company leaders were awarded, by grateful boards, annual compensations that leaped ever higher. In an amazing chart titled “Up, Up and Away,” Phillips shows that while the highest-earning executive in 1981 made a then-mind-boggling $5.7 million, his equivalent in 1988 received $40 million, and his successor to that title in 2000--John Reed of Citigroup--accepted $290 million in compensation. Tax breaks and special concessions for special interests--agriculture, oil and gas--were negotiated with an obliging Congress. Welfare mothers, by contrast, lost out, as did virtually all other vulnerable elements of our society. Tens of millions of Americans live under the poverty line, without the basic welfare net that is commonplace in Canada and Europe. Though this imbalance of wealth does not exist in any other Western society, it is commonplace in corrupt regimes in the developing world, like Indonesia.

Within a short while, free-market economists and conservative professors will be wheeled out in droves to attempt to pick holes in Phillips’ statistics and to demolish his arguments. But such a reaction to prove Phillips wrong may miss two important aspects of “Wealth and Democracy.”

The current celebration of wealth in this country is nothing less than an abdication of the philosophies of some of the greatest Republican leaders, Abraham Lincoln and Teddy Roosevelt, who were the most unrestrained in their condemnation of excessive concentrations of wealth, of its capacity to corrupt true democracy and of the need to rein in its excesses and to pay more attention to the country’s social fabric. In his preface, Phillips quotes from a stunning Nov. 21, 1864, private letter from Lincoln in which the president sounds eerily like George McGovern or Ralph Nader when he confesses his worry and trembling that “as a result of the war, corporations have been enthroned, and an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people....”

Phillips has a similar field day in quoting statement after statement from Roosevelt reiterating the opinion that labor is more deserving of support than capital and that too much wealth in the hands of a small minority is not only offensive to the American sense of fairness, it is dangerous to the republic itself. Excess money, in this view, purchases special privileges, corrupts low-paid officials and distorts the electoral will. In a narrower sense, it is also dangerous to the Republican Party, which brings us back to where Phillips started off his long career.

In one of the niftier sections of “Wealth and Democracy,” we are reminded that Nixon was in favor of higher taxation of unearned income, as opposed to earned income, and increased subsidies for the poor. Such embarrassing details are assembled not by someone who has drifted into the ranks of the Democratic party but by a Republican who thinks his own party has lost its roots and its decency.

Phillips then goes on to argue that such excesses of wealth and greed and inequity have helped bring down--or may even have been the chief cause in bringing down--virtually all flourishing great powers in the past and that the United States will be no exception. More than in any previous work, the author has scoured the history of other countries (Rome, the Dutch republic, the British empire) to prove his point, and his examples are convincing. For all the claims of American exceptionalism and for all the evidence around us of this country’s preeminence in the fields of military, economic and technological power, Phillips assembles too many troubling historical analogies for the reader to shrug off his point. The Dutch in their golden age of the early 18th century, and the staggeringly rich landowners and bankers of late Victorian Britain were, though they did not know it, not far from their slow demise.

This is, then, a call to action. The political analyst of 30 years ago has become the soothsayer, social critic and economic reformer of the early 21st century. Predictions nearly a half century ago about the spreading grip of the Republican Party have been replaced by stern warnings that this very party is treading on dangerous waters and harming the American democracy.

“Wealth and Democracy” is a brave book. It will be interesting to see how it fares as this year’s election campaigning develops. But my guess is that it will outlast most of the cant that passes as political discourse today, and we will be better for it.