“The Self Destruction of the 1 Percent”

Chrystia Freeland’s October 13th, New York Times opinion piece, “The Self Destruction of the 1 Percent” compares the rise of the oligarchy in 14th century Venice to what is happening in the United States today. She concludes that, despite the Obama administration pulling us back from the brink, we remain on a fundamentally dangerous path.

In this essay extracted from her book, Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else,” Freeland argues that we have traveled down this road before, where the rich get richer as the middle classes and the poor decline. Then and now, it’s a capitalist story that doesn’t end well.

The story goes like this: The rich, driven by greed, use the power of the state, grab everything for themselves, and by doing so, impoverish the nation that allowed them to flourish. In their stupidity and short sightedness, they destroy the open, inclusive system that enriched them. The nation goes into decline, never to recover its former power and wealth.

In 1315, when the Venetian city-state was at the height of its economic powers, the upper class acted to lock in its privileges, putting a formal stop to social mobility with the publication of the Libro d’Oro, or Book of Gold, an official register of the nobility. If you weren’t on it, you couldn’t join the ruling oligarchy.

The political shift, which had begun nearly two decades earlier, was so striking a change that the Venetians gave it a name: La Serrata, or the closure. It wasn’t long before the political Serrata became an economic one, too. Under the control of the oligarchs, Venice gradually cut off commercial opportunities for new entrants. . . . The reigning elites were acting in their immediate self-interest, but in the longer term, La Serrata was the beginning of the end for them, and for Venetian prosperity more generally.

Freeland’s insightful historical analysis points to the present day corruption in Washington D.C. She calls out both Democrats and Republicans for funneling money to the wealthy at the expense of the majority. She reminds that it was a bi-partisan, government enabled, corporate feeding frenzy, in a deregulated environment, that caused the economy to melt down in 2008.

Unfortunately, the current administration and Congress have not done enough to seriously mitigate the danger of another global economic meltdown. Oligarchs like Jamie Dimon and Lloyd Blankfein have never been held responsible for the economic wreckage they caused, and they continue to take financial risks that endanger us all. Growing income inequality threatens the United States in the same way it threatened 14th century Venice. As in historical Venice, the wealthy use government to rig the system leaving the working and middle classes out in the cold. Freeland writes:

That was the future predicted by Karl Marx, who wrote that capitalism contained the seeds of its own destruction. And it is the danger America faces today, as the 1 percent pulls away from everyone else and pursues an economic, political and social agenda that will increase that gap even further — ultimately destroying the open system that made America rich and allowed its 1 percent to thrive in the first place.

Case in point: Freeland notes that at a time of severe economic crisis, both Democrats and Republicans rewarded our present day oligarchy, the top 1 percent, with a huge percentage of the economic gains from the 2008 economic bailout. She also calls the subsequent weak economic recovery a “crony recovery” because it has benefited corporations more than individuals.

Exhibit A is the bipartisan, $700 billion rescue of Wall Street in 2008. Exhibit B is the crony recovery. The economists Emmanuel Saez and Thomas Piketty found that 93 percent of the income gains from the 2009-10 recovery went to the top 1 percent of taxpayers. The top 0.01 percent captured 37 percent of these additional earnings, gaining an average of $4.2 million per household.

The second manifestation of crony capitalism is more direct: the tax perks, trade protections and government subsidies that companies and sectors secure for themselves. Corporate pork is a truly bipartisan dish: green energy companies and the health insurers have been winners in this administration, as oil and steel companies were under George W. Bush’s.

The American people know very well the deck is stacked against them—more now than in 2008. They are aware the Citizen’s United SCOTUS decision allows billionaires to buy elections. They have given Congress a well-deserved approval rating in the single digits. Despite premature announcements of its death, the Occupy movement is alive and well, regularly fielding its representatives to cable talk shows. We even have a genuine oligarch running for president, one who dismisses 47% of the population as irrelevant slackers, and, if elected, would fast track the funneling of money upward.

It feels to me like we are at a tipping point. Either the United States will go the way of 14th century Venice, with increasing poverty and a declining middle class, or Progressives of all stripes, inside and outside of government, will begin to fight back.