"It must be by this time evident to all men of reflection, who are either free from erroneous prepossessions, or can divest themselves of them, that it is a system so radically vicious and unsound as to admit not of amendment but by an entire change in its leading features and characters."
The options: 1. Karl Marx. 2. Alexander Hamilton. 3. Theodore Roosevelt. 4. Mikhail Bakunin. 5. Glenn Beck. 6. None of the above.
The envelop please ...
Did you guess Karl Marx? Wrong. The correct answer: Alexander Hamilton (Federalist Paper 22). Entire change: no, we can’t imagine today such revolutionary words coming from a Revolutionary War hero, ultra conservative U.S. Constitution maker, and our first Treasury Secretary (under Washington) -- but there they are.
Like him or not, Hamilton is part of our daily lives. Right now, you probably have on you his steel-engraved portrait -- a 10-dollar bill. Not a bad cross to bear; in fact, don’t leave home without it (Hamilton was a hyper protectionist). More on money shortly.
You say you want to help your country? Really? It’s easy. Send copies of The Federalist Papers (co-authored by Hamilton) and The Anti-Federalist Papers to your United States representative and senator. I guarantee that 99.9% of them have not read both books – the whole thing, not just predigested Readers Digest excerpts or poli sci professor retreads.
While you’re at it, don’t forget President Obama. He knows as little -- or as much -- as they do
Erroneous prepossessions? I wonder …
Given the 2010-2011, billion-dollar giveaway, coupled with last week’s stock market plunge and rush to gold, I’ll bet deep down, you suspect that Congress, the president, their appointees and advisors don’t know what the hell they’re talking about. As the calamitous news pours in, as your life savings and pension funds run out before your impotent eyes, you may find yourself singing along with Peter, Paul and Mary:
Where have all the flowers gone, long time passing?
Where have all the flowers gone, long time ago?
Where have all the flowers gone?
Young girls have picked them everyone.
Oh when will they ever learn?
Oh when will they ever learn?
Classic 1960s song. In it, Hamilton’s spirit -- entire change -- was alive and well. In the face of new realities, however, and with deepest apologies, I want to suggest a change in lyrics. Don’t panic, PPM fans -- we’re only looking at one word.
First, what new realities? No, we can’t ignore them and escape chaos.
To see them in naked black and white, go to www.census.gov/hhes/www/income/data/historical/families/index.html. Table F-2. What you will find:
Our census bureau periodically takes the U.S.A. population and divides it into five parts. The bureau then reports the size of the slice of the national income pie going to each fifth of the population. Thus, in 1947, the poorest one-fifth of the population received 5.0% of our nation’s income. In 2009, that same fifth received only 3.9%.
Undoubtedly, a poor German or American today is well off compared to a poor Chinaman in the 1600s. “Poor,” “middle,” and “rich,” then, are phenomena that exist not in absolute terms but rather relative to the total wealth of the society in question.
Once that nonabsolute definition is accepted, the figures cited above for the lowest fifth of the American population speak for themselves. No, we can’t and won’t ignore them.
So, how are American families doing?
(1) The richest, top fifth of all families received 43.0% of the national income in 1947. In 2009, their share had grown to 48.2%. First conclusion: the rich are getting richer. Two facts worth noting: (i) the super rich benefited the most. The slice of the pie going to the top 5% of all families blossomed from 17.5% in 1947 to 20.7% in 2009. (ii) The rise of the rich is relatively recent. The share going to the top 5% actually declined after 1947 until 1989, the first year of the Bush Sr. administration, when it reached 17.9%. Thereafter, the upward climb continued, consolidated.
(2) The rich and their spokesmen like to say a rising tide raises all boats. Sorry, not in this case. The rise of the rich took place at the expense of those least able to afford it. The share of national income going to the lowest two-fifths of the population fell from 16.9% in 1947 to 13.3% in 2009. Second conclusion: the poor are getting poorer.
(3) 1947? Old stuff, you sniff. O.K., let’s run the clock back only to 1995, the Oklahoma bombing and Bill Clinton’s third year as president. As of 2009, (i) the lowest, poorest fifth of the population’s share of the income pie fell from 4.4% to 3.9%; the share of the second lowest fifth, from 10.1% to 9.4%; of the third fifth, the middle, from 15.8% to 15.3%. The slice going to the fourth fifth stayed at 23.2%. The share going to the remaining fifth, the richest, rose from 46.5% to 48.2%. (ii) If “middle class” is defined as the second, third, and fourth fifths of the population, then the share of the national income going to the middle class in 1995-2009 shrank from 49.1% to 47.9%. Third conclusion: the middle class is declining.
(4) The fall of the middle class, like the rise of the rich, is a relatively recent phenomenon. In 1981, Ronald Reagan’s first year as president, the middle class (second, third, and fourth fifths) received 53.5% of America’s income. In 2009, that share slipped to 47.9%. (During the same period, the slice going to the richest 5% of the population ballooned from 14.4% to 20.7%).
(5) In 1992, the middle class’s slice of the income pie was 51.0%. In 1993, its share was cut to 48.9%, and never again rose above 50%. That drop, totally unnoticed, was pivotal not only for the middle class but also for the entire country. More in a moment.
Poor poorer; rich richer; middle class smaller. The triple play is as disastrous as it is undeniable.
Let’s look closer at what I believe is the core of the crisis: the decline of the middle class. I analyzed it in depth in The Source of Terrorism: Middle Class Rebellion and in a series of Internet articles. In those publications my focus was on a long-term development: if middle class rebellion, the source of terrorism, increases under stress and tension, it can be expected that as the middle class is economically eroded, rebellion will grow -- and with it, terrorism.
Tragically, we don’t have to wait for a tragedy. The economic weakening of the middle class is already having grave repercussions. And -- contrary to everything Washington is saying and not doing -- no, we can’t ignore them and survive. The reason:
The middle class is indispensible to Western civilization. 2000 years ago, Aristotle observed the key role the middle class plays. The Source of Terrorism, (pp. 52-3):
Aristotle wrote that neither the rich nor the poor would “tolerate a system under which either ruled in its turn: they have too little confidence in one another. A neutral arbitrator always gives the best ground for confidence; and ‘the man in the middle’ is such an arbitrator.”
But why should the man in the middle be trusted? Answer: the middle class “forms the mean” and “moderation and the mean are always best.” Being moderate, those who occupy the middle “are the most ready to listen to reason.”[i]
In brief, the middle class was Aristotle’s totem.
Because the middle class is the best class, it follows that “first, the best form of political society is one where power is vested in the middle class, and secondly that good government is attainable in those states where there is a large middle class….”[ii] Aristotle called that best political system a polity or “mixture of democracy and oligarchy…incline[d] more towards democracy….”[iii] Not only is the polity the best political system, it is also inherently stable:
"There is no risk, in such a case, of the rich uniting with the poor to oppose the middle class: neither will ever be willing to be the subject to the other; and if they try to find a constitution which is more in their common interest than the ´polity´ is, they will fail to find one."[iv]
Today, the middle class-based polity, the hybrid political system of oligarchy and democracy, provides the major arena in which the middle class moderates the rich and the poor.
In way of summary, in a note to himself James Madison characterized the system he and the other Founding Fathers were attempting to build: “The most difficult of all political arrangements is that of so adjusting the claims of the two classes [i.e., ´the class with, and the class without property´] as to give security to each, and to promote the welfare of all.”[v]
What can destroy a polity? What could ruin the American political system?
Aristotle foresaw two dangers:
(1) The first is socio-economic. “Where the number of the members of the middle class outweighs that of both the other classes -- and even where it only outweighs that of one of the others -- a ‘polity’ can be permanently established.”[vi] As mentioned, in 1992-93, America slid silently past the first threshold.
(2) The second danger is political. It comes neither from outside enemies nor the poor, nor the middle class, but from the wealthy who want to convert a polity into an aristocracy:
"[Forgetting the claims of equity], they not only give more power to the well-to-do, but they also deceive the people [by fobbing them off with sham rights]. Illusory benefits must always produce real evils in the long run; and the encroachments made by the rich [under cover of such devices] are more destructive to a constitution than those of the people."[vii]
In 2008-2009, for the first time in history, the American oligarchy stepped out from behind lace curtains and locked doors, and, in front of TV cameras and microphones, stuck their hands out. Then -- to astonished eyes around the planet -- Bush and Obama forked over billions of public dollars.
For over 200 years, nobody had seen the famous “Invisible Hand” of Adam Smith, the hand that, godlike, transforms personal greed into benefits for all humanity. During the Bush and Obama Administrations, the Hand finally, really, truly appeared. Hope you liked the show …
Someday, history will show those encroachments made by the rich were the consequence of the fall of the middle class under the 50% threshold. Simply put: due to economic weakness, the middle class has lost the political strength and will to balance the upper and lower classes.
The census bureau’s data don’t go beyond 2009. I emailed the bureau asking when it was going to post the income data for 2010. They answered "sometime after September 13, 2011." Hmmm ... Question: will 2011 data be released in September 2012, two months before the presidential election? Given Obama’s billion-dollar party with newly-found friends, the 2011 data will likely show a worsening of the triple play. Go figure.
I wonder ... Do those 2011 data already exist, but are being withheld from the public? If so, they could help explain the cathouse-or-courthouse effect we are witnessing -- the steady stream of men entering and leaving the White House, particularly the President’s Council of Economic Advisors. As you gaze at their stretch limousines whizzing by and wonder who is inside, you can be sure of one thing: it ain´t Hamilton.
Disastrous economic facts are why, no, we can’t accept any White House announcement that “due to technical problems” the 2011 income data cannot be released until after the 2012 elections. A more likely ploy: the census bureau discovers a “need” to “redefine” its terms or to “clarify” the data with qualifications and modifications, the obvious is thereby obscured.
Back to Peter, Paul and Mary. When will they ever learn? We have the answer. They have indeed learned -- only too well. As for the erroneous prepossessions Hamilton mentioned, the American oligarchs divested themselves of them years ago. The economic crisis that flared up last week signaled here we go again: the mega rich are ready, waiting in the wings. Lights, cameras, action.
Look anew at your disappearing savings, vanishing investments, paltry pensions. Giving money to the rich didn’t work before. Why should it work now in the days ahead? Summers, Greenspan, Rubin, Goolsbee, Bernanke: why should we turn for guidance to the very people who created and perpetuated the mess in the first place? To the point: why are those guys still on TV?
Aristotle defined the best system, the policy, as an oligarchy/democracy hybrid “inclined more toward democracy.” The giveaway of billions of dollars show the inclination switched in 2010-11 away from democracy. It was a moumental moment we witnessed, the turning point in American history.
Fourth conclusion: we no longer have a polity. We have an oligarchy with democratic accessories and aristocratic pretensions.
In this new system, so radically vicious and unsound (Hamilton) where is Madison’s welfare for all? His security to each? No, we can’t find them. They were picked, and not by young girls.
The causes of the decline of the middle class -- the centerpiece of the calamitous triple play -- are well known. So, what are we waiting for?
Here we arrive at The American Tragedy. Due to the death of the polity, no, we can’t implement the solutions. No brave new world here; just more of the cowardly old one.
To restore the polity requires a resurrection of the democratic component. But it is not what we are getting.
The resurrection of democracy would constitute nothing less than the Second American Revolution. That entire change, as Hamilton would call it, is as necessary as it is totally contrary to what Obama and his country clubber buddies, advisors, legislators, judges, melancholy media magnates, lobbyists and other assorted D.C. hangers-on are doing.
No, we can’t continue down the road to ruin without being ruined. I think Hamilton and Madison, Adams and Jefferson, Washington and Franklin, would agree. The important thing is, do you?
All of which leads back once more to Peter, Paul and Mary, and to that one-word change:
Oh when will we ever learn?
Oh when will we ever learn?
[i] Aristotle, The Politics of Aristotle, translated and edited by Ernest Barker, Oxford University Press, New York, 1962, pp. 181, 186. (Book IV, Chapters XI, XII). Tocqueville held the same view of the rich and the poor as implacable rivals: “If you put aside the secondary causes of great human disturbances, you will almost always find inequality. It is the poor who wanted to despoil the rich of their goods, or the rich who tried to enslave the poor….” (« Écartez les causes secondaires qui ont produit les grandes agitations des hommes ; vous en arriverez presque toujours à l’inégalité. Ce sont les pauvres qui ont voulu ravir les biens des riches, ou les riches qui ont essayé d’enchaîner les pauvres. […] ») Alexis de Tocqueville, De La Démocratie en Amérique II, in Œuvres, Volume II, Bibliothèque de la Pléiade, Gallimard, Paris, 1992, p. 769. (III, XXI).
[ii] Aristotle, op.cit., p. 182. (Book IV, Chapter XI).
[iii] Ibid., p. 174. (Book IV, Chapter VIII).
[iv] Ibid., p. 185. (Book IV, Chapter XII).
[v] James Madison, “Note 1 in Convention of 1787, August 7th,” in Ralph Ketcham, The Anti-Federalist Papers and The Constitutional Convention Debates, Penguin Books, New York, 1986, p. 151.
[vi] Aristotle, op.cit., p. 185. (Book IV, Chapter 12).
[vii] Aristotle, op.cit., p. 186. (Book IV, Chapter XII). Brackets made by the translator. Tocqueville foresaw the same crossroad: “Is it possible that, after having destroyed feudalism and defeated kings, that democracy will retreat before the bourgeoisie and the rich? Will democracy stop now that it has become so strong and its adversaries so weak?” (« Pense-t-on qu’après avoir détruit la féodalité et vaincu les rois, la démocratie reculera devant les bourgeois et les riches ? S’arrêtera-t-elle maintenant qu’elle est devenue si forte et ses adversaires si faibles ? » » Alexis de Tocqueville, De La Démocratie en Amérique I, in Œuvres, op.cit., pp. 6, 7. (« Introduction »).