Is Billionaire Capitalism a Thing?

Ever so often, I like to re-examine my conclusions. This blog is an example; it may not be of general interest, but my readers will at least know that I’m making an effort to keep my arguments clear and (I hope) correct.

My posts often follow a pattern. I link to a news story and then use it to illustrate some aspect of billionaire capitalism. I think this approach works, but there is the risk of falling into a tautological trap, where anything negative gets equated to “billionaire capitalism” and vice-versa. (Left-wing writers often fall into similar traps.)

The problem is that I haven’t proven the existence of billionaire capitalism as a political movement. Is it really a thing? Yes, there are far more billionaires than there used to be. But is this the result (or even the cause) of a political movement that is a sharp break with our democratic traditions?

The null hypothesis is that the rich are usually self-serving and indifferent to the suffering of the poor, and this is often reflected in their political positions. So nothing has really changed—the rich still don’t care about the rest of us, and they are still trying to get richer. This implies that there was no dramatic change in the capitalist agenda beginning about 1980.

One of my main hypotheses is that billionaire capitalism is a new development, in which the rich have shifted from manufacturing and trade to making money by controlling government policies: tax cuts, deregulating the banks, destroying the labor unions, gutting environmental and safety laws, and direct subsidies. And these policies have resulted in a rapidly accelerating concentration of wealth.

Of course, not all capitalists have shifted away from manufacturing and trade, as Steve Jobs and Elon Musk can attest. But I submit that capitalism’s center of gravity has definitely shifted toward political control and finance.

But to prove my hypothesis of billionaire capitalism we need to contrast it with the industrial capitalism that was dominant before 1980.  How to distinguish between them? There are four areas where the contrast between pre- and post-1980 capitalism is most noticeable:

Concentration of wealth

The industrial capitalism that flourished from Lincoln to Reagan did see significant concentration of wealth, notably in the Gilded Age. But the Gilded Age was also characterized by high overall economic growth and steep increases in wages and productivity. That is, the rich may have gotten a higher share of the wealth created during this period, but other groups also benefitted. Not the South, of course, but many industrial workers and some farmers.

And the concentration of wealth during the Gilded Age was not permanent. Much of the period between 1932 and 1980 saw reductions in the concentration of wealth, through taxation as well as a range of policies designed to widen the middle class, improve wages and reduce rural poverty. And it’s likely that the concentration of wealth slowed earlier than 1932; an income tax was introduced in 1913.

This reduction in the concentration of wealth did not harm industrial capitalism, in fact it increased consumer demand which in turn increased corporate revenue and profits. The economy grew rapidly from 1945 to 1980, when the concentration of wealth was low compared to today.

By contrast, the concentration of wealth since 1980 has accelerated to the present day, and it is intended to be permanent. But the concentration of wealth after the Civil War ebbed and flowed, and significant resistance surfaced fairly early, particularly around the issue of Free Silver—which was really a question of increasing the money supply to help debtors, and farmers in particular.

And the opposition to monopolies was vigorous, and culminated in the Sherman Anti-Trust Act of 1890.

A particularly telling difference between the two eras is this: pre-1980, Americans generally opposed great concentrations of wealth while supporting capitalism itself. They saw great wealth as a threat to democracy. As Woodrow Wilson put it:

“If there are men big enough to own the government of the United States, they are going to own it.”

This position is almost unthinkable today. Most modern Americans cannot imagine a vibrant capitalism without billionaires.

Stability of society

For most of the period from Lincoln’s time to Reagan’s, the rich strongly favored social stability, and this extended to limiting public debt and the money supply, which was achieved in those days by the using the gold standard rather than silver.

This emphasis on social stability did not exclude large investments in education (e.g., the Land Grant colleges) and infrastructure, particularly railroads. Nor did it exclude Progressive reforms and suffrage for women. In fact, the Progressive push to eliminate corruption and incompetence in the civil service was seen as furthering social stability.

Much of what happened during this period was a reaction to the Civil War. Our vision of America does not typically include the understanding that we suffered two generations of intense political instability, from the Nullification Crisis of 1832 to the end of Reconstruction in 1877. But for two or three generations after the Civil War, this instability cast a shadow over American politics. In the South, of course, the effects of that period never ended.

Thoughtful people might well have pushed for Progressive reforms as a way of legitimizing post-Civil War political and social institutions, to increase political stability. In any case there was a reforming and improving spirit at that time that had the effect of distancing people from the issues of the Civil War.

Let’s turn now to the era post-1980. We immediately see that the rich, and the Republican party which is their political arm, routinely seek to de-stabilize society, by “putting everything on the table,” even issues that were decided decades ago. For example, part of the relative social peace we achieved in the ‘70s involved accepting the changes made in the Civil Rights era, and thoroughly weaving those changes into the fabric of society through busing and affirmative action, as well as eliminating racial insults and stereotypes from daily speech. Busing was widely unpopular and probably ill-advised, and affirmative action was resented by many whites, but even these measures did not cause any serious re-consideration of the goals of racial justice and reconciliation.

There was always foot-dragging by racist whites, but this did not include any effort to restore Jim Crow. Most people accepted that the old system was dead, and that African-Americans were going to keep most or all of the gains they’d achieved in the ‘60s and ‘70s, and this included racists who were still actively involved in slowing further progress. That is, although racism was still alive and kicking in the ‘80s and ‘90s, it was not reactionary; it did not aim to restore Jim Crow circa 1950.

But once racist billionaires got involved, the situation changed.  A good example is Robert Mercer, financing white supremacist groups: https://thinkprogress.org/these-wealthy-institutions-are-quietly-financing-white-nationalism-5313db89b185/

Why in the world would Robert Mercer want to de-stabilize race relations in America? What possible good could come from that? For 55 years we’ve had institutions and social norms that contained many of our racial conflicts, and that’s a significant achievement.

Race riots are now rare, whatever the provocation. Even an atrocity like the Trayvon Martin case does not result in cities burning. With the exception of police violence, and outside Florida, whites and blacks are unlikely to kill each other in modern America, and that’s definitely an improvement over historical norms, particularly in the South. The younger generation of blacks and whites seem to get along reasonably well, at least among the urban and suburban middle classes. We certainly have racial tension, but it is less intense than in the ‘60s.

Besides his incomprehensible views on race, Mercer has other causes. He advocates the gold standard, he’s a climate denier, and he contributes money to “AIDS deniers,” which implies he believes AIDS is not caused by HIV. This theory was sold to President Mbeki of South Africa, with terrible results:

From https://en.wikipedia.org/wiki/HIV/AIDS_denialism:

“Despite its lack of scientific acceptance, HIV/AIDS denialism has had a significant political impact, especially in South Africa under the presidency of Thabo Mbeki. Scientists and physicians have raised alarm at the human cost of HIV/AIDS denialism, which discourages HIV-positive people from using proven treatments.^{[2][8][10][11][12][13]} Public health researchers have attributed 330,000 to 340,000 AIDS-related deaths, along with 171,000 other HIV infections and 35,000 infant HIV infections, to the South African government’s former embrace of HIV/AIDS denialism.^[14][15] The interrupted use of antiretroviral treatments is also a major global concern as it potentially increases the likelihood of the emergence of antiretroviral-resistant strains of the virus.^[16]”

If we regard his views as a political program and not as private opinions—and his spending, particularly on Breitbart, seems to indicate an intensely political motive—then the Mercer Program is:

• A return to the pre-1964 state of race relations in America, the restoration of Jim Crow and white supremacy, negating the efforts at racial justice and reconciliation made in the ‘60s and since. At a deeper level, Mercer is denying that non-whites are fully human.
• A return to the gold standard. Economies since the Industrial Revolution have needed a money supply that matches or exceeds economic growth, and the gold available has often been inadequate. Therefore, the gold standard has mostly had a deflationary effect. Although the gold standard wasn’t the primary cause of the deflationary spiral of the Great Depression, it did prevent the government from increasing the money supply to meet the crisis—and it would do the same during any future economic downturn. So Mercer is either denying the validity of the economic theory of money supply, or he’s denying that preventing or shortening economic depressions is desirable.
• A denial that HIV causes AIDS. Early in the AIDS crisis, when HIV was first associated with the disease, there was some legitimate doubt whether the virus was actually the cause. But the success of anti-retroviral drugs has now proven this beyond any doubt. Mercer is denying science, and even the validity of deductive reasoning.
• A denial that climate change is occurring. Again, this is a denial of atmospheric science and even of the mere measurements of rising temperatures, rising sea levels and shrinking glaciers.

He also supported Brexit, but it’s difficult to tell why exactly.

Of course, most people will shrug their shoulders and say that Mercer is crazy, and he may well be. But his mental health is beside the point—he could be crazy in any number of ways, but he’s crazy in this way: every single one of his delusions involves reversing decisions that have tended to stabilize society, limit the spread of disease and maintain our climate. And these decisions have mostly been based on science.

If this is a political program, then it must have a revolutionary end. Because the effect of what Mercer desires is to destabilize society across the board.

And not just to destabilize. In all seriousness, the combination of runaway climate change, epidemic disease, race war and severe deflation could lead to a collapse of civilization, at least temporarily.

Mercer doesn’t spell out his vision of things to come, but it’s a fair guess that he wants to increase the power, wealth and prestige of people like himself. I call this vision the “billionaire state.”

The billionaire state would probably seem like the end of civilization to most of us, even if we still have Netflix.  That’s if by “civilization” we mean something based on the New Testament, the Enlightenment, science and democracy.

https://www.cbc.ca/news2/interactives/sh/wex94ODaUs/trump-robert-mercer-billionaire/

Foreign Policy

From the end of the American Revolution to 1945, wealthy Americans did not have their own foreign policy, because all Americans largely wanted the same things: to avoid becoming a colony or dependency of Europe and to avoid being drawn into Europe’s interminable wars—or if we were drawn in, to fight always with a view to a just and stable peace.

As time passed and America grew in population and power, the possibility of re-colonization receded. By the 1860s, Lincoln could say:

“From whence shall we expect the approach of danger? Shall some trans-Atlantic military giant step the earth and crush us at a blow? Never. All the armies of Europe, Asia and Africa combined, with all the treasure of the earth (our own excepted) in their military chest, with a Buonaparte for a commander, could not by force take a drink from the Ohio River, or make a track on the Blue Ridge, in the trial of a thousand years. No, if destruction be our lot, we must ourselves be its author and finisher. As a nation of free men we will live forever or die by suicide.”

But the possibility of being drawn into European wars remained an issue until 1945, when we gained the power to prevent most such wars.

With the rise of Communism, however, the rich began to diverge from the rest of us in their foreign policy goals. Ordinary Americans were initially less exercised by Communism, until the Soviet Union stole the technology for nuclear weapons, which was an obvious existential threat to all of us.

The young and the educated middle class split with the wealthy over the Vietnam War, partly because opposing Communism in the Third World seemed too expensive and ultimately pointless, and partly out of a general desire to de-escalate the Cold War, which had nearly resulted in a nuclear war during the Cuban Missile Crisis.

But the overall strategy of protecting Europe, Japan and the Middle East from the Soviets and the Chinese seldom aroused significant opposition. Americans were mostly united in their foreign policy views for a long time, Vietnam notwithstanding.

But at some point after 9/11 the right-wing media began fawning over Vladimir Putin, and long before that time billionaires had decided that Saudi Arabia was an ally—not of the US—but of the billionaires themselves.

Most Americans realized early on that Putin’s Russia was not our friend, and that went double for Saudi Arabia. But they are “shining cities on the hill” to American billionaires, inspiring examples of what society could be. And the billionaires have succeeded in shifting US foreign policy to a pro-Russia, pro-Saudi position. Trump wants to withdraw from NATO and if he can provoke a war with Iran (to serve Saudi interests), he will probably do so. And without Putin’s efforts, Trump would probably not be president, so the relationship has benefits for both Russia and American billionaires.

NATO is implicitly based on a shared social agenda of democracy, economic growth and social progress. (And “social progress” meant policies proposed by democratic socialists and liberals.) Since NATO’s social agenda is unacceptable to billionaires, they reject the alliance. This hostility to NATO isn’t just a personality quirk of Trump’s—it’s a logical outcome of an ideology that he shares with other billionaires.

So now we have two foreign policies: one for the billionaires, and one for everyone else. Russia and Saudi Arabia (and China at times), can be relied upon to subvert democracy and the middle class everywhere, which is exactly what Mercer and the Koch brothers are doing here in America.

Having two foreign policies is potentially catastrophic, of course.

Environmental Policy

In the old days of industrial capitalism, environmental protections were hardly even controversial. Although individual industrialists would usually pollute whenever it was profitable, capitalists did not oppose conservation as a class. Fish and game laws and the National Parks were broadly popular. The capitalists of the time seemed to feel that these measures benefited everyone and perhaps Christian teachings on stewardship played a role in their attitude.

In 1970, sweeping environmental legislation passed Congress on a bi-partisan basis, some of it unanimously, with little opposition from business or the wealthy. In fact, the Club of Rome was actively in favor of environmental protection.

There was consensus on the environment through three presidential administrations, and significant progress was made on air and water pollution.

With the Reagan administration, all that changed, and the EPA’s budget was gradually cut by 30%. However, work continued on the most serious and well-known issues, such as acid rain, ozone depletion and on Superfund sites. (Although Reagan’s appointee Anne Gorsuch badly mismanaged the Superfund program.)

Certainly no one disputed the scientific evidence of acid rain or the ozone hole, or pretended that Love Canal was a hoax.

But now, in 2019, the biggest environmental problem in history is routinely denied, despite near-unanimity among climate scientists and obvious physical changes in the environment, such as rising sea levels and shrinking glaciers. Climate denial is now nearly a billion dollar a year industry.

“The total annual income of these climate change counter-movement-organizations is roughly $900 million.”  https://en.wikipedia.org/wiki/Climate_change_denial

To put this number in perspective, $900 million per year is more than Americans contribute to presidential elections. Yes, you read that right. The most expensive presidential election campaign in recent times was 2008, when the candidates spent about $2.8 billion between them, which is of course $700 million per annum. https://www.opensecrets.org/overview/cost.php

The money spent on climate denial could have been invested in reforestation or research into carbon sequestration, or put to some other good use, but no.

One my assumptions is that capitalists and conservatives act rationally, within the limits of their ideology and socialization. Which is to say that they often do apparently senseless things—but if you dig deep enough, you generally find they have their reasons.

But spending more money on climate denial than on capturing the White House? That, I must say, is difficult to explain.

Summary and Conclusions

In all four areas—Concentration of Wealth, Social Stability, Foreign Policy and Environmental Policy—we see distinct differences in the views and actions of capitalists pre- and post-1980.

This difference is perhaps most dramatic in the area of Social Stability. Who can remember a case of the wealthy attempting to de-stabilize society across the board and on such thin motives? Yes, German industrialists supported Hitler, but they had the specific goal of increasing armament spending—and the system they were trying to undermine was only 15 years old.

I invite my readers to find a parallel to the Mercer Program anywhere else in history.

Furthermore, climate denial as a central tenet of capitalism is impossible to envision before 1980. Simply denying the facts had never been a pattern in capitalism before the current age. In fact, the financial, organizational and technical demands of industrial capitalism tended to make capitalists more realistic than average, particularly compared to the clergy and aristocracy.

Also, before 1980, it was normal to oppose vast concentrations of wealth while supporting capitalism. And most people made a distinction between monopolistic and non-monopolistic capitalism, with hardly anyone defending monopolies.

The situation since 1980 is a sharp break with the past. No one worries about monopolies anymore—except for the EU and Paul Krugman—and it’s difficult for modern people to even conceive of a rationale for capitalism that doesn’t include justifying vast accumulations of wealth.

And it should be noted that capitalism is a shape-shifter, as Braudel illustrates so well in Civilization and Capitalism. It’s not unusual for capitalism to change its focus; it did so on a massive scale with the discovery of the New World, and then again with the Industrial Revolution.

And history also contains examples of the upper class concentrating wealth through political power, just as we see in today’s world; the enclosure movement in Britain (starting in the sixteenth century) is a very clear case of this.  https://en.wikipedia.org/wiki/Enclosure