Inequality, Billionaires and stealth politics in the US

The NYT Weekend magazine recently covered the issue of inequality in the United States.  

This is an excellent illustration that puts in perspective the extraordinary wealth of Jeff Bezos in the form of nine different ways to view it.

I have blogged here separately about this interview of Thomas Piketty, the foremost chronicler of inequality of our times.  

This on the endurance of the Horatio Alger articulated narrative on the realisation of the American dream,

Perhaps no cultural figure helped to keep the American dream on life support longer than Horatio Alger, the 19th-century novelist who wrote adventure stories for boys. Alger commanded enormous popularity in his time, and his novels became integral to the enduring fantasy of American egalitarianism. His name is synonymous with the “rags to riches” narrative we seem unable to relinquish... 

Today, whether or not they realize it, the wealthy tell the stories of their lives — and our class structure — within the framework that Alger articulated. They all cast themselves as scrappy entrepreneurs who start at the bottom, climb to the top and step into a benefactor role, transforming from Ragged Dicks into versions of Mr. Whitney. Rather than memoir, the autobiographies of billionaires are couched as business advice, self-help, policy prescriptions or even quasi-religious texts, all united by an Alger-inflected fantasy of class mobility that is increasingly imperiled, often by the political agendas of the very billionaires writing these books.

This on the rise of billionaires,

In the 1950s, the economist Simon Kuznets popularized the idea that inequality was an unfortunate but self-regulating side effect of economic growth; whenever it got too high, Kuznets reasoned, the political process would rein it in. This was known as the Kuznets curve, a parabola that showed inequality soaring before being slowly brought back to Earth through redistribution. Kuznets believed that the richest societies would eventually be the most equal. 

But in the last 12 years, the American political system has delivered Citizens United, a top marginal tax rate of 37 percent (down from a high of 94 percent in Kuznets’s day) and a billionaire president openly hostile to the democratic process — along with 332 new billionaires. The Kuznets curve has fallen out of favor, too, replaced by something called the Kuznets wave, which shows successive peaks and valleys of inequality. Branko Milanovic, the economist who put forward this revised model, thinks it might take at least a generation to tamp down the current peak.

And the nature of the modern knowledge-based economy,

This shift to a highly financialized, postindustrial economy was helped along by the Reagan administration, which deregulated banking, cut the top income tax rate to 28 percent from 70 percent and took aim at organized labor — a political scapegoat for the sluggish, inflationary economy of the ’70s. Computer technology and the rise of the developing world would amplify and accelerate all these trends, turning the United States into a sort of frontal cortex for the globalizing economy. Just as important, the tech revolution created new ways for entrepreneurs to amass enormous fortunes: Software is by no means cheap to develop, but it requires fewer workers and less fixed investment, and can be reproduced and shipped around the world instantaneously and at practically no cost. Consider that the powerhouse of 20th-century capitalism, Ford Motors, now employs about 183,000 people and has a market capitalization close to $68 billion; Google employs about 156,000 people and has a market cap of around $1.8 trillion. This new economy would be run by, and for, knowledge workers, who would reap most of the gains, and therefore have more money to spend on services — a sector that would come to sort of, but never fully, replace the manufacturing this transformation did away with.

And wealth accumulation in that economy, of a capitalism that's dominated by asset price appreciation, 

That is, an economy in which the rising price of assets — stocks, bonds, real estate — would be, somewhat counterintuitively, a fuel for economic growth. It has been a good time, in other words, to own a lot of assets. And owning assets is mostly what billionaires do. In his book “Capital in the Twenty-First Century,” the French economist Thomas Piketty notes that the new economic order has made it difficult for the superrich not to get richer: “Past a certain threshold,” he writes, “all large fortunes, whether inherited or entrepreneurial in origin, grow at extremely high rates, regardless of whether the owner of the fortune works or not.” He uses the examples of Bill Gates and Liliane Bettencourt, the heiress to the L’Oréal fortune. Bettencourt “never worked a day in her life,” Piketty writes, but her fortune and Gates’s each grew by an annual rate of about 13 percent from 1990 to 2010. “Once a fortune is established, the capital grows according to a dynamic of its own,” Piketty notes, adding that bigger fortunes tend to grow faster — no matter how extravagant, their owners’ living expenses are still such a small proportion of the returns that even more is left over for reinvestment.

Jaime Lowe writes about the influence the rich wield on the American political system and their practice of "stealth politics", which involves actively working behind the scenes to shape government policies. He draws on the work of Benjamin Page, Jason Seawright, and Matthew Lacombe who have investigated the impact of the superrich Americans on congressional and presidential policies. 

Much of the “stealth politics” practiced by America’s ultrarich is happening at the state and local levels, where many crucial pocketbook issues are decided, often outside the scrutiny of the national media. In some states, that has meant a reduction in the pensions and collective bargaining rights of public-sector workers and the rejection of Medicaid extensions... David Koch invested heavily in conservative causes for decades before his death in 2019. He and his brother Charles recognized the importance of exercising influence in state legislatures and city councils. “That’s where voting rules are established,” Lacombe says. “That’s where congressional districts are drawn. So, a lot of the sort of rules of the game are established on those levels.”.. “A lot of really wealthy Americans probably can pick up the phone and talk to somebody on a high-level position in Washington pretty much anytime,” Page says.

Benjamin Page on the American version of oligarchs,

“The evidence has piled up in such a way that it’s maybe not unreasonable to call some of America’s wealthiest people oligarchs. I think that’s the way I’d put it.” He pauses. “Lots of evidence.” What makes American oligarchy different from its Russian counterpart is that it operates at significantly greater arm’s length, driven by lobbying and campaign contributions rather than outright corruption... Page acknowledges that American oligarchy is different — it is embedded in the political system.

Finally, some numbers on campaign finance in the US,

Multimillionaires who made political contributions gave on average around $4,500 annually; for billionaires, the amount was $500,000... Among Americans overall, roughly 18 percent make political donations, usually in amounts between $25 and $100. Forty percent of all political donations come from the top 1 percent of the 1 percent.

The landmark work in the area of impact wealth and political influence is by Martin Gilens, who used years of survey data to show that policy makers responded almost exclusively to the preferences of the affluent Americans.