More than a hundred years ago, when the first really gargantuan American fortunes in steel, oil and railroads began to pile up, outraged citizens protested that the United States was fast becoming like some European plutocracy, where the corporate elite rigged the rules to further swell their wealth and power. Sound familiar? By 1912 the top 1 percent of Americans owned 56 percent of the nation's wealth. The top 10 percent owned 90 percent.
Now, a century later, the word plutocracy has been dusted off and is back in play. We're in the midst of a new Gilded Age of unprecedented wealth, corporate villainy and the rich politically pressing for more, more, more (for themselves).
Much seems the same, but, ah! the differences. Back then, Republican President Teddy Roosevelt denounced the "malefactors of great wealth" and championed numerous measures to rein them in, including an estate tax on "fortunes swollen beyond all healthy limits." Roosevelt, himself very much of the privileged classes, believed that the "man of great wealth owes a particular obligation to the State because he derives special advantages from the mere existence of government." Kathleen Dalton's Theodore Roosevelt: A Strenuous Life (Knopf, 736 pages, $35) reacquaints us with a rich Republican politician who was a real compassionate conservative, a man who fought hard so all Americans could share in the nation's astonishing wealth.
Contrast Teddy Roosevelt's old-fashioned belief in noblesse oblige and equality with our current Republican President George W. Bush, who strives with messianic zeal to make the richest Americans even richer. First he wants to eliminate forever the very estate tax Teddy Roosevelt felt was so important, and now Bush the Second has proposed various fiscally reckless tax cuts that he asserts (in that sincere and winning way he has) will benefit all, a claim the Financial Times immediately analyzed and dismissed as "obviously bogus."
Bloomberg Financial News calculated that the president would get as much as $44,500 from his own proposed tax cuts, while Dick Cheney's tax break would be $327,000, more than what 98 percent of Americans earn each year. Is it any surprise that the word plutocracy has returned?
Kevin Phillips has even taken to using this term -- plutocracy -- to describe our current and alarming state of social and economic affairs. His Wealth and Democracy: A Political History of the American Rich (Broadway Books, 496 pages, $29.95) lays out in detail the historical ups and downs of wealth, and how the wealthy under President Reagan and both Bushes have used their ever-greater political clout to get richer. "The cost to the ordinary American has been substantial," laments Phillips, "in reduced median family income, in stagnant wages, in a diminished sense of community and commonweal, in fewer private and governmental services."
To put into context George W. Bush's bizarre and cruel crusade to make the super-rich still richer (even as 40 million Americans have no health insurance), it helps to know the following. In 1976 the top 1 percent of Americans owned less than 20 percent of the nation's wealth, compared with 56 percent in Teddy Roosevelt's era. Why? Because the U.S. government in the decades after World War II was actively committed to greater economic equality.
That was then. Now, after two decades of an economic boom coupled with Republican policies and tax cuts, the top 1 percent of Americans have once again almost doubled their share of national wealth, to 38 percent. To truly appreciate the recent vast roll-ups in wealth for those in the topmost economic sliver, consider that in 1982, when Forbes Magazine first began listing the four hundred richest Americans, the entry threshold was $91 million and average net worth was $400 million. By 2001 you needed $725 million to make the list, and the average net worth was $2.4 billion.
In these same decades, the bottom 60 percent of Americans saw little meaningful change in their (often meager) pay checks. And yet it is not these average struggling Americans that concern our compassionate president. No, he yearns only to funnel more money to the already ultra-rich. Talk about gall.
Bush's crusade to permanently repeal the estate tax has galvanized a growing movement of rich and prominent people to actively oppose him. Their group, Responsible Wealth, aims to shame the Congress into fiscal and social responsibility. William H. Gates Sr. (Bill's father and a wealthy attorney in his own right) and Chuck Collins lay out the group's case in Wealth and Our Commonwealth (Beacon, 192 pages, $25). These two are clearly appalled at where the U.S. finds itself and where it is going, noting that we are "now the most unequal society in the industrialized world. The richest fifth of Americans earn 11 times more than the bottom fifth. At the bottom end of the pay scale, the number of people working for poverty wages is troubling. .... In 1980 the disparity between the highest-paid workers in America's 365 largest companies and their employees was forty-two to one. Today, the ratio exceeds five hundred to one."
Gates and Collins point out -- as we see soaring budget deficits in the years ahead -- that permanently eliminating the estate tax as the Republicans hope to do will cost the federal government either $154 billion (the conservative estimate) or $752 billion (the liberal estimate) each year. Either way, this is a serious loss when we know the first wave of aging baby boomers will begin to draw on Social Security and Medicare. Thanks to the arcana of this new tax law, state treasuries will feel the brunt of the disappearing estate tax first. California, already strapped from the bursting dot.com bubble, lost $356 million in estate tax revenues last year as the phaseout began.
In Wealth and Our Commonwealth, Gates and Collins argue, as did Teddy Roosevelt, that society "has a just claim on the accumulated wealth of its most prosperous citizens." Our society plays a far larger role in American success than many want to acknowledge. There are the public schools, the universities, health care, the transportation infrastructure, law and order and a sophisticated system of property rights, the banking and investment systems. All this makes ours a society where you can do business and make a fortune. Yet too many Americans have come to bitterly resent every penny they pay in taxes. They should recall Oliver Wendell Holmes' honest words: "Taxes are the price we pay for civilization."
If you know, as Gates and Collins do, that "less than 1 percent of the population make contributions of two hundred dollars or more to candidates; half the donors have incomes over $250,000 per year," you see why they worry about the rich and their escalating political influence. Of course, the Bush folk cunningly cloak their pro-rich crusade as concern for the average folk. The White House insists that eliminating the estate tax is all about saving the family farm. Yet Gates and Collins show that the American Farm Bureau Federation could not produce one single real live family that lost their farm because of estate taxes.
At this particular juncture in the nation's history of wealth and power, David Rockefeller's Memoirs (Random House, 496 pages, $35) serves as a rare and amazingly honest glimpse of the travails and triumphs of a rich ruling-class family, even one so firmly rooted in noblesse oblige. (This Standard Oil heir never flinches in telling how his various children became Marxists, changed their names, etc.)
As President Bush exerts all his considerable charm to sugarcoat his hardball political drive to make the super-rich still richer, it is telling that David Rockefeller, 89, former CEO of Chase Manhattan Bank, has joined Gates Sr. in promoting Responsible Wealth. Presumably, like Gates and Collins, Rockefeller knows a plutocrat when he sees one and subscribes to the chilling words they quote from Justice Louis Brandeis, "We can have concentrated wealth in the hands of a few or we can have democracy. But we cannot have both."
Jill Jonnes is an American historian and author. Her Empires of Light: Edison, Tesla, Westinghouse and the Race to Electrify the World will be published next year by Random House. An updated edition of her book South Bronx Rising: The Rise, Fall, and Resurrection of an American City is coming out this fall.