The Greatest Story Never Told By Hollywood: Episode III: The Plutocracy Strikes Back
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Image: Mammon, a/k/a America without its makeup.
Key Takeaways:
1. Extreme wealth concentration is destroying the conditions under which the democratic-republican model of government can be maintained in the United States.
2. Since 1776, America’s Social Aspect Ratio has increased from 1,000:1 to 2,000,000:1. Since World War II, $30 trillion has been transferred from labor to capital relative to the 1947 labor share run-rate.
3. Government intervention of some kind is absolutely necessary to deconcentrate wealth and rehabilitate an independent middle class.
In our first post in this series, we discussed how the history of Tiberius Gracchus was inexorably intertwined with Polybius’ model of Anacyclosis.
In our last post, we discovered how Tiberius Gracchus was perhaps the greatest reformer in the history of democratic republics of all time. It was because he sought to restore the very essence, to regenerate the very DNA, of a democratic republic: The independent middle class.
In this final post in this three-part series, we will consider the historical parallels between the Roman Republic and the United States, and ask the question: Do America’s present economic circumstances warrant an approach based on similar logic used by the Gracchi?
THE PARALLELS BETWEEN THE ROMAN REPUBLIC AND THE UNITED STATES.
As Rationist No. 13 has already elaborated these parallels in detail, it is only necessary to quote that source at some length:
The Roman Republic and the United States share these essential dispositions and landmarks of descent in common:
FIRST, Rome was once the world’s superpower republic, and the United States presently is the world’s superpower republic.
SECOND, Rome achieved global monetary, financial, cultural, and linguistic hegemony, and the United States has achieved global monetary, financial, cultural, and linguistic hegemony.
THIRD, Rome’s agrarian middle class was once the backbone of the Roman Republic, and America’s middle class is the backbone of the United States.
FOURTH, the moneyed interests of both the Roman Republic and the United States captured a disproportionate share of the profits of imperial and interstate commerce.
FIFTH, the moneyed interests of both the Roman Republic and the United States employed various techniques to create or simulate a relative oversupply of domestic labor [or labor substitutes].
SIXTH, Rome’s middle class was destroyed by extreme wealth concentration, and America’s middle class is presently being destroyed by extreme wealth concentration.
SEVENTH, the late Roman Republic deployed subsidies to mitigate middle class precariousness so as to pacify the people, and the United States is deploying subsidies to the same end.
EIGHTH, precariousness and idleness led to uncontrollable political patronage in the Roman Republic, and the same forces create intense partisan loyalty in the United States.
NINTH, patronage and faction destroyed political moderation in the Roman Republic, and the same forces are eroding political moderation in the United States.
Rationist No. 13 further analyzed the parallels in behavior between the elites of both republics:
In both the Roman Republic and the United States, upon having achieving world supremacy, the moneyed interests made the world into their playground. In both cases, they extended their networks into foreign territories. In both cases, they developed closer ties with wealthy foreigners who could advance their respective economic interests than with their own countrymen. In both cases, they imported cheap goods, undercutting domestic manufactures. In both cases, they imported cheap labor or expatriated labor to foreign workers, undercutting domestic labor.
Even worse, in both cases, they eliminated free labor whenever they could. In both republics, slaves were used extensively. Slaves were used throughout the entire lifecycle of the Roman Republic, and during almost a century in the life of the United States. But though slavery has been forever prohibited by the Thirteenth Amendment in America, businesses within the United States more and more makes use of mechanization, automation, robots, algorithms, and artificial intelligence, which from the standpoint of labor supply and wage suppression creates the same impact for free labor as slavery: Substitution of domestic free labor by capital assets concentrated in few hands. …
In the Roman Republic, and generally in all places before the Industrial Revolution, wealth was concentrated in land in large latifundia; in the United States, wealth is now concentrated in blocks of securities in large corporations.
In a word, in both republics, the wealth of the middle classes were siphoned into the upper classes while the people of the middle classes were drained into the lower classes. Though the particular names, dates, and places of these plots may be different, the themes are the same: The democratically potent middle classes were fleeced by their own countrymen, producing extreme social stratification and political polarization. The ending of this Greek tragedy in Rome is now a matter of record: Faction, war, and revolution.
Will America close the book on the democratic-republican model of government in the same way? Its founders foresaw that it would. In his farewell address, George Washington warned against the evils of faction, in words sounding in the republic-destroying exploits of Marius, Sulla, Caesar, Pompey, Antonius, and Octavian:
The alternate domination of one faction over another, sharpened by the spirit of revenge, natural to party dissension, which in different ages and countries has perpetrated the most horrid enormities, is itself a frightful despotism. But this leads at length to a more formal and permanent despotism. The disorders and miseries, which result, gradually incline the minds of men to seek security and repose in the absolute power of an individual; and sooner or later the chief of some prevailing faction, more able or more fortunate than his competitors, turns this disposition to the purposes of his own elevation, on the ruins of Public Liberty.
Enough rhetoric. Let’s do some math.
THE EXTREME CONCENTRATION OF WEALTH IN AMERICA, BY THE NUMBERS.
In our last post, we considered that upon the eve of the American Revolution, New England was perhaps the most egalitarian place in the measurable world. That was precisely the conclusion of economists Lindert and Williamson in their study on American Incomes 1774-1860. This sentiment was echoed by Alexis de Tocqueville, who literally started his famous treatise Democracy in America by noting how egalitarian America was.
But let’s look at the numbers. We will start by calculating the social aspect ratio between the median and top household net worth at the country’s beginning. The social aspect ratio measures how much richer the top household is than the national median household net worth. We don’t have precise numbers, but we have enough to get the picture and draw the sharp contrast between America then-and-now.
The median household net worth in America in 1776 was about £175. This is a reasonable estimate based on economist Alice Hanson Jones’ research on the middle colonies in 1774. Applying a 1:4.44 GBP to USD conversion rate implies a household net worth of approximately $775 USD.
According to historian Walter Edgar, the richest American in 1770 was South Carolina slaveholder Peter Manigault, worth around £33,000. This implies a social aspect ratio of less than 200:1 in 1770. This means the richest American in 1770 was less than 200 times richer than the median American household.
Financier Robert Morris is frequently called the richest man in America in 1776, but he probably did not have the highest net worth. While he may have owned the most assets, he also owed the most debt. His fortune was annihilated in bankruptcy. At the end, Morris had a negative net worth, which is consistent with his pattern of frequently soliciting money and overleveraging himself. Any net worth he had was clearly mercurial, and heavily based on unique and non-recurring transactions with the fledgling federal government. Given this profile, it’s difficult to believe that his actual, unencumbered net worth would exceed 3X that of Peter Manigault from 6 years earlier. Let us therefore generously presume that the actual net worth of Robert Morris was around $440,000 in 1776. Against a median household net worth of $775, this implies a social aspect ratio of about 570:1. Thus, the richest American in 1776 was less than 600 times richer than the median American household. The following reinforces the reasonableness of this guesswork.
William Bingham (died 1804) is said to be the richest American for 1780. His wealth was eclipsed by Benjamin Franklin (died 1790) in 1785, who was in turn eclipsed by John Hancock in 1790. John Hancock died in 1793, and was surpassed by both George Washington and Elias Hasket Derby. Firm numbers for all are elusive. The figure of $350,000 is given for John Hancock’s fortune at the time of his death in 1793. George Washington appraised his estate at $530,000 at his death in 1799, and Elias Hasket Derby’s fortune is estimated at around $800,000 in the same year.
Notwithstanding the speculation, it seems clear that even 25 years after 1776, the top households still only hover around 1,000x the median household net worth as it existed in 1776. All of which is to say that no American was more than 1,000 times richer than the median household net worth on the day that America was born. American society was always shaped as a pyramid, perhaps, but originally as a very flat pyramid.
AMERICA’S FOUNDING NUMBERS, COMPARED TO TODAY’S NUMBERS.
In 1776, America’s social aspect ratio was under 1,000:1.
Today, it approaches 2,000,000:1.
From 1,000:1 to 2,000,000:1. America is now probably more stratified than the ancient aristocracies and monarchies that the Founding Fathers repudiated. The shape of American society has transformed from a flat pyramid to a pointy, towering, and presently teetering obelisk.
This massive stratification did not happen overnight. But once it started, it proceeded apace. Rough calculations suggest the following evolution of America’s social aspect ratio:
- 1776: 1,000:1
- 1965: 20,000:1
- 1985: 60,000:1
- 1995: 185,000:1
- 2010: 830,000:1
- 2013: 1,050,000:1
- 2021: 2,000,000:1
Here is the data plotted on a chart:
It seems that the climate change activists are not the only ones who can boast a chart with a hockey stick.
America’s social aspect ratio remained relatively flat until the Vietnam War. It then began to climb rapidly. This trend in the social aspect ratio correlates to another trend observed since the end of World War II: The diminishing share of Gross Domestic Product (GDP) to labor, along with the concomitant rising share allocated to capital.
The Bureau of Labor Statistics (BLS) started tracking the relative labor share of GDP in 1947. Since then, as of immediately prior to the coronavirus pandemic, nearly $30 trillion in value has been transferred from labor to capital relative to the 1947 labor share run-rate. Every year since 1947 save one (1960), the labor share was lower than it was in the first year in the series. By calculating each annual delta from the 1947 run-rate, then applying that amount to that year’s GDP, each year’s damages to the labor share can be calculated. The raw data is presented below (figures in billions of 2012 chained USD):
[CHART VISIBLE ONLY ON DESKTOP OR TABLET DUE TO MOBILE DEVICE SIZE LIMITATIONS…OTHERWISE YOU’D BE SCROLLING FOR A WHILE]
Year | GDP | Labor Share | Capital Share | Annual Delta | Damages |
1947 | $2,036.20 | 65.40% | 34.60% | 0.00% | $0.00 |
1948 | $2,120.00 | 64.95% | 35.05% | 0.45% | $9.54 |
1949 | $2,108.00 | 64.28% | 35.73% | 1.13% | $23.72 |
1950 | $2,291.10 | 63.13% | 36.88% | 2.27% | $52.12 |
1951 | $2,475.40 | 62.80% | 37.20% | 2.60% | $64.36 |
1952 | $2,576.70 | 63.70% | 36.30% | 1.70% | $43.80 |
1953 | $2,697.50 | 64.40% | 35.60% | 1.00% | $26.98 |
1954 | $2,681.90 | 64.58% | 35.43% | 0.83% | $22.13 |
1955 | $2,873.20 | 63.05% | 36.95% | 2.35% | $67.52 |
1956 | $2,934.40 | 65.00% | 35.00% | 0.40% | $11.74 |
1957 | $2,996.20 | 65.00% | 35.00% | 0.40% | $11.98 |
1958 | $2,974.00 | 65.10% | 34.90% | 0.30% | $8.92 |
1959 | $3,180.20 | 64.25% | 35.75% | 1.15% | $36.57 |
1960 | $3,262.10 | 65.48% | 34.53% | -0.07% | -$2.45 |
1961 | $3,345.70 | 65.03% | 34.98% | 0.37% | $12.55 |
1962 | $3,550.70 | 64.10% | 35.90% | 1.30% | $46.16 |
1963 | $3,705.30 | 63.60% | 36.40% | 1.80% | $66.70 |
1964 | $3,918.80 | 62.93% | 37.08% | 2.47% | $96.99 |
1965 | $4,173.40 | 62.20% | 37.80% | 3.20% | $133.55 |
1966 | $4,448.70 | 62.18% | 37.83% | 3.23% | $143.47 |
1967 | $4,570.70 | 62.63% | 37.38% | 2.78% | $126.84 |
1968 | $4,795.40 | 62.65% | 37.35% | 2.75% | $131.87 |
1969 | $4,945.20 | 63.95% | 36.05% | 1.45% | $71.71 |
1970 | $4,954.40 | 64.55% | 35.45% | 0.85% | $42.11 |
1971 | $5,117.60 | 63.23% | 36.78% | 2.18% | $111.31 |
1972 | $5,386.70 | 63.13% | 36.88% | 2.28% | $122.55 |
1973 | $5,690.90 | 63.68% | 36.33% | 1.73% | $98.17 |
1974 | $5,660.10 | 64.15% | 35.85% | 1.25% | $70.75 |
1975 | $5,648.50 | 62.40% | 37.60% | 3.00% | $169.46 |
1976 | $5,952.80 | 61.58% | 38.43% | 3.83% | $227.69 |
1977 | $6,228.10 | 61.70% | 38.30% | 3.70% | $230.44 |
1978 | $6,572.80 | 62.03% | 37.98% | 3.38% | $221.83 |
1979 | $6,780.90 | 62.78% | 37.23% | 2.63% | $178.00 |
1980 | $6,763.50 | 63.53% | 36.48% | 1.88% | $126.82 |
1981 | $6,935.20 | 62.63% | 37.38% | 2.78% | $192.45 |
1982 | $6,810.10 | 63.83% | 36.18% | 1.58% | $107.26 |
1983 | $7,122.30 | 61.90% | 38.10% | 3.50% | $249.28 |
1984 | $7,637.70 | 61.45% | 38.55% | 3.95% | $301.69 |
1985 | $7,956.20 | 61.38% | 38.63% | 4.03% | $320.24 |
1986 | $8,231.70 | 62.15% | 37.85% | 3.25% | $267.53 |
1987 | $8,516.40 | 62.93% | 37.08% | 2.47% | $210.78 |
1988 | $8,872.20 | 63.10% | 36.90% | 2.30% | $204.06 |
1989 | $9,198.00 | 62.15% | 37.85% | 3.25% | $298.94 |
1990 | $9,371.50 | 62.65% | 37.35% | 2.75% | $257.72 |
1991 | $9,361.30 | 62.65% | 37.35% | 2.75% | $257.44 |
1992 | $9,691.10 | 62.63% | 37.38% | 2.78% | $268.93 |
1993 | $9,957.70 | 61.88% | 38.13% | 3.53% | $351.01 |
1994 | $10,358.90 | 60.95% | 39.05% | 4.45% | $460.97 |
1995 | $10,637.00 | 60.68% | 39.33% | 4.73% | $502.60 |
1996 | $11,038.30 | 60.68% | 39.33% | 4.73% | $521.56 |
1997 | $11,529.20 | 60.73% | 39.28% | 4.68% | $538.99 |
1998 | $12,045.80 | 61.95% | 38.05% | 3.45% | $415.58 |
1999 | $12,623.40 | 61.93% | 38.08% | 3.48% | $438.66 |
2000 | $13,138.00 | 63.15% | 36.85% | 2.25% | $295.61 |
2001 | $13,263.40 | 63.15% | 36.85% | 2.25% | $298.43 |
2002 | $13,488.40 | 61.38% | 38.63% | 4.03% | $542.91 |
2003 | $13,865.50 | 60.65% | 39.35% | 4.75% | $658.61 |
2004 | $14,399.70 | 60.23% | 39.78% | 5.18% | $745.18 |
2005 | $14,901.30 | 59.15% | 40.85% | 6.25% | $931.33 |
2006 | $15,315.90 | 59.25% | 40.75% | 6.15% | $941.93 |
2007 | $15,623.90 | 59.63% | 40.38% | 5.78% | $902.28 |
2008 | $15,643.00 | 59.85% | 40.15% | 5.55% | $868.19 |
2009 | $15,236.30 | 58.30% | 41.70% | 7.10% | $1,081.78 |
2010 | $15,649.00 | 56.98% | 43.03% | 8.43% | $1,318.43 |
2011 | $15,891.50 | 57.15% | 42.85% | 8.25% | $1,311.05 |
2012 | $16,254.00 | 57.03% | 42.98% | 8.38% | $1,361.27 |
2013 | $16,553.30 | 56.68% | 43.33% | 8.73% | $1,444.28 |
2014 | $16,932.10 | 56.83% | 43.18% | 8.58% | $1,451.93 |
2015 | $17,390.30 | 57.43% | 42.58% | 7.98% | $1,386.88 |
2016 | $17,680.30 | 59.38% | 40.62% | 6.02% | $1,064.84 |
2017 | $18,079.10 | 59.62% | 40.38% | 5.78% | $1,045.86 |
2018 | $18,606.80 | 59.43% | 40.57% | 5.97% | $1,110.34 |
2019 | $19,032.70 | 59.71% | 40.29% | 5.69% | $1,083.13 |
$30 trillion transferred from labor to capital since World War II. This sounds like a little bit like what the Roman elites did to the Roman farmers after Punic War III. In the words of French historian Victor Duruy:
After having pillaged the world as praetors or consuls during time of war, the nobles again pillaged their subjects as governors in time of peace; and upon their return to Rome with immense riches they employed them in changing the modest heritage of their fathers into domains vast as provinces.
Rome after the Third Punic War. Just as America after the Second World War. These were the wars that made Rome and America the masters of their worlds. It’s almost funny that the dispositions and responses of their leading men would be so similar, and so reckless toward those whose valor or labor made such fabulous wealth possible in the first instance.
$30 trillion transferred from labor to capital since World War II. This figure exceeds the entire net worth of Japan today. Domains as vast as provinces indeed.
ANACYCLOSIS REDUX: THERE’S NOTHING NEW UNDER THE SUN.
In the final analysis, Anacyclosis is all about wealth. At the highest level of abstraction, Anacyclosis simply stands for the proposition that the diffusion and reconcentration of wealth precedes the diffusion and reconcentration of political power. Applied against mankind’s original political vocabulary – the Greek typology of constitutional regimes – this sequence, when permitted to consummate, resolves itself into the familiar one-few-many cycle.
Where wealth is sufficiently diffused to establish a powerful aristocracy, monarchies will transform into republics. Where wealth is sufficiently diffused to establish an independent middle class, democracies will be integrated into the governing fabric of these republics, establishing democracies. As political evolution is accretive, democracies are more properly called democratic republics. In any case, the relative infrequency of independent middle classes explains the relatively rarity of democracy throughout human history.
Contemporary states similarly situated with respect to their socioeconomic configurations will undergo similar transformations, thus summoning waves of democracy. Other contemporary states not so blessed with middle classes may copy various patterns of democracy, such as the names of democracies and republics, people’s political parties, and elections, but possess none of the substance.
In any event, when the originating middle classes unravel, the rationale and justification for the democratic element evaporates. Only the energy of democracy continues, for a time, through forms and rituals perpetuating the fantasy that consent can be given by anyone who do not possess the volition to withdraw it. Hence the great show of Augustus being “given” power by the Roman Senate legitimized the death of the Roman Republic and the inauguration of global imperial monarchy. This was concluded by Rationist No. 5:
AUTHENTIC DEMOCRACY IS NOT ROOTED IN THE FANTASY THAT CONSENT IS GIVEN, BUT IN THE POSSIBILITY THAT IT BE WITHHELD.
Tiberius Gracchus saw this problem, at least to some degree. His immediate concern was to rehabilitate the small hold farmer class to continue to feed the Roman military machine. But he recognized enough to ask the essential question: “Is not a citizen worth more than a slave?”
And so he undertook to rehabilitate the independent middle classes by the most obvious method apparent to him: The revival of an ancient law imposing caps on household use of public land. His mission was to get commoners back on the land so he could get them back in the army. Whatever the particulars, however, the problem he confronted is analytically no different than the problem that America now faces. Which is:
This, in turn, will entail government intervention of some form. If the American people wish to restore any semblance of a true democratic republic, America can’t just do nothing. The question is accordingly not whether the government shall intervene, but how. And if America wants to learn from all that has been considered above, then there is actually someone calling himself Gracchus who claims to have a plan.
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