America + Rule By and For the Rich = Democratic Plutocracy

Over the past decade in the United States, why hasn’t income-based resentment politics been a broader cultural phenomenon? In other words, why don’t the working and middle classes hate the rich in more obvious ways than they do? Is it that they have all come under the spell of Ayn Rand novels? Or is Christianity functioning as a mass opiate? Perhaps the poor and middle classes have not noticed the country’s stark and fast growing income inequality because television has been really good this past decade.

These may all be contributing factors, but Raghuram Rajan’s recent book, Fault Lines: How Hidden Fractures Still Threaten the World Economy (2010), offers another one, and it’s quite provocative. Here’s Francis Fukuyama summarizing Rajan’s thesis:

Rajan argues that the working and middle classes whose incomes either stagnated or fell during the past generation were in effect bought off by cheap credit: The flood of capital coming in from Asia and other surplus countries, creatively packaged by the banks and quasi-public institutions like Fannie Mae and Freddie Mac, allowed people to borrow against the future and enjoy standards of living that were in the end unsustainable. In his view, the day of reckoning has finally arrived: Cheap credit masked inequality at least in the sense that it enabled many people to increase their consumption, even if they could not keep up with richer cohorts who were increasing their consumption even faster. Now that easy credit has dried up, people grow angry when confronted with the stark reality that their bankers have done far, far better than they.

In other words, the working and middle classes were all lulled to sleep by their big credit card limits and their opportunities to treat their houses like ATMs. Put differently, they thought they were rich too. Now they know they’re not.

I doubt that this will change the plutocratic politics of the next decade. Since the 1970s, intellectuals like Robert Nozick have vanquished John Rawls. And I suspect that America’s corporate plutocrats will be successful (via propaganda outlets like Fox News) at simply directing mass anger at President Obama and cultural elites (that is, college educated liberal “atheists”), leaving the economic elite—the rich—laughing all the way to their (publicly bailed out) banks.

Here’s Fukuyama’s definition of plutocracy:

[It is] rule by and for the rich. . . . [It is] a state of affairs in which the rich influence government in such a way as to protect and expand their own wealth and influence, often at the expense of others. . . . [T]his influence may be exercised in four basic ways: lobbying to shift regulatory costs and other burdens away from corporations and onto the public at large; lobbying to affect the tax code so that the wealthy pay less; lobbying to allow the fullest possible use of corporate money in political campaigns; and, above all, lobbying to enable lobbying to go on with the fewest restrictions.

This is Rush Limbaugh’s wet dream, isn’t it? But it isn’t a dream. It’s the tired husk that’s left, 235 years later, of the American Revolution. We’re a democratic plutocracy (an oxymoron), and corporations—treated legally as individuals with rights—now use their vast wealth to manipulate the electorate, corrupt politicians, and generally dictate the range of the possible. The rich live like gods, blissfully unaffected by the plight of their fellow citizens in the larger polis, and the working poor and unemployed have little obvious stake in the country. In other words, America’s democratic social contract has frayed. 

Now what?

A train wreck, right?