Concentrated Wealth or Democracy
I’ve been teaching a class on American presidents this winter focusing on five men who to varying degrees, at least in my mind, were “touched by greatness.” Hardly anyone has questioned my choice of Jefferson, Lincoln or Theodore Roosevelt. All three are, after all carved into Mount Rushmore and each helps define “presidential greatness.” I get some push back for thinking Lyndon Johnson gets some consideration, but even those who see LBJ’s legacy as being blackened by Vietnam have to admit his civil rights and domestic policy accomplishments were historic.
I get many questions about including Woodrow Wilson.
Searching for a one sentence answer to why Wilson was “touched by greatness,” I’ve settled upon the fact that one of the 28th
The fact that Brandeis is largely forgotten today, at least outside of legal circles or by alums of Brandeis University, is a real shame. The great man has a lot of tell us about the state of capitalism and the returning cycle that, as in his time has produced vast inequalities in income.
In the time just before the Great Depression – as I noted in a recent piece income inequality has now returned to levels last seen just before the big crash – a booming if artificially inflated American economy seemed to many to be on an endless upward growth trajectory. Brandeis was one of the few to see what was happening in the Roaring Twenties more clearly and to forecast, as his biographer has written, “that the so-called boom had very weak underpinnings.” Vast income inequality was part of the weakness.
Writing in the New Republic in 2010, Jeffrey Rosen said of Brandeis that he “opposed big government as well as big business, and therefore he opposed also the central regulation of the money trusts. Instead he was determined to break up the trusts and to untangle the web of political and economic influence that made concentrated financial power possible in the first place.”
Rosen continues: “The idea of [banks] ‘too big to fail’ is the perverse culmination of Brandeis’s dystopian view of high finance. His main concern was not, as his critics suggest, the economic inefficiency of large firms but the oligarchic influence they wielded over the American financial and political system which allowed them to shield themselves from accountability for their own greed and recklessness. In an irony that Brandeis would not have relished, the smaller banks that resisted the risky proprietary trading of the mega-banks were allowed to fail, while the biggest banks that caused the crisis by flooding the market with junk securities were rescued.”
Brandeis, the legal and economic scholar born before the Civil War, recognized a hundred years ago the perverted connection that exists between the power of politics (and public policy) and the massive influence of finance in a capitalist system. The two combine to help create the kind of economic inequality that now has potential presidential candidates from both parties talking about the need to “focus on the middle class.”
No one, from Elizabeth Warren or Bernie Sanders on the political left or Rand Paul or any of a dozen pretenders on the political right has yet found the effective political language to talk about this issue although the political class is obviously reading the opinion polls and recognizing the need to address some broad-based concerns. The struggling politicians might do well to read Louis Brandeis’s book Other People’s Money published in 1914.
Twice in the 20th Century Brandeis’s ideas about “bigness” and “monopoly,” not to mention the concentration of economic power, influenced political action. The first occasion occurred during the struggle between Wilson and Theodore Roosevelt for leadership of the progressive movement. Wilson and Democrats largely won that political battle as the result of the historic election of 1912. Then with Brandeis’s help Wilson moved to create the Federal Reserve System, legalize the income tax and tighten business regulation. The second time was when Franklin Roosevelt came to the presidency and presided over what became the New Deal with much tougher regulation of banks and securities and a much greater role in the economy.
Both presidents understood the connection Brandeis made long ago between concentrated economic power and dominate political power. If income inequality, defined as a huge percentage of the world’s wealth held by a tiny percentage of the richest and most politically connected people, has become – again – a defining issue of our age then the solution requires a recalibration of all that power and influence.
Ironically, it is not a political leader, a legal scholar or even an economist who is most clearly talking about the issues the old Zionist Louis Brandeis spent his lifetime understanding. Rather it is an inquisitive Jesuit, trained in the humanities and philosophy, who comes closest to channeling the great justice.
“Some people continue to defend trickle-down theories which assume that economic growth,
The Zionist knew in 1914 and the Jesuit a hundred years later that we again have a choice between a system of oligarchy invested for the most part in maintaining economic and political power or a system of democratic capitalism where the tangle of influence and control gives way once again to widespread opportunity. Some will always term this “class warfare,” but it’s not that at all. The real issue is about the survival of an inclusive democratic system where the economy works for everyone. The current circumstances prove again that despite our “naïve trust,” as Francis would say, capitalism is simply not self regulating.
As a perfect illustration of the tangled intersection of finance and politics, the print edition of the New York Times on Sunday had two stories that underscore the “oligarchic influence” of finance and politics. The first story detailed the mad race for campaign money that has been set off by Mitt Romney’s abrupt exit from the Republican field. The story mentioned Jeb Bush’s, Chris Christie’s and Marco Rubio’s pursuit of hedge fund managers, billionaire investors, the owner of the New York Jets, the co-founder of Home Depot and Idaho millionaire Frank VanderSloot – the people who finance campaigns and increasingly determine who the candidates will be.
When the lengthy story about money and politics jumped from page 1 to page 12 – I’m sure this was just a coincidence – it ran next to a story headlined: “JP Morgan to Pay Out $99 Million Over Graft.”
That story noted that the largest U.S. bank, a key player in the 2008 Great Recession, “did not admit wrongdoing” in a scheme to defraud investors by “rigging prices in the $5.3 trillion-a-day foreign exchange market.” The nearly $100 million payment the bank will make comes on top of a billion dollars the bank had earlier agreed to pay in civil penalties for what can only be characterized by an old and entirely appropriate word – greed.
Mr. Justice Brandeis would be neither amused or surprised.
Next Time: Why the 1 Percent Should Address Income Inequality…