America Is Exceptionally… Kleptocratic

Authored by Charles Hugh Smith via OfTwoMinds blog,

The sheer weight of this outlandish asymmetry of wealth and power is pulling the nation into disorder.

The U.S. Constitution doesn’t address a small elite owning most of the nation’s private wealth and using a sliver of that wealth to influence the federal government so their wealth and political power increase in a self-reinforcing feedback: as a result of their campaign contributions and lobbying, the elites’ wealth continues expanding, enhancing their political power to further expand their wealth, and so on.

This financial and political dominance is thus perfectly legal. As Bastiat’s famous quote puts it:

“When plunder becomes a way of life for a group of men in a society, over the course of time they create for themselves a legal system that authorizes it and a moral code that glorifies it.”

This legalized looting has now reached such absurd extremes that kleptocracy no longer does justice as a descriptor of the U.S. Consider this excerpt from Monopoly Versus Democracy (Foreign Affairs):

Like their forebears in the early twentieth century, today’s Americans have experienced decades of growing inequality and increasing concentrations of wealth and power. The last decade alone witnessed nearly 500,000 corporate mergers worldwide. Ten percent of Americans now control 97 percent of all capital income in the country. Nearly half of the new income generated since the global financial crisis of 2008 has gone to the wealthiest one percent of U.S. citizens. The richest three Americans collectively have more wealth than the poorest 160 million Americans. (emphasis added.)

If you read that three kleptocrats held more wealth than half the residents of Lower Slobovia, that the top 0.1% own more wealth than the bottom 80% and that a near-zero 3% of all income flowing from capital trickled down to the bottom 90%, what would you think about wealth/power asymmetry in Lower Slobovia?

We now know what American Exceptionalism really means: exceptionally kleptocratic. Even as private wealth soared to unprecedented heights in the past decade of Federal Reserve largesse (endless trillions for financiers and too-big-to-jail speculators), the percentage of stocks owned by the fortunate class of the 90% to 99% fell from 39% to 35% and the percentage owned by the bottom 50% slipped to 0.6%. (Data from the Federal Reserve’s FRED database)

Now there are rumblings in Washington D.C. about closing tax loopholes for corporations, which scoop 15% of the nation’s GDP as profits. This is certainly very pretty political theater, but please let me know when you and I can rent a post office box in Ireland and pay no federal income taxes, while corporations are paying the total federal tax rates we pay (40+%) with 15.3% self-employment tax, 3.9% supplemental Medicare tax, etc.

The sheer weight of this outlandish asymmetry of wealth and power is pulling the nation into disorder. There are no legal or political limits on private wealth and political power, and the politicians that depend on the wealthy to fund their re-election campaigns have demonstrably little interest in harming the geese that lay their golden eggs.

The super-wealthy and Corporate America reckon that they can suppress any resistance to their dominance with virtue-signaling and political suppression, but they must have flunked history: when the bottom 90% own effectively zero income-producing capital and no political voice, and even the top 9.9% don’t really have any real political power, then disorder of the uncontrollable variety arises to rebalance the extreme asymmetry.