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Created Equal

How the divide between rich and poor has undermined the Constitution.

From the Wobblies Series by Michael Brophy/Courtesy of Russo Lee Gallery

In 1656, in the aftermath of the English Civil War, the political theorist James Harrington outlined an ideal form of government. In The Commonwealth of Oceana, he imagined a country that, like his own, had overthrown its monarch and was now governed by its own people in their common interest. Harrington recognized that it would be hard to divide power equally throughout this new society. In “class warfare” constitutions—those that split power between the nobility and the people—one group inevitably came to dominate the other, “as the people did the nobility in Athens, and the nobility the people in Rome.” The result was tyranny or anarchy.

Harrington’s major insight was that popular government could only be stable if the people were political equals, which meant they must also be economic equals. Political power, he saw, was precisely correlated with wealth: When property is concentrated among the few, landowners can wield undue influence and distort the balance of power. A true commonwealth, Harrington argued, required that “the whole people be landlords” so that no one group could “overbalance” the rest. The people of his imaginary Oceana are each granted a parcel of land, thus breaking up large fortunes and estates.

Knopf, 432 pp., $28.00

Harrington was not the first to envision a society ruled by neither rich nor poor. Donato Giannotti, a leader of the Florentine Republic in the sixteenth century, saw promise in the mediocri, his city’s new and expanding middle class. If the mediocri could grow larger than rich and poor put together, he speculated, they could hold the balance of power and ensure a degree of stability. Aristotle saw similar promise in the “middling” stratum he observed in the fourth century B.C. in Athens. Because they shared neither the overwhelming burdens of the extremely poor, nor the all-consuming vices of the very rich, they were uniquely positioned to mediate between the two extremes. But Aristotle did not make more of this line of thought, because the middle class was not yet large enough to form a majority. That would have to wait for the founding of America.

In his new book, The Crisis of the Middle-Class Constitution, Ganesh Sitaraman proposes that America in the eighteenth century represented the first instance in history of a country with a middle class large enough to permit the realization of a commonwealth. Two-thirds of white Americans owned land, compared to only one-fifth of the population in England. “Conditions approaching the slums of London,” Sitaraman observes, “were unknown in America.” White colonists also enjoyed remarkable equality of wealth: The top 1 percent of Americans possessed 8.5 percent of total income in 1774, compared to 19.3 percent in 2012. (Sitaraman deals only glancingly with slavery, acknowledging that “economic equality and economic opportunity did not extend to everyone.”) Even six decades later, Alexis de Tocqueville found a country where the people were “more equal in their fortunes ... than they are in any country in the world and than they have been in any century of which history keeps a memory.”

Not only were American statesmen of the era keenly aware of the uniqueness of their economic situation, but they were also guided by Harrington’s vision of a republic of equals. Harrington, John Adams wrote, “has shown that power always follows property.” The only way to preserve “equal liberty and public virtue” in a republic, Adams reasoned, would be to “make the acquisition of land easy to every member of society.” If a majority of people owned land, they would also hold the balance of political power. The Founding Fathers, however, were also aware of the inverse: that the republic could not withstand drastic inequality. Sitaraman begins his book, in fact, by identifying the collapse of the middle class in our time as the greatest single threat to America’s constitutional government. As the middle class has declined—from 61 percent of the population in 1971 to less than 50 percent in 2015—the power of the superrich has soared. The 20 richest Americans are now wealthier than half of the country’s entire population combined. And economic power translates directly into political power: Between 1983 and 2012, corporations’ expenditure on lobbying soared from $200 million to $3.3 billion. Amid such extreme imbalances, Sitaraman argues, we are now faced with a choice—to accept our current state of oligarchy, or to attempt to restore the equality on which the republic was founded.

The Founders foresaw threats to equality in the republic from its earliest years, particularly in the transformation of America into an industrial economy. James Madison and Thomas Jefferson believed that the preservation of American equality and liberty depended on maintaining an economy of yeoman farmers and small merchants, and that industrialization would inevitably undermine America’s unique social order by creating a European-style economic and political elite. In Democracy in America, Tocqueville warned of “How Aristocracy Could Issue from Industry.” “As the principle of the division of labor is more completely applied,” he explained, “the worker becomes weaker, more limited, and more dependent.” Over time, the gulf between workers and employers could come to resemble the relation between peasants and lords.

In 1791, Madison and Jefferson attempted to scuttle Alexander Hamilton’s proposal to create a national bank, fearing the commercial development it would underwrite. When Andrew Jackson became president and refused to renew the bank’s charter in 1836, he condemned the bank as a “concentration of power in the hands of a few men irresponsible to the people” who would “put forth their strength to influence elections or control the affairs of the nation.” Ironically, it was the American promise of equality of opportunity that laid the groundwork for a new class hierarchy based on outsize achievement.

James Harrington’s vision of a republic of equals inspired the Founders.
Corbis Historical/Getty

As Sitaraman explains, the wage-labor system itself posed a direct challenge to the very idea of republican government. Citizens of a true republic must be free political thinkers and actors, not dependent on anyone else for their economic sustenance. This was true of a yeoman farmer who sold what he grew, but not of wage-laborers forced to work long hours in factories to afford the bare essentials of life. As historian Eric Foner has observed, many nineteenth-century adherents of republicanism believed that “a man who remained all his life dependent on wages for his livelihood appeared almost as unfree as a southern slave.”

Although the Founders (with the notable exception of Hamilton) worried about the rise of manufacturing, they contented themselves with the thought that industry would not replace agriculture as the dominant mode of production in America so long as there remained land to settle and farm in the West. Benjamin Franklin argued that land was so plentiful that any “labouring man, that understands husbandry” could quickly save up enough money to buy a “piece of new land sufficient for a plantation, whereupon he may subsist a family.” In America anyone could, in theory, still become a landowner, as the citizens of Harrington’s Oceana were. In 1829, Madison conjectured that it would be another 100 years before America would grow so crowded that its citizens would be “necessarily reduced by a competition for employment to wages which afford them the bare necessities of life.”

That estimate proved overly optimistic. In 1857, four years before the outbreak of the Civil War, the conservative English historian Thomas Babington Macaulay issued a dire prediction of the inequality to come. “As long as you have a boundless extent of fertile and unoccupied land,” Macaulay wrote,

your laboring population will be far more at ease than the laboring population of the old world…. But the time will come when New-England will be as thickly peopled as Old England. Wages will be low…. You will have your Manchesters and Birminghams … [and] hundreds of thousands of artisans will assuredly be sometimes out of work.

The “closing of the American frontier” was officially heralded in the year 1890, and by that time the United States was well on its way to becoming a predominantly urbanized and industrialized nation. The country was also riven with widespread labor unrest. President Rutherford B. Hayes sent in federal troops to quell the Great Railroad Strike of 1877, and in 1894, when the Pullman strike shut down most of the country’s railroad traffic, Henry Demarest Lloyd, the muckraking journalist and early Progressive activist, deemed the crisis “greater than that of 1776 or 1861.” With the Supreme Court disinclined to enforce antitrust laws, the “great merger movement” from 1895 to 1904 produced a set of monopolies such as DuPont, General Electric, and American Tobacco, each of which controlled up to 90 percent of its industrial sector.

The disparity between the working class and its corporate masters was now so pronounced that President Hayes, from his retirement, made an astounding statement. “This is a government of the people, by the people, and for the people no longer,” he proclaimed. “It is a government by the corporations, of the corporations, and for the corporations.”

Clearly, James Harrington’s formula that political power follows land had become outdated. Political power now followed capital. The structure of Harrington’s commonwealth, in which equality was underpinned by an even distribution of real estate, would need to be revamped for the new age of capitalist enterprise.

The Knights of Labor—not a labor union per se, but more a lobbying organization for working people in general—took up the challenge with its plan for a cooperative commonwealth. “Our rulers, statesmen, and orators have not attempted to engraft republican principles into our industrial system,” George McNeill, who co-authored the Knights’ constitution, charged in 1887. “Republican institutions are sustained by the ability of the people to rule.... The foundation of the Republic is equality.” He also complained that corporate power was now a “greater power than that of the State.” Business had become a kind of “State within a State” that was “quietly yet quickly sapping the foundations of majority-rule.”

The cooperative commonwealth that the Knights envisioned was premised on “joint ownership and control over industrial enterprises.” Unlike some radical reformers of the era, such as Eugene Debs, the Knights were not partial to the idea of state ownership of corporate entities. For them, the term “cooperative” meant that employees would share in the ownership and management of private companies. The cooperative structure, as Sitaraman observes, “transformed each industrial organization into a mini-republic of its own.”

For this principle, the political scientist Alex Gourevitch has termed the Knights “labor republicans,” who showed how to adapt republican principles for an industrial age. The purpose of reforms such as the eight-hour workday and the cooperative organization of industry was to bring workers into the middle class, so they could fulfill the Aristotelian notion of mediating political power between the extremes of rich and poor. The labor republicans also took seriously the concept of “civic virtue,” which in the cooperative commonwealth would necessarily involve “habits of cooperation and collective action.” They established reading rooms and educational centers, and campaigned for maximum-hours laws, so that workers could gain the level of education required of well-informed citizens in a republic.

Such bottom-up efforts at revitalizing the republic met with limited success. In his 1914 book, Drift and Mastery, Walter Lippmann proposed that the nation had entered a period of alarming “drift” because it had not figured out how to “master” the forces unleashed by industrialization. The American people, Lippmann saw, lived in a “fear economy.” Workers could lose their jobs at any moment, or find themselves insolvent in old age, or suffer a serious illness without affordable health care. Theodore Roosevelt, who read Lippmann’s book, concluded that “there can be no real political democracy unless there is something approaching economic democracy,” and that “there can be neither political nor industrial democracy unless people are reasonably well-to-do.”

The central challenge of the Progressive era was to restore the balance of economic equality on which, in Sitaraman’s account, the American Constitution was predicated. To curtail the unbridled power of the new, behemoth corporations, Progressives strengthened antitrust measures and created regulatory agencies such as the Federal Trade Commission. They also addressed the problem of income inequality head-on, authorizing a federal income tax in 1913 and passing an estate tax in 1916—a category of taxation that Founders such as Jefferson and Madison had wanted to impose in a form severe enough to block the transfer of substantial fortunes from one generation to the next.

Progressives also passed reforms to mitigate the ability of the new money interests to influence the political system: They banned corporate contributions to federal political campaigns, allowed voters to elect U.S. senators directly, and established primaries and ballot initiatives. In addition, they worked to create and expand the reach of a wide range of public institutions, from schools and parks to libraries and playgrounds (there was a full-fledged “playground movement”). What all of the Progressive reform efforts had in common was that they sought to strengthen the res publica—the “public thing”—and were therefore profoundly republican in nature.

In 1932, when Franklin Roosevelt and the New Dealers swept into office, they believed that radical structural reforms needed to be made in the capitalist system if it was to be saved from its own deep-seated and self-destructive flaws. But over time, as Sitaraman notes, this enthusiasm waned, and the New Dealers ultimately failed to safeguard democracy from the corrupting influence of wealth.

One reason was the rise of new economic theories promulgated by British economist John Maynard Keynes. Under the New Deal, the National Recovery Act focused entirely on regulating production to create jobs. But as Keynesian economics gained adherents, the aim of altering the structure of capitalism was gradually replaced by the narrower goal of using public spending to augment consumer purchasing power. In addition, Roosevelt himself underwent a personal transformation from a would-be structural reformer at the beginning of the New Deal to a passionate advocate for what political philosopher Michael Sandel calls “egalitarian liberalism.” In the face of increasing industrialization, FDR proposed a second bill of rights “to assure us equality in the pursuit of happiness.” This included the right to a job, a decent home, medical care, education, and protection from the economic fears of old age, sickness, and unemployment. By focusing on rights, Sitaraman comments, Roosevelt could “preserve democracy without having to reform the structure of corporate capitalism.”

The labor movement, too, largely moved away from traditional ideals of republican government toward egalitarian liberalism. On the eve of World War II, labor leader Walter Reuther proposed a plan whereby the big car companies would begin building military aircraft by pooling their resources and setting up industrial councils with worker participants. The auto companies reflexively opposed Reuther’s plan. But after the war, Reuther received a surprise peace offering from Charlie Wilson, the head of General Motors, who recognized that greater stability of labor would enable the company to engage in long-range planning. Wilson offered workers a two-year contract with much-improved salaries and benefits, followed by a five-year contract with even better terms.

The five-year agreement—known as the “Treaty of Detroit”—boosted the standard of living for GM employees by 20 percent. It effectively moved autoworkers into the middle class—but, as Sitaraman notes, it also marked “the end of an era whose aspiration was to structure corporations to create a ‘republic’ or ‘democracy’ within industry.” Gone was Reuther’s vision of industrial councils and worker participation. From now on, workers would get their benefits from their employer, not the state. The treaty’s provisions became standard throughout industry, even among white-collar workers in manufacturing plants. All in all, Sitaraman observes, it “established the basic framework for American social policy, led to a generation of broadly shared economic growth, and helped build the postwar middle class.”

The part of Sitaraman’s book describing the Treaty of Detroit falls within a section titled “The Glorious Years.” It is a very short section—only 15 pages—and its length is appropriate, since the so-called Glorious Years did not last long. If you take the Treaty of Detroit as their starting point—1950—and accept as their impending end point the year when productivity began to stagnate and wages to fall—1970—this period spanned little more than two decades.

The years since 1970 have been characterized by a precipitous decline in union membership. This deterioration was caused, in part, by trends in the global economy. But it was also the result of a deliberate, systematic campaign by American business to reduce union bargaining power. In Sitaraman’s view, the effort was sparked in 1971 by future Supreme Court Justice Lewis Powell’s militant letter to the U.S. Chamber of Commerce calling for aggressive, coordinated action against the business community’s perceived enemies. In 1978, when business lobbyists succeeded in killing a modest labor reform bill, United Auto Workers President Douglas Fraser proclaimed that “the leaders of industry, commerce, and finance in the United States have broken and discarded the fragile, unwritten compact previously existing during a past period of growth and progress.” The Treaty of Detroit, which the UAW had pioneered, was now effectively dead.

The waning power of labor has both worsened inequality and eroded the republican political tradition. At the core of the republican political ideal is responsible civic engagement. Tocqueville, after his travels in America, theorized that what social scientists now call “intermediary institutions” or “civil society”—small associations that mediate between the individual and the state—are crucial to the exercise of American democracy. “The formative aspect of republican politics,” Michael Sandel observes, “requires public spaces that gather citizens together, enable them to interpret their condition, and cultivate solidarity and civic engagement.” Labor unions, in particular, provide their members with a social structure within which they can develop the skills necessary to participate in public affairs outside the union hall. The business establishment, by taking direct aim at the power of labor unions, has succeeded not only in breaking the principal connection between the working class and the American political system, but in fostering a level of anomie and social despair among blue-collar workers that threatens the stability of the nation’s social and political order.

As the economic gulf between rich and poor widens, the perspective of members of the wealthiest class becomes more and more distorted. In Our Kids: The American Dream in Crisis, political scientist Robert Putnam describes how the middle class has all but vanished in his hometown of Port Clinton, Ohio. In stark contrast to his own experience growing up there in the 1950s, the rich and poor now lead completely separate lives: geographically, educationally, and socially. In situations of such radical socioeconomic division, studies show, the rich eventually lose their sense of empathy for people unlike themselves, and become less inclined to make investments in their communities or support public programs unless they primarily benefit members of their own class.

The situation most feared by Aristotle and other philosophers of the republican tradition—the ascendance of an oligarchy devoted mainly or solely to its own interests—is now firmly in place. The political wishes of the American people are rarely translated into legislation by Congress, and then usually only when popular preferences on an issue happen to coincide with those of the elite—a phenomenon that political scientist Martin Gilens calls “democracy by coincidence.” The key to republican government is the participation by all citizens, at least to some degree, in the governmental process; but a large portion of the American population—and in many elections, a majority—doesn’t even vote. They stay home on Election Day because they don’t think their votes are going to make a real difference in the conduct of public affairs—and according to the data cited by Sitaraman, they are not wrong in that assessment. Donald Trump was elected president, in no small part, because he gave many working-class Americans the feeling that they could finally make a strong impact on the political system, for good or for ill. It seems clear that many did not much care which.

Trump’s presidency, like many catastrophes, bears a silver lining. Before the election, when a victory by Hillary Clinton was widely seen as inevitable, many so-called “progressive” organizations were trumpeting their plans to reform the entire American political system from the top down—an approach sometimes referred to as managerial liberalism. Little if any mention was made of seeking the involvement or support of the American public. With Clinton’s triumph assumed, the Democratic Party establishment felt no need to include the masses in its plans for the country.

Now, with a faux-populist installed in the White House—and with the rest of the government under the control of a Republican Party whose platform bears little if any resemblance to the actual wishes and needs of the public—the left has a rare opportunity to organize a new and genuine grassroots movement. In its present circumstances, in fact, the left has little choice but to organize from the ground up, if it is to move forward at all.

There are encouraging signs that such a process is already underway, principally in the raucous town meetings that groups like Indivisible have spawned across the country. Better still, the organizing is being done mainly by young people, many of them entering the political arena for the first time. But mere resistance to the diabolical schemes of the enemy is not sufficient. To rally the American public in the long term, the left must craft a comprehensive, alternative political program that addresses economic inequality and restores the broad parity essential for the effective functioning of America’s constitutional system.

Sitaraman provides us with a much-needed reminder of how economic inequality has been adjudicated in the past—and how it can be more effectively alleviated in the future. He raises the possibility of passing tougher inheritance laws, but absent an actual revolution, that doesn’t seem any more feasible today than it did in the time of Madison and Jefferson. He rejects outright the idea of a “class warfare constitution” to divide power between rich and poor. His most powerful suggestion for change lies in a return to the cooperative commonwealth and the rise of a new labor movement—one focused not purely on collective bargaining within the workplace, but more broadly on the empowerment of workers. At a time when full-time employment is rapidly being replaced by short-term and contract work, unions must adopt new tactics and organize a wider range of workplaces and workers. Only long-lasting, structural change will reestablish the level of equality that both Harrington and the Founding Fathers saw as necessary for a republic.

In The Folklore of Capitalism, Thurman Arnold—who oversaw the antitrust division of the Justice Department during the last years of FDR’s presidency—took stock of capitalism’s triumph over republicanism. If only there had been a “great cooperative movement” back in the original Progressive era, Arnold lamented, it “might have changed the power of the industrial empire.” Perhaps the American left should consider the possibility that it still could.