Knowledge and the Cardinal: Revolution or Police State? Beware the Pitchforks!

You show me a highly unequal society, and I will show you a police state. Or an uprising….It’s not if, it’s when.

It’s not often that you get a really rich person talking publicly about the dangers of growing income inequality in the United States. And especially the consequences of looming social unrest. Come to think of it, we never hear someone in the super rich club talking about the need to rebuild the middle class and to seriously address the huge numbers of Americans who live in, and at near, poverty.

Well, there’s one rich guy who not only gets it but who has increasingly become more vocal for a call to action by America’s elected representatives and business people. Meet Nick Hanauer, author of the opening quotation. (It should be acknowledged that investor and philanthropist Warren Buffet has spoken about America’s warped taxation system that favors the wealthy.)

Hanauer, age 57, was born in New York City (photo below). An average student, he earned a philosophy degree from the University of Washington. After graduating, he began work at his family-owned Pacific Coast Feather Company; he’s still the CEO and co-chairman. However, when he was a young man he displayed what he’s acknowledged as an appetite for risk, and began investing in numerous ventures over the years. One of his early investments was Amazon, serving as an advisor until 2000. He created Gear.com, which later merged with Overstock.com. Many other ventures line Hanauer’s CV, but of interest was his forming The True Patriot Network, a political action tank. He also helped create The League of Education Voters in the state of Washington.

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An advocate of a higher minimum wage, Hanauer (pictured) wrote a commentary in 2013 for Bloomberg BusinessWeek, in which he proposed a $15 minimum wage. The following year, Hanauer and Eric Beinhocker published Capitalism Redefined. This is recommended reading. However, it was Hanauer’s commentary featured as a special report in Politico that caused people to sit up and pay attention.

The Pitchforks are Coming…for Us Plutocrats is an in-your-face, frank assessment of where America is at on the issue of income distribution. You can also listen to Hanauer in this TED Talk, where he makes an appeal to his “fellow plutocrats” to help initiate the needed socio-economic changes to reduce income inequality. Be sure to take to watch this illuminating video.

A contentious public figure in the past few years, owing to his TED Talks and media interviews, Hanauer’s viewed by right-wing capitalists, and many Republicans, as too left-leaning and too critical of America’s capitalist society. Based on developments over the past 20 years, from NAFTA to China’s entry to the World Trade Organization to the 2008 financial meltdown and ensuing Great Recession to the Occupy Movement to the proposed Trans Pacific Partnership, these criticisms hold little substance. American workers, especially those in manufacturing and information services, have gotten screwed.

Hanauer points out that in 1980 one percent of the U.S. population controlled eight percent of the national income. The bottom 50 percent held 18 percent. Fast forward to today and the top one percent controls 20 percent (up 12 points); in contrast, the bottom half has only 12 percent (down six points). However, of more relevance than these numbers is understanding the distinction between income and wealth.

To be in the one percent club required an annual cash income of $500,000 plus in 2008. However, at the core of the one percent issue is wealth, encompassing assets less liabilities. On that front, one percent of Americans control about 35 percent of the country’s wealth. However, that share of the nation’s wealth has barely budged upwards since 1962 (only 2.2 percentage points). Wealth begets more wealth. It’s the massive disproportionate increase in income by the one percent between 1979 and 2007, up 275 percent, that raises eyebrows—and tempers. The middle class, in comparison saw its income rise by just under 40 percent.

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The middle class has been squeezed relentlessly not just in the U.S. but in Canada, the UK, Europe, Australia and New Zealand, with wages stagnating in real terms, young people being underemployed and older workers being thrown to the curb as work is outsourced overseas. No wonder why Great Britons voted to exit the European Union (aka Brexit), when one considers how the country has been hammered economically outside of metropolitan London.

One can pick at some of Hanauer’s arguments, but the underlying point is that American society, as we’ve come to see it evolve into a post-WWII healthy middle class, is under extreme threat. The work of Presidents Eisenhower, Kennedy, Johnson, Nixon, and Carter started to unravel with the later introduction of trade agreements that saw jobs outsourced overseas. President Reagan, who oversaw the growth of the U.S. debt by $1.86 trillion (more than even President G.W. Bush), did take on the Soviets and through a sustained effort with Mikhail Gorbachev saw a large reduction nuclear weapons.

It was under Presidents H.W. Bush, Clinton and G.W. Bush that China’s massive manufacturing hub was created and took hold. President Clinton, many have forgotten, signed the legislation to eliminate the Glass-Steagall act of 1933 (enacted under President Roosevelt) which was aimed at separating consumer banking from investment banking. And President G.W. Bush and his successor Barak Obama didn’t have much of a clue when it came to economics. In short, for the past two decades-plus it has been America’s plutocracy that has controlled the way forward for the US economy, and by extension Canada.

We hear about the “One Percent,” as portrayed by the Occupy movement” that not only spread across the U.S. and Canada but Europe, the UK, Australia, India, Brazil, Argentina and many more countries. But what’s really at issue is the .01 percent, those super rich people who as this two-part British documentary explains benefitted mightily from the exploitation of consumer debt, initiated by CITI bank. Watch The Super Rich and Us, Part One. And here for part two.

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Many people have attributed the expression “The One Percent” to nobel prize winning economist Joseph Stiglitz. While Stieglitz is a perceptive commentator on the socio-economic-class tensions prevailing in the US, it was actually President Franklin Roosevelt who coined the expression in the summer of 1914. It was at a public address in Reading, Pennsylvania, just when WWI was breaking out in Europe, and Roosevelt as Assistant Secretary of the Navy remarked in his address:

“There have been two kinds of successful politics devised in our system of government…. The first is the kind which seeks to build up party strength by obtaining … power based on the personal domination of a few men and the perpetuation in places of authority of those few men and their own appointed successors. That has been in the past, we must admit to our shame, a successful kind of politics, but the day of its success has just about come to an end…. The administration believes that the national government should be conducted for the benefit of the 99 per cent, and not, as has been sometimes been the case in the past, for the benefit of the 1 per cent….” (from Young Mr. Roosevelt, by Stanley Weintraub).

This is not the first time in history since the Industrial Revolution where extreme income and wealth inequality have become incendiary issues. Yet we, as human beings, like to consider ourselves as more sophisticated and educated compared to our forebears in the early 1900s and during the 1800s. We shouldn’t congratulate ourselves or feel superior, given our technology advancements. As a 21st Century society we’ve actually fallen backwards. The longer we wait to seriously correct the disparities in the economy, labor market and financial system, the longer and more difficult will be the road back. Hanauer’s correct about the metaphorical pitchforks. One has only to read some history on what happens when repressed people finally stand up and assert themselves.

The most ironic thing about rising inequality is how completely unnecessary and self-defeating it is. If we do something about it, if we adjust our policies in the way that, say, Franklin D. Roosevelt did during the Great Depression—so that we help the 99 percent and preempt the revolutionaries and crazies, the ones with the pitchforks—that will be the best thing possible for us rich folks, too. It’s not just that we’ll escape with our lives; it’s that we’ll almost certainly get even richer.
— Nick Hanauer (from “The Pitchforks are Coming”)

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