Why inequality is a threat to governance

Book review: The Crisis of the Middle Class Constitution

THE CRISIS OF THE MIDDLE-CLASS CONSTITUTION

Why Economic Inequality Threatens Our Republic

Ganesh Sitaraman 

Alfred A Knopf; 423 pages; $28

President Obama labelled income inequality “the defining challenge of our time.” But why exactly? Why am I hurt if Mark Zuckerberg develops Facebook, and gets rich on the proceeds? Some care about the unfairness of income inequality itself, some care about the loss of upward mobility and declining opportunities for our kids and some care about how people get rich — hard work and innovation are okay, but theft, legal or otherwise, is not.

Yet there is one threat of inequality that is widely feared, and that has been debated for thousands of years, which is that inequality can undermine governance. In his fine book, both history and call to arms, Ganesh Sitaraman argues that the contemporary explosion of inequality will destroy the American Constitution, which is and was premised on the existence of a large and thriving middle class. He has done us all a great service, taking an issue of overwhelming public importance, delving into its history, helping understand how our forebears handled it and building a platform to think about it today.

As recognised since ancient times, the coexistence of very rich and very poor leads to two possibilities, neither a happy one. The rich can rule alone, disenfranchising or even enslaving the poor, or the poor can rise up and confiscate the wealth of the rich.

Some constitutions were written to contain inequalities. In Rome, the patricians ruled, but could be overruled by plebeian tribunes whose role was to protect the poor. There are constitutions with lords and commoners in separate chambers, each with well-defined powers. Sitaraman calls these “class warfare constitutions,” and argues that the founding fathers of the United States found another way, a republic of equals. The middle classes, who according to David Hume were obsessed neither with pleasure-seeking, as were the rich, nor with meeting basic necessities, as were the poor, and were thus amenable to reason, could be a firm basis for a republic run in the public interest. There is some sketchy evidence that income and wealth inequality was indeed low in the 18th century, but the crucial point is that early America was an agrarian society of cultivators with an open frontier. No one needed to be poor when land was available in the West.

Of course, the fears about industrialisation were realised, and by the late 19th century, in the Gilded Age, income inequality had reached levels comparable to those we see today. In perhaps the most original part of his book, Sitaraman, an associate professor of law at Vanderbilt Law School, highlights the achievements of the Progressive movement, one of whose aims was taming inequality, and which successfully modified the Constitution. There were four constitutional amendments in seven years — the direct election of senators, the franchise for women, the prohibition of alcohol and the income tax. To which I would add another reform, the establishment of the Federal Reserve, which provided a mechanism for handling financial crises without the need for the government to be bailed out by rich bankers, as well as the reduction in the tariff, which favoured ordinary people by bringing down the cost of manufactures. Politics can respond to inequality, and the Constitution is not set in stone.

What of today, when inequality is back in full force? I am not persuaded that we can be saved by the return of a rational and public-spirited middle class, even if I knew exactly how to identify middle-class people, or to measure how well they are doing. Nor is it clear, postelection, whether the threat is an incipient oligarchy or an incipient populist autocracy; our new president tweets from one to the other. And European countries, without America’s middle-class Constitution, face some of the same threats, though more from autocracy than from plutocracy, which their constitutions may have helped them resist.

Sitaraman reviews many possible correctives, including redistribution to reduce inequality; better enforcement of antitrust laws; campaign finance reform to break the dependence of legislators on deep pockets; compulsory voting; and restrictions on lobbying, including the possibility of “public defender” lobbyists to act on behalf of the people. I would add the creation of a single-payer health system, not because I am in favour of socialised medicine but because the artificially inflated costs of health care are powering up inequality by producing large fortunes for a few while holding down wages; the pharmaceutical industry alone had 1,400 lobbyists in Washington in 2014. American health care does a poor job of delivering health, but is exquisitely designed as an inequality machine, commanding an ever-larger share of GDP and funneling resources to the top of the income distribution.

Perhaps the least familiar and most intriguing policy proposal that Sitaraman discusses is the idea of reviving the Roman tribunate: 51 citizens would be selected by lot from the bottom 90 per cent of the income distribution. They would be able to veto one statute, one executive order and one Supreme Court decision each year; they would be able to call a referendum, and impeach federal officials.

Such a proposal seems fanciful today, but so is campaign finance reform, or greater redistribution. Yet we do well to remember Milton Friedman’s dictum that it takes a crisis to bring real change, so that our job in the meantime is to develop alternatives to existing policies that are ready for when “the politically impossible becomes politically inevitable.” There will surely be no lack of crises in the days to come.
 

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