Thursday, August 04, 2011

Winters on Oligarchy

Andrew Koppelman

Jeffrey Winters’s new book, Oligarchy, is a brilliant comparative study of the role of wealthy elites in politics. He argues that the protection of wealth is a central theme in politics throughout history. He draws on an enormous range of illustrations, from ancient Greece and Rome to medieval city-states to contemporary Indonesia and the Philippines. He also shows its influence in the contemporary United States, in a way that is remarkably timely.

Winters taxonomizes oligarchy, which he defines as “the politics of wealth defense by materially endowed actors,” (4) into four broad types. Warring oligarchy, the most primitive form, forces each rich actor to rely on his own private force to protect his wealth. It is familiar from medieval Europe, but he shows that it also drove Appalachian feuds in the 19th and early 20th century, in which elites fought for control of mining and timber wealth. Ruling oligarchies, in which each oligarch is armed but they govern collectively through institutions marked by codes of conduct, are unstable: Mafia dons often war upon each other; Rome and the Philippines succumbed to one-person rule. Sultanistic oligarchy concentrates the means of coercion in one person, who provides property and income defense for the elite. Suharto provided this stability for years in Indonesia, but when looting by his grown children endangered this equilibrium, the wealthy class deserted him and he was driven from power. Civil oligarchy is an impersonal, institutionalized government in which the law is stronger than any individual. Here, Winters thinks, democracy can coexist with oligarchy, as it does in the United States. But even civil oligarchies will collapse if they do not satisfy the need of the rich for property protection. If that happens, oligarchs will arm themselves. Even those of us who are fortunate enough to live in the most civilized forms should be alive to their continuities with the others.

Winters’s approach is obviously relevant as American politics shifts resources away from the poor toward the rich, starving infrastructure and public education. He thinks that the oligarchical concentration of wealth, which enables the rich to hire armies of lobbyists and tax lawyers, explains why, since 1970, the gains from the growing U.S. economy have been concentrated at the top, while incomes of the bottom 90 percent stagnated.

Wealth defense is a constant even in civil-oligarchy regimes that have robust welfare states. In Finland, for example, the top 0.5 percent of the population owns 71.6 percent of the capital market, compared with 41.4 percent in the United States. The Scandanavian countries have high taxes, but these are consumption taxes, which burden the entire citizenry rather than concentrating on the rich. The extremely rich have always managed to ensure that they shared their tax burdens with the merely prosperous. Similarly in America, where the top tax bracket starts at $250,000. Bill Gates pays the same nominal rate as his dentist.

Once the various methods of tax avoidance are taken into account, it becomes clear that America’s tax system is actually regressive: in 2007, the top 1% of taxpayers paid an effective rate of less than 24%. The top 1/10 of 1% paid less than 22%. The top 400 incomes paid less than 17%. (246) The marginal rate for some hedge fund managers, five of whom earned more than $1 billion in 2007, has been zero, because they operated through offshore partnerships that let them defer taxes. (248)

Oligarchy is a wonderful book. I don’t work in comparative politics, but I found it riveting reading, particularly in its detailed treatment of Winters’s academic specialty, modern southeast Asian regimes. He focuses attention on an aspect of the big political picture that is too often overlooked. I don’t think I’ll ever think about politics in the same way again.

There is, however, a cost to looking at the world from such a broad comparative perspective. Local variations that matter can become obscured. Scandanavia has its oligarchs, but these are much better countries to be members of the bottom 90% than the United States, where politics continues to focus on the rate, rather than the direction, of upward redistribution of wealth. America’s oligarchs are unusually greedy: the Bush tax cuts, a major source of our huge federal deficit, were spearheaded by rich Republicans who decided that their enormous gains in the 1990s boom just weren’t enough for them. Winters can’t account for this, because, as he himself shows, oligarchy is a constant across civil regimes. America’s fetishizing of the wealthy and powerful, its contempt for the weak and needy, and its eagerness to thwart its own legitimizing narrative of equal opportunity (as I write this, college aid for the poor has just barely escaped the budget ax), needs a different explanation.

Winters’s focus on American schemes of tax avoidance also gets distracted by irrelevancies such as whether some of these schemes are illegal. They may be, but why does it matter? The real issue is the protection of concentrated wealth, which he shows has been accomplished very effectively by methods of indisputable legality, such as the steady reduction of the top tax bracket in recent decades. The Reagan and Bush tax cuts cost the treasury more than any trick that sophisticated lawyers could devise. Winters offers a valuable perspective on how inequality persists, but he can’t explain the peculiar cruelties of modern American politics.

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