Subverting the national education system and media were necessary for the long-term seduction of the American people by the Economic Royalists. But for immediate change, Lewis Powell saw a opportunity in the courts and o Capitol Hill. “ The educational program suggested above would be designed to enlighten public thinking, but one should not postpone more direct political action, while awaiting the gradual change in public opinion to be offered through education and information.” In 1971, only 175 companies had registered lobbyists. By 1982, thee were nearly 2500. Royalists were dumping huge amounts of money lobbying for favorable legislation. At the same time, they were sending brand-new right-wing think tanks devoted to espousing the same free-market, Andrew Mellon, Warren Harding ideologies that led to the last Great Crash: massive tax cuts, deregulation, and privatization. The American legislative exchange Council was founded in 1973. So, too, was the Heritage Foundation. And in 1977, the CATO Institute was founded, first as the Charles Koch Foundation, and then remained a few years later as CATO. These royalist think tanks were (and are backed by millions of dollars from modern corporate Economic Royalists.
Lewis Powell writes, “Under our constitutional system, especially with an activist-minded Supreme Court, the judiciary may be the most important instrument for social, economic and political change.” He notes, “This is a vast area of opportunity for the Chamber, if it is willing to undertake the role of spokesman for American business and if, in turn, business is willing to provide the funds.” He suggests the Chamber would need a highly competent staff of lawyers. In the 1970s, with the Royalists’ Chamber of Commerce now focused on the courts, a spring of explosive decisions throughout the decade would give the Royalists what they needed to eventually overthrow FDR’s New Deal Revolution that was culminating in the 1960s.
In 1976, in Buckley v. Valeo, the Supreme Court ruled that political money is speech, implying that those who have more money have more free speech in our political system. That same year, in United States v. Martin Linen Supply Co., corporations are given Fifth Amendment protections against double jeopardy. And in Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council, the Supreme Court ruled that advertising is a protected form of free speech. A year later, in 1977, in First National Bank of Boston v. Vellotti, the Supreme Court overturned state restrictions on corporate political spending, saying such restrictions violate the First Amendment. The Federalist Society was founded in 1982 with millions of dollars in funding by the Royalist-allied Bradley Foundation, which built a nationwide network of jurists, attorneys, legal scholars, and politicians to indoctrinate a new generations legal system with Royalist interpretations: corporate personhood is real, money is speech, democracy is not sacred, and organized money should always have privilege over organized people. A new wave was rising, an sweeping across the political and economic landscape in America. Unlike in the 1960s, the Economic Royalists were riding this one.
John Maynard Keynes was the leading economist in the first half of 20thcentury. Roosevelt adopted Keynes’ theory, and this was the birth of American Social Democracy a capitalist system that still bred winners and losers but ensured that losers wouldn’t be condemned to death and that winners wouldn’t have the power to bring down he entire system. Another economist of 20thcentury, Friedrich Hayek promoted neoliberalism, an economy based solely on free markets. Milton Friedman organized Mont Pelerin Society and brought Hayek’s message to his alma mater, the University of Chicago. What Hayek was unable to do mainly because he was operating with the catastrophic consequences of his free-market philosophy still fresh in everyone’s mind, Friedman would do – and that’s lead a global counterrevolution against controlled capitalism, and in particular against the New Deal. Friedman used Hayek’s theory in Chile – immediately privatize government industries, cut spending, and open up Chilean markets to free trade. No more Keynesian economics, in which the government kept greed and monopoly under control. As a result, the Chilean economy collapsed. In 1974 Friedrich Hayek as recognized by the central bank of Sweden with their Nobel Prize for economics. The award documented the beginning of a great shift in the intellectual center of gravity of the economies profession toward a restoration of confidence in markets, in deed a renewed belief in the superiority of markets over other ways of organizing economic activity. Two years later, the Nobel economics prize was awarded to Milton Friedman, the changing of the guard was complete. The neoliberalism movement was now afoot and had gained legitimacy. And the Royalists were thrilled. Margaret Thatcher, a devout follower of Friedman’s economics philosophy, would rise to power in the UK, deregulate her nation open up the markets, and cut government spending.
Meanwhile in the 1970s, Yom Kippur War ignited oil embargo by OPEC countries. The crisis morphed into prolonged inflation and economic stagnation. Under the pressure of economic hardship, doubts crept into the American psyche. People questioned whether the institutions born out of the New Deal were now failing and new institutions had to be built. The Powell Memo had organized the business class under Royalist principles, while neoliberalism as promoted by the Mont Pelerin Society and the Chicago boys had brought the political and economic class n line with the Royalists. The long fuse to the Crash of 21stcentury was lit.
In her writings, which have become foundational for libertarian theology, author Ayn Rand suggested that the only purpose of government should be to prevent oppression by force. What she neglected to consider was all the force inherent in nature. What she neglected to consider was all the force inherent in nature. If you are hungry, there is the ‘force’ of biology. If you are homeless, you confront the “force” of wind and storms, ice and snow if you are sick, you confront the ravages and “force’ of disease. These were the forces that provoked the first governments. The first communities, clans, and tribes. The first nation-states. It was easy for libertarian elitists, to talk about how there should be “no government beyond police, the army, and courts.” They all have enough resources that they don’t need to deal with the forces of raw nature. And that explains why billionaires would bankroll libertarian-leaning think tanks that will, when the crash comes with its full force, tell us it was “caused” by “big government.” However, in the real world, humans must confront both nature and other humans. Which is why we create governments, and why we create economies.
But it wasn’t until 1776, when Thomas Jefferson brought up “Life, liberty, and the pursuit of happiness,” that the idea of a large class of working people having the ability to “pursue happiness” – the middle class – was even seriously considered as a cornerstone obligation of government. As Jefferson realized, with no government “interference” by setting the rules of the game of business and fair taxation, there could be no broad middle class- maybe a silver of small businesses and artisans, but the vast majority of us would be the working poor under the yolk of elites. The economic royalists know this, which gets to the root of why they set out to destroy government’s involvement in the economy. After all, in a middle-class economy, they may have to give up some of their power, and some of the higher end of their wealth may even be “redistributed” – horror of horrors – for schools, parks, libraries, and other things that support a healthy middle-class society but are not needed by the rich, who live in a parallel, but separate, world among us.
As Jefferson pointed out, a totally “free” market, where corporations reign supreme just like the oppressive governments of old, could transform America “until the bulk of the society is reduced to be mere automatons of misery, to have no sensibilities left but for sinning and suffering. Then begins, indeed, the bellum omnium in omnia, which some philosophers observing to be so general in this world, have mistaken it for the natural, instead of the abusive state of man.”
United States has had two great periods of what we today call a middle class. The fist was from the 1700s to the mid-1800s, and was fueled by virtually free land for settlers (stolen from the Indians) and free labor (slavery in the South and indentured immigrants in the North). The result was ( as de Tocqueville pointed out) the most well-educated, politically active, middle-class “non-aristocrats” in the world. The second period didn’t take hold until after World War II. Unlike the first, the second had to be carefully constructed with specific (and what some might define as “socialist”) policies put in place during the New Deal, which asserted more democratic control over the economy and workplace in order to hold the Royalists in check. FDR’s administration set in several critical steps in rebuilding a middle class:
STEP ONE: PROGRESSIVE TAXATION: To both stimulate and balance that domestic economy, FDR reinstituted progressive taxation, which gave workers more to spend and gave the rich an incentive to pay their workers better to maintain a stable workplace, thus stimulating demand for more goods and services. And as studies from the center for American Progress show, when the top marginal income tax rate is above 50 percent, economies perform letter as whole. During the past fifty years average annual GDP growth and employment growth was the highest when the top marginal income ta rate was between 75 and 80 percent. The lowest was when the top marginal income tax rate was 35 percent.
STEP TWO: A SOCIAL SAFETY NET With the Social Security Act of 1935, FDR created Social Security and laid the groundwork for states to implement unemployment insurance. Roosevelt went on to say, “Liberty requires opportunity to make a living – a living decent according to the standards of the time, a living which gives man not only enough to live by, but something to live for.” For a middle class to take hold, basic necessities must be met. FDR went a step further and proposed a Second Bill of Right in 1944. Although never came to fruition, but in 1965, President Lyndon Johnson’s “Great Society” built upon FDR’s “New Deal” Social Security Act and created Medicare.
STEP THREE: PROTECTIONS FOR WORKING PEOPLE. When George Washington took office, remembering how difficult it was for him to find an American-made suit to wear to his inauguration, he tasked his treasury secretary, Alexander Hamilton to come up with a plan to make America more self-sufficient – to produce its own goods and services and not have to rely on Britain anymore. The full title of Hamilton’s plan was “Alexander Hamilton’s Report on the Subject of Manufactures; Made in His Capacity of Secretary of the treasury.” Thanks to Hamilton’s plan, the United States had built up an enormous manufacturing base that was able to sustain tens of millions of high-paying blue-collar jobs to produce the worlds goods – from refrigerators to clothes to cars. In addition, the Wagner Act of 1935 guaranteed Americans the right to form a union and bargain collectively with their corporate employers in thee now booming manufacturing plants.
STEP FOUR: RULES IN THE MARKETPLACE. For example, there was the Sherman Antitrust Act of 1890, which was intended to limit the size of corporations. In response to the Robber Baron monopolies, Presidents Howard Taft and Woodrow Wilson went trust-busting. Beginning in the early 1800s, laws were passed in several states to make it easier for legislators to revoke corporate charters if businesses were operating against the public’s interest. And this routinely happened. After the stock market crashed in 1929, FDR created SEC and FDIC. Teddy passed Tillman Act in 1907 banned corporate contributions in political elections.
In 1981, with Economic Recovery Tax Act, the Royalists under Reagan went right to work taking down that first pillar on which FDR rebuilt the American middle class: progressive taxation. Reagan succeeded, a few years later, in dropping the top income tax rate even lower, to 28 percent where it hadn’t been since before the Great Depression. That era from 1947 to 1979, in which all classes of Americans saw their incomes grow together, ended. A new era, in which only the wealthiest among us got rich off a booming economy, commenced. Productivity now is four times higher today than in 1950s, as businesses became far more profitable, there was a far greater incentive for CEOs to pull those profits out of the company and pocket them, because they were suddenly paying an incredibly low tax rate. The poorest 20 percent of Americans, meanwhile, saw their incomes actually decrease by 7 percent between 1979 and 2008. In the thirty years prior, their incomes had grown by 118 percent. The economic mistakes of the 1920s were coming back around. And, again, the influx of all this hot money in the market, couple with a robust deregulation agenda through the 1980s and 1990s, would trigger a series of painful financial panics.
The irony is that the Economic Royalists in the Reagan administration didn’t do the real harm to the social safety net that had once supported the American middle class. It was a Democratic president who did it. Bill Clinton was elected in 1992 after promised agenda called “A New Covenant”. But the New Covenant never got off the ground. According to Adam Curtis uncovers in a documentary series entitled The trap, just a few weeks before Bill Clinton was to take the oath f office, he was paid a little visit by two notorious Royalists, the CEO of Goldman Sachs at the time, Robert Rubin, who would alter become Bill Clinton’s treasury secretary, and Alan Greenspan, the chairman of Federal Reserve. Rubin and Greenspan sat the young president down and explained to him that the Royalists were in charge. In 1996, Clinton signed into law the Personal Responsibility and Work Opportunity Reconciliation Act. The law undid LBJ’s Great Society legislation, which had succeeded in cutting poverty rates in America from 22 percent in 1963 down to 12.6 percent n 1970. Before reform, 70 percent of impoverished families had access to a lifeline. But after reform, by 2009, only 30 percent did.
With the Reagan Revolution in the 1980s, Alexander Hamilton’s eleven-point plan, yet another pillar on which the middle class was built, was scrapped. In 1986, Reagan lowered tariffs. He vetoed protectionist trade bills throughout his presidency. And he doubled American’s spending in the global economy. And when Bill Clinton moved in to the White House in the 1990s, Tariffs were ditched. Over the last decade, fifty thousand manufacturing plants in the United States have closed down and 5 million manufacturing jobs have been lost. So When George W. Bush took office in 2001, the economic royalists would step up their assault. There comes cataclysmic crash.