Our New Plutocracy
In any introduction to foresight, we would be remiss if we didn’t conclude with a mention of perhaps the greatest single negative socioeconomic development of the modern era. We are speaking now of the great growth in economic inequality and the consequent plutocracy that has emerged in modern industrial nations since the mid-20th century. Plutocracy, with its counterinnovative monopolies, corporate welfare, crony capitalism, corruption, and the erosion of the good jobs, the social and educational contract for the middle class, and democracy and evidence-based thinking, is a predictable development of the great wealth that has always been generated by technology and globalization, in successive waves since the Industrial Revolution. Wealth always accrues the fastest to the holders of capital, and never has it been built faster for corporations and the top 1% than in our modern era of globalization since the 1960’s.
As an example of where we are in economic inequality, as Gar Alperovitz outlines in What Then Must We Do? (2013), mean wages haven’t gone up in the US for the last four decades, while the top 1% (3 million Americans) now make as much money as the bottom 180 million Americans, representing almost 60% of our society. The highest marginal tax rates on the wealthy were 91% in 1950, and are 20-35% today. Corporate taxes have fallen from 32% of federal revenues in 1952, to 8% in 2011. Corporations now effectively control many of the institutions of American democracy, a condition that wasn’t true in the 1950s, and there is vast economic concentration in most of our most lucrative industries (banking, insurance, health care, energy, broadcasting, telecom, transportation) with most wealth flowing through a very small number of corporations, which act as policy cartels.
For a financial industry example, the average inflation-adjusted size of US banks has increased more than fivefold since 1984, while the number of banks has dropped from 14,000 to barely 7,000, and continues to rapidly drop. The top four US banks now hold nearly 40% of US citizen deposits, and from 2006-2012, the top six increased their relative assets from 55 to 60% of US GDP, during the bank bailouts. This advanced economic concentration in several of our wealthiest industries, and the corruption, oligopoly policies and unfair profit extraction that come with such concentration, now appears immune to any kind of antitrust regulation. Both the breakups of Standard Oil in 1911 and AT&T in 1984 were fully reversed by legal re-mergers a few decades later.
Also, the more expensive running for political office has become, the more the entire process is owned and run by and for the wealthy as well. It cost all US Presidential candidates $92 million to run for election in 1980. By 2008, candidates were spending $1.1B. By 2012, it cost $2B, doubling in just four years. And with the recent Citizens United court decision, corporations have lost any remaining restrictions on their campaign spending. Out of the wealthiest 21 OECD countries per capita, the US now ranks 19th in public spending on social programs as a percentage of GDP. No reasonable futurist should expect this spending ratio to improve anytime soon.
The more rigged the US political system has become toward ownership and operation by the wealthy—the clearest term for this is plutocracy—and by our largest corporations, the plainest term here being corporatism, the more implausible any near-term reform strategies seem. Knowing where we are in this respect, where we’ve come from, and where we are likely to go is a fundamentally important insight for anyone doing economic, political, and social foresight work.
The wealthiest Americans live, as always, in a truly different world. They don’t have to worry about our failing public schools, lack of health care, good middle-class and lower-income jobs, or most other collective problems. They aren’t affected by the poor quality of our modern security systems like the TSA, which has yet to figure out how to trust and pre-clear the vast majority of American citizens for their airline flights, because their corporate jets aren’t subject to intrusive security screening. They even profit directly from the inefficiencies and waste in our finance, health care, defense and security industries, via ownership interests. In short, they are to a large extent unaccountable, and are likely to remain so for some time to come.
What’s more, our new American plutocracy, with its corporate-owned mass media, has been increasingly effectively used since the rise of the neocons in the 1980s to polarize the American political scene. Rather than seeking compromise and action, we now have privately-funded think tanks, pundits and slick 24/7 news networks pandering to political polarization and noncooperativity. This noncooperativity between our newly-built churches of “right” and “left” is not new. It has happened several times before in many countries in times of middle class stagnation. Don’t expect it to go away anytime soon, because the polarization strategy, continually reinforced by media and party representatives, seeking, or falsely creating, fresh new stories to offend us is an effective way both for each party to generate interest and outrage, and an effective way for the right to keep creeping overregulation and socialism at bay. Both think they are making the world better by polarizing the debate, meanwhile the government becomes deadlocked and ineffective as any kind of check against the ever-growing power of corporations and the wealthy.
The Global Financial Crisis of 2007-8 briefly highlighted inequality and job concerns in the US, but massive state financial support of the economy via quantitative easing, and continued deflation due to relentless technological advance have kept inequality and jobs secondary political issues, for now. Yet with recent bank bailouts and other corporate welfare initiatives during the crisis ($700M in the 2008 TARP program alone), American citizens increasingly hold the opinion that the US political economic system no longer reflects average voter values. Other than ineffectual “leaderless protests” like the Occupy movement of 2011, they just don’t know what to do about it, yet.
Fortunately, there are solutions ahead, but they are not necessarily the ones we might think.
We’ve attempted the most predictable early solutions with the periodic election of Democrats to our presidency (Clinton, Obama) and other offices. But in a deeply plutocratic environment, democrats have to lean to the plutocrats to get anything done. They don’t lean to the right. Rather, both right and left must always lean to the rich. As Michael Parenti describes in America Beseiged (1998), the two parties have become increasingly identical as corporate wealth has grown vs. the state. Today we have a government of Republicrats and Demopublicans, to use Parenti’s terms, both catering almost exclusively to the interests of the rich. Our choices are Coke and Pepsi, and neither seek to empower the middle class.
The rich, in turn, are happy to see both parties lose their moral centers and become politically deadlocked and ineffective. Clinton managed to balance the government’s budget after years of deficits, and Obama managed to get the JOBS bills passed to help small business, but we are hard-pressed to find more examples of benefits for the average person from these presumably Democratic administrations. Even “Obamacare” couldn’t be passed without premium hikes, a major defeat for his administration that rightly angered the average person, and has fueled calls for a rollback from the right. That attempt at reform was a big lesson in how hard it is for the government to try to restrain the rate of profit growth in the medical-industrial complex, which has grown to be the second-largest industry in developed economies, after finance, and far ahead of defense. Health care may eventually grow even larger than finance, as our average age keeps growing and as medicine gets ever more useful and personalized. The only industry that promises to grow larger than health care in the long run is information technology, but that likely won’t happen until after we reach the technological singularity later this century. In short, Obama should have picked a much smaller series of targets and industries for reform, as the economic forces opposing big improvements to the social contract today, by any sitting president, are so great.
The election of Trump, a right-populist demagogue, in 2016, is another predictable effort by frustrated middle class voters, particularly those in the South and Midwest, to improve their lot, as the first-level solution of turning to the left has proven ineffective. A Trump presidency may be good for big business for a while, and help us roll back some of the more ridiculous political correctness and regressive leftism that we’ve seen from the liberals in recent years, but it will likely do nothing for small business, where we really need the help. We may see at least a media focus on good US jobs and manufacturing, and a long-needed social stigma against corporations doing business here that don’t commit to keeping a strong technical competency here at home.
In the Trump administration, I would love to see a government body producing, or a subsidy for private production, a series of numbers on the ratio and quality of US jobs provided, per dollar of domestic revenue earned, for every major public and private corporation doing business here. But in reality, as a politician, he doesn’t even have that level of power. Any such bill would die in committee, and be cited as government “bloat.” It is directly adverse to the interests of the plutocracy. Like Reaganomics in the 1980’s and Bush II in the 2000’s, one of the few things we can predict with 99% certainty is that we’ll see even greater wealth distribution to the rich from the rest of society during his administration.
History shows that in its early stages, plutocracy has many advantages. Plutocratic systems get more done, more efficiently. Then they become inefficient, and the country swings back to a more democratic state, in a natural cycle. Then too much democracy becomes ineffective, and leaderless, and the next wave of technological change creates opportunities for plutocracy again. We describe this as the Political-Economic Pendulum in Chapter 8.
We’ve been growing our economic plutocracy strongly since the 1980s, when incomes between the deciles of American society started diverging again, after decades of converging during the New Deal and WWII. As seen in this Mother Jones chart of Piketty and Saez 2012, we’ve now reached levels of inequality previously seen in pre-Depression 1920’s America.
We’ll inevitably see a swingback to a more democratic state, meaning a set of real and broad improvements to our social contract that rival the massively positive ones our grandparents and parents got in the 1940’s (free education, health care, social security, civil rights, etc.). It’s just going to take a little bit longer before we get organized enough to make those changes happen.
We aren’t saying that wealth and income inequality, as measured by the difference between the highest and lowest deciles of society, won’t continue to grow. That may very much be in the cards for us. Physicist and Evo Devo Universe scholar Adrian Bejan and Marcelo Errera published a fascinating 2017 paper arguing that such inequality is developmental. What we are saying is that the size and strength of the middle class, and the particulars of its social contract, is clearly a free evolutionary choice, which varies widely today between one developed society and the next.
We can unfortunately predict that the democratic reset we need on our growing plutocracy is not going to come from an American president anytime soon, given our current gerrymandered and polarized political system. For example, even if a more entrepreneurship-friendly and S&T-aware version of Bernie Sanders (a candidate who fell far short of what is needed on both counts) is eventually elected on a populist surge in a few years time, their administration would most likely be legislatively hamstrung by our plutocrat-controlled Capital Hill, and their message would be largely neutralized by our plutocrat-owned mass media.
One current problem is that the American people don’t yet appreciate the centrality of information science and technology, entrepreneurship, and virtual immigration (global technical workforce remotely employed by our entrepreneurs) policy to modern wealth creation. Another problem is that leading corporations can effectively use their political influence in our captured legislatures and regulatory agencies to limit any policies that would seriously develop S&T, entrepreneurship, or virtual immigration, as all of those and related policies would threaten their current business models. Thus a middle class oriented populist that directly championed these issues would presently be unelectable. They’d have to come in under a different set of agendas and then switch focus, making the prospect particularly difficult at present.
Consider the cartels in the US telecommunications industry. They are unified in a strategy of slowing deployment and denying gigabit fiber to the home as long as possible, as that response maximizes current profits and prevents real competition, like true internet television, from developing. America invented the internet but we were 30th in the world in cost per megabit in 2014, and I doubt we are better ranked today. There is likely little overt conspiracy, just structural oligopoly and the deep bias against innovation and competition that results from it. We see this across the economy but most obviously in what we will call, in Chapter 5, the FiMMIT complex of the world’s most wealthy and influential industries. Trump is presently doing what he can as of this writing to dismantle net neutrality and serve the telco lobbies, so we can expect continued poor broadband development and telco oligopoly growth for his administration, at least.
Economic historian Walter Scheidel in The Great Leveller: Violence and the History of Inequality from the Stone Age, to the Twenty-First Century (2017), gives a wealth of evidence from the history of all types of governments so far that only major system shocks, including pandemics and plagues, deeply economically damaging (“great”) depressions, mass-mobilization warfare, and powerful, and usually violent, social revolutions have caused reversals of inequality over the years. Almost all political reforms that are initiated within a plutocracy only slow inequality growth, at best. Scheidel observes a plutocratic system is generally too rigged to self-correct, via internal mechanisms.
As most of the system shocks Scheidel cites are rapidly disappearing from our ever more interdependent and automated society, we are left, looking forward with the very powerful (and mostly nonviolent) social revolution of personal sims, discussed later in this chapter, and revolutionary force of regular entrepreneur- and technology-driven creative destruction, discussed in our section on the Political-Economic pendulum, as the leading tools that will generate the next swingback. Creative destruction is the less powerful of the two great leveling forces, as it only occurs reliably in markets undergoing rapid technological change. In all other markets, the degree of real competition and innovation depends on the quality and cost of access of education, our legal structures, the impartiality of our courts, and the strength of our institutions. In many industries in capitalist plutocracies, oligopolies have grown strong enough to buy up early competition and limit the rise of new players. Fortunately, the more information technology infects all industries, we are seeing a large, albeit likely a temporary, increase in creative destruction in many industries today.
Personal sims the major solution, and the real “social revolution” ahead. I am quite sure citizens will increasingly use them to reempower themselves, and the smarter the sims get, the more we’ll use them to do evidence-based changes to our economic and political system that are proven to maximize innovation and creative destruction in all our industries. We are heading into a new and exponentially more intelligent form of democracy, one that hasn’t existed historically before, which greatly limits the conclusions we can draw from Scheidel’s past data. Unfortunately, he never mentions “creative destruction” once in his otherwise very impressive work. The idea that we will all soon have personal AIs interpreting our world for us, and helping us with our purchases, actions, initiative crafting, amendments, and candidate and party selection, is also missing from his forward analysis. Yet that is the kind of democracy that is, fortunately, in the cards for our children. If we’re lucky, and get busy making it, we’ll see it as well.
Thankfully, accelerating science and technology continues almost regardless of political environment. In the fastest moving industries, especially information technology, at least outside of telecommunications, oligopolies are continually being disrupted by new entrants. Exponential innovation, and its exploitation by entrepreneurs, can’t be stopped. They can delay broadband growth for years, but they can’t stop it.
This Guide predicts that the next Great Swingback from Plutocracy, with social contract expansions and wealth redistributions mirroring the 1930s and 1940s, will come primarily from the continued acceleration of information technology, with the most powerful applications being our personal sims and the knowledge web behind them, and a coming mass movement, sparked by number of opportunistic opinion leaders, that brings us individual-empowering and redistributive reforms.
We’ll see reforms like a living wage Basic Income Guarantee, constitutional amendments, campaign finance amendments, and a great many new forms of digital empowerment of the average voting citizen. Let’s briefly discuss each source in turn.
Accelerating information technology, and its use by entrepreneurs will increasingly give each of us new tools for mass collaboration and mass civil action. Over the next fifteen years, information technology will deliver a suite of increasingly powerful and personalized software tools and platforms that will start modeling our interests, and lobbying to protect and advance them in the world. The most powerful of these tools is what I call a personal sim, and we’ll discuss it in Chapter 2. Sims will allow us to collaborate, entertain ourselves, learn, buy, vote, and sponsor initiative legislation that truly advances our own interests, as we will see.
Second, we will eventually see a social movement, run by some well-spoken opinion leader, to use these new technologies to incite mass social actions (non-unionized strikes, walkouts, protests, etc.) that will put broad and unprecedented pressure on our dysfunctional and rich-focused governments to institute these changes. As an inspiring example of that, I’d like you to think about Lech Walesa, the Polish electrician whose organizing efforts over the 1970s and 1980s, eventually imitated by others who saw his successes, became one of the primary sparks that motivated others to end eighty years of Eastern European Communism.
Virtually no observers at the time thought political and economic structures could change so quickly and peacefully, in so many countries, but they did. The kleptocratic regimes that followed in the most corrupt countries were often not much better for the masses, but Poland, Estonia, the Czech Republic, and several other countries have been shining exceptions, signaling the possibilities of good governance to others. For more how mass actions, though they are infrequent, have always been the most fundamental creator and legitimator of the state, and its most irresistable force once they reach a scale threshold, see the excellent A Force More Powerful: A Century of Non-Violent Conflict, 1999, or watch the film of the same name.
In the same vein, I think we’ll see the swingback from Plutocracy, in a mostly peaceful social revolution, led by a modern Walesa within the next few decades, one that ushers in a Basic Income and related reforms in all our industrialized democracies first, and other democracies later. That doesn’t mean plutocracy ever goes away. As a form of governance it is as necessary as democracy, and countries will continue to naturally swing between both states, as we describe in Chapter 8. But it does mean that the current excesses of plutocracy will be rectified, and for some decades afterward, it will be most accurate for sociologists to describe our most developed nations as primarily social democracies again, rather then the plutocracies they have become. The pendulum never goes away, but we are morally obligated to minimize its extremes.
So while it is easy to get depressed when we learn the facts of modern plutocracy, it is quite uplifting to realize that science and technology will continue to grow exponentially in power and intelligence in coming years, far outstripping our global elite. Very soon intelligent personal software will be advising us in what to learn, what to buy, who to associate with, and how to vote, and we’ll all be living in a very different kind of democracy. You may not believe this story, but would you have believed me in 2002 if I’d told you cars would be driving themselves legally in some states within a decade (Nevada, March 1, 2012)?
Even later this century, our machines will get so smart they will surpass all humans on the planet in their wealth and capabilities, a topic futurists call the technological singularity. They’ll also offer us several ways for our memories and minds to enter their world, a topic futurists call uploading. Whether you believe the singularity and uploading will occur or not, both of these coming events are deeply evidence based. All that experts argue about now is the timing, not whether they will happen, so they are worth understanding.
Machines are presently moving all our critical algorithms into their world, including how we think, and how our immune systems protect us from harm, at a truly astonishing pace. As we’ll see, guiding our rapidly-improving machines on an empowering and ethical path of development has become the most important story we can tell about the human future. We’ll devote a whole chapter to that, Chapter 2, as it is a story most people still haven’t been told, or don’t yet want to hear. But whether we want to hear it or not, we are rapidly headed for a much different, and eventually, much better world.