The self-destruction of the 1%

The history of humans has some constant themes. An excellent Op-ed in the NY Times this weekend reminds us of how the seeds of economic and social misery have always been sown in the inclination of the haves to pull up the social ladder after themselves once they have managed to climb to the top.

“IN the early 14th century, Venice was one of the richest cities in Europe. At the heart of its economy was the colleganza, a basic form of joint-stock company created to finance a single trade expedition. The brilliance of the colleganza was that it opened the economy to new entrants, allowing risk-taking entrepreneurs to share in the financial upside with the established businessmen who financed their merchant voyages.

Venice’s elites were the chief beneficiaries. Like all open economies, theirs was turbulent. Today, we think of social mobility as a good thing. But if you are on top, mobility also means competition. In 1315, when the Venetian city-state was at the height of its economic powers, the upper class acted to lock in its privileges, putting a formal stop to social mobility with the publication of the Libro d’Oro, or Book of Gold, an official register of the nobility. If you weren’t on it, you couldn’t join the ruling oligarchy.

The political shift, which had begun nearly two decades earlier, was so striking a change that the Venetians gave it a name: La Serrata, or the closure. It wasn’t long before the political Serrata became an economic one, too. Under the control of the oligarchs, Venice gradually cut off commercial opportunities for new entrants. Eventually, the colleganza was banned. The reigning elites were acting in their immediate self-interest, but in the longer term, La Serrata was the beginning of the end for them, and for Venetian prosperity more generally. By 1500, Venice’s population was smaller than it had been in 1330. In the 17th and 18th centuries, as the rest of Europe grew, the city continued to shrink.” Read: The self-destruction of the 1 percent

Today we are repeating many of the same mistakes:

“Even as the winner-take-all economy has enriched those at the very top, their tax burden has lightened. Tolerance for high executive compensation has increased, even as the legal powers of unions have been weakened and an intellectual case against them has been relentlessly advanced by plutocrat-financed think tanks. In the 1950s, the marginal income tax rate for those at the top of the distribution soared above 90 percent, a figure that today makes even Democrats flinch. Meanwhile, of the 400 richest taxpayers in 2009, 6 paid no federal income tax at all, and 27 paid 10 percent or less. None paid more than 35 percent.

Historically, the United States has enjoyed higher social mobility than Europe, and both left and right have identified this economic openness as an essential source of the nation’s economic vigor. But several recent studies have shown that in America today it is harder to escape the social class of your birth than it is in Europe. The Canadian economist Miles Corak has found that as income inequality increases, social mobility falls — a phenomenon Alan B. Krueger, the chairman of the White House Council of Economic Advisers, has called the Great Gatsby Curve.”

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9 Responses to The self-destruction of the 1%

  1. William says:

    Although the highest taxrate was 90% in the 1950s there were a number of ways to get around paying such a high rate.

  2. Jeff Hubbard says:

    So how do we get the ladder back in reach of the 99%? There do not seem to be any Carter Glasses or Pecoras around – – the people in power feather their own nests by trampling on the common man and woman.

  3. Robert Lynn says:

    We are not living in the Middle Ages anymore but progressive politicians seem intent on taking us back. This article is socialist gobbleygook. It rejects capitalism and blames the free market economy for the results of a century of progressive economic experimentation. Our current economic situation was created by government not capitalism. The New York Times hardly qualifies as authoritative.

  4. John C says:

    In the here and now, the financialization of the economy (using debt and monetary debasement) over the past three or four decades has allowed some to harvest wealth from workers and savers without adding any real wealth to the economy themselves (at least not via this process). This has resulted in the growing gap between rich and poor and the decimation of the middle class. A stable society cannot be sustained under these conditions, but I fear it will get much worse before it gets better. The powers-that-be are (slowly) pulling the rug out from under us and most people don’t even know it’s happening, or at least they don’t understand why. Instead they contribute to their own destruction by, for example, taking on much more debt than they should in order to buy overvalued homes.

  5. Pat says:

    George Carlin’s Greatest Moment!

  6. John C says:

    Agreed. Capitalism (and being blessed with tremendous natural resources) made America the greatest country in the history of the world. Today, capitalism is being blamed for our socio-economic turmoil. However, the people who are trying to convince us of the evils of capitalism (real capitalism, not finance capitalism) are the same ones who corrupted capitalism to harvest wealth and use that wealth to take over government. We the people really need to understand what is truly happening. We should not reject capitalism. We should shun those who try to corrupt it (the fascists who run the world).

  7. William says:

    The point is that the rich no longer want to share their wealth with the poor. That’s essentially a return to feudalism. Whether it happens in the US, Canada, Venice, the UK, or any other country.

  8. Robert Lynn says:

    No, progressives are returning us to industrial feudalism. The rich never wanted to share their wealth just like you don’t want to share you home with two other families or five or six homeless people. We have seen common sense and freedom rejected in favour of socialist central planning and central control of peoples live and the stripping away of personal freedoms. Personal beliefs are now considered anti-social and subject to legal sanctions.

  9. William says:

    No, it happened IN SPITE OF all those “progressive” policies.

    If the bottom 99% have no income or wealth where’s the demand for the manufactering sector going to come from ?

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