The rich are in bad odor. The Left has made the “1 percent” a target of sustained moral and political criticism. But what exactly is wrong with the wealthy?
Liberals often insist on the need for economic fairness. Some argue that the wealthy could pay more taxes without substantially harming the economy, though they should be grateful when taxpayers provide money to advance progressive goals. Others object to the very existence of large fortunes and seek to erode them via taxation. But the substantial majority of the very rich are self-made—two-thirds of the Forbes 400 built their own businesses, a proportion that is growing—and they add far more to the welfare of consumers than they retain in wealth.
Perhaps more troubling is the claim that the rich create social costs for the polity by wielding disproportionate influence in the political process. In Why Does Inequality Matter?, Harvard philosopher T. M. Scanlon identifies the political effects of wealth inequality as one of its most consequential costs. Yale political scientist Jacob Hacker and venture capitalist Nathan Loewentheil argue, more specifically, that the outsize influence of the very rich blocks policies to help the middle class and poor that the political system would otherwise enact. And Vermont senator Bernie Sanders, perhaps the most prominent critic of inequality in the U.S., says that ours is an “oligarchic” society “in which a small number of incredibly wealthy and powerful billionaires own and control a significant part of the economy and exert enormous influence over the political life of our country.”
Such concerns animate a raft of new proposals—from legislation that would prevent people from spending money on electioneering, to efforts to limit tax deductions or to require the disclosure of donors’ identities for philanthropy that promotes certain causes. The argument that the wealthy pose a threat to our system has also been used to justify tax proposals that might substantially harm economic growth. Even if such exactions prove inefficient, some progressives defend them on the grounds that they curb the political power of the rich. Yet, however popular it has become, the argument that the disproportionate influence of the wealthy threatens American democracy fails on several levels.
Begin with the problem of defining how much influence is too much. Evidence suggests that politicians do often follow the views of the wealthy on such matters as taxation, spending, and regulation: for example, the wealthy are less enthusiastic about raising the minimum wage than is the general population. But unequal influence—exerted through money spent on campaigns or political causes—does not necessarily mean undue influence. Perhaps the wealthy have more informed perspectives on certain issues than the average voter and push for policies that benefit not only themselves but others, too.
The U.S. is a representative democracy, not a direct democracy. The Framers expressly rejected the notion that the people should be able to instruct their representatives on how to vote. One proposed amendment to the Bill of Rights would have permitted voters to impose such binding directions, but James Madison objected: the nation’s representatives “must be able to contradict the sense of . . . the people” and not to vote for measures that they thought harmed the “public good,” he argued. Representatives will inevitably consider not just whether their policies align with the electorate’s current views but whether they will have good effects—at least, if they want to be reelected. Voters have short memories; they will hardly forgive politicians whose policies do harm just because those policies once earned high marks in opinion polls.
Public-choice theory—the application of economic principles to political decision-makers and institutions—reminds us that since individual voters are unlikely to change the result of an election, they will be naturally, and rationally, ignorant of most policies. They will often vote for expressive reasons—to affirm their image of themselves as good people. In times of crisis, voters may tend to pay more attention to the concrete consequences of their vote. But given that voting in ordinary times is mostly expressive, politicians should not uncritically obey popular sentiment but instead translate it into prudent policy.
For many wealthy voters, however, properly assessing the consequences is part of their self-image, making them more wedded to intricacies of policy debate. In business, where the rich have usually made their wealth, prediction makes the difference between success and failure, and understanding the real-world effects of policy becomes an imperative. Intelligent people who spend their lives gauging the markets for their products or anticipating how regulations will affect their companies often possess impressive predictive skills that ordinary workers may not possess.
In particular, business leaders are likely to be more grounded in their views than politically engaged intellectuals, who tend toward abstraction, imagining a just society without considering the consequences of the steps needed to realize their vision—which may not be realistic in the first place. As historian Augustin Cochin observes, “whereas in the real world the arbiter of all thought is proof and its issue is the effect, in the [intellectuals’] world the arbiter is the opinion of others, and the aim their approbation.” In the house of mirrors of the intelligentsia, trendy orthodoxies can gain popularity, regardless of their long-term consequences. The rich tend to be better positioned to provide a unique perspective that focuses on the likely consequences of policies—an important component of what Madison referred to as the “public good.”
The ideological or political sway of the rich also pales compared with that of other groups whose impact the Left often celebrates. Key progressive constituencies, especially the media, the academy, and the public bureaucracy, exercise a tremendous influence on American politics, culture, and governance, despite holding political views far less representative of the general public than those of the wealthy. The rich would emphatically lose in any contest to name the most ideologically homogenous, politically powerful group—the group, too, most likely to thwart popular opinion.
Consider journalists, those gatekeepers of culture and politics. Editors decide which stories get covered, which don’t, and which receive top billing; reporters filter events through narrative frames that trickle into public school curricula; and opinion writers editorialize on behalf of issues and candidates. The vast majority of journalists are Democrats, and the influence of legacy media still far outweighs that of their conservative or independent competitors. Journalists’ views are becoming more uniform and intolerant of dissent: just think of Tom Cotton, whose New York Times op-ed calling for the military to quell nationwide riots resulted in a newsroom revolt and the resignation of the editorial-page editor.
Or take academics, who, far from being confined to the ivory tower, transmit ideas to the next generation. Fashionable claims that the U.S. was founded on an ideology of slavery, that interlocking systems of oppression dominate the downtrodden, and that the Founders used liberty as a smokescreen for white supremacy got their start in college classrooms. As in journalism, many universities encourage a creedal atmosphere, unwelcoming to those who fail to repeat the social-justice catechism. And like journalists, professors are far to the left of the average American. At Harvard, only 4 percent of faculty political donations go to Republicans. At many universities, it’s impossible to find more than a few professors in the humanities or social sciences who hold conservative views.
Another example: federal bureaucrats, who wield influence via the administrative state. One might think that top bureaucrats don’t exert much independent sway, as they serve under political appointees, who change with presidential administrations. But most political appointees are short-termers, who don’t always grasp procedural and substantive intricacies and must keep good relations with their subordinates to be successful—and that allows those subordinates to use their expertise to shape policy. Federal bureaucrats, like the media and academics, stand to the left of the median Democrat. Government lawyers are more liberal than the average lawyer, who is himself more liberal than the average American. In 2016, 95 percent of presidential campaign contributions from federal bureaucrats went to Hillary Clinton.
Compared with any of these groups, the rich are a paragon of balance. The richest 4 percent of Americans went slightly for Democrats in 2012 but favored John McCain in the previous election. Billionaire donors exist across the political spectrum. The Koch brothers and the late Sheldon Adelson have mostly contributed to right-wing candidates and causes; Tom Steyer and George Soros have contributed to the Left. If the rich lose their influence, while the aforementioned groups retain theirs, the commanding heights of opinion-making will become more unbalanced—not because the rich are so far to the right but because they are a rare source of heterogeneity in the debate.
In fact, the wealthy cannot prevent people with unorthodox views from joining their ranks in the same way that the aforementioned groups can. Classical political philosophers worried that the power of the rich could create an oligarchy, but ancient societies were more static than modern market democracies. The next generation of the rich will make its money from unforeseen innovations and entrepreneurship. Such creative destruction also generates fresh insight in the political sphere, bringing in people with a keen appreciation of how society works in reality—particularly when they are compared with journalists, academics, and bureaucrats.
Some will object to this comparison. Journalists, academics, and bureaucrats are engaged in a fundamentally different enterprise from that of wealthy political donors, they might argue: the former focus principally on ideas and policy; the latter pursue electioneering. But no hard boundary demarcates electoral speech from political speech in general; democracy is an ever-bubbling cauldron of political ideas. The themes that reporters emphasize to the public and the ideas that academics transmit to the next generation arguably do more to shape the political terrain than election advertisements or initiatives funded by wealthy donors. Who has more long-term influence on our politics—a prominent law professor at Yale, or a billionaire funding an ad campaign?
This is not to say that wealthy people don’t exercise substantial political influence. But when they do, it is often to prevent more enduring, undemocratic imbalances from forming.
Concentrated interest groups—a set of people with shared interests and a legal mechanism for avoiding free-rider problems, enabling them to press efficiently for a political agenda—include professional guilds and unions, both private and public. These groups exert substantial political power and pose a significant problem for democratic governance, securing exactions and regulations that benefit narrow interests at the expense of the public. When unionized police and public school teachers negotiate contracts that provide extravagant pensions and insulate themselves from discipline, they degrade the public services that government workers are expected to provide. And when guilds like the American Bar Association secure burdensome licensing regulations, they protect incumbents at the expense of entrants.
These groups challenge the theory of democracy on which our republic is founded. In Federalist No. 10, James Madison identified the greatest danger to republican governance as the tyranny of the majority. A large republic was likely to contain a multiplicity of factions, Madison understood, making it harder for a stable majority to form and oppress minorities. But if concentrated interests come to wield disproportionate power, the extended republic with many factions will generate, rather than check, oppression, since certain interest groups will obtain spending and regulation that benefit them at the majority’s expense. Even if the exactions from interest groups are individually small, the costs imposed on a diffuse majority will be large overall.
Rich individuals are best positioned to push back against such concentrated groups. No one else will do it. The poor lack the know-how or the organization, and the middle class the money, to counteract them. Urban charter schools, which break the public education monopoly and offer families a choice in schooling, are sustained largely by the contributions and political support of the rich. Efforts to relax occupational-licensing restrictions or reform police accountability mechanisms also depend on support from the wealthy and their charitable foundations.
“It’s important for a nation to have citizens with substantial resources to push back against the government.”
But the rich don’t form an interest group of their own: they do not possess the legal mechanisms to avoid the free-rider problems that make it easier to lobby collectively. Hence they cannot prevent progressive taxation, in which the 1 percent pays a substantially higher proportion of its income in taxes than any other group. It betrays a fundamental ignorance of the ways of modern democracy to examine the influence of the wealthy without considering how that influence operates in a system rife with concentrated interest groups.
Finally, history and logic indicate that a democracy in which the wealthy can exercise sway is likely a more stable and prosperous regime than one where the government attempts to redistribute influence from one group to another. When people are unequally talented and differently organized, seeking to ensure that everyone has equal influence is a utopian project that would have high costs.
The rich can stand up more easily than others to overweening officials and mobs, forming a bulwark against arbitrary or tyrannical rule. Most of the time, ordinary citizens are not present as a substantial counterweight to the state because of their rational ignorance of politics and policy and the difficulty of coordinating their efforts. It thus is important for a nation to have citizens with substantial resources and peculiar abilities to push back against the government.
This is especially true in democracies, which, after all, can find themselves threatened by demagogues and mobs. Democracy transmutes personal emotions into political passions, creating popular movements that encourage zealous conformity and threaten the openness to argument upon which government by consent relies. Democracies also tend to split citizens into partisan tribes, which enforce conformity within their ranks and generate polarization. The rich can stand up to such trends, since they need not worry about keeping their jobs, getting raises, or ruining their connections within a party. With freedom from fear comes the ability to act independently.
Far from being a negative influence in democratic societies, then, the wealthy are a net positive. They provide a counterweight to mobs and tribes. They fight against special interests on behalf of more diffuse interests. They counteract more ideologically homogenous and powerful groups, including the press and academia. And they often inject into democratic deliberation a better understanding of the consequences of political decisions. None of this means that we should be ruled by the very rich alone, nor should inequality in influence translate to inequality in voting. But the wealthy, constituting a tiny fraction of voters, are not just a dynamo of our prosperity. They are also important to a civic life that allows for prosperity, order, and openness. They make democracy smarter, more stable, and less insular.
Photo by SMARTBOY10/GETTY IMAGES
