The Matador's Cape (Part 1)
The Forgotten History of the Middle Class
This is the 1st of 3 mini-essays about the fundamental tension between democracy and wealth-hoarding. America is an experiment in both. We are a strange mixture of democratic ideals from Classical Greece and hierarchical capitalism from Renaissance Europe. That’s an explosive combination. So far, the wealth of American capitalism has been sequestered from democratic redistribution by a series of clever deceptions. This mini-essay series illustrates the point by drawing an analogy with the red cape of a matador.
The way to build a thriving middle class is not some profound cosmic mystery. America accomplished it during the 1930s with the New Deal. That signature legislation package was, of course, President Roosevelt’s response to the misery of the Great Depression. It featured a minimum wage, unemployment benefits for the hard-up, and a monthly Social Security check for all senior citizens. To create jobs, the Roosevelt administration also funded the construction of public works projects like the Hoover Dam and San Francisco's Bay Bridge.
The cost of all those expensive New Deal programs was considerable, but tax revenues had collapsed along with the rest of the economy. So Roosevelt jacked up tax rates on the only people with any money left; the wealthiest American families. The way he saw it, it was either that or a communist revolution like the one that had taken place only fifteen years before in Russia. The New Deal jump-started the circulation of money by taxing money away from where it was pooling, and spending it where it was desperately needed. That’s why the Revenue Act of 1935 was sardonically referred to as the “Soak the Rich” bill. These policies proved to be smash hits at the ballot box. FDR won four presidential elections. The popularity of the New Deal was the most unsettling part for the wealthy...it was democracy.
Some of the rich tried to avoid their “soaking” by overthrowing the Roosevelt administration. Their plan was to install a fascist dictatorship like the one emerging in Germany at the time. They wanted to eliminate democracy because it threated their wealth. But the conspirators made a key mistake when they tried recruiting General Butler of the US Marine Corps to lead them. “Ol’ Gimlet Eye”, as he was known, went to Congress and blew the lid off the whole scandal. It was in all the papers at the time and the incident went down in history as the “Business Plot”.
During the depression, America’s wealthy discovered that preserving great hoards of wealth is a tall order under democratic conditions. Unpopular economic outcomes can always be undone by a vote, and that’s essentially what the New Deal was. Since they couldn’t banish democracy outright, they turned instead to gas-lighting the electorate with propaganda. These tricks allowed them to quietly reverse the New Deal without breaking the illusion of democracy. Tax rates on the rich were lowered to pre-New Deal levels by Reagan. Wealth inequality in America has already surpassed that of the Gilded Age, and our middle class is rapidly disappearing. Keep a weather eye out for Part 2 and Part 3 of this series, which will highlight two of the clever ruses that, like a matador’s red cape, were devised distract us from these grim economic realities.
