America—Democracy or Plutocracy?

by Frances Moore Lappé, May 9, 2024

What happened to the middle class in the United States? The rich ate it.

(Photo Credit: Giorgio Trovato/Unsplash)

Originally Published on Common Dreams, May 09, 2024

Almost 90 percent of us think of ourselves as being “middle class,” but we’re way off. In 1970, 62 percent of Americans did qualify; but by 2021, our shrinking middle class was down to 42 percent. By 2022, the value of our minimum wage has fallen by 40 percent since the late 60s.

And our poverty rate? Today, at 12.4 percent, it’s the highest among almost all 38 OECD nations. Only the newest member, Costa Rica, suffers a higher poverty rate.

So, how did our view of ourselves become so distorted?

We were once indeed primarily middle class because we had stepped up to tackle poverty. In the late 1950s, our official poverty rate was about 22 percent, but Lyndon Johnson’s War on Poverty cut that rate in half, hitting a low of 11 percent in 1973. Then Reaganism struck, and by 1983 poverty had spread to nearly 15 percent.

And now?

While our official rate is indeed lower, it is still high and misses millions struggling to meet essential needs.

Our path to this sad outcome began in the 1980s. Reversing the War on Poverty, Reagan began dismantling welfare protections while slashing taxes on the ultrarich. Capturing the tenor of the time, in the 1987 film “Wall Street”, Gordon Gekko declared “greed is good.”

Reaganomics paved the way for today’s shocking inequality.

In 1978, the top 0.1 percent held roughly 7 percent of wealth. By 2018, this tiny group enjoyed about 18 percent. Most shocking: By 2019, America’s three richest families held more wealth than the bottom half of us.

Hardly a middle-class nation, today’s concentration of wealth ought to make a Russian oligarch blush. Out of 178 countries the CIA ranks by income inequality, the U.S. lands between Micronesia and Morocco—at 56th. No industrial democracy is near us. The closest—New Zealand—is 31 places less extreme, at 86th.

An additional injustice?

While workers’ share of national wealth has been shrinking, their productivity has soared. Between 1979 and 2017, worker productivity grew by 70 percent, while hourly compensation rose by a meager 11 percent.

And who benefited?

As earnings for the bottom 90 percent of Americans rose by just over a fifth, the wealth of the top 0.1 percent grew by 343 percent. That's 17 times more!

Thus, we shouldn’t be surprised that in 2019 the bottom half of us held only 2 percent of the nation’s wealth.

Moreover, while American workers had to take on more hours to boost their relatively stagnant earnings and as healthcare and housing costs climbed, the wealthy increased their gains and used it to further warp our nation’s democratic institutions: By funding candidates and hiring lobbyists to ensure their interests were heard at the expense of ours. From 1998 to 2023 alone, dollars spent paying Washington lobbyists grew almost three-fold, from $1.5 billion to $4.1 billion.

Thus, when our rules are set to bring the highest return to those with the most, a market economy not only selectively rewards the already wealthy; it undercuts democracy.

The pain of Reaganomics should have taught us one clear lesson. A market economy can only work for the common good within rules set democratically—free from private control—to ensure opportunity for all. The beginning of these rules would be basics such as an enforced, livable minimum wage, as well as strong and enforced anti-trust laws.

Such steps could move us toward a market serving the most basic freedom of all—thefreedom to thrive.