Faculty Fellows Lecture Series: Speech of James S. Todd, Ph.D., Senior 
Lecturer, Department of Political Science, University of Arizona, 9/16/98

Maldistribution of  Wealth in the U.S. Today

 Maldistribution of wealth in the U.S. is at its highest point of the 
 century. From 1929-1962, inequality in the US narrowed; since 1969 it has 
 increased.  The richest 10 percent earned 7.5 times as much as poorest 
 ten percent in 1969; the most recent figures show an increase to
 approximately 13%. In 1970, the richest one percent controlled 20% of 
 the nation's wealth; that figure had increased to 40% in 1990 and is now 
 estimated to be about 46% (that equates to 26% in France, 21% in Sweden, 
 and 18% in great Britain in 1990). There is growing disparity in both 
 incomes and wealth.  With regard to incomes, Plato told Aristotle
 that in any organization, no one should earn more than five times what 
 the lowest paid earn.  In 1996 the average salary package of the top 365 
 corporate managers was $5.6 million.  If you take the average median 
 household income of $35,500 for 1996,  and compare it, executives are 
 making 160 times that amount.  (Furthermore, salaries are deducted as 
 business expenses, lowering taxes paid by corporations - the amount 
 claimed increased from $109 billion in 1970 to $307 billion in 1995.)  It 
 should also be noted that  many of the executives pulling in these 
 astronomical salaries were busily engaged in downsizing their companies,
 often laying off thousands of workers.  While wages and benefits of 
 average workers increased 3.1% in 1997, executive compensation packages 
 increased 29.2% after an 18% increase in 1996 )   To put this in 
 perspective, the total 1997 copmensation of Harvey Golub, CEO of American 
 Express was $33.2 million, equal to the salaries of 1,500 employees
 (the company laid off 3,300 employees that year).
 
 The number of poor in 1996 was 36.5 million, a poverty rate of 13.7%.  
 Forty percent of the poor were children.  The number of poor was 4.1 
 million above the 1989 level, but the number is below its peak of 39.3 
 million in 1993.  There has been, however, an increase in those at
 the very bottom, with half what is considered the threshold level income, 
 from 13.9 million in 1995 to 14.4 million in 1996. The threshold was   
 $16,000 for a family of four and $12,000 for a family of three. (John 
 Schwarz of our department has pointed out that these threshold levels are 
 too low and do not come close to what is necessary to purchase the basics 
 of the good life in America.)
	 The maldistribution is worse in the United States than in any 
 other industrialized nation (the highest 20% inthe U.S. have thirteen 
 times as much wealth as the lowest twenty percent, followed in 
 decreasing order by Australia, new Zealand, Switzerland, Canada,
 Britain, France, Italy, Germany, Holland, Belgium, Sweden, and Japan 
 (5-1). Comparing the top 10 percent to the bottom 10 percent, the U.S.  
 had the highest ratio, 5.6 in 1989, Canada 4, France and Britain 3.4, 
 Japan 2.8, Germany 2.4, Australia, 2.3, and Sweden 2.2. Statistics, of 
 course, are fungible, susceptible to manipulation depending on which 
 years you choose for comparison.  For example, Democrats have statistics  
 showing that the 70% of the income generated by the economic policies of 
 the 1980s (read Reagan administration), went to the top 1% of earners; 
 Republican statistics show that only 33% went to them.  (Hello? how much 
 is too much?)  At that same time others claim that the top 1% of earners 
 are often not included in most income distribution studies (the Census 
 Bureau has for years never interviewed anyone in its studies who makes 
 more than $300,000 (that figure was raised in 1994 to one million,  but 
 still excludes the hundreds of billionaires and hundreds of thousands of   
 multi-millionaires who make more than that).
	There is general agreement that the rich have been getting much 
 richer in the last twenty years. A Census Bureau report in 1997 shows the 
 top 20%'s share of household income was 49% in 1996, up from 43.8% in 
 1967; the poorest twenty percent's share was 3.7% in 1996, down from
 4.0% in 1967.   The middle 60% also saw its share drop, down to 47.4  
 percent in 1996 from 52.3% in 1967. A recent improvement in the status 
 of the poor seems to be due mostly to the rise in the minimun wage
 resulting from legislation passed in 1996.
 
 Madison's theories
 
 	In preparation for the constitutional convention, which he was 
 instrumental in bringing about, Madison read everything he could find on 
 the history of attempts at free government. His conclusion, summarized so 
 eloquently in The Federalist Papers, particularly Nos. 10 and 51, was 
 that the greatest threat to free government was the dangerous vice called
 "faction", a group motivated by a common interest adverse to the 
 interests of other groups or the aggregate interests of society.
	 The most common source of factional strife, he found, was 
 maldistribution of wealth.  If the maldistribution became too extreme, 
 one of two things happened: either the poor revolted, cut off the heads   
 of the rich, and redistributed their property, or the rich set up a 
 police state and took away the freedom of the poor.   Either way, free 
 government ended, replaced by anarchy or tyranny.
	 To guard against such a result Madison favored several approaches:
 1. Provide for westward expansion, in the hope that for as long as 
 possible we could remain a nation of small farmers, who would be 
 independent and zealous resisters of any encroachments on their freedom.  
 He knew such an approach would only help until the nation was fully 
 populated and then he speculated a stronger government would be 
 necessary.
 2. Provide for two houses in the legislative branch with different 
 constituencies, the House representing the average citizen, elected by 
 the people, and the Senate representing the propertied elite, with its 
 members chosen by the state legislators.  Thus measures adversely 
 affecting the masses or the propertied elite could not make it through 
 the legislative process.
 3. The "silent operation of laws which, without violating the rights of 
 property, would reduce extreme wealth towards  a state of mediocrity and 
 raise extreme indigence towards a state of comfort."  
	 Hamilton, a politician for the nineteen nineties, a bisexual 
 philanderer who had to issue a public apology for one of his heterosexual 
 affairs, viewed things quite differently than Madison, although they were 
 close allies through the founding period.  Hamilton, who at nineteen
 wrote a friend of his intention to find the wealthiest wife possible, 
 and then went on to do so, marrying into the Schuyler family of New York, 
 believed that for the young nation to survive it must develop industrially 
 as rapidly as possible and its policies must benefit those with the 
 money to spur on the development.  The government should have whatever 
 powers would be necessary to promote that development and keep order.  
	 Hamilton's successes as Secretary of the Treasury, championing 
 policies such as the first national bank, opposed by Madison, caused 
 Madison to conclude that the system he hoped would prevent the triumph of 
 any one faction could use another check, and he set about the work, 
 together with his friend and mentor, Thomas Jefferson, of setting up our 
 two party system, so that if one party strayed too far toward one faction 
 or the other, as Madison thought the Federalists had toward the wealthy,  
 the voters could vote the other party inot power. 

 How are Madison's theories working today?

  1.the country has long ago ceased to be a nation of small farmers, but 
 the middle class that Madison valued, as had Aristotle long before him, 
 has remained strong.  However, at the present time, the middle class is 
 under assault; it is bearing the brunt of the growing maldistribution, 
 watching its salaries sink, with both partners in its two-parent families 
 forced to work to make ends meet and to attempt to hold onto the 
 standard of living enjoyed by the previous generation.  Meanwhile, there 
 are increasing signs that the social mobility that has characterized the 
 nation for most of its history is declining with middle class individuals 
 seeing their status erode while a permanent poor underclass seems
 to be developing with little if any hope of escape. (See John Schwarz's 
 "Illusions of Opportunity")
 2.the original system with regard to the House and Senate has been 
 drastically changed with the passage of the Seventeenth Amendment in 1913 
 which provided for the direct election of  Senators.  In theory, this 
 change should have presented more of a threat to the propertied elite, 
 since the "masses" could now vote in a majority membership of both
 houses to set about the work of redistribution of property.  And indeed, 
 there have been periods in which the majorities of both houses have 
 indeed done that, starting with the progressive movement, followed by 
 the New Deal of Franklin Roosevelt and the New Frontier and Great Society 
 programs of John F. Kennedy and Lyndon Johnson in the sixties. 
 Progressive legislation was passed by state legislatures and Congress 
 beginning in the last years of the 1800's when there was growing concern 
 about gross maldistribution of wealth in the nation.  The legislative 
 branch responded to the public, but much of what was passed was ruled 
 unconstitutional by the state and national supreme courts. The income tax 
 was found unconstitutional; laws regulating wages and working conditions  
 were declared a violation of the precious right to contract or ruled to 
 be unconstitutional takings of property in violation of the newly created 
 right to substantive due process.  Injunctions, created to prevent 
 restraint of trade by big business interests were used instead to crush 
 strikes called by labor unions.   Coupled with the action of the courts 
 in many cases was the action of the executive, both the president and 
 state governors.  For example, during the widespread labor troubles in 
 the mining industry, particularly in the west, progressive state 
 legislatures would enact ten hour work days (prohibiting miners from 
 being worked more than ten hours a day).  When mine owners ignored the 
 laws, the Western Federation of Mineworkers ordered strikes. Scabs were 
 quickly employed; eventually there would be violence or the threat of 
 violence, violence that may have been instigated by private detectives 
 in the employ of the mining companies.  Calls would then go out to the 
 Governor and the President for help to protect the community, and the 
 national guard would be dispatched.  Union members were then routinely 
 rounded up, detained sometimes for months without charges being brought 
 or loaded on freight trains and dumped in neighboring states with 
 instructions not to come back.   Just after World War I, in the midst of 
 a great "red scare" precipitated at least partly by the activities of an 
 ambitious young cross-dresser, J. Edgar Hoover and his agents, who one 
 presumes knew as little about his sexual and millinery adventures as the
 White House staff knew of  President Clinton's intern training program.  
 After a series of bombs were found in the mails and a few others went 
 off, one at the door of Attorney General A. Mitchell  Palmer - and no one 
 was ever apprehended or charged with making or mailing the bombs - a well 
 coordinated nationwide series of raids took place, mostly designed to go 
 after and destroy the socialist movement in this country.  Radical labor
 union members were rounded up, those not citizens deported, and others 
 detained, tried, and convicted, mostly on charges of sedition or 
 conspiracy.   
	Things began to change in the 1930's, again following a period of 
 great increase in maldistribution of wealth in the United States.  
 Franklin Roosevelt swept into office, with his party gaining large
 majorities in both houses of Congress.  They began to pass major new 
 legislation designed to pull the country out of the depression and 
 establish regulatory mechanisms that would insure we never experienced 
 such a depression again.  Now both the legislative and executive branches 
 were favoring legislation that would place limits on the right to
 property and reduce extreme wealth towards mediocrity and extreme 
 poverty towards comfort. But in two years time the Supreme Court, still 
 dominated by corporate lawyers dedicated to "laissez faire", struck down 
 thirteen New Deal Laws.  After Roosevelt asked Congress for authority to, 
 in effect, pack the Supreme Court with sympathetic justices, two members  
 of the Court switched sides, the right to property was downgraded, and 
 the Court began to uphold extensive government regulation of the economy, 
 based mostly on an expansive interpretation of the power of Congress to 
 regulate interstate commerce.  Eventually Roosevelt would replace all of 
 the Supreme Courtþs justices as they died off or retired.
  The Nation entered a new era, culminating in the New Frontier and Great 
 Society programs of the Kennedy and Johnson administrations, in which tax 
 rates on the wealthy soared and programs designed to benefit the poor 
 and eventually eliminate poverty multiplied. Clearly property interests 
 needed a new way to protect themselves.  It took some time, but that
 way has been found  First, there has been an ongoing, widespread attack 
 on welfare, the tax system, and the national government.  The attitude 
 begun with FDR and carried on by Kennedy and Johnson, that Government 
 was capable of solving any problem in our society, gradually gave way, 
 partly as a result of the failure of 60's programs themselves,  to the
 attitude that government is the problem.  Idealistic programs, designed 
 to eliminate poverty and make us a greater nation have been ridiculed for 
 waste and ineffectiveness and their budgets cut and programs eliminated, 
 ironically at the same time that the Pentagon budget, riddled beyond 
 belief with waste and inefficiencies, has increased dramatically.
 As government payments and benefits to poor people have declined, on 
 both the state and federal level, government payments and benefits to 
 corporations have increased  (often going to some of the largest 
 contributors, e.g., subsidies for the tobacco industry, money for Disney 
 and fireworks, money to help Gallo sell wines abroad, etc.).  
 Second, and closely related, the cost of running for office in the United 
 States has increased dramatically.  Members of Congress now have to raise 
 somewhere in the vicinity of $5,000 a week to finance a campaign for 
 reelection; senators, $25,000 a week for six years - assuming an average 
 state, not a super-expensive one like California where over $50,000,000 
 was spent in the Feinstein Huffington race.  So, while in theory the 
 members of both houses, elected by the people, should be responsive to 
 the people's needs, it is the people with the most money who have the 
 most access to our representatives (and, ironically,  it is, 
 increasingly, the people with money, often millions, whose numbers are
 growing in both houses.)  Faced with growing maldistribution of wealth, 
 what do these legislators do?  Well, they cut spending on welfare, they 
 curtail programs that benefit the poor and the average American, and they 
 concentrate on programs that will only increase the maldistribution, 
 e.g., tax cuts for the rich (further cuts in the capital gains tax), or, 
 on the state level, cuts in property taxes.  Meanwhile, the President has
 become the Fundraiser in Chief (did any of you make it to the $50,000 a 
 plate luncheon in New York a couple of days ago?), and the Supreme Court, 
 dominated with Justices appointed by Nixon, Reagan, and Bush - many of 
 them millionaires themselves - has begun to experiment with breathing new 
 life into the right to property with consequent new limits on what the 
 legislative branch can do.
 3.see no. 2
 4. As to the parties, neither party now represents the interests of the 
 poor or the underclass, although the Democratic party continues to claim  
 to do so, and is certainly more entitled to such a claim than are the 
 Republicans on the basis of history. It was a Republican President, 
 Reagan, who led the attack that broke the air traffic controllers
 strike.  But it has been a Democratic president who has championed NAFTA 
 and GATT  and the world-wide free trade that continues to put downward 
 pressure on the living standard of the American middle-class.  


 What Then Must We Do:

	 Leo Tolstoi, after familiarizing himself with the þhunger, cold, and 
 degradation of thousands of peopleþ wrote that he "understood not with my 
 mind or my heart but with my whole being, that the existence of tens of 
 thousands of such people in Moscow - while I and thousands of others 
 over-eat ourselves with beef steaks and sturgeon and cover our horses and 
 floors with cloth or carpets...is a crime, not committed once but constantly;
 and that I with my luxury not merely tolerate it but share in it."  
	 We in the United States, I contend,  tolerate and share in just 
 such a crime, while we amuse ourselves with circuses.  Seen in these 
 terms, I suggest to you the debasement of the oval office that recently 
 occupied the attention of our entire media and government is not the 
 crime with which we should be concerned.  Rather, it is the debasement of 
 our nation, where legalized bribery has crippled our legislature, subjected 
 it to the domination of the wealthy faction, and produced policies that 
 court disaster and the loss of our free government, as Madison predicted, 
 either through imposition of a police state (need I mention the huge 
 increase in the number of  prisons in our nation, the proliferation of 
 gated communities and private police forces, and the increase in public
 police and their budgets) or a  bloody and, I assure you most unpleasant, 
 revolution. 
	 What is needed is widespread citizen involvement, both thousands 
 of honest and dedicated citizens who will volunteer to run for public 
 office and refuse to accept contributions from the big monied interests 
 and citizens who will work and vote for the election of such candidates.  
 For in the last analysis the best and only hope is government by the 
 people, but government by the people works only, if as Franklin indicated 
 as he left the constitutional convention, the people are up to the task.