Tom Magstadt's Blog

Tom Magstadt

Tom Magstadt
Ridgway, Colorado, USA
July 23
Dr. (not physician; more like metaphysics)
self-employed freelance writer
There's a charming old stone cottage at the end of a lane in a sleepy village called Utery ("Tuesday") in the former Sudetenland (West Bohemia). I miss it. Worst job: farm hand. Best job: teaching at the Air War College, Maxwell Air Force Base. Worst good job: CIA intelligence analyst. Favorite profession I didn't choose: journalism.


MAY 17, 2012 1:02PM

Inequality Or Sustainability? Or, Why Madison Needs Marx

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Marx famously said that the bourgeoisie unwittingly produces its own gravediggers.  Marx was convinced that capitalism inexorably gives rise to an elite social class whose members create an economy that contains the seeds of its own destruction.  The prime movers in Marx's theory of history – a.k.a., dialectical materialism – assumed the form of a rising middle class of merchants who, in Marx's time, were emerging as the industrial giants he called "monopoly capitalists".  Capitalism in its advanced stages produced a few big winners and multitudes of losers, the latter constituting a vast underclass of exploited workers who were increasingly impoverished, alienated, and dehumanized.

The super-capitalists who emerge as the champions of the new economic order soon come to abhor the very system that creates them.  Once ensconced at the commanding heights of the economy they naturally want to eliminate competitors.   They want control.   To protect their wealth, they need power.   Power to minimize risks and flatten out the business cycle.   They understand all to well that the power to tax is the power to destroy (or to create tax loopholes).  They want the state to stay out of the economy, but protect business from "unfair" competition and encroachments of all kinds.  And from the workers.      

But that was then and this is now.  Today, Communism and Marx are equally discredited.  Right?   

The failure of Communism according to Wall Street's grand princes, corporate raiders, the conservative press, the elite business-school professoriate, and a host of other apologists for Capitalism proved that Marx was wrong – about everything.  But clearly Marx's critics protest too much.

In fact, the failure of Communism proved nothing of the kind.  Communism as it was radically reinterpreted and applied by Lenin and Stalin in the Soviet Union used Marx as a fig leaf for a totalitarian political order that was, ironically, unsustainable because it attempted to run the economy without any reference to market forces or economic "laws".  Which is not to say that Marxism offers a coherent set of prescriptions to cure all the ills of modern society – indeed, Marx himself had surprisingly little of interest to say about how to set things right.

But Marx was right in his analysis of what was wrong with capitalism and the kind of representative democracy James Madison enshrined in the Federalist Papers (especially #10).  In focusing on the tendency of capitalism to reproduce the extreme inequality associated with feudalism, Marx had an insight that deserves far more attention than it has gotten in the United States, especially since it's now clear that Madison's cure for factions isn't working and that if stability and sustained growth is to be achieved in a world we can no longer hope or pretend to dominate it is necessary to adopt corrective measures implicit in Marx's trenchant critique.

Madison recognized the danger and identified its source:  "the most common and durable source of factions has been the various and unequal distribution of property. Those who hold and those who are without property have ever formed distinct interests in society."  His solution was to create a large republic encompassing a great variety of interests and parties.

Of course, unlike Europe, democracy in America makes room for only two viable political parties; these two parties, Republicans and Democrats are so entrenched, and the legislative process so sclerotic, that virtually nothing creative or restorative ever emerges from the U.S. Congress now – quite the opposite.   And starting in the 1980s the Reagan Revolution crushed what remained of the free-wheeling, faction-friendly pluralism Madison imagined.   Face it: in the USA today, the nice idea of a political order equally friendly to a diversity of interests – or even opinions – is dead.

A recent study from The Stanford Center for Poverty and Inequality* starkly demonstrates when this transformation occurred.  The study produced "twenty facts about US inequality that everyone should know".  Here's one telltale fact:  In 1965, CEO pay in the United States was 24 times higher than the average production pay for workers.  By 1977, it had risen to 35 times.  It then doubled to 70 times by 1989 (that is, during the first decade of the Reagan Revolution).  During the 1990s, thanks in no small part to the Republicans' Contract with America, it rose to a peak of nearly 300 times (!).  Today, even after the self-induced Wall Street meltdown in the fall of 2008 it stands at roughly 185 times.

This one fact alone raises the kind of questions that will either be addressed by the ruling plutocracy (the 1% who own most of the wealth, control the politicians, and often become the policy makers – think Robert Ruben, Henry Paulson and Timothy Geithner) or else it will lead – with the inevitability of Marx's dialectical laws – to the spirit of revolt we are now witnessing in Europe (notably Greece, Spain, France, and the Czech Republic).  Meanwhile, Washington has seen fit to bail out Wall Street but not to change the rules, regulate the banks, place any curbs on CEO pay, or even tax capital gains at the same rate earned income is taxed.

No less revealing and disturbing is the Stanford study's findings relative to the "deregulated" U.S. labor market:  "The percentage of all wage and salary workers who are union members has declined from 24% in 1973 to 12.4% in 2008. The decline in the private sector was steeper than the decline in the public sector. At the same time as union membership declined, the real value of the minimum wage also fell by 25% in the 1980s, leading to a weakening influence of the minimum wage on the low-wage labor market. These two developments in combination may be understood as the foundation of the newly 'deregulated' U.S. labor market."

Clearly, the inequality implicit in empirical research of this kind has dire implications not only for the poor but also for a broad swath of middle class America.  Ditto for a growing segment of the population who are young, college educated, facing bleak job prospects.

If we are going to restore the Madisonian idea of a decent commercial republic in this country, one which is sustainable and morally defensible, the plutocrats and the conservative commentariat that serves them so obsequiously will have to do something they find extremely distasteful.  They will have to admit that in order for the system to endure, much less prosper, Madison's cure needs a strong dose of the medicine implicit in Marx's analysis.


*Online at

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