MAGA Rebellion Against Elite’s Control of the American Economy

Sherwin Rosen, a former chair of the Economics Department at the University of Chicago, wrote an article in the American Economic Review in 1981 titled “Superstars.” It revealed the natural tendency for a few individuals to do extremely well in each recognized field as in entertainment, sports or other areas of social, financial or intellectual interest, and for all others to be left on the sidelines as “also-rans.” Economics involves more than money. Economic decisions can often require time, money, and mental energy. How many superstars can you keep in mind and constantly compare in each and every area of importance?

The top star gets an inordinate financial reward compared to the almost-as-good person in second place. Our limited time and mental energy may cause us to reward Taylor Swift with enormous compensation when a less well know but equally proficient singer and dancer may get little or no attention or compensation. This limitation plays an important role in inappropriately and inefficiently directing a large portions of economic rewards to the “winners” in what inevitably boils down to a “winner-take-all” economy and a severely distorted money flow away from Main Street (the losers), where most of the work is performed, and into Wall Street (the winners), where most of the rewards accumulate.

It is very important to recognize that the financial economy and the real economy are quite separate and very different from one another. The vast majority of the money in the financial economy is owned by institutions and wealthy people (the “winners”), which include most bankers, doctors, lawyers, and the upper management of America’s largest companies. Yes, there was that Vermont janitor, Robert Read, that died at age 93 with $8 million, demonstrating the enormous power of compound interest. However, he was the rare exception that defies the overwhelming statistical evidence that proves the rule: “In America, if you start poor, you stay poor.”

When financial media commentators refer to “the people,” they are usually not talking about the sixty-two percent of people who are living paycheck-to-paycheck or the two-thirds of Americans with no college degree. They are not talking about the MAGA crowd. They are talking about themselves and other wealthy people. The net worth of Treasury Secretary Janet Yellen is estimated to be $20 million while that of Federal Reserve chair Jerome Powell is around $55 million. Much of the stock in the New York stock exchange is owned by millionaires and billionaires. This can lead to a complete lack of understanding of the real day-to-day concerns of most Americans.

While the original land allocations made by King George for the American colonies held up for several centuries, the memory of the French Revolution gave the elite a strong sense of noblesse oblige and motivated them to avoid accumulating enormous wealth. Consequently, in the 1800s the elite encouraged westward expansion with phrases such as “forty acres and a mule” for frontier farmers and the government’s payoff of modest mortgages for widows of union soldiers in the Civil War who “bought the farm” in dying for their country.

This was in sharp contrast to Argentina, which allocated the land in its western expansion into its Pampas grasslands to the elite. The elite in Argentina employed the peasants to work the land but not gain ownership of that land. This severely suppressed the motivation of the peasants in Argentina to work hard and creatively. Consequently, productivity and economic growth in the United States far exceeded that of Argentina. This was further enhanced by government support in creating agricultural experiment stations in the United States.

In the United States, the Land of Opportunity paid off for those willing to work hard on the frontier until the late 1890s and the early 1900s when a distorted money flow set in to over-reward the wealthy elite such as Andrew Carnegie and John D. Rockefeller to bring about financial instability. Fortunately, our democratic institutions allowed the rebellion brought about by the Great Depression that began in 1929 to bring Franklin D. Roosevelt into the presidency to oversee a transition to a somewhat more equitable economy with better money flow for the 1930s MAGA crowd, which enabled America to avoid its own version of the French Revolution.

Beginning around 1960 and reaching a turning point in 1980, America made a transition from our old aristocracy based primarily on legacy to a new meritocracy. In recent years the decline of America’s aristocracy and its replacement with the new meritocracy made the superstar effect and the distorted money flow much worse. The new superstars felt no sense of noblesse oblige and no reason to hold back in accumulating huge amounts of wealth for themselves and their prodigy. While earlier generations of Americans recognized the importance of providing free and mandatory elementary and secondary education for each and every one of our children as essential to the overall growth of our wealth as a nation, in recent years vocational and college educational attainment has been restricted to those who can come up with enough money to cover the ever increasing cost of higher education, leaving behind two-thirds of Americans (the core of Trump’s MAGA crowd).

This distorted money flow, which moved money away from the real economy and into the financial economy, has been further aggravated by the Federal Reserve Bank due to its limited policy tools that are designed primarily to affect the financial markets on Wall Street, with only a rather limited and lagged effect on the real economy on Main Street. As early as the mid to late 1990s and then after the Great Recession of 2007-2009, the Federal Reserve exacerbated the distorted money flow by pumping too much money into America’s financial markets, which aggravated income and wealth inequality while encouraging an enormous increase in both private and public debt.

Just as Marie Antoinette was confused and caught off guard making her “let them eat cake” remark, many wealthy Americans have not caught on to the real significance of the “hang Mike Pence” and the attempt to kill Nancy Pelosi’s husband as the tip of the spear in a rebellion where the election of Donald Trump to serve as America’s first dictator may be just the beginning of our problems. Controlling and mitigating our distorted money flow and its resulting economic and political instability is essential if we are to avoid a catastrophe and potential blood bath. In spite of all of the warnings of the danger to our democracy of electing Donald Trump to a second term as president, the MAGA crowd continues to press for what boils down to essentially a Trump dictatorship as described in detail by his re-election team. Their willingness to throw away almost 250 years of democracy suggests an anger against the American elite that cannot and must not be ignored. Let’s hope that there are no guillotines set up on the steps of our nation’s capitol.

It is not just about money. Respect, or the lack thereof, is as important, or even more important, than the money. The big mistake of the Democrats occurred in the late 1970s when they started transitioning from a pre-distribution strategy to a redistribution strategy. Under pre-distribution, the Democrats followed the countervailing power approach promoted by Kenneth J. Galbraith in his book: “American Capitalism” in 1952. Where a few companies dominated an industry enabling abnormally high profits, Democrats supported unions to match and control the power of those companies. This mitigated and minimized the distorted money flow that would have otherwise gone almost entirely to the elite. Democrats also got strong minimum wage laws enacted during the 1950s and 1960s.

Unfortunately, the Democrats changed to a redistribution strategy by 1980 where they emphasized higher income and estate/inheritance taxes for the wealthy instead of continuing to support strong unions and higher minimum wages. This not only gave conservatives the opportunity to criticize the Democrats for reversing the “free market” economy’s allocation of rewards, but made working people get more money from welfare and other need-based programs that left them with less dignity and self-respect. Recently Democrats including President Biden are beginning to realize their mistake and return to a pre-distribution strategy with stronger support for unions, higher minimum wages and earned income tax credits. But this change in strategy may be too late for the 2024 election.

Will the MAGA crowd be satisfied with a Trump presidency that simply focuses on replacing the deep state’s commitment to the constitution with a commitment to Trump and arresting Trump’s opponents? What will be done to suppress CNN, MSNBC, The New York Times, The Washington Post and the rest of the “fake news” media? Would that be enough to satisfy the MAGA crowd? Will they want more and will they become disillusioned with Trump if he does not provide better jobs with better pay and more respect for their work? The revolution has begun. The key question is how far will it go?

Dr. Martin Luther King, Jr. emphasized that his civil rights movement was strictly nonviolent. He repeated this to his followers again and again. Otherwise, the 1960s might have been as bloody as the 1860s. Of course, Dr. King was murdered as well as President John F. Kennedy and presidential candidate Robert Kennedy. Hopefully, Donald Trump will emphasize the importance of nonviolence if he loses the 2024 presidential election. Trump will need to make it clear that he does not condone violence, and if he wins the 2024 presidential election, he will not pardon anyone who has committed violence.