The New Aristocracy

When Alexis de Tocqueville wrote of America in the early 19th century in his classic Democracy in America, he was comparing America's democracy to the declining norm in Europe: aristocracy.

The European aristocracy, a landed aristocracy, ruled with inheritance and privilege. Exclusionary guilds and inherited wealth kept a calcified social order lacking change and social mobility. Great wealth was to be expected only by those who had it.

Capitalism upset this old social order. When capital was allocated to more efficient industries, people, and countries by merit rather than by the whims of aristocracy, their hold on society and its wealth loosened. This turmoil was a critical element in the revolutions of the 19th century and the two devastating wars of the 20th century. The Jews, inaccurately identified with the rise of communism, were more accurately identified with the new capitalist order, and it obviously did not endear them to the displaced aristocracy.

But America and capitalism were made for each other. Just as the idea of a king was soundly rejected by the founding fathers, the idea of distributing wealth by privilege did not take root in America. American was a clean slate, and wealth had to be created. Even with lands taken from the Indians and tilled by slaves, an aristocracy was largely avoided, as industry and commerce wielded greater power.

While the social engineers decry the hardening and widening of discrepancies in income, this is true only if you look at the categories as static groups. As Thomas Sowell notes, when you look beyond the groups at individuals you find a fluid and mobile society. Few in the bottom tier stay there, and many in the upper tier drop out of that category.

Focusing only on the income categories ignores the social mobility that characterizes America's success. Unfortunately, the growth in government, taxes, and regulation damages that social mobility and hardens the social order. The wealthy will focus on retaining and protecting their wealth, reducing the capital that funds the opportunity for the poorer to acquire wealth. The efficient creation and allocation of capital that we call capitalism is the most effective, productive, unbiased, and sustainable instrument of redistribution in history. It was this new social order that toppled the aristocracy in Europe and made America the wealth creation engine that it is. It was this machine that attracted the poor from the rest of the work to create their own fortune.

It is harshly ironic that this president who so openly preached redistribution will more likely hinder it. It is the young who will pay more for health care and get less, who will have to pay the interest on this record debt, and who will be penalized the most for reaching to the next income bracket.

It is also noteworthy that this president's policies will more likely help the large corporations that he demonizes than the small business that not only more effectively redistribute the wealth, but also create most of the new jobs we so desperately need. It is the large companies getting bailed out and the small businesses with higher variable costs that will suffer more from higher taxes and mandates. It is much easier to shut down a business with lower fixed costs, leaving less competition to the established companies.

In his misguided and clumsy attempt to redistribute, the president has created a new aristocracy of politically favored big companies and members of the government. We have replaced "creative destruction" with stifling security. Established companies are protected, and new, innovative companies are handicapped. Government pay and benefits are dwarfing what most private companies can pay. The First Lady condemns those who use their education to seek "merely" better pay instead of public service. Exactly who is supposed to pay the taxes they intend to distribute? 

In their world, economic self-interest is evil, and political self-interest is good. History confirms the opposite.

Our Congress routinely passes laws its members exempt themselves from following. In spite of the empty promises to the contrary, this burden of additional government control will not fall exclusively on the wealthy. After those in charge run out of money from the wealthy, the debt burden will remain, and the middle class and the poor will be forced to recognize the painful emptiness of promises to access wealth that is not theirs.

Although long the preferred place for the poor to make their fortune, it has never been easy to get rich in America. But it is about to get much harder.

Henry Oliner blogs at rebelyid.com.
When Alexis de Tocqueville wrote of America in the early 19th century in his classic Democracy in America, he was comparing America's democracy to the declining norm in Europe: aristocracy.

The European aristocracy, a landed aristocracy, ruled with inheritance and privilege. Exclusionary guilds and inherited wealth kept a calcified social order lacking change and social mobility. Great wealth was to be expected only by those who had it.

Capitalism upset this old social order. When capital was allocated to more efficient industries, people, and countries by merit rather than by the whims of aristocracy, their hold on society and its wealth loosened. This turmoil was a critical element in the revolutions of the 19th century and the two devastating wars of the 20th century. The Jews, inaccurately identified with the rise of communism, were more accurately identified with the new capitalist order, and it obviously did not endear them to the displaced aristocracy.

But America and capitalism were made for each other. Just as the idea of a king was soundly rejected by the founding fathers, the idea of distributing wealth by privilege did not take root in America. American was a clean slate, and wealth had to be created. Even with lands taken from the Indians and tilled by slaves, an aristocracy was largely avoided, as industry and commerce wielded greater power.

While the social engineers decry the hardening and widening of discrepancies in income, this is true only if you look at the categories as static groups. As Thomas Sowell notes, when you look beyond the groups at individuals you find a fluid and mobile society. Few in the bottom tier stay there, and many in the upper tier drop out of that category.

Focusing only on the income categories ignores the social mobility that characterizes America's success. Unfortunately, the growth in government, taxes, and regulation damages that social mobility and hardens the social order. The wealthy will focus on retaining and protecting their wealth, reducing the capital that funds the opportunity for the poorer to acquire wealth. The efficient creation and allocation of capital that we call capitalism is the most effective, productive, unbiased, and sustainable instrument of redistribution in history. It was this new social order that toppled the aristocracy in Europe and made America the wealth creation engine that it is. It was this machine that attracted the poor from the rest of the work to create their own fortune.

It is harshly ironic that this president who so openly preached redistribution will more likely hinder it. It is the young who will pay more for health care and get less, who will have to pay the interest on this record debt, and who will be penalized the most for reaching to the next income bracket.

It is also noteworthy that this president's policies will more likely help the large corporations that he demonizes than the small business that not only more effectively redistribute the wealth, but also create most of the new jobs we so desperately need. It is the large companies getting bailed out and the small businesses with higher variable costs that will suffer more from higher taxes and mandates. It is much easier to shut down a business with lower fixed costs, leaving less competition to the established companies.

In his misguided and clumsy attempt to redistribute, the president has created a new aristocracy of politically favored big companies and members of the government. We have replaced "creative destruction" with stifling security. Established companies are protected, and new, innovative companies are handicapped. Government pay and benefits are dwarfing what most private companies can pay. The First Lady condemns those who use their education to seek "merely" better pay instead of public service. Exactly who is supposed to pay the taxes they intend to distribute? 

In their world, economic self-interest is evil, and political self-interest is good. History confirms the opposite.

Our Congress routinely passes laws its members exempt themselves from following. In spite of the empty promises to the contrary, this burden of additional government control will not fall exclusively on the wealthy. After those in charge run out of money from the wealthy, the debt burden will remain, and the middle class and the poor will be forced to recognize the painful emptiness of promises to access wealth that is not theirs.

Although long the preferred place for the poor to make their fortune, it has never been easy to get rich in America. But it is about to get much harder.

Henry Oliner blogs at rebelyid.com.

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