In the United States, we’ve mostly eliminated the spoils system in politics (except, of course, here in Chicago, where it continues as if nothing had changed since the Jackson presidency and Tammany Hall). Now, however, we have a spoils system in the economy, and that has people like Robert Samuelson worried.
In all honesty, I sympathize. Just last week, I was forced to spend long hours on the telephone with three different businesses which—in a clear pattern of consciously making “mistakes” they hoped bill payers like me wouldn’t notice—overcharged for their services. Oops, they said, our mistake. Now that you’ve caught us, we’ll refund the excess charges.
Clearly, American businesses these days are grabbing every last dollar they can get away with—whether it be the airlines or banks or utilities. Samuelson’s examples are BP, “patent trolls,” and CEOs, all of whom are engaged in plundering of one sort or another.
But Samuelson’s premise is there’s a sharp difference between wealth creation (which, in his view, fuels economic growth) and a spoils society (which involves battles over redistributing wealth that already exists).
There are two ways to become richer. One is to provide more goods and services; that’s economic growth. The other is to snatch someone else’s wealth or income; that’s the spoils society. In a spoils society, economic success increasingly depends on who wins countless distributional contests — not who creates wealth but who controls it. This can be contentious. Winners celebrate; losers fume.
What Samuelson doesn’t understand is that the process of wealth creation in the United States was, throughout the postwar period, an economy based on spoils, as labor productivity and corporate profits great in tandem. It’s just that real wages also continued to rise during that period. “To the victors belonged much but not all of the spoils,” would be an appropriate slogan for that time.
Then, in the mid-1970s, things changed and we entered a new period of American capitalism. Then it became “to the victors belong almost all of the spoils,” as productivity and profits continued to rise but wages remained stagnant. That growing inequality is what created the conditions for the crash of 2007-08, and which has resumed during the post-2009 recovery.
The U.S. economy, during the entire postwar period, right up to the present, has been based on a combination of producing and redistributing wealth, with pitched battles throughout. The only change is that, beginning in the mid-1970s, the tiny minority at the top, based on their prior successes, became increasingly adept at capturing and redistributing to themselves the surplus produced by everyone else, who were left outside the spoils system.
And that’s where we are today, with new records being set for the share of income going to those at the top (with a rising corporate profit share, stock prices, and the percentage of income going to the top one percent) and everyone else being left behind. That’s what should have people like Samuelson worried: that the members of the one percent have, like Jackson, declared themselves the victors and to them—and only to them—belong the spoils.