Last month, ThinkProgress spoke with MIT economist Daron Acemoglu, who explained how income inequality is crushing the middle class’ political power. “When economic inequality increases, the people who have become economically more powerful will often attempt to use that power in order to gain even more political power,” he said. “And once they are able to monopolize political power, they will start using that for changing the rules in their favor.”
Today, Yale political scientist Jacob Hacker — co-author of Winner-Take-All Politics — sat down with ThinkProgress, to give us his thoughts on the subject. Hacker explained that, as the wealthy accumulate more resources, they will be able to “shape policy in ways that benefit them,” which leads to a vicious cycle of increasing wealth and increasing power:
Obviously, I am concerned about whether inequality hurts our overall economic growth, and in particular whether inequality undermines the ability of middle-class incomes to grow because the distribution of growth matters, as well as the level of growth. But to me the biggest issue is that, as we’ve seen this massive increase in the share of national income going to the very rich, those at the top have also been able to use that, those resources and the influence that comes with them, to shape policy in ways that benefit them…They push for policies that benefit those at the top and then in turn that further increases the income and sway of those at the top.
Hacker pointed to the Bush tax cuts for the rich and the financial deregulation of the 1990s as outcomes of wealthy individuals exerting undue influence over the political system, using Sandy Weill, Citigroup’s former chairman, as an example.
“Sandy Weill was not some kind of stand-alone entrepreneur who innovated his way to prosperity. He was a guy who was at the top of one of the nation’s most powerful institutions, and then pushed, aggressively — with the support, it should be said, of a lot of Democrats — for changing this Depression-era banking law [separating commercial and investment banking],” Hacker said. This change allowed Citigroup to become one of the biggest banks in the nation, engaging in aggressively risky trading. Of course, Citigroup then crashed and was bailed out in 2008.
“The point is that those at the top are seeking, as are most businessmen and executives, they are seeking higher returns. But they don’t only get higher returns through business ingenuity and savvy competition in the market, but also through reshaping public policy,” Hacker said.