1
Working and Living in the Shadow of Economic Fragility
Edited by
Marion G. Crain
Michael Sherraden
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Library of Congress Cataloging-in-Publication DataWorking and living in the shadow of economic fragility / edited by Marion G. Crain, Michael Sherraden. pages cmIncludes index.ISBN 978–0–19–998848–81. United States—Economic conditions—2009– 2. United States—Economic policy—2009– 3. Unemployment—United States. 4. Working poor—United States. 5. Recessions—United States. I. Crain, Marion G. II. Sherraden, Michael W. (Michael Wayne), 1948– HC106.84.W67 2014330.973—dc232013033915
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157
9
Guardianship and the New Gilded Age
Insular Politics and the Perils of Elite Rule
Joe Soss and Lawrence R. Jacobs
Over the past several decades, inequalities of income and wealth have risen
sharply in the United States (Volscho & Kelly, 2012). Th e richest have pulled away from
the rest, not just economically but also socially and politically (Hayes, 2012, pp. 137–
205). Th eir superior positions have become more secure as rates of social mobility have
declined over time and relative to mobility in other wealthy nations (Organization for
Economic Cooperation and Development, 2010). At the other end of the economic lad-
der, decent jobs—the kinds that off er some stability and provide the wages and benefi ts
needed for families to sustain livable lives—have become scarce (Mishel, Bivens, Gould,
& Schierholz, 2012). Two-earner families today take home less than one-earner families
did in the 1970s and carry far more of the risks associated with sickness, disability, old
age, job loss, and changes in family status (Hacker, 2006).
Th e contemporary era of rising inequality has coincided with a period of declining
confi dence in elite actors and institutions. Recent years have seen a particularly sharp
spike in public outrage and distrust. Across the political spectrum, from the Tea Party to
the Occupy movement, protesters have taken to the streets to decry what they see as an
elite betrayal of the common good and a system rigged to serve the advantaged. Th e two
movements are at odds politically, but they share a profound loss of faith in elites. Th at
loss of faith now extends to most Americans, protesting or not. Recent national polls
reveal that trust in government and elected leaders is at the lowest levels ever recorded
in the United States—lower even than right aft er the Watergate scandals (Gallup, 2011).
Levels of trust in the major institutions of the market—banks, fi nancial institutions, and
corporations—are as low as or lower than trust in the federal government (Kohut, 2012;
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Working and Living in the Shadow of Economic Fragility158
Pew Research Center for People and the Press, 2011). We argue that governing elites in
the United States deserve the popular outrage directed toward them.
Since the 1970s, governing elites in America have become increasingly insulated from
democratic processes, citizen pressures, and public accountability. Th eir growing insular-
ity, in turn, has contributed to rising economic inequality, social insecurity for all but
the wealthiest Americans, and deep pathologies in the policy process. Democratic insti-
tutions have not disappeared, of course, but they coexist today with a host of political
forms that sequester elite decision makers and shield them from public accountability.
Interactions among our governing elites are marked by rancorous confl ict and polariza-
tion in some arenas and by smooth collaboration and consensus in others. At both poles
and most points in between, however, elites govern America today with their eyes pri-
marily on one another.
Americans outside the upper echelons of business and government are relegated to the
sidelines, their potential for infl uence now reduced to one of the “problems” that elites
endeavor to manage (Jacobs & Shapiro, 2000). Th is demotion of the citizenry to the sta-
tus of bystander (or object of manipulation) has combined with recurrent spectacles of elite
corruption, self-serving action, and partisan deadlock to foster political distrust and deep
skepticism about the eff ectiveness of government. Th us, the very political developments
that have served the rich at the expense of the rest now infl ame and reinforce opposition to
government and its capacity for public actions that would redistribute income and wealth.
Th is opposition extends even to those who would benefi t most from the policies. So too,
as economic and political inequalities rise together, large segments of the public become
accustomed to their marginal role in governance and, though political distrust is widespread,
popular deference to ruling authorities becomes more routine and normative (Solt, 2012).
In this chapter, we make two contributions to the study of the politics of inequality
in the United States. First, our analysis upends a classic argument from elite democratic
theory—namely, that ordinary people are prone to irrational passions and the patholo-
gies of faction; they are too willing to trample rights and will enthusiastically embrace
irresponsible policies. Enlightened elites, we are told, safeguard democracy from these
tendencies and serve as guardians of the public good. Recent history, we argue, supports
the opposite conclusion. It is democracy that enlightens elites, makes their confl icts pro-
ductive rather than debilitating, and safeguards against enthusiastic, self-congratulatory
pursuits of irresponsible policies.
When elites are insulated from democratic dialogue with the public, they gravitate
toward excessive and oft en disastrous forms of confl ict or consensus. On one side is the
polarized confl ict that has crippled the US Congress in recent years, producing an ugly
mix of inaction and irresponsible action. On the other side are the ruinous dynamics of
groupthink among fi nanciers, regulators, and Federal Reserve offi cials—dynamics that
led to the social and economic crises of the Great Recession. It is, in fact, hard to say
which of the two has been more damaging for democracy—or for Americans in the lower
half of the income distribution.
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Guardianship and the New Gilded Age: Insular Politics and the Perils of Elite Rule 159
Second, our analysis engages a growing body of scholarship that seeks to explain
the rise of economic inequality in America on a scale far greater than in other wealthy
democracies. In recent years, scholars have begun to assert that this development can-
not be adequately explained by analyses that focus only on such systemic developments
as demographic shift s, technological changes, institutional rules of the workplace, and
globalization. Rather, rising inequality in America should be understood, in large part, as
an outcome of politics and public policy (Bartels, 2008; Gilens, 2012; Hacker & Pierson,
2011; Jacobs & Skocpol, 2005; Kelly, 2009).
Most scholars who advance this argument emphasize what might be called the hori-
zontal dimension of political life—a left -right dimension of politics that captures the
balance of power among competing coalitions of organized interests. From this perspec-
tive, the politics of inequality is conceptualized as a form of “organized combat” (Hacker
& Pierson 2011, p. 287). On one side are the Democratic Party, labor unions, and aligned
interests and organizations; on the other side are the Republican Party, organized busi-
ness interests, and related organizations (Bartels, 2008; Hacker & Pierson, 2011; Volscho
& Kelly, 2012). Th e perspective suggests that the rise of inequality in the United States
has refl ected the growing power of business interests and the declining fortunes of labor
unions; it has advanced most sharply when government institutions have been controlled
by Republicans (Bartels, 2008). Th e rising importance of money in American politics
exacerbates these developments; it tightens the bond between affl uence and infl uence,
providing the Republican Party with signifi cant structural advantages in electoral and
legislative competition (Bartels, 2008; Gilens, 2012; Hacker & Pierson, 2011; Winters &
Page, 2009). From this perspective, the threat to democracy posed by rising economic
inequality is also conceptualized along the left -right dimension: because of power imbal-
ances in organized political combat, the median voter loses sway and policies fall “to
the right of ” (i.e., more market-conforming and inequality-producing than) the actual
outcomes preferred by most Americans (Hacker & Pierson, 2011, p. 211).
Th e balance-of-power story is, in our view, correct and essential. But taken alone, it
is incomplete. To fi ll it out, we must connect it to changes along what might be called
the vertical dimension of politics—the dimension that connects elites to mass publics
and indicates the depth of their mutual engagement in governance. At one pole of this
dimension, elites govern from a highly insulated position and possess expansive freedoms
of action. Citizens may be rallied as supporters or appealed to as sources of legitimacy
for elite action, but they are seen primarily as objects of governance, as risks to be man-
aged, and as political resources to be deployed (Wolin, 2008). At the other pole, elites
are fi rmly embedded in ongoing relationships of democratic representation and, thus,
limited by a variety of constraints and countervailing powers. Citizens are organized into
politics and exercise civic agency as coparticipants in governance (Boyte, 2005; Fung &
Wright, 2003).
Elites have always stood at the center of American governance, but the extent of their
insulation has varied greatly across eras, depending on the broad organization of the
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Working and Living in the Shadow of Economic Fragility160
political economy. During the mid-twentieth century, elites operated within a variety of
constraints that placed them in dialogue with the public and subjected them to pressures
from nonelites. Since the 1970s, a rising tide of elite autonomy has swallowed one policy
domain aft er another. Advanced by institutional changes that shield decision making
from public infl uence, it has been justifi ed by arguments for public deference to experts
and enlightened offi cials. Th ese developments have proceeded under both major political
parties, and they have empowered governing elites at the expense of ordinary Americans.
From this perspective, the problems that have advanced economic inequality are only
partially captured by accounts that focus on the horizontal dimension, which empha-
sizes power imbalances between political combatants and deviations from the policy
outcomes preferred by the median voter. Economic inequality has risen in tandem with
and through the advancement of a broader erosion of democracy. Th at erosion is char-
acterized by insulated elite rule, diminished civic organization, and the marginalization
of popular political agency. It has occurred not just on the right but on the left as well,
not just in the state but also in the powerful institutions of the market and civil society.
To understand the politics of inequality in the United States today, one must clarify
how shift s in the right-left balance of power have intersected with the growing insula-
tion of governing elites. Neither dimension can be entirely reduced to the other. 1 Indeed,
an appreciation for both dimensions helps to clarify the present political moment: Th e
administration of Barack Obama has diminished the power of the Right, slowing or
reversing its policy agenda in important respects (balance-of-power approaches would
emphasize such developments). In certain areas, however, the administration has adopted
a technocratic managerial style that has further sequestered the power of elites.
In what follows, we begin by clarifying what we mean by “governing elites” and explain-
ing why the relative insulation of elite rule should be seen as a key feature of the political
economy, a feature that varies over time. We then outline the major forces that democra-
tized elite-centered governance during the mid-twentieth century and helped produce an
era of broadly shared prosperity. Finally, we turn to the period since the 1970s, explaining
how the insulation of governing elites has grown over time and why it has contributed to
rising economic inequality. In our conclusion, we briefl y suggest some important priori-
ties for renewing American democracy.
Elite Rule and the American Political Economy
Th e term “governing elites” may lead some to think of government offi cials. To others,
it may suggest a clandestine group conspiring to advance secret agendas. It sounds a bit
like the “power elite,” which an earlier era of scholars saw as a coherent, tightly connected
group that monopolized power by occupying commanding positions in business, gov-
ernment, media, and other key institutions (Mills, 1956, p. 3; see also Domhoff , 1967).
Elements of these earlier approaches remain helpful in mapping power across sectors and
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Guardianship and the New Gilded Age: Insular Politics and the Perils of Elite Rule 161
focusing on those at the upper echelons of American institutions. Yet we use the term in
a somewhat diff erent way, and it is worth taking a moment to avoid confusion.
By governing elites, we refer to people who participate in the process of governance—
an activity that extends beyond government. In contemporary governance, networks of
actors in the state, market, and civil society make decisions, separately or together, that
“guide and restrain the collective activities” of society (Keohane & Nye, 2000, p. 12; see
also Bevir, 2010; Treib, Bähr , & Falkner , 2007). We intend for our analysis to encompass
a variety of sites—in government but also in businesses, nonprofi t organizations, policy
institutes, philanthropic foundations, and other institutions. By governing elites , we refer
to actors at such sites “who regularly have the capacity to wield a great amount of power
and authority in the form of decisions and non-decisions which signifi cantly infl uence
the values of society” (Bachrach, 1967, p. 77). 2
Governing elites do not share a single demographic profi le, nor are they necessarily
members of a group that takes intentional action together. Th ey are people who, by virtue
of the positions they occupy, possess outsized infl uence in power relations. Th ey also pos-
sess extraordinary capacities to exercise authority and coordinate the activities of others.
Governing elites rise to their positions in a variety of ways. Some are elected or appointed
to government offi ce; others gain admission by virtue of professional credentials and
technical expertise; others ascend through the ranks of corporate or nonprofi t manage-
ment; still others leverage their vast personal fortunes for a seat at the table.
People who hold elite positions in one arena of governance may hold little infl uence in
another. Within a given policy area, contending elites may hold opposing values, goals,
and interests. Diversity among elites is hardly guaranteed, however. In many sites of gov-
ernance, one fi nds clusters of governing elites who share remarkably similar experiences,
assumptions, interests, and worldviews. For instance, a new fi nancial rule may spark fi erce
debates among elites who share experiences in the fi nancial sector and consider it com-
mon sense to defer to international fi nance and shield private fi rms from state regulations
(Brown & Jacobs, 2008).
In large, complex societies, governing elites of some kind are a political necessity.
Busy citizens cannot follow every public issue or participate directly in every decision.
In political life as elsewhere, society needs divisions of labor, delegations of authority,
and systems of political representation that shape as well as respond to public opinion. It
needs professionals who possess technical expertise, inform public debate, devise policy
proposals, and evaluate the eff ects of collective choices (Fischer, 2009; Warren, 1996). In
a well-functioning representative democracy, governing elites and relevant publics con-
stitute and respond to one another in an ongoing dialogue (Disch, 2011). Th e problem is
that this back and forth has broken down in the United States today.
Or perhaps we should say that it has broken down again. Th e history of democracy in
the United States is, in many respects, a tale of ebbs and fl ows in the insulation of govern-
ing elites. Th e nation’s constitutional founding was itself an eff ort to insulate governance
from the “unruly” public (Dahl, 2003, p. 24). James Madison and the framers of the US
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Working and Living in the Shadow of Economic Fragility162
Constitution sought to overcome what they saw as an excess of democracy under the
Articles of Confederation. Citing the tendency of the masses toward “violence,” incom-
petence, and “temporary or partial considerations,” Madison hoped for a system in which
elites could impose themselves between the people’s desires and government actions,
serving as gatekeepers who “refi ne and enlarge the public views” to “best discern the true
interest of their country” (Publius, 1787, p. 2). For democracy to work, he stated, “you
must fi rst enable the government to control the governed” (Publius, 1788, p. 2). Toward
this end, the Constitution tempered popular pressures on governing elites by leaving in
place extensive voting restrictions (based on race, gender, and property ownership) and
by insulating political institutions. 3
Over the ensuing decades, elite rule was oft en consolidated, disrupted, and driven
toward democratic forms. Plantation aristocrats and their allies ruled the Old South
through extreme forms of political exclusion, racial subjugation, and economic exploita-
tion. Th rough long periods of the nineteenth century, entrenched elites controlled both
major parties without disruption. During the Gilded Age, business elites oft en decided
Americans’ fates in ways that were virtually unconstrained by government offi cials, who
were oft en deeply in their debt. It was in this era that the powerful politico Mark Hanna
famously quipped, “Th ere are two things that are important in politics. Th e fi rst is money,
and I can’t remember what the second one is” (Miner & Rawson, 2006, p. 526). Indeed,
periods of profound economic inequality have typically coincided with eras of insulated
elite governance, each development abetting the other.
How is such a feedback loop disrupted? Typically, great groundswells of popular
pressure combine insurgent social movements with shift s in the degree and direction of
electoral participation. Popular movements use ad hoc activities (including protests and
strikes) to directly challenge insulated elite rule, fracture elite consensus, and disrupt the
political coalitions on which elites depend (Goodwyn, 1978; Piven, 2006). Th e critical
elections that accompany these movements embolden and empower reformers to create
new constraints on wealth accumulation and reconnect governance to the masses.
Reformers during the Jacksonian period of the 1820s and 1830s, for example, stymied
the King Caucus that allowed a small clique to monopolize candidate nominations. Th ose
eff orts precipitated an era of mass mobilization and democratic opening (Ostrogorski
[1902], 1970). Abolitionists would later capitalize on these new democratic opportuni-
ties. Using insurgent tactics to disrupt sectional alliances and challenge both political
parties, they helped put an end to chattel slavery and turned the US Constitution into
a far more democratic document. Th e Populist movement of the late-nineteenth cen-
tury, including the presidential campaigns of William Jennings Bryan, set an agenda for
economic redistribution (including the establishment of the federal income tax) and
precipitated an “age of reform” that set the cornerstones upon which future generations
would build the American welfare state (Brinkley, 2000; Hofstadter, 1955; Kazin, 2006).
Th e institutional arrangements created at such times generally last well beyond the
turbulent episodes that mark their birth. Time and again, however, governing elites have
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Guardianship and the New Gilded Age: Insular Politics and the Perils of Elite Rule 163
seized on the subsidence of popular pressures to shed the new constraints, protect them-
selves from accountability, and enhance their capacity for autonomous action.
When citizen engagement fades and elites become less worried that citizens will pun-
ish them politically, elite decision makers in government and business oft en drift into
favoritism and corruption. Th e eff ects on the lives of ordinary Americans can be disas-
trous (Glaeser & Goldin, 2006). If liberated from the need to win over broad swaths of
the public, elites tend to lose sight of the center, fi ghting bitterly among themselves and
gathering into uncompromising, polarized camps (McCarty, Poole, & Rosenthal, 2006).
With only like-minded experts observing and checking them, technocrats have recklessly
wagered the health and welfare of Americans on grand designs backed by elegant theo-
ries. In these circumstances of widening latitude, governing elites have persistently failed
to serve as “guardians of the public good” (Publius, 1787, p. 2). Instead, they have proven
exquisitely sensitive to the interests of business and the affl uent; such attention comes at
the expense of the less advantaged.
Democratizing Governance and the Great Compression
From this perspective, it is no accident that the high-water mark of economic equality in
the United States—the era of broadly shared economic prosperity known as the “great
compression” (1940s–70s)—coincided with an era in which governing elites confronted
unusually strong democratizing constraints. It was no golden era of democracy, to be sure,
especially for Americans who were not White, male, heterosexual, and employed. But it
was a period in which elites were forced to accept limits and share power—a period in
which governance was rooted in a meaningful dialogue between elites and nonelites.
Federated civic organizations with cross-class memberships connected business
elites to workers, and public offi cials to constituents, providing forums where citizens
learned about public issues and were recruited into political life (Skocpol, 2003). Labor
unions grew in strength and number, drawing workers into the political process as an
organized and potent force that elites on the Left and Right could not ignore (Dray,
2010; Levi, 2003). Th e major political parties operated as big-tent organizations (Epstein,
1989). Th ey won elections by mobilizing armies of foot soldiers and by appealing to the
numerous split-ticket voters whose moderate and episodic votes could not be counted
on ( Jacobson, 1990; Kimball, 2004). Business elites operated on a constraining fi eld of
government regulations and social norms that, along with tax-and-transfer policies, con-
verted productivity gains into broadly shared prosperity (Kenworthy, 2011; Western &
Rosenfeld, 2011).
Th e politics of inequality in this period operated on an institutional foundation
made far more conducive to democracy by the achievements of the Progressive and New
Deal eras. During the Progressive Era (1890s–1920s), activists and reformers cleaned
out many of the corrupt systems of collaborative elite rule that linked vast inequalities
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Working and Living in the Shadow of Economic Fragility164
of wealth to insulated, undemocratic processes of governance during the Gilded Age
(1870s–90s). Th ey attacked corrupt party machines that relied on patronage reward
to sustain public cooperation while reserving power for elites. Th ey extended the vote
to women and directly strengthened popular control over governing elites on multiple
fronts—for example, through the direct election of US senators, new referendum and
recall procedures, and primary election systems (Diner, 1998). As ordinary Americans
assumed a more prominent place in governance, mechanisms of economic equality and
social protection also emerged. Among these were a progressively redistributive federal
income tax, workman’s compensation programs, and mother’s pension programs. Th e
New Deal deepened these developments by imposing new constraints on fi nancial and
banking elites (e.g., the Glass-Steagull Act, the Securities Act, and the creation of the
US Securities and Exchange Commission); promoting the political organization of labor
(e.g., the Wagner Act); and strengthening redistributive programs and social protections
(e.g., the Social Security Act). 4 Th e Great Compression was a product of a certain type of
political era in which civic groups and ordinary citizens were organized into the govern-
ing process. Indeed, it is telling that leading scholarly analyses of US politics describe this
era as a raucous clashing of groups, an era when deadlock and delay oft en emerged if poli-
cies could not draw sustained support fr om the electorate (Burns, 1967; see also Dahl, 1956).
Governing elites were constrained by the rules, norms, and relationships in which they
were embedded; by countervailing political forces that came from beyond their ranks;
and by the need to appear familiar, engaged, and responsive to community members and
organizations at election time.
Under these conditions, the needs and aspirations of ordinary people played an impor-
tant role in governance, and governance produced broadly shared material benefi ts.
Problems of inequality in this period—both economic and political problems—centered
on exclusions from the broad social compact that positioned large numbers of Americans
as participants in civic life and as cobenefi ciaries of economic prosperity. Th e shortcom-
ings of American democracy remained legion. Th ese disproportionately aff ected women,
racial minorities, and the very poor. Th ey were especially severe in the South. But placed
in a broad historical perspective, the period can be seen as a relative low point in the insu-
lation of governing elites and as a high point in shared economic prosperity.
Insulated Elite Rule and the New Gilded Age
In the 1970s, the United States began to dismantle the political and economic compact
that produced engaged and contested democracy in the three decades following World
War II. Civic associations, the once common links between business leaders and work-
ers, disappeared (Skocpol, 2003). Business ownership shift ed from wealthy local fami-
lies—people who oft en had deep roots in their communities and held a variety of civic
leadership and stewardship roles—to corporate operatives who owed their allegiance to
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Guardianship and the New Gilded Age: Insular Politics and the Perils of Elite Rule 165
the profi tability expected by shareholders (Page, Bartels, & Seawright, 2013). Business
elites moved to expand their freedoms to pursue the kinds of rapid, unilateral actions that
maximize profi ts. Th ey adopted new production models based on managerial fl exibility
and cheap, fungible workforces. Th rough unilateral and state-based strategies, businesses
removed themselves from the limits imposed by collective bargaining relationships with
labor unions (see the chapter by Crain in this volume).
Across a wide range of policy areas, constraints on elites also have been rolled back
by shift ing governance away from government itself. Since the early 1990s, the big push
has been to “reinvent” government as a collaborator that shares power with organiza-
tions from the business and nonprofi t sectors (Osborne & Gaebler, 1993, p. xxii; see also
Kettl, 2002). As contracts have bestowed public resources and authority on nongovern-
mental organizations, new networks of governing elites have emerged under the guise
of “public-private partnerships” and “cross-sector collaborations.” Interacting in these
networks, elites from various sectors produce outcomes that Americans cannot strictly
blame on any democratically accountable institution or representative.
Th e shift ing of governance away from government complemented more direct eff orts
by business elites to shed the constraints imposed by the citizenry’s political representa-
tives. Th e result was a substantial weakening of what John Kenneth Galbraith (1967, p. ii)
termed the “countervailing” powers of government. Business interests invested heavily
in campaign contributions, new lobbying capacities, think tanks, and other resources for
“organized combat” (Hacker & Pierson, 2011, p. 287). Th ey deployed these capacities to
roll back regulations, cut taxes, and weaken or capture the state agencies charged with
monitoring their actions (Akard, 1992; Ferguson & Rogers, 1986). As they slipped out
of governmental constraints, business elites used their newfound freedoms to opt out of
the social compact that supported a vibrant and growing middle in the mid-twentieth
century. Businesses moved quickly to pare back wages and benefi ts, renege on pension
agreements, shift health care and pension risks onto workers, and diminish the budgetary
costs and labor-market–tightening eff ects of social protections for US workers (Hacker,
2006; Piven & Cloward, 1997).
As business elites freed themselves from unwanted governmental limits, state authori-
ties took parallel steps to enhance their autonomy from mass publics. Reacting to the free-
dom movements of the 1960s, concerned elites began to warn in the 1970s of an “excess of
democracy” that threatened to overload state institutions, erode political legitimacy, and
make society ungovernable (e.g., Crozier, Huntington, & Watanuki, 1975, p. 113; King,
1975). Th ey asserted that political institutions had become too porous, subjecting public
offi cials to a paralyzing onslaught of group demands and citizen voices. Indeed, over the
ensuing decades, elites in government would move in a variety of ways to shore up the
institutional boundaries between themselves and citizens.
Congressional leaders, for example, developed a host of strategies to exercise independent
power and shield themselves from popular pressure. Today, demands from the public are
blunted through escalated uses of the Senate fi libuster or sidestepped via the growing abilities
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Working and Living in the Shadow of Economic Fragility166
of the Speaker of the House of Representatives and the Senate Majority Leader to set agendas
and control rules in their chambers (Mann & Ornstein, 2008). Members of both legislative
chambers possess a range of sophisticated tactics for minimizing the visibility of their policy
decisions and avoiding exposure to blame (Weaver, 1986). Policies are cleverly designed to
obscure or delay costs and cloud the identities of elite benefi ciaries (Hacker & Pierson, 2005;
Mettler, 2011). Deploying sophisticated strategies of “craft ed talk” developed through public
opinion research (Jacobs & Shapiro, 2000, p. xiii), elected offi cials use stories, arguments,
and symbols to frame actions that service the affl uent. Th ese frames cast policies in terms that
Americans fi nd palatable or, in some cases, rally behind even as they are harmed.
Elites in government also insulate themselves by moving issues to arenas where vis-
ibility and accountability are limited. Elected offi cials distance themselves from
inequality-enhancing decisions by shift ing them to insulated, secretive government agen-
cies, such as the Federal Reserve, and to expert panels run by unelected administrators
and judges. In many cases, they react to rapacious market forces by doing nothing, as in
the case of stagnating minimum-wage and crumbling labor-relations systems. Th e result
is maddening to watch: lawmakers go before the public to denounce outcomes that their
actions ensured. But the process plays a key role in linking insulated elite rule to the pro-
duction of inequality. Politicians dodge public outrage by pointing to a ready supply of
scapegoats. Liberated from blame, they retain popular support while reaping the political
rewards that come from providing favors for more attentive and well-heeled interests.
Not surprisingly, these maneuvers to shield elected offi cials from accountability have
accompanied a resurgence of broader eff orts to demobilize and defang the electorate. In
recent years, numerous actions have been taken to make it more diffi cult for less advan-
taged Americans to make their voices heard. Examples include eff orts to toughen voter
registration procedures, impose new voter identifi cation rules, and sustain felony disen-
franchisement laws (Keyssar, 2012; Manza & Uggen, 2006; Piven, Minnite, & Groarke,
2009). Legislators also have used their redistricting authorities to redraw jurisdictions,
creating a growing number of “safe seats” that insulate elected offi cials from public
accountability (Bullock, 2010, p. 123).
In addition, lawmaking increasingly falls under the growing sway of the executive
branch, which relies on prerogative powers through administrative rule making and
executive orders (Mayer, 2002; Moe, 2003). In recent decades, “the strategy of unilateral
action has grown increasingly more central to the modern presidency” (Moe & Howell
1999, p. 852). Th e administration of George W. Bush is widely seen as a high-water mark
for the “imperial presidency,” and Democrats decried it for unilateral evasions of the
democratic process (Rozell & Whitney, 2009). However, many of these techniques per-
sist under the Obama administration.
For example, President Obama has continued to use signing statements, albeit at a lower
rate, to reinterpret provisions of new statutes and thus to unilaterally alter their eff ects.
He has adopted a technocratic managerial style of “enlightened administration” that
“risks short-circuiting the legislative process and implementing major reforms through
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Guardianship and the New Gilded Age: Insular Politics and the Perils of Elite Rule 167
means largely invisible to the public” (Milkis, Rhodes, & Charnock, 2012, p. 67). He has
asserted “vigorous authority to exercise power independently of his Democratic base in
Congress” and, in areas as diverse as climate change, economic policy, health care, hous-
ing, and education, has appointed “policy czars” with broad authority to “cut through—
or leap frog”—traditional processes of policymaking and implementation (Milkis et al.,
p. 66). Embracing Th aler and Sunstein’s (2008, p. 3) argument that elites should design
“choice architecture” in subtle ways to ensure that ordinary people pick correctly, Obama
appointed Sunstein as the head of the Offi ce of Information and Regulatory Aff airs,
granting him broad authority to review and revise government regulations.
Th e continued accretion of presidential power under Obama has had mixed eff ects
on economic inequality. Th e Obama administration used its administrative powers to
establish environmental rules, to create new regulations on labor relations, and to expand
health insurance coverage in ways that mitigate market distributions ( Jacobs, 2012;
Jacobs & Ario, 2012; Jacobs & Skocpol, 2012). Although a fuller treatment of the nuances
of the administration’s actions is not possible here (but compare Jacobs & King, 2012;
Skocpol & Jacobs, 2011), its policies raise an important puzzle: technocracy in the hands
of the Democrat-progressive coalition may help check or perhaps off set market opera-
tions. To fl esh out this puzzle fully would, in our view, require attention to the long-term
eff ects of technocracy, including its role in undermining democratic responsiveness and
its potential to persistently redirect America’s political economy.
Even with the somewhat mixed record of the Obama administration, the broad theme
of the past four decades is disturbing: governing elites succeeded in separating gover-
nance from the more democratic processes of policymaking that prevailed during the
mid-twentieth century. As a consequence, the wealthiest Americans have siphoned vast
resources out of public and private systems while little has been done to address the grow-
ing insecurities of citizens suff ering from declining wages and supports.
Insulated Elites and the Financial Meltdown
Emerging in 2007 and leading to the Great Recession, the recent fi nancial crisis off ers
a stark illustration of many of the dynamics outlined in this chapter (e.g., Carpenter,
2011; Ferguson & Johnson, 2009a, 2009b; Krippner, 2011; Wessel, 2010). Networks
of elites created and then managed the crisis, with individuals oft en moving back and
forth between positions in state and market institutions that governed through extensive
consultation. Th roughout, elites worked to shield themselves from democratic pressures
and public accountability as they managed events from insulated positions of institu-
tional power. Ignoring mounting evidence of trouble and increasingly shrill warnings
from outside, authorities recklessly clung to ideologically driven policy agendas accepted
as enlightened conventional wisdom among the narrow groups of elites that mattered
to them.
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Working and Living in the Shadow of Economic Fragility168
Rampant corruption fl ourished and was tolerated among elites who claimed they
needed to be buff ered from politics so that they could apply their expertise in virtuous
service to the public interest. As political decisions determined economic winners and
losers on a vast scale, citizens were reminded that they could not hope to understand all
the complexities involved and should trust in the knowledge, skill, and virtue of techno-
cratic elites. On measures designed to service banking interests and the affl uent, govern-
ing elites proved remarkably capable of agreement and action. On decisions to meet the
needs of Americans in the lower half of the income distribution, they descended into a
sorry spectacle of polarization, discord, and deadlock. While millions of Americans suf-
fered from losses of jobs and homes, federal offi cials quickly doled out over $7.7 trillion to
big banks, insurance companies, and other fi nancial institutions—that jaw-dropping fi g-
ure accounts only for transfers through March 2009 and yet amounts to half of the value
of everything produced in the United States during that year (Ivry, Keoun, & Kuntz,
2011). As one of the country’s most prominent business reporters explained, “Th e big
powered, moneyed institutions are in control in Washington. . . . Th ere’s a drastic imbal-
ance between the people who created the problem and the people who had to pay [for] the
problem. . . . [With] the rise of the fi nancial institutions as a percentage of GDP, . . . [they]
can persuade the treasury secretary that, if you don’t bail me out Armageddon is going to
happen and everyday people will lose access to their money and the world will come to
an end” (Morgenson, 2012).
Th e power to threaten, however, is only part of the story. As the Great Recession pro-
ceeded, arguments touting the advantages of governance by experts and governing elites
proved highly resilient, even in the face of clear evidence of elite failure. Shortly aft er
his departure from a post in the Obama administration for a top corporate position at
Citigroup, and despite the persistence of widespread pain from the fi nancial meltdown
and recession, Peter Orszag (2011) argued publicly that, when it comes to democracy,
Americans now have “too much of a good thing.” Citing issues as diverse as climate
change, fi nancial recovery, long-term fi scal planning, monetary policy, health care pol-
icy, tax policy, and infrastructure investment, Orszag (2011) called for an expansion of
technocracy-centered, managerial governance modeled aft er that of the Federal Reserve.
To be sure, the Great Recession aroused public demands for new constraints on
fi nancial elites, and these demands have been hard to ignore. Some signifi cant new
forms of oversight emerged from such interventions as the Sarbanes-Oxley Act and the
Dodd-Frank Act of 2010. 5 Th ey were championed and passed as eff orts to impose tough
new limits on banking and fi nance elites but soon met with organized resistance that
slowed or subverted implementation of important provisions. In many areas, banking
elites waited for the public outcry to subside and then quietly moved to restore and even
strengthen their freedoms to self-regulate with limited political accountability.
Federal regulators, many of whom previously worked at the very fi rms they regulated,
mostly functioned as collaborators in this project. Believing that their fi rst responsibil-
ity was to the “fi nancial health of those banks” (on which all depend) rather than to any
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Guardianship and the New Gilded Age: Insular Politics and the Perils of Elite Rule 169
process of public accountability, they embraced the fi rms’ preferred view that govern-
ment regulation should be kept to a minimum (Morgenson & Story, 2011). Against the
backdrop of catastrophic failures of self-regulation, they delegated broad new governing
authorities to “clearinghouses” of fi nancial elites under the pretext that (more publicly
accountable) government offi cials could not understand the complexities of the new
fi nancial commodity markets (Story, 2010). Th e identities of the banking elites who run
these clearinghouses are hidden from the public, yet they have broad leeway to regulate
themselves and “protect the interests of big banks in the vast market for derivatives, one
of the most profi table—and controversial—fi elds in fi nance” (Story, 2010, para. 2).
In the Great Recession, governing elites were ultimately able to evade a democratic day
of reckoning even as they failed to deliver on their promises and betrayed the trust of the
public. In 2010, the fi rst offi cial year of economic recovery, the top 1 percent of income
earners captured 93 percent of the income gains over the preceding year (Saez, 2013). For
the staggering numbers of less fortunate Americans who lost jobs, homes, and their retire-
ment savings, the “recovery” was still a long way off .
Conclusion
Th ere has never been a “golden era” of thoroughgoing democratic rule in the United
States. Th e powerful have long organized US political and policy processes to invite dis-
engagement and to bias decision making in favor of the advantaged (Schattschneider,
1960). Race, gender, religion, and sexuality have served as the basis for exclusion and sub-
ordination of individuals (Smith, 1997). Th e poorest Americans have been chronically
marginalized in the political process, just as business has enjoyed a reliably privileged
position (Lindblom, 1977; Piven & Cloward, 1974).
Despite these limitations and more, the period from the 1940s to the 1970s was one
in which the United States constrained governing elites, who found themselves hemmed
in by countervailing popular forces in a variety of ways. Since the 1970s, however, elites
have expanded and insulated their capacities for a mode of governance that is oft en unen-
cumbered by involvement from citizens and public interest groups. Elites contend with
other elites; they manage nonelites. Th e products of this mode of governance surround
Americans; they can be seen in the spiraling concentrations of wealth in gated communi-
ties and in the desperation of struggling Americans whose dreams of livable lives grow
ever more distant.
Can anything be done? Our answer is an emphatic yes. Citizens continue to have the
power to disrupt and constrain governing elites (Piven, 2006). Well-organized electoral
coalitions and social movements can disrupt—as they have in the past—the prevailing
politics of insulated elite rule. Consider how popular resistance halted the Bush admin-
istration’s aggressive push to privatize Social Security (Béland, 2007). Or consider the
powerful role played by citizen groups, such as Health Care for America Now, in the
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Working and Living in the Shadow of Economic Fragility170
passage of the Patient Protection and Aff ordable Care Act of 2010 (Pub. L. No. 111-148,
124 Stat. 119; see also Jacobs & Skocpol, 2012). Or consider how a wave of popular out-
rage prompted the Susan G. Komen foundation to quickly reverse its unilateral decision
to defund Planned Parenthood (Belluck, Preston, & Harris, 2012).
Th ese instances of popular infl uence swim against the tide in US politics today. To
make them less exceptional, citizens must demand deep, systemic reforms to undo the
combination of political and economic inequality that defi nes this new Gilded Age.
Fortunately, the needed reforms are not so mysterious, and many have already been
developed. Campaign fi nance reforms should deepen transparency through disclo-
sure rules, make small donations more eff ective through public matching, and restore
the capacity for state regulation of campaign contributions (Ackerman, 2013). Election
laws can be redesigned in a variety of ways to broaden citizen participation. Examples
include Election Day holidays, early voting, easier registration, and felon enfranchise-
ment (Ackerman, 2013; Piven et al., 2009). New institutional designs can be used to pro-
mote a greater citizen role in police oversight and public educational institutions (Fung,
2006). A variety of reforms are available to revitalize civic organizations in America and
to promote informed public engagement in policy design and implementation ( Jacobs,
Cook, & Delli Carpini, 2009). Reforms of the Senate fi libuster and the party nomina-
tion process can play an essential role in redemocratizing major government institutions
(Mann & Ornstein, 2012). Th e United States does not need good blueprints; they are
already available. What is needed is the kind of political will and commitment to action
that allowed citizens and reformers to end the last Gilded Age.
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Notes 239
2011) (statement of Ray Boshara, Senior Advisor, Federal Reserve Bank of St. Louis). http://
www.gpo.gov/fdsys/pkg/CHRG-112shrg74143/pdf/CHRG-112shrg74143.pdf.
7 . Although the PSID gathers extensive income data during each wave, it fi rst collected com-
parable data on assets during the 1984 wave; it subsequently fi elded a module of asset-holding
questions for the 1989, 1994, 1999, 2001, 2003, 2005, 2007, and 2009 waves. Because this analy-
sis considers the life-course dynamics of asset poverty across 5-year blocks of time, we use data
from the 1984, 1989, 1994, and 1999 waves; we combine data from the 2003 and 2005 waves
to create a comparable 5-year point in time for 2004. We use 5-year intervals for the life-table
analysis of asset poverty because 5-year intervals separate the early PSID individual-panel asset
waves. Th is approach underestimates the true incidence of asset poverty because we sample
annual household asset data for individuals at one point during these age intervals rather than
at fi ve points; thus, estimates are lower than those produced if one uses yearly panel data. See
Haveman and Wolff (2000) for further details on the construction of asset poverty using
the PSID.
8 . Homestead Act of 1862, Pub. L. No. 37-64, 12 Stat. 392 (1863); Servicemen’s Readjustment
Act of 1944, Pub. L. No. 78-346, 58 Stat. 284 (1945); Veterans’ Readjustment Assistance Act of
1952, Pub. L. No. 82-550, 66 Stat. 663 (1953).
Chapter 9
1 . Political elitism has never been an exclusive province of the political right. Consider, for
example, W.E.B. DuBois’s argument that the achievement of racial justice would depend on a
uniquely “talented tenth” (1903, p. 33), or Vladimir Lenin’s belief that only an elite vanguard
could lead the misguided proletariat down a revolutionary path to emancipation.
2 . As Peter Bachrach (1967, p. 79) rightly emphasizes, “It is imperative that the defi nition of
political elite be suffi ciently broad to include both governmental and nongovernmental institu-
tions. . . . [For example], there seems little question that heads of giant corporations are political
elites.”
3 . A short list of constitutional features designed for this task must include the separation of
powers and federalism; the selection of US Senators by state legislators; the appointment (with-
out election) of federal judges for their lifetime; and the Electoral College (Dahl, 2003). In his
original Virginia Plan for the Constitution, Madison went further, proposing to give central-
ized national elites the power to tax and regulate all commerce and to veto all state laws. Stating
that he wanted the US national government to “have powers far beyond those exercised by the
British Parliament,” Madison also wanted it to control the establishment of universities, the devel-
opment of infrastructure, the organization of all militias, and the chartering of all corporations
(Robertson, 2005, p. 228).
4 . Banking Act of 1933 (Glass-Steagull Act), Pub. L. No. 73-66, 48 Stat. 162 (codifi ed as
amended at 12 U.S.C. § 227 [2011]); Securities Act of 1933, Pub. L. No. 73–22, 48 Stat. 74 (codi-
fi ed as amended at 15 U.S.C. §§ 77a–77aa [2011]); National Labor Relations Act of 1935 (Wagner
Act), Pub. L. No. 74-198, 49 Stat. 449 (codifi ed as amended at 29 U.S.C. §§ 151–169 [2011]);
Social Security Act of 1935, Pub. L. No. 74-271, 49 Stat. 620 (codifi ed as amended at 42 U.S.C.
§§ 1301–1397mm [2011]).
5 . Sarbanes-Oxley Act of 2002, Pub. L. No. 107–204, 116 Stat. 745; Dodd-Frank Wall Street
Reform and Consumer Protection Act of 2010, Pub. L. No. 111–203, 124 Stat. 1376.
13_9780199988488_c13.indd 23913_9780199988488_c13.indd 239 16-11-2013 11:17:4216-11-2013 11:17:42