Winters' Oligarchy: Expanding The Wealth Defense Agenda

Jun 20, 2024

The last post introduced Professor Jeffrey Winters’ ideas about oligarchy. For Winters, oligarchy is not a specific mode of government. Rather, it is the politics of wealth defense practiced by the tiny number of disproportionately wealthy individuals who emerge in most societies. In Winters’ argument, the politics of wealth defense will change depending on the political context in which oligarchs find themselves and the specific nature of the threats to their wealth. But generally, wealth defense can be thought of in two main parts: property defense and income defense.

According to Winters, throughout history, threats to property often forced oligarchs to arm themselves, build private armies, or take direct control of the government to defend their property. The rise of the modern state, one willing and able to protect even oligarchic-level property claims, changed the game. With the state protecting their property, oligarchs could shift their focus from property defense to income defense. And income defense basically entailed fighting taxes levied by the same state that was now protecting their property. Winters calls an oligarchy with these characteristics a civil oligarchy.

In his 2011 book, Oligarchy, Winters argued that in the United States, we have a civil oligarchy. American oligarchs, freed from the burden of property defense, focus on fighting taxes. And they wage this battle by hiring thousands of lobbyists, accountants, and lawyers—a professional corps that Winters aptly dubs the “income defense industry.” These highly-skilled professionals swarm over and gnaw their way through the tax code like a million tireless termites, day after day, year after year, for as long as oligarchs are willing to pay them.

The cumulative effect of this army of paid professionals steadily grinding away at threats to oligarchic income surpasses and outlasts the political power that can be generated by all but the very largest and most successful popular social movements. Winters bestows the title “worker bees'' on these professionals of the income defense industry. Gardeners might find this defames those benign and helpful creatures buzzing about the flower garden. Hence, “termites.” With this small amendment, Winters’ case is compelling.

But in the United States, the political struggle against groups empowered through democratic mechanisms extends far beyond relatively discrete battles over taxation. So, as noted at the end of the prior post, if we were to conclude our analysis of oligarchy in the United States with the tax-fighting activities of the income defense industry, we would end up with a seriously inaccurate picture. To improve that picture, we need to flesh-out the wealth-defense agenda of America’s wealthiest.

Civil oligarchy encompasses the politics of corporate wealth defense

First, we should reconsider the connection between the politics of personal wealth defense waged by wealthy individuals, and the politics of corporate wealth defense waged by corporate elites. As discussed in the February 18 post, Winters distinguishes between oligarchs and corporate elites. This distinction relates to Winters’ definition of oligarchs as enormously wealthy individuals whose political power stems from their ability to deploy great personal wealth in defense of their wealth. By contrast, the political power of corporate elites is based on their positions at the head of corporations and their ability to deploy corporate wealth for political purposes.

The February 18 post post discussed some of the reasons for distinguishing between oligarchs and corporate elites: power based on a position of authority in a corporation is more transient than power based on a vast personal fortune; corporate elites face a different set of threats and inducements than do wealthy individuals and hence may develop different political agendas; the legal and ideological arguments related to limiting the ability of individuals to buy political influence are potentially different and more controversial that the legal and ideological arguments related to limiting the ability of corporations to buy political influence.

All that being acknowledged, in trying to make practical sense of our political system, it is often difficult to distinguish between the goals, tactics, and ideologies of oligarchs and those of corporate elites, or, for that matter, between corporate elites and the corporations they are charged with running. In large part, this is because corporations are the primary aggregators, managers, and growers of private property in our economic system, including property owned by oligarchs. For example, a tiny minority of the wealthiest Americans hold a disproportionate share of both publicly-traded and private corporations. According to Federal Reserve data, at the end of 2023, the top 0.1% of wealthiest Americans held 23.4% of corporate equities and mutual fund shares, 22.9% of corporate and foreign bonds, and 28.4% of private business value.

Additionally, a very large percentage of the wealth of individual oligarchs is invested in publicly traded and private corporations. For example, according to the Federal Reserve, as of Q3 2023, the wealthiest 0.1 % of Americans held 46.3% of their wealth in the form of corporate equities (stocks) and mutual funds (likely, much of this also invested in stocks) and 22.2% of their wealth in private businesses (i.e., likely most are corporations not traded on the stock market). So, practically speaking, for oligarchs to successfully defend personal wealth, corporate elites must also succeed in defending corporate wealth. This makes it very difficult to disentangle the wealth defense interests of oligarchs from the wealth defense interests of corporations.

Beyond financial considerations, there are a host of practical, social and psychological reasons why corporate elites might adopt and embrace the values and political ideologies of oligarchy. There is an overlap between the two sets of people in that some corporate elites are wealthy enough in their own right to be counted as oligarchs; oligarchs may have enough personal control over corporations through ownership that they can impose their views and agendas on the elites running the corporations; oligarchs and corporate elites may share common antipathy toward taxation, regulation, or the growth of social programs that create the need for taxation; and, corporate elites may view oligarchs as the “winners” in system that uses wealth to measure personal and professional merit.

So, it is not surprising to find oligarchs and corporate elites working on common political projects in either ad hoc or formal coalitions, or pursuing the same political goals along parallel, independent paths. Where we see corporate elites intervening in the political system to defend corporate wealth, it does not seem unreasonable to assume that this is also serving the political wealth defense agenda of one or more oligarchs. So, one extension of Winters’ theory of civil oligarchy is to simply acknowledge that, while oligarchs and corporate elites can and perhaps should be separated conceptually, the politics of wealth defense engaged in by oligarchs encompasses the corporate wealth defense engaged in by corporate elites to a very significant degree.

Civil oligarchy still entails property defense

Second, although oligarchs in a civil oligarchy focus on income defense—basically, the fight against taxation—they must still pay attention to property defense. This is because, while the modern state removes some threats to oligarchic property (theft, trespass, seizure, etc.), it also creates a whole new set of threats to property. These threats arise from the state’s great power to severely restrict the ability of large property owners to exploit their property for economic gain.

Arguably, because this sort of regulation cuts into the profits and hence the income of the property owner, resistance to these sorts of regulations could be viewed as a form of income defense. But equally, and perhaps of greater political consequence, it is also a form of property defense. Why? In the law, when government regulation cuts into a property owner’s ability to exploit their property for profit, it can be framed as a taking of the property itself.

For example, if a corporation (let’s say one deploying the invested wealth of one or more oligarchs) buys a piece of land, what the corporation owns is a set of rights in that land: the right to exclude others from using the land, the right to sell or lease the land, and so forth. In the absence of restrictions, one of the most important rights that the corporation owns is the right to exploit the property for economic gain. So, it might want to clear cut the forest on the land and sell the timber, dig an open-pit copper mine on the now denuded tract, dump the tailings from the mine into a wetland on a portion of the property, build a refining plant on the filled-in wetland, and pipe toxic byproducts of the plant into the river that flows next to the property.

In response, the government might impose limitations on the corporation’s use of its property, either to stop certain damaging practices, or to force the corporation to pay some of the cost of that damage. And when the government does this, it has the effect of reducing the value of the right of exploitation owned by the corporation. This can be interpreted in the law as a taking of part of the property owned by the corporation.

The value of what has been taken from the corporation might be reflected in the value of the corporation’s land before and after regulations are put in place. The corporation may have bought the land anticipating the range of profitable uses described above. But if the government forbids these uses or makes them far more expensive through regulation, the corporation may be unable to sell the property for anything approaching what would have otherwise been the case. It is no surprise, therefore, that the ability of the regulatory state to limit the right of corporations and oligarchs to exploit property for economic gain is taken as a very severe threat indeed and that consequently, curtailing this threat is a significant goal of civil oligarchy.

What sharpens this dispute is that the corporation is not the only actor in this scenario with a property interest. Imagine a homeowner who bought a house that happens to be downwind and downstream from the plot of land which our hypothetical corporation wishes to develop. If the corporation is permitted to go forward, or if the government does not force it to pay the cost of controlling its pollution, the value of the homeowner’s property may drop precipitously, because fewer people will want to live in the vicinity of so much pollution. The fish in the river may be dangerous to eat or dead, the groundwater unsafe to drink, the air painful to breathe, the roads choked with giant trucks and machinery rumbling by at all hours, and so forth.

Everyone who owns a house in the vicinity will be in the same boat. Collectively, they’ve lost a lot of wealth because their property is worth less than it was before the corporation next door started exploiting its property without paying to control its own pollution. They would not be wrong to conceive of this as a transfer of wealth from their pockets to the pockets of the corporation, which has basically forced them to shoulder part of the cost of its own economic activity. And they would be within reason to wonder why their own property rights should be valued or defended any less than the property rights of the corporation.

This simplistic narrative highlights one of the most consequential political questions that we face, one that is right at the center of civil oligarchy: who should bear the cost of economic development? If we make the land owner who wishes to exploit their property for economic gain bear more of the cost of this exploitation, then the cost imposed on others in society will be lower. But we might end up with far less economic development, and this, some might argue, would be to society’s detriment. So, we might argue that the corporation should be free to operate as it wishes. But is that a fair outcome for those who see the value of their own property decline or otherwise pay the costs resulting from their neighbor’s property exploitation? It is a question that cannot be answered without recourse to ideology, ethics, and values.

But the more practical political question is not who should bear the cost of economic development, but who will bear it. This question is resolved through the political system: in legislatures that have the power to enact laws either restraining or unleashing property owners; administrative branches that often have broad power to promulgate and enforce or weaken regulations on property use; and in courts, which often allocate the cost of economic development through interpretation of the law. This question is a little simpler to answer: generally, politically weaker groups will bear as much of the cost of economic development as politically powerful groups can shift onto them.

While the role of legislatures and regulatory agencies in deciding how to allocate the costs of development is fairly easy to observe, the role of courts is often obscured by legalese. The legal historian Morton Horwitz did much to shed light on this subject in his influential and in some circles controversial 1992 book, The Transformation of American Law, 1780-1860 (the first of a two-volume set). In broad strokes, Horwitz argued that, beginning early in the nation’s history, an emerging legal elite allied itself with leading mercantile and commercial interests and, along with aggressively pro-commercial judges particularly among the federal judiciary, reshaped American law to serve the purposes of commerce and industry by shifting the costs of development onto others. (253-66). He summarized:

[t]he transformation in American law both aided and ratified a major shift in power in an increasingly market-oriented society. By the middle of the nineteenth century the legal system had been reshaped to the advantage of men of commerce and industry at the expense of farmers, workers, consumers, and other less powerful groups within the society. Not only had the law come to establish legal doctrines that maintained the new distribution of economic and political power, but, wherever it could, it actively promoted a legal redistribution of wealth against the weakest groups in the society. (254)

Legal developments in the 1970s, in which the Supreme Court began to build constitutional protections around influence-buying, can be viewed as a part of this longer-term transformation. As discussed in earlier posts, during the 1960s and 70s, a rising swell of citizen activism on a variety of fronts ranging from environmental protection, consumer rights, public health, and other areas, had the effect of pushing costs of economic development back onto those who were creating those costs—large corporations. Not surprisingly, this sparked an ideological backlash led by America’s largest corporations and the sorts of individuals we are calling oligarchs (see, e.g., September 23, 2023 post). And in a series of key legal victories for this movement, beginning in the mid-1970s and continuing today, the Supreme Court created, defended, and expanded constitutional protections for influence-buying by individuals and corporations (see, e.g., October 24, 2023 post). In a sense, one can see in this the Supreme Court rebalancing the political system in favor of a civil oligarchy: the ability to buy political power translates into the ability to shift the cost of economic development onto economically weaker groups in society.

Oligarchic wealth defense entails access and exploitation of public property

Third, oligarchic wealth defense doesn’t just entail defense of private property rights. At least for certain oligarchs, it requires continual access on favorable terms to publicly-owned resources such as deposits of natural resources. Historically, the federal government itself has been the largest owner of property in the country, beginning with its claims to vast extents of land with all of the forests and animals on the land and all of the mineral or oil deposits under it, as well as ownership of oil and gas deposits offshore. Over the course of our history, much of this public property has been given away, leased, or sold to private parties for various purposes, usually entailing some sort of profit-seeking activity.

The political result is that oligarchs whose wealth depends upon the continual input of raw materials found on or under public lands, cannot afford to crouch in a defensive posture vis a vis the government, content to merely fend-off regulations and taxes. They must actively acquire rights to exploit the property that the government holds on the public’s behalf. One might quibble that this is really an agenda of wealth offense, rather than wealth defense. Whatever one might call it, maintaining access to public resources held by the government is a key feature of both oligarchic and corporate wealth-generating political agendas.

Oligarchic wealth defense entails general opposition to the expansion of government

Fourth, even relatively discrete battles against taxation and regulations can fuel a far broader and much more ideological battle against the expansion of government-funded social welfare programs. Every expansion of public health care, of public education, of social security, etc., can be interpreted as a threat to oligarchic income because it may be used to justify an increase in income or wealth taxation. Every expansion of environmental regulations, workers’ rights, or consumer protections and every restraint placed on oligarchs’ access to public property poses a threat to oligarchic property because it represents a limitation on that most valuable feature of property—the right to exploit it for profit. And every limitation on the exploitation of resources held by the public represents a threat to the wealth-generating apparatus of one set of oligarchs or another.

Final reflections

If we want to interpret our political system through the lens of oligarchy, and if we accept Winters’ perspective that oligarchy is the politics of wealth defense, then we should be aware of the breadth of that agenda. Even in a civil oligarchy, oligarchy encompasses far more than the defense of income against taxes. It encompasses a continual battle to defend property—most importantly the right to exploit property for profit—from whatever impediments that legislatures, the regulatory apparatus of the modern state, or the courts might otherwise impose. It further encompasses a continual need to access and exploit public property held by the government. And it provides a foundation in economic self-interest for an ideological opposition to expansion of state programs intended to advance the public welfare that might require an expansion of taxation.

Of course, this political agenda or parts of it are embraced by many Americans who would not be considered oligarchs. This includes not only corporate elites as discussed above, but also members of more vaguely-defined commercial, business, professional and even working classes who are not oligarchs or elites in any sense, but who nonetheless see their own economic success or welfare as reliant upon the maintenance of a system and set of principles that is generally favorable to oligarchy.

None of this necessarily undermines Winters’ theory of civil oligarchy. Arguably, Winters’ main thesis is that the modern state, by removing certain types of threats to oligarchic property, allowed oligarchs to disarm or give up direct control of government, and to engage in the political system through legal means. And this still seems to be the case, even when considering the full scope of oligarchy in the United States.

Going forward

The goal of many posts up until now has been to try to understand the sort of political system that operates within America’s constitutional order. Although these posts have explored a broad range of ideas, there has been a more narrow purpose: Before we can really explore whether the power of wealth interests within our current political system is some kind of deviation from, or corruption of, the purposes of the men who drafted the Constitution, it seemed necessary to come to some view of the character of that system.

Up until now, this discussion has been largely theoretical. And on balance, the weight of the posts might suggest that our political system looks and feels like what Gilens and Page would call a system of economic elite domination (see, e.g., December 2, 2023 and January 8, 2024 posts). But is such a gloomy assessment warranted?

The next two posts will consider our political system from a more practical perspective. The first will look at the political battle over the Affordable Care Act. This battle has pitted determined social welfare reformers against the most politically powerful corporations and ideologically intransigent oligarchs in the country. So, the fact that reformers were able to enact and subsequently defend a major piece of social-welfare legislation, while admitedly only a partial victory for them, also tells us something about our political system that may prompt a more favorable reassessment.

The post after that will look at the ongoing political battle over climate change. In this case, the inability of our political system to respond commensurately to a human-caused process that now makes a dire future all but inevitable, although widely understood among business, political, and academic elites for at least the last 30 years, may prompt a return to our earlier, more gloomy assessment.

That our political system can show a certain plasticity of character depending upon the interests at stake by itself tells us a great deal, even while it makes an easy characterization frustratingly elusive. And because the battle over climate change centers the political power of core property interests within our political system, it will provide a good point upon which to pivot to our constitutional era and the ideological and practical purposes of the men who drafted the Constitution and their views on the proper relationship between property and democracy.

The Dissonance

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