First Letter from Tim Ferguson to Carter Price and Kathryn Edwards, May 2024

Abstract: On or about the Ides of every month except March, the Adams Institute will send two letters to prominent Americans whose words or actions are relevant to the proposed amendment, and whose contributions to the idea of democratic-republican government merit all of our attention. These letters will also carbon-copy other distinguished individuals who were somehow involved in the recipient’s words or deeds, or in our analysis thereof.

Our initial letters, along with correspondence explaining to copied individuals why they were copied, will be published as an open diary of correspondence in the hopes of inspiring discussion of our proposed amendment and emulation of the recipients’ good examples. PDF files featuring scans of all this original correspondence will be available for download, and the substantive content of each primary letter will be pasted in blog-post format.

May 15, 2024

Dear Drs. Price and Edwards:

We commend your 2020 Working Paper Trends in Income From 1975 to 2018,[1] and we credit Civic Ventures’ interview of Dr. Price[2] for raising it to our attention. The astonishing magnitude of the problem they reveal – and the headwinds younger generations now face – may perhaps be most effectively communicated to ordinary Americans with a little vignette explaining how, over the past 50 years, they’ve been deprived of an amount of income so massive that it exceeds the entire wealth of every other nation on Earth except China:

In the Second World War, America and her allies defeated the Axis powers of Germany, Japan, and Italy. During the next two decades (the “Baby-Boomer Years”), the income gains of ordinary American workers kept pace with national economic growth. But that all changed in 1975. Since then, the total value of income that has been diverted to the top 10% – relative to the trends of the Baby-Boomer Years – exceeds the entire national wealth of Germany, Japan, and Italy combined.[3]

But the results represent more than just statistics and equations. By so concisely encapsulating the damages that have been visited upon ordinary Americans since 1975, your research makes an indispensable contribution to an indispensable conversation, one ultimately converging upon our most essential national question: By what form of regime will America be governed? Shall we redeem our egalitarian founding principles in the perfection of our republican experiment? Or be consigned to the grotesque wealth concentration to which your research bears witness, and the insecurity, dependency, patronage, demagoguery, and Caesarism following upon it?

We write to briefly summarize how your research fits into this debate. This debate continues an ancient argument among three Persians twenty-five centuries ago over whether they should be governed as a monarchy, aristocracy, or democracy.[4] And as this debate shall not only continue as far again into the future and beyond, but as our actions or omissions will affect our children’s future as well, we also write to strengthen the neural network of people of common sense and good will – some of which who are copied here – who understand that a broad diffusion of wealth is essential to maintain the security, independence, optimism, and moderation upon which true republican government rests.

The relationship between political economy and regime formation is easily simplified with a familiar metaphor:

Classical republican political theory holds that political revolution ultimately resolves into a cycle, or a wheel.[5]

Following ancient theories and examples, the Constitution was conceived as a brake to arrest that wheel.[6]

But despite that clever political architecture, the diffusion and re-concentration of wealth is the motor which rotates that wheel.[7]

Popular government is stable and responsible, steering between populism and plutocracy, only when wealth is diffused in a broad middle class.[8]

Rome’s path to Caesar and America’s rising authoritarianism, both caused by middling insecurity, confirms that the motor overwhelms both the brake and steering.[9]

No political society has ever developed a corrective – a transmission or a gearbox – to serenely reverse extreme wealth concentration.[10]

These ideas help to explain much about the lifecycle of democracy, including: Why it comes and goes in historical waves[11] (because it rides in and out on the tide of the middle class); why it was summoned by the Hoplites and has been concentrated in the West (because the broadly-diffused, privately-held agricultural surplus required for robust middle-class formation was elsewhere elusive before the Industrial Revolution); why it’s a sham without an independent and preeminent middle class (because economic insecurity and necessity breed political patronage, depriving the electorate of any real political choice[12]) and why orthodox wealth redistribution plans are palliatives and sedatives, but not correctives, solving for insecurity but not dependency (because they convey sustenance through government intermediaries rather than conveying income through market actors).

While you’re careful not to impute malice or blame or even describe the causes of extreme wealth concentration, your research is invaluable because it helps to reveal its dimensions. And while you refrain from “expressing any kind of normative ‘should’ for an inequality measure,” as it “gets away from statical measurement and into socioeconomic policy and political belief quickly,” we do so eagerly, noting that the common intuition of mankind has held steady in all the time since that Persian argument that the middle class should own half.[13]

On that score, we think the best way to achieve that normative 50% “should” target consistent with the values we’ve noted above within a system of market capitalism, is through a technique of market capitalism: The long-term incentive plan. Guided by rational plan design principles, our approach to induce productive and voluntary wealth de-concentration through market actors would therefore simply be to tether the wealth of the top households at an efficient multiple of the national median household net worth – say 10,000:1 or such other figure sufficient to capture households collectively wielding market power[14] – such that their outcomes would rise and fall lockstep with the median. In other words, we’d flip the presumption of trickle-down on its head, replacing it with the median-benchmarked compensation philosophy no gains for the middle, no gains for the top. Discovery of the correct multiple would enable future legislators to incentivize markets to backsolve for a middle class of any target size.

To hold the plutocracy to this incentive plan, we need simply find a proper ratio and enforce a robust household wealth appraisal and anti-expatriation regime. By so moderately putting a yoke around the plutocracy’s neck rather than a blade to its throat as radicals are wont to do, we can trust human nature to do the hard work. No new taxes or mandates for enterprise are required. Market actors would determine how to raise the median. And as the median is omniscient, howsoever they decide to do it, elites must nullify all adverse forces which depress the median, including offshoring, rentierism, automation, and inflation.

To actually get this plan adopted, we would give each State equal shares of all revenues raised by ratio enforcement – trillions of dollars over time – based on a constitutional amendment that Thomas Jefferson once proposed.[15] This strategy enables the States to bypass Congress via Article V convention and eliminate the inevitable Apportionment Clause attacks that will prove mortal to all wealth taxes conceived as a federal statute. The Founders would certainly approve of this plan or some other approach of like tenor,[16] as well as of your critical research which show plainly shows the urgent necessity thereof.

Sincerely,

Tim Ferguson

[1] In accepting your 2022 John F. Kennedy Profile in Courage Award^® from the Kennedy library.

[2] Autobiography, reminiscences and letters of John Trumbull, from 1756-1841.

[3] (i.e. Anacyclosis (ἀνακύκλωσις), the idea that the natural and probable sequence of political evolution is tribal chiefdom, monarchy, tyranny, aristocracy, oligarchy, democracy, and ochlocracy or mob-rule) (For the anthropology see, e.g., Pindar, 2^nd Pythian Ode, Herodotus (III. 80), Thucydides (VIII. 97), Plato (Rep. VIII) (Laws, III. 676 A), Aristotle (Nic. Eth. 8.10; Pol. 1286b), Polybius (Hist. Bk. VI), and possibly Panaetius, Dicaercus, Isocrates, Protagoras, and Hecateus). See also Dionysius, (Rom. Ant. VII, 54-56) Cicero, De Re Publica, I, XXIX, II, XXV), Sextus Pomponius, Justinian’s Digest, I Bk. I, Tit. 2., 2. 1-11), Machiavelli Discourses on Livy, Ch. I. Bk. II. See also John Adams, An Essay on Man’s Lust for Power, All Men would be Tyrants if they could, with the Author’s Comment in 1807 (describing Polybius’ sequence as “the Creed of my whole Life. See also Alexander Hamilton, Federalist No. 9, alluding to Anacyclosis. See also David A. Teegarden, Death to Tyrants!: Ancient Greek Democracy and the Struggle against Tyranny, Princeton University Press, 2014. Figure A1 therein shows that ancient Greek city-state regimes peaked accordingly.

[4] The idea is attributed to the legendary Spartan lawgiver Lycurgus. For the anthropology, see, e.g. Thucydides, Peloponnesian War, 8.97.2 Plato, Laws, 681d; Laws, 712d; Menexus, 238b-d, Dionysius of Halicarnassus, Roman Antiquities, VII.55, Polybius, Histories, VI.10-18, and Servius the Grammarian, Commentary on the Aeneid of Vergil, 4.682. See also Charles I, His Majesties Answer to the Nineteen Propositions of Both Houses of Parliament, 1642, Montesquieu, The Spirit of the Laws, Book XI, Chapter VI, John Locke, Two Treatises of Government, Book II, Chapters XII-XIII James Madison, Federalist Nos. 47, 48, and 51, and Articles I, II, and III of the United States Constitution.

[5] See James Harrington, Commonwealth of Oceana, Part I, John Adams to James Sullivan, 26 May 1776 and Defence of the Constitutions, Vol. III, Letter III (Padoua), Noah Webster, An Examination into the Leading Principles of the Federal Constitution, and Misc. Remarks on Divisions of Property.

[6] See Euripides, Suppliants, Line 238 et seq., Plato, Laws 679b, Aristotle, Pol., 1291b, 1295b, and Alexis de Tocqueville, Democracy in America. See James Madison, Federalist No. 10: “The most common and durable source of factions has been the various and unequal distribution of property.” See also Aristotle, Pol., 1291b, 1295b. See also Tocqueville, Id. To summarize: where the middle class prevails, the people are too busy for demagogues, too optimistic for faction, too traditional for radical ideas, too independent for patronage, and too moderate for extremism.

[7] On how extreme wealth concentration destroyed the Roman republic, which is history’s closest analogy, see Appian, The Civil Wars, I.1, Sallust, Conspiracy of Catiline, 10, 33. I; 37.3, 38, 53, The Jugurthine War, 4, Livy, History of Rome, Preface, Tacitus, Annals, 3.27, Florus, Epitome, I, XLVII, Lucan, Pharsalia, 1.63. Marcus Philippus said in 104BC that out of perhaps 400,000 citizens, only around 2,000 held any significant wealth.

[8] See Walter Scheidel, The Great Leveler: Violence and the History of Inequality from the Stone Age to the Twenty-First Century, Princeton 2018. Shows that structural inequality has only been reduced by the shocks of plague, revolution, mass-mobilization warfare, or state collapse.

[9] Noah Webster, Miscellaneous Remarks, 1790: The causes which destroyed the ancient republics were numerous; but in Rome, one principal cause was the vast inequality of fortunes … . Rome, with the name of a republic, was several ages losing the spirit and principle. The Gracchi endeavored to check the growing evil by an agrarian law but were not successful. In Caesar’s time, the Romans were ripened for a change of government; the spirit of a commonwealth was lost, and Caesar was but an instrument of altering the form when it could no longer exist. Caesar is execrated as the tyrant of his country; and Brutus, who stabbed him, is applauded as a Roman. But such was the state of things in Rome, that Caesar was a better ruler than Brutus would have been; for when the spirit of a government is lost, the form must change.” Edited for modern spelling and punctuation.

[10] See remarks from British Colonel Lord Adam Gordon in 1764: “The levelling principle here, everywhere operates strongly and takes the lead, and everybody has property here, and everybody knows it.” See also Tocqueville, Id. And Peter H. Lindert and Jeffrey G. Williamson, American Incomes 1774-1860, NBER 18396, 2012, showing that in 1774, New England and the Middle Colonies were the most egalitarian place in the measurable world.

[11] See a letter from George Washington to Richard Henderson, 19 June 1788, celebrating: “…the equal distribution of property the great plenty of unoccupied lands, and the facility of procuring the means of subsistence.” See also Mercy Otis Warren, History of … the American Revolution, 1805 Vol. I. Ch. I.: “Democratic principles are the result of Equality of condition.”

[12] See John Adams, Dissertation, 1765: “Property monopolized, or in the Possession of a Few is a Curse to Mankind. We should preserve not an Absolute Equality – this is unnecessary, but preserve all from extreme Poverty, and all others from extravagant Riches,” Thomas Jefferson to James Madison, 28 October 1785: “Legislators cannot invent too many devices for subdividing property,” James Madison, Parties, 1792, advocating measures to “reduce extreme wealth towards a state of mediocrity, and raise extreme indigence towards a state of comfort” and Noah Webster, Id., 1790: “The basis of a democratic and a republican form of government, is, a fundamental law, favoring … a general distribution of property.”

[13] See Victor Duruy, Histoire des Romains, II, 46-47, 1879 (quoted by A. Stephenson, Public Lands and Agrarian Laws of the Roman Republic, 1891) “After having pillaged the world as praetors or consuls during time of war, the nobles again pillaged their subjects as governors in time of peace; and upon their return to Rome with immense riches they employed them in changing the modest heritage of their fathers into domains vast as provinces.”

[14] See Aristotle, Pol., 1295b, and James Harrington, Id., advocating wealth caps to balance the nobility with the commoners. That the intuition of ordinary Americans believes the middle should own half, see Michael I. Norton and Dan Ariely, Building a Better America – One Wealth Quintile at a Time, Perspectives on Psychological Science, Association for Psychological Science, 2011.

[15] Price, Carter C. and Kathryn A. Edwards, Trends in Income From 1975 to 2018. Santa Monica, CA: RAND Corporation, 2020. Calculates that through 2018, $47 trillion had been diverted from ordinary households relative to post-World War II run rates.

[16] Q2 2023 Federal Reserve data shows that total U.S. household wealth is ~$150 trillion and the middling share is: (a) 28.1%, when defined as middle three asset quintiles by income; and (b) 28.6% when defined as the “middle 40%” (between the top 10% and bottom 50%), averaging 28.35%. This shows that the middling share is at least $30 trillion less than it would be if the middling share were at least 50%.

[17] Median-top household net worth tethering at an efficient mathematical ratio, such that the top households having market power enjoy future gains only in proportion to median gains, rising and falling lockstep with the national median, thus scaling capitalism’s own device of the long-term incentive plan from the level of enterprise to nation. The initial ratio would be 10,000:1 (implying a $1.43 billion cap); existing fortunes would be grandfathered to the extent repatriated to the United States.100% of the revenues would be distributed to the States, inducing ratification and strengthening federalism.

Property monopolized, or in the Possession of a Few is a Curse to Mankind. We should preserve not an Absolute Equality – this is unnecessary, but preserve all from extreme Poverty, and all others from extravagant Riches.

John Adams, 1765