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.
September 13, 2024
Dear Mr. Wu:
Our last letter considered how middle-class primacy is the sine qua non for legitimate popular government, summarizing the role of the middle class in political society as follows:
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.
In the summary of Operation Abigail, enclosed with this letter, we outline a single, simple, historically-informed political intervention derived from the Classical anthropology contained in our last letter that, if duly enforced, would safeguard middle-class households from every conceivable economic force that could otherwise threaten them. The remainder of this letter supplements that plan, with special consideration of its relationship to industry consolidation and monopolization. We ask you to consider Operation Abigail in that light, and opine on its merit.
Even without reference to that Classical anthropology, none should debate the proposition that, the bigger the middle class, the better.[i] Few would debate there’s a problem: the middle class is struggling.[ii] Few also could fail to see the consequences of wealth concentration at its expense: insecurity, pessimism, crime, addiction, polarization, political faction, demagoguery, and authoritarianism.[iii] But many debate the causes, variously blaming regulation, taxes, debt, personal irresponsibility, inflation, corporate greed, neoliberalism, crony capitalism, racism, geographic arbitrage, union-busting, offshoring, immigration, automation, and, a topic on which you are an expert, monopolization and industry consolidation.[iv]
As there’s ample room to debate the causes, there’s ample room to debate the remedy. These include antitrust enforcement, labor unions, progressive taxes, corporate taxation, welfare, safety nets, minimum wage, basic income, job guarantees, price controls, and de-regulation. Setting aside laissez-faire fantasies conceived in Libertarian romanticism or social-Darwinian cruelty, reasonable minds can debate the merits of these plans, but must also remember their limitation: they are only palliatives and sedatives – and none of them curatives – to the disease of extreme wealth concentration.[v]
No society has ever solved the problem of wealth concentration,[vi] although the Lex Sempronia Agraria of Tiberius Gracchus perhaps came nearest. That law capped household use of public lands. Its motive was to rebuild the Roman republic’s infantry by rehabilitating the middle census ranks feeding into it. Its method was to break up the vast estates illegally occupied by Rome’s plutocracy through a combination of acreage caps and land grants. Its failure precipitated the bloody tournament of demagogues which destroyed that republic,[vii] ending any great experiments in popular government for almost 2,000 years. John Adams praised this law to Abigail Adams as a “genuine republican Measure,” while Thomas Jefferson emulated it with his 50-acre land grant plan in his draft Virginia constitution. And Operation Abigail is its spiritual heir, cut from the same republican cloth, adapted for the capitalist mode of economy.[viii]
The idea behind Operation Abigail is to scale capitalism’s own device of the incentive plan to the national level. The incentive would be created by tethering ultra-rich household outcomes to the national median household net worth such that they rise and fall lockstep in mathematical proportion to the national median. Once this ratio is in place, elites must raise the median in order to themselves enjoy any future gains, thereby encouraging them to value median gains as much as capital gains. Our initial proposal is 10,000:1, subject to adjustment within a prescribed range, along with grandfathering of existing fortunes under specified conditions.
At first blush a wealth cap may seem anti-American and anti-capitalist, but neither is true. As to the first point, America’s Founding Fathers would certainly endorse this plan.[ix] And as to the second, nothing could be more capitalist than using capitalism’s own techniques to perfect capitalism itself. It is in fact anti-capitalist not to require an incentive plan. No good capitalist allows management to roam free without one; everyone knows they’d otherwise extract the value of the enterprise to their benefit and the detriment of the stockholders.[x] In like manner we, the common stockholders of a capitalist commonwealth, should demand a national incentive plan to ensure that it operates under proper incentives. And, like a true incentive plan, this approach imposes no mandates, regulations, or corporate taxes upon enterprise. It is left to market actors to determine how to raise the median.
Our proposed household wealth cap is therefore not paired with corresponding household distributions. Our plan is to create a market incentive by which wealth will be de-concentrated via market actors rather than redistributed through government intermediaries. But we do incorporate a feature that would draw the vast majority of wealthy households to our side: While our tax would prospectively cover all households above the 10,000:1 ratio (currently around 675 households whose wealth exceeds $1.5 billion, around $5 trillion in the aggregate),[xi] we propose a moratorium on all wealth taxes for all households below the effective ratio in perpetuity, and all other federal household direct tax rate hikes for 20 years.[xii]
By conditionally grandfathering existing fortunes, excusing corporations and enterprises from its reach, and imposing a moratorium on wealth taxes for virtually the entire American body politic, our plan does not wage class warfare. It doesn’t treat “the rich” as a monolithic interest group, and we do not seek to put a knife to the plutocracy’s throat. If anything, we instead seek to put a yoke around its neck. By these distinctions, we can drive the requisite wedges into America’s plutocracy with a precision and force that has not been seen since the Lex Acilia Repetundarum of Gaius Gracchus cast a sack of daggers into Rome’s, that the knights may be raised a rival to tame the rapacious senators.[xiii]
Naturally, this incentive plan requires both effective appraisal and anti-expatriation regimes for those few households which are covered and that it encompass enough households having the requisite market power for the ratio to exert incentive power.
But there is an optimum ratio for every time and place, and properly calculated and enforced, implementation of median-top household wealth tethering would leave no lawful means of evasion for those households exceeding the limit. This is because the median net worth is omniscient. Income only accounts for revenues over a period, but doesn’t factor outflows or prices. Purchasing power may tell us something about household security, but nothing about household dependency, particularly when households are subsidized. The national median household net worth, however, accounts for the cumulative effects of all economic activity and all adverse effects operating against the median already enumerated, including debt, inflation, offshoring, automation, racial disparities, and industry consolidation and monopolization.
Although the technique of median-top tethering could ultimately help to cure extreme wealth concentration, we don’t now suggest that our incentive plan, even if perfectly administered, is a panacea that would enable policymakers to dispense with all other interventions. Once the ratio acquires the force of custom, elites consign themselves to its operation, and experience is gained, legislators could adjust it to back solve for our minimum fifty percent target. This would take time, but we can envision the day where, following the restitution of the middle class, the body politic able to contribute more than the government draws from the public treasury, the scope of appropriations and therefore the need for revenues and deficits would be reduced. In that future, the national debt could be paid down, household taxes could be severely reduced, and perhaps taxes upon enterprises could be eliminated altogether.
At least until the doctrine of median-top wealth tethering becomes into the dominant intervention regulating our national economic affairs, however, this incentive plan must exist alongside other interventions exerting more immediate effect, including anti-trust enforcement.
At the end of the day, the beauty of median-top wealth tethering is that it works no matter how covered households acquired their fortunes. Predators cannot hide behind innovators; parasites cannot masquerade as entrepreneurs. Every dollar siphoned from the median, whether by offshoring, automation, or monopolization, drags down the cap in mathematical proportion to ratio. In fact, the more that bad actors use zero-sum methods to extract wealth from the commons, the more the ratio punishes the entire elite class, which will turn the moderate elements against the insatiable. With that in mind, we close considering a few of its virtues in relation to the problems of industry consolidation and monopolization.
First, households are the final owners of virtually all wealth (approximately 95%),[xiv] making household-targeted interventions more efficient than those targeting enterprises. Second, measures targeting individuals carry greater force and are easier enforced than those applied to enterprises. Third, household tantrums are less destructive than market tantrums. Fourth, while the ratio must cover the minimum number of households collectively wielding market power, our initial ratio of 10,000:1 covers below 700, reducing the number of “arms to twist” from an enforcement standpoint that interventions targeting multinational hydrae.[xv] And fifth, and particularly relevant to your field, the more concentrated a given industry becomes, the fewer households must be covered to exert pressure.
We are eager to know your thoughts, and if they are approving, to have your endorsement.
Sincerely,
Tim Ferguson
A copy of Operation Abigail was enclosed behind this letter in the physical mailing to this recipient. Here is a link to the current version of Operation Abigail, which may have superseded the version that was submitted with this letter. Refer to the PDF scan of this letter for the version which was sent to this recipient.
[i] The common intuition of mankind is that the middle class should own at least half. See Aristotle, Politics, 1295b, and James Harrington, Commonwealth of Oceana, Part I. The intuition of ordinary Americans agrees; 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. Total national wealth is around $150 trillion. The middling share is 25.9% when the middle class is defined as the middle 60% by income quintile (Federal Reserve, Q4 2022) and 30.51% when it is defined as the middle 40% by wealth percentile (Federal Reserve, Q1 2024).
[ii] The middle-class share of national wealth has decreased by approximately 3.5% in the past 20 years, and by about 5% in the past 30. Distribution of Household Wealth in the U.S. since 1989, Federal Reserve (based on the Survey of Consumer Finances and Financial Accounts of the United States). See also Carter C. Price and Kathryn A. Edwards, Trends in Income From 1975 to 2018. Santa Monica, CA: RAND Corporation, 2020, calculating the gains that would have but did not accrue to ordinary Americans since 1975 relative to post-World War II run rates. The abstract: “From 1975 to 2018, the difference between the aggregate taxable income for those below the 90th percentile and the equitable growth counterfactual totals $47 trillion.”
[iii] That wealth concentration is the prime cause of political faction in popular republics, see James Madison, Federalist No. 10, 1787: “The most common and durable source of factions has been the various and unequal distribution of property.” See also Alexander Hamilton’s warning on extreme wealth concentration: “While property continues to be pretty equally divided, and a considerable share of information pervades the community; the tendency of the people’s suffrages, will be to elevate merit even from obscurity. As riches increase and accumulate in few hands; as luxury prevails in society; virtue will be in a greater degree considered as only a graceful appendage of wealth, and the tendency of things will be to depart from the republican standard. This is the real disposition of human nature.” New York Ratifying Convention, 21 June 1788.
[iv] See Tim Wu, The Curse of Bigness: Antitrust in the New Gilded Age, Columbia Global Reports, 2018.
[v] Historical examples include the Lex Thoria, the Cura Annonae, the Zakat, pensions in the Han Dynasty, among other forms of poor relief. Modern examples include the social safety net, welfare benefits, and more recently, basic income. None of these actually reverse wealth concentration.
[vi] 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.
[vii] That extreme wealth concentration destroyed the Roman Republic, 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.
[viii] See John Adams to Abigail Adams, 25 August 1776, on Tiberius Gracchus reviving “the old Project of an equal Division of the conquered Lands, (a genuine republican Measure, tho it had been too long neglected to be then practicable).” The Lex Sempronia Agraria revised the Lex Licinia-Sextia, imposing hard caps on private use of public lands. Adams was influenced by James Harrington, who advocated an agrarian law to balance the nobility with the commoners, capping landholdings at £2,000 annual revenues. See also John Adams to James Sullivan, 26 May 1776, advocating measures “to make the Acquisition of Land easy to every Member of Society: to make a Division of the Land into Small Quantities, So that the Multitude may be possessed of landed Estates.” See also Noah Webster’s favorable account of Gracchus in Miscellaneous Remarks on Divizions of Property … in the United States, 1790: “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.” On two specific attempts to implement a Gracchan viritim (land grant), see the first three drafts of Thomas Jefferson’s 1776 Virginia constitution, reviewed by James Madison, establishing a 50-acre viritim, and General Sherman’s Field Order No. 15, approved by Abraham Lincoln, making 40-acre land grants to freedmen from lands along the South Carolina and Georgia coasts. Read Jefferson’s 1776 constitution especially in conjunction with his 1776 laws to abolish entails and primogeniture in Virginia, by which, he announced to John Adams, he “laid the axe to the root of Pseudoaristocracy.” Thomas Jefferson to John Adams, 28 October 1813.
[ix] On ancient Greek writings praising the middle class, see Euripides, Suppliants, Line 238 et seq., Plato, Laws 679b, and Aristotle, Pol., 1291b, 1295b. On pre-revolution Enlightenment Era transmission of the middling virtues, see David Hume, Of the Middle Station of Life, 1742, extolling the virtues of middling status. That our Founding Fathers would endorse government intervention as necessary to sustain America a middle-class republic, see John Adams, Dissertation on the Canon and Feudal Law, 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, 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.: “The basis of a democratic and a republican form of government, is, a fundamental law, favoring … a general distribution of property.” That the Founders well-understood that America was born middle class, see, 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,” Benjamin Franklin, Observations Concerning the Increase of Mankind, 1751: “6. Land being thus plenty in America, and so cheap as that a labouring Man, that understands Husbandry, can in a short Time save Money enough to purchase a Piece of new Land sufficient for a Plantation, whereon he may subsist a Family; such are not afraid to marry; for if they even look far enough forward to consider how their Children when grown up are to be provided for, they see that more Land is to be had at Rates equally easy, all Circumstances considered. 7. Hence Marriages in America are more general, and more generally early, than in Europe,” Richard Price, Observations on Civil Liberty, 1776, stating that “The Colonies consist only of a body of Yeomanry supported by agriculture, and all independent, and nearly upon a level; in consequence of which, joined to a boundless extent of country, the means of subsistence are procured without difficulty,” Thomas Pownall, A memorial address to the sovereigns of America, 1783, stating that America was characterized by “a general equality, not only in the Persons, but in the power of the landed Property of the Inhabitants” and that America stands on a “natural equal level Basis,” Charles Pinckney, speech of 25 June 1787, stating: “The people of the U. S. are perhaps the most singular of any we are acquainted with.—Among them there are fewer distinctions of fortune & less of rank; than among the inhabitants of any other nation.—Every freeman has a right to the same protection & security and a very moderate share of property entitles them to the possession of all the honors & privileges the public can bestow.—Hence arises a greater equality, than is to be found among the people of any other country, and an equality which is more likely to continue. … there will be few poor & few dependent,” George Washington to Richard Henderson, 1788: “America … will be the most favorable Country of any in the world for persons … possessed of a moderate capital, to inhabit. … it will not be less advantageous to the happiness of the lowest class of people because of … the facility of procuring the means of subsistence.” For confirmation by contemporaneous observers, see Alexis de Tocqueville, Democracy in America, 1835: “Amongst the novel objects that attracted my attention during my stay in the United States, nothing struck me more forcibly than the general equality of conditions.” For confirmation by modern researchers, see Peter H. Lindert and Jeffrey G. Williamson, American Incomes 1774-1860, NBER Working Paper 18396, 2012, showing that in 1774, New England and the Middle Colonies were the most egalitarian place in the measurable world.
[x] The events precipitating executive compensation tax laws (280G and 409A) tell the story of executives running roughshod over other stakeholders.
[xi] This 10,000:1 ratio today implies an initial wealth cap of ~$1.5 billion (based on last 4-year average reported national median), surpassed by ~675 American households by the aggregate sum of $5.0 trillion. Median figures given reflect the average of 2019-2022 Census Bureau Data.
[xii] The 20-year feature is taken from constitutional precedent of the 20-year moratorium on a ban for the slave trade under Article I, Section 9.
[xiii] On this law’s wedging force, see Granrud’s Roman Constitutional History (1902): “Besides these measures for protecting and strengthening himself and his party, Gaius Gracchus carried others with the view of dividing and weakening the hostile party, the nobles and the rich. … Truly might Gracchus say that he had thrown daggers into the Forum, that the citizens, or the noble and the rich, might lacerate one another with them.”
[xiv] See The rise and rise of the global balance sheet, McKinsey Global Institute, November 2021. Shows that “Net worth is mostly held by households— half in the form of financial claims on corporates and governments, the other half in real estate.”
[xv] This is the same logic underlying corporate compliance programs as set forth in commentary note 2(C)(ii) (Large Organizations), Chapter 8, of the U.S. Sentencing Commission Guidelines: “A large organization should encourage small organizations (especially those that have, or seek to have, a business relationship with the large organization) to implement effective compliance and ethics programs.”
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.
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© 2024 John Adams Institute. All rights reserved. The John Adams Institute, operating as the Adams Institute for the Preservation of the Democratic-Republican Model of Government, is not a government organization or affiliated with any government organization. We do not endorse or oppose any specific candidates for public office. This website is not a government website. No statement or suggestion of government endorsement is intended or should be inferred. No endorsement of any of our ideas or activities by any person referenced on this website is intended or should be inferred unless otherwise explicitly stated. The John Adams Institute is a nonprofit corporation, is not a tax-exempt organization, and does not engage in commercial activities. No communication on this website is intended as a lobbying communication or as a solicitation for financial support but is only intended to stimulate intelligent public discourse. For full legal terms and disclaimers, visit our Legal page.
