Today’s plan by Elizabeth Warren is more republican orthodoxy. She wants to keep private equity firms from looting and destroying U.S. corporations.
I first read about private equity firms in Robert Kuttner’s book, published last year, Can Democracy Survive Global Capitalism?:
Invariably, a private-equity takeover means an even deeper squeeze on worker wages, benefits, and job security. The truly nefarious aspect of the private-equity business model is that windfall profits are typically extracted in advance, so that when the actual operating company falters, the equity partners experience very little loss, if any. The model turns on its head the usual incentives to operate a business prudently and to view workers as long-term assets. Private-equity partners accomplish this trick by borrowing heavily against a newly acquired company, paying themselves an exorbitant “special dividend,” as well as management fees, that together typically far exceed the actual equity they have invested in the company. Then then move to aggressively cut costs. If they succeed, they often sell the stripped-down company to someone else. if they cut too deeply, they’ve already made their fortune up front, and they can use bankruptcy either to shut down the operation or to shed its debts and restructure it.
As an example, Kuttner gives Bain Capital’s takeover of KB Toys in 2000. Bain sent KB into bankruptcy, shedding 10,000 jobs but raking in a 360 percent gain on its investment.1
If you want some background for most of Warren’s policies, read Kuttner’s book as well as Ganesh Sitaraman’s 2017 book The Crisis of the Middle-Class Constitution. Sitaraman, the book’s back flap reports, is a law professor as well as Warren’s former policy director and senior counsel. It was Middle-Class Constitution that tipped me off to Warren’s republican roots.
By “republican roots,” I don’t mean that Warren was a Republican, though she was. And by “republican” (lower-case “r”), I don’t refer to a party but to someone who supports a republican form of government, as opposed particularly to a monarchy. The republican-monarchist debate was big in England during the seventeenth century and big here around the time of our revolution. We should debate it anew: our president wants a monarchy, and he’s trying to tear down what’s left of republicanism.
England’s seventeenth century brought the republican theorist behind Sitaraman’s title. James Harrington’s 1656 book Commonwealth of Oceana describes what Sitaraman calls a “middle-class constitution.” Harrington’s idea is based on the balanced constitution of Aristotle and Polybius — the one, the few, and the many — except that the balance isn’t simply the short-term avoidance of the ancients’ frequent civil wars between the haves (“the few” in the ancient constitutions) and the have-nots (“the many”). His insight was the constitutional potential inherent in the “middle people” (our middle class) who were unknown to the ancients.
Harrington had two principal insights, according to Sitaraman. First, “If inequality between rich and poor created strife, relative economic equality should eliminate internal conflicts, create a stable government, and guarantee freedom.” Political freedom, as Hannah Arendt points out in On Revolution, was the express purpose of both the American and French revolutions. Both revolutions started with liberation from monarchy, but only the American one ended with what would be a longstanding republican constitution. The French Revolution was taken over by the destitute, and the purpose of the revolution’s “relative economic equality” wasn’t to guarantee freedom but to guarantee bread.
The success of the American Revolution relative to the French one would not have surprised Harrington. The economic inequality in France fed the revolution, but in the long run it starved freedom. Napoleon was as much of an absolute ruler as Louis XVI before him.
Warren’s policies don’t set out to create a revolution in the French tradition or otherwise, but to restore us to our current revolution, which began in 1776. Her economic policies have a political end (“political” still in the larger sense: republican vs. monarchical government) — republican freedom.2
Harrington’s second insight, Sitaraman continues, was that “if the balance of property changed, the political system would change as well.” We’ve lived through Harrington’s insight in reverse since the mid-1970s: our middle class has shrunk and the rich have gotten far richer; consequently, we’ve become (as Jimmy Carter pointed out) an oligarchy. Our political system has changed for the worse.
Harrington’s plan for addressing the economic inequities of his day was enacting agrarian laws, which would cap real estate ownership by annual yields and end primogeniture in favor of equal distribution to the children of large fortunes.3 Our situation is too complicated to be addressed by agrarian laws, as Warren’s plan today attests.
Before Harrington and the Hebrew Revival that influenced him, republican theory concerning property was much like today’s classical liberal theory: defend property rights with almost no exceptions. But Harrington’s then-new republican theory, which came as the threat of a republican form of government was being realized in England, changed republican orthodoxy. Harvard Professor Eric Nelson points out Harrington’s influence on Montesquieu’s and Jefferson’s views on the limits of private ownership:
It is a measure of Harrington’s extraordinary influence that, from 1660 onwards, agrarian laws would remain permanently at the center of republican political thought. Writers from Montesquieu to Rousseau, and from Jefferson to Tocqueville, would regard it as axiomatic that republics ought to legislate limits on private ownership in order to realize a particular vision of civic life.4
Montesquieu explicitly states his fear that economic inequality would sink a republic: “Inequality would enter at the point not protected by the laws, and the republic will be lost.”5 Sitaraman summarizes Montesquieu’s proposed solutions:
The answer Montesquieu suggested, was to “regulate to this end dowries, gifts, inheritances, testaments, in sum, all the kinds of contracts.” Passing on wealth to others in an unregulated fashion would “disturb the disposition of the fundamental laws.” After a long discussion of innovative methods for regulating the transfers and concentration of wealth, Montesquieu recognized a practical reality: “Although in a democracy real equality is the soul of the state, still this equality is so difficult to establish that an extreme precision in this regard would not always be suitable.” He therefore suggested establishing outer bounds of wealth and then passing laws that will “equalize inequalities” thorough “burdens they impose on the rich and the relief they afford to the poor.”6
A mid-1880s letter from Jefferson to Madison addresses the mass unemployment Jefferson was observing in France at the time. Here’s the more theoretical part of the letter:
I am conscious that an equal division of property is impracticable. But the consequences of this enormous inequality producing so much misery to the bulk of mankind, legislators cannot invent too many devices for subdividing property, only taking care to let their subdivisions go hand in hand with the natural affections of the human mind. The descent of property of every kind therefore to all the children, or to all the brothers and sisters, or other relations in equal degree is a politic measure, and a practicable one. Another means of silently lessening the inequality of property is to exempt all from taxation below a certain point, and to tax the higher portions of property in geometrical progression as they rise. Whenever there is in any country, uncultivated lands and unemployed poor, it is clear that the laws of property have been so far extended as to violate natural right. The earth is given as a common stock for man to labour and live on. If, for the encouragement of industry we allow it to be appropriated, we must take care that other employment be furnished to those excluded from the appropriation. If we do not the fundamental right to labour the earth returns to the unemployed. It is too soon yet in our country to say that every man who cannot find employment but who can find uncultivated land, shall be at liberty to cultivate it, paying a moderate rent. But it is not too soon to provide by every possible means that as few as possible shall be without a little portion of land. The small landholders are the most precious part of a state.
Jefferson here seems to propose the end of primogeniture with regard to inheritance, an indexed property tax rate, and the grant of small parcels of land. But he leaves a qualified door open for other ideas (“legislators cannot invent too many devices for subdividing property, only taking care to let their subdivisions go hand in hand with the natural affections of the human mind”), and he says that the unemployment of those who wish to be employed is a sign that “the laws of property have been so far extended as to violate natural right.”
Jefferson’s concern for what America could do to avoid the kind of economic disparity he saw on the streets of Paris should be ours, too. It’s certainly Warren’s concern. Her concern for economic fairness, I believe, is not borne chiefly out of compassion but out of statesmanship.
Our heritage of Atlantic republicanism, therefore, has always been anchored in an awareness of how economic disparity can undermine a republic. Republicans who fail to share that concern are republicans in name only.
- Robert Kuttner, Can Democracy Survive Global Capitalism?, at 111. ↩
- Ganesh Sitaraman, The Crisis of the Middle-Class Constitution, at 53 – 55. ↩
- Eric Nelson, The Hebrew Republic: Jewish Sources and the Transformation of European Political Thought, at 79. ↩
- Nelson, supra, at 86. ↩
- Montesquieu, Spirit of the Laws, at 5.5 (45). ↩
- Sitaraman, supra, at 57 – 58. ↩