Crackpots like Kevin Phillips.

Bruce Bartlett

7/10/2002 12:00:00 AM - Bruce Bartlett
Anyone who has ever followed the stock market knows that there are certain people who are "stopped clocks." They predict market crashes year after year after year. But like the clock that is right twice a day, if they keep at it long enough, eventually they are right. However, anyone who followed their advice consistently would lose money 99.99 percent of the time. In politics, too, there are stopped clocks. One is Kevin Phillips. For more than 20 years, he has been writing books making the same tired argument about how the rich are running everything, getting richer by the day off the sweat of the working man's brow, and that they will soon be brought down by a populist revolt. Republicans are the handmaidens of the rich in Phillips' various diatribes, and will reap the whirlwind unless they become Democrats, he repeatedly asserts. Since the editors at New York publishers are overwhelming liberal, they are happy to publish Phillips' Republican-bashing whenever there is a Republican in the White House. True to form, Random House has just published a new screed by him, "Wealth and Democracy." As in his previous efforts, it is long on overheated rhetoric and meaningless facts, and short on analysis and understanding of complex social, historical and economic trends. Phillips gets off on the wrong foot literally on the first page, when he quotes Abraham Lincoln as saying, "As a result of the war, corporations have been enthroned, and an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people until all wealth is aggregated in a few hands and the Republic is destroyed." The only problem with this quote, which perfectly encapsulates Phillips' worldview, is that Lincoln never said it. It is a bogus quote that exists nowhere in Lincoln's speeches and writings. Professional historians know this. But of course, Phillips is not a professional historian. Nor is Phillips an economist. This is readily apparent in his extensive discussion of inflation and deflation, which just happen for no apparent reason in his book. He alludes to the Federal Reserve's role in prolonging the Great Depression by causing the money supply to collapse, but Phillips never links this to the deflation that followed. Nor does he mention, even in passing, the critical role of the Smoot-Hawley Tariff in triggering the stock market crash and ensuing economic downturn. To Phillips, it was all due to "over-consumption" or some other nonsense. Phillips makes a big deal out of the ups and downs in prices over the last two centuries, and he even prints a helpful price index all the way back to 1790 in an appendix. But he almost never converts monetary values from the past into current dollars. Nor does he put figures into context, because it would reduce their shock value if he did. An example of Phillips' misuse of economic data is his discussion of corporate taxes. He reports that they have fallen from 26.5 percent of federal receipts in 1950 to just 10.2 percent in 2000. The clear implication is that big businesses are getting away without paying their fair share. An honest discussion, however, would have pointed out that corporate profits fell from 12 percent of GDP to 8.4 percent over this period, explaining almost all the decline in taxes. Much of the book is taken up with page after page of rich people and how rich they are or were, as if this has some meaning. Yet Phillips never notes the heavy turnover on his lists, because it undermines his thesis that America has become a plutocracy. But as Alexis de Tocqueville observed 150 years ago, "The rich are constantly becoming poor," and, "the rich daily rise out of the crowd and constantly return thither." Just look at all the Internet fortunes that have gone up in smoke lately. A careful reading of Phillips' sources shows that many are to openly Marxist historians like Gabriel Kolko and Eric Hobsbawm, and ultra leftist magazines like The Nation, for whom Phillips now writes. Indeed, the following quote from Marx could serve as a summary of his book, "Accumulation of wealth at one pole is ... at the same time accumulation of misery ... at the opposite pole." Contrary to Phillips, Lincoln celebrated wealth and the right to be rich. This is what he really said on the subject: "I take it that it is best for all to leave each man free to acquire property as fast as he can. Some will get wealthy. I don't believe in a law to prevent a man from getting rich; it would do more harm than good." I think most Americans share Lincoln's philosophy, not the whining envy of crackpots like Kevin Phillips. Note: The last Lincoln quote may be found in Roy P. Basler, ed., "The Collected Works Of Abraham Lincoln" (Rutgers University Press, 1953), vol. 4, p. 24. The phoniness of the first Lincoln quote is discussed in Matthew Pinsker, "The Bogus Quote Kevin Phillips Fell For," available at http://historynewsnetwork.org.