TCS Daily

Prosperity Creates an Election Stalemate

By James K. Glassman - November 20, 2000 12:00 AM

Capitalism and new technology have combined to create the first mass affluent society, says social commentator Dinesh D`Souza, author of The Virtue of Prosperity, Finding Values in an Age of Techno-affluence. That's changed the political debate from how to create wealth to how to spread its use to higher purpose, creating political gridlock.

James K. Glassman: Dinesh, many commentators during the election controversy have said that the results show the nation more divided than ever between haves and have-nots. In your new book, The Virtue of Prosperity, Finding Value in an Age of Techno-affluence, you indicate there may be something larger going on. What do you see as the message from the election?

Dinesh D`Souza: Prosperity is now the defining characteristic of American society. Over the past two decades America has created the first mass affluent class in world history, what I call the "overclass". In 1980, there were fewer than 1 million families in America with a net worth of $1 million or more. Now the number of millionaire households has climbed to 5 million. Five million households - that's 20 million people! And Americans want to keep this prosperity going, showing this by voting, in effect, for gridlock.

Glassman: Could you explain that a little more?

D'Souza: There's a new debate going on. The old debates -- which were about collectivism, the size of government, coping with scarcity - are fast becoming obsolete. Politicians over the past century argued endlessly over the creation of wealth. As late as 1992 Bill Clinton ran against George Bush on getting the economy going again. But this time both Al Gore and George W. Bush took the strong economy for granted, even to the extent of telling us what they would do with a projected 10-year surplus. The new debate is over the use of wealth. Of course, people will continue to argue, as Bush does, that the government should not tax 25 cents on a dollar, or as Gore does, that it should take 26 cents on a dollar. But it is hard to get too excited about that debate. What I think we are starting to see is the emergence of a new debate that focuses on technology and the New Economy.

Glassman: Now, when you are talking about millionaires, just to define our terms, you are talking about people who have a million dollars in assets, is that right?

D'Souza: Yeah, I'm talking about people with a net worth of a million dollars. The "Overclass" refers to people who make a $150,000 a year and have a net worth of $1 million or more. In 1980, there were very few of those people. In 1980, in fact, if you made $55,000, you would be in the top 5 percent of income owners in America. It seems hard to believe, yet $55,000 in 1980 equals $75,000 today, and the fact is that if you make $75,000 today, you are squarely in the middle class, you are not rich. You need $150,000 today to be in the top 5 percent.

So, there has been a redefinition of the class structure in America, kind of a redrawing of the class lines, and as a result, this has enormous implications for politics and for education and for philanthropy, and so on.

Glassman: What is the source of this over-class, as you call it, and the new prosperity that is changing our politics?

D'Souza: It is important to realize what is new about this New Economy. Some people say that what's new about it is the revival of capitalism. But, of course, capitalism has had revivals in the past, such as the 1920s, the Gilded Age. Even technology, of course, is not new. In a sense, one can say the Internet is continuous with earlier forms of technology, like the telegraph and the telephone and the car and the airplane, all of which helped shrink distances of space and time. Even cyberspace, in a sense, is not new. But we forget that fiberspace is where we are when we talk on the phone. It's been around for over a hundred years.

Glassman: So what is different today?

D'Souza: What is new and what has happened in the last 20 years is the collapse of the Berlin Wall and the elimination of any real conceivable alternative to capitalism. From the past we had capitalism, but we can always imagine other systems, other alternatives. Today, capitalism appears intellectually unrivaled as the only system that can be imagined to really create wealth.

That's one thing that is new -- the creation, in a sense, of a single world market, the increasing porousness of borders, and the emergence of the entrepreneurs. A generation ago John F. Kennedy stood up and said: If you're young, if you're idealistic, if you care, you should join the Peace Corps; you should become a public servant; don't devote yourself to your own self-interest, focus on the public interest. Reagan challenged him. Reagan said: No, it's the entrepreneurs who are the embodiment of the American possibility. And I think that Reaganite idea has triumphed. So, today, more people want their kids to be like Bill Gates than like Bill Clinton.

Glassman: And what else is new?

D'Souza: And then there is technology. The Internet and other technologies have changed the way we do business in America and also changed the way we live our social lives. E-mail, for example, has become indispensable to many of us in communicating, and the Internet is a tool of research. We also have other new forms of technology that are coming down the pike -- miniaturization technology, so-called robotics, biotechnology. And this is giving us human beings a new power, not just over nature, but also over human nature - the power to alter our own genes, the power to alter the destiny of future generations.

So, the combination of the triumph of capitalism, the emergence of the entrepreneur, the integration of the world market and new forms of technology has all created a truly new situation.

Glassman: You have noted there are two critiques of this New Economy. Did you see either of them in the election?

D'Souza: There are two critiques that have emerged on techno-affluence, which I in some ways see are merging together. One is the left-wing critique. It was reflected in Al Gore's phrase "prosperity for all." It is in the name of inequality. Gore argued that prosperity is wonderful but that it has to be extended to all to be good. The other is the right-wing critique, which is in the name of community and morality. It was echoed in the campaign by George Bush's slogan "prosperity with a purpose." His implication is that prosperity is not enough if moral and cultural values deteriorate. Material progress has not produced moral progress. So, Bush, while wanting to keep the economy humming also pledges to restore such things as civility and decency to public life.

Glassman: How do you appraise the two critiques?

D'Souza: Now, for the left-wing critique, I have limited sympathy. And by that I mean that what's happened is that even though we hear a lot of bewailing about the wealth gap, the truth of the matter is that the old mantra, which is the rich are getting richer and the poor are getting poorer, no longer applies. The current situation is that if the rich are getting richer, the poor are also getting richer, although not at the same pace. And as I mentioned earlier, what has happened since 1980 is that many people have left the middle class and have joined the upper-middle class, or as I put it the over-class. And in doing so, the distance between them and the rest of the population has increased.

Glassman: The critics say that's a bad thing. Is it?

D'Souza: No, it's a very good thing. It means that avenues of personal fulfillment that were previously open only to an aristocratic few are now open to the many. So, wealth has become a mass phenomenon and that's good.

Glassman: What about the right-wing critique?

D'Souza: The right-wing critique is a little more serious because in effect it says that we don't care about that. The issue is not who is being left behind. The issue is that wealth itself creates anti-social and destructive effects, that wealth and technology -- techno-capitalism -- uproots families, destabilizes communities and, in a sense, gives the ordinary man the same opportunities for debauchery that were previously available only to the aristocrats.

Glassman: Have you found that to be true?

D'Souza: It is true that a wealthy society is going to be, I think, a more materialistic society and, to a certain degree, a more self-indulgent society because it puts in our hands tools that we didn't have before. There's a sense in which scarcity and necessity and even conflict impose a kind of compelled solidarity among communities. I think, for example, of Tom Brokaw's book, The Greatest Generation. What made "the greatest generation" so great was the Depression and World War II. It was scarcity and war that produced the virtues of the greatest generation and to some degree the failure of the greatest generation was its failure to replicate itself. It could not produce another great generation.

Glassman: Affluence did that?

D'Souza: I believe one reason is affluence. The generation of the '30s and '40s wanted to have things for their kids, things that they never did, so we got the spoiled kids of the '60s.

Glassman: So, affluence has a down side.

D'Souza: But there's another side to it that I think has been downplayed. And that is that wealth also frees us from necessity and drudgery. Necessity often forces us, or forces people, to do bad things. So, in that sense, wealth does create opportunities for virtue because it opens up avenues of fulfillment and even spiritual driving. I quote my colleague, Michael Novak, in my book: "The Bible tells us that man does not live by bread alone, but you have to have bread to know that."

What to me is intriguing is that I see in Silicon Valley and in the tech world a lot of interest in the so-called values issues. How do I integrate wealth into a life that is more meaningful? How do I integrate my own success into some notion of the civic good, of the public good? So, there's a desire to make wealth serve a higher purpose, and I think in general that's a very good aspiration.

Glassman: When you talk about technology being a driving force in producing this over-class, what do you mean by that? In other words, where does the wealth come from?

D'Souza: Well, the wealth comes from two sources, one is the creation of new stuff, and the other is the elimination or the great reduction of transaction costs. Here is what I mean by new stuff. You know in traditional economic theory that we think of supply and demand, and we think of people demanding things and then businessmen going out and providing it. And to me what is interesting is, in the last several years, the complete vindication of what may be called the supply-side notion, that we have all kinds of stuff that comes down the pipe that no one ever asks for.

Glassman: If no one asks, then why would businesses produce it?

D'Souza: I remember Akiro Morita, the late CEO of Sony, once told me how he got the idea for the Sony Walkman. Nobody wrote him letters saying: I want a Walkman; I want to have a radio-like devise attached to my head. It's just that when he went to the beach, he would see this kid carrying around these heavy boom boxes that were cumbersome for them and annoying to everybody else. And so he brought in the engineers at Sony and said: Listen, why don't we figure out how we can take a car quality stereo, attach a couple of nodes to it, and let people have a portable radio or cassette player. Initially, the Sony engineers were a bit flabbergasted. But they agreed to do it, and the new product stormed the market. So new stuff that we didn't know, in fact, that we didn't think we needed, has become now indispensable. That's one thing that's new.

Glassman: What's the other thing?

D'Souza: The second thing that's new goes back to something that the Nobel Laureate Ron Coase discussed. He said that what's interesting about capitalism is that if somebody produces something I write, for example, why do I have to go to a publisher? Why do I have to do interviews? Why do I have to buy ads? Why can't I just sell directly to my readers? Why aren't all products sold directly? Why don't all products bring producers and consumers into direct contact? And he realized that the reason for this is transaction cost -- the cost of getting the good from the production side to the person who needs it. You have to find that person, you have to tell him about it, you have to convince him to buy it, and then you have to get it to him. What the Internet does and what technology is doing is substantially reducing transaction costs, and that is going to make a big difference.

Glassman: Where does the government fit in to all of these? In other words, would you say that one of the reasons for this boom in wealth has been the lack of government interference?

D'Souza: Absolutely. I think that the government since the Reagan era has gone from an attempted engineer of the economy to being a spectator or, at best, a referee. And that's the role we want the government to play -- we want the government to adjudicate contracts; we want the government to insure that there is a framework in which the free market can flourish. But it is hard for me to believe that, 15 years ago, when I was a newcomer to the United States, there were tempestuous debates in the country over having blue-ribbon commissions of academics and government leaders and captains of industry sitting around a round table and deciding questions such as how many computers should be made next year? Thank God, that kind of nonsense is now behind us. Not even Al Gore is proposing anything like that.

So there has been a triumph for the market. But it is also true, ironically, that affluence creates two things. One is that it creates government surpluses. The other is that it creates a psychological mentality among the well-off in which they become soft about the hard virtues that led to this affluence, and so they begin to say things like, "Oh, gee, we got to make sure that no one is left behind," and "Oh, gee, we can spend more money on education," and so on. So there is a new openness in the country to government. Government has not only more means at is disposable in the form of surpluses, but it also is able to make an argument to the well-off, saying, "Hey, gee, you've done pretty well. Why don't you let us do something for everybody else?"

Glassman: You mentioned before that you see the two critiques of the New Economy merging. I can see Gore's approach in what you've just said. But what about Bush's? And what about the division in the election?

D'Souza: Both Gore and Bush want to do something to extend prosperity and channel it to serve the good of society. Their disagreement is over how to go about this. Gore wants the government to be the instrument. Bush wants to increase the investor class through private retirement accounts while reforming the culture by setting an example of integrity in the White House and giving parents more power to shape their children's lives by, for example, letting them choose what school their children attend. And the election shows that American people have not made up their mind about these conflicting approaches to making prosperity serve some higher purpose. They know, though, divided government has produced the greatest boom in history. So, they've voted, once again, for gridlock. They seem to believe that prosperity by itself contains moral benefits by giving more people the resources to find meaning in their lives.

Glassman: I think we've gotten our 15 minutes. I really appreciate it.

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