Keating: A Rich Man’s Country?
by Maryann O. Keating, Ph.D.
Democrats and Republicans tend not to discuss politics at social events. Recently, however, conversation at a local restaurant converged into two shared concerns: growing income inequality and oligarchy, the excessive influence of the wealthy.
Oligarchies concentrate power in the hands of elites who direct government policy for their own benefit, with ordinary citizens having little say. Oligarchy takes many forms: rule by royalty, religious leaders, military officers, business leaders or wealthy technocrats. We like to think the U.S., unlike Russia or China, is not controlled by such elites. But the question deserves a closer look.
Americans rightly focus on the potential for wealthy individuals and corporations to dominate policy and election outcomes. Economic inequality alone is not the defining feature of oligarchy- it is, however, a symptom. Oligarchy advances whenever any powerful interest group exerts undue control over local or national government.
Guarding against these tendencies requires vigilance, not just emotional reactions to conspicuous wealth or dramatic business failures. What matters is identifying specific laws and practices that benefit particular industries and interest groups at the expense of everyone else. In other words, tolerance for failure and success is acceptable; corruption and government favoritism are not.
A high degree of income inequality characterizes oligarchy but does not cause it. In the absence of fraud or distorted government policy, an idealized correct distribution of income does not exist. Simply equalizing income through taxes and government distribution is not the answer; individuals should remain free to pursue either large incomes or other personal goals.
It is worth noting that the top 1 percent of income earners in the U.S. already pay roughly 38 to 40 percent of all personal federal income taxes and subsidize local amenities. The tax burden should remain within a range that does not create a perverse incentive for the wealthy to seek government control to protect their assets.
Pre-tax data do confirm that income inequality in the U.S. has increased substantially since 1980. The lowest 20 percent of U.S. households earn less than half the national median income while the upper 20 percent earn about twice that. However, programs such as the Earned Income Tax Credit, Temporary Assistance for Needy Families, Food Assistance, Section 8 Housing Assistance, and income-driven student loan repayment substantially narrow or even erase the gap between the lowest and middle-income households. Fortunately, more U.S. households are moving into the upper-middle-income category. The issue, then, is not income redistribution but whether individuals have access to achieving higher income levels. The upward and downward mobility of households is even more significant than income shares.
Data dividing households into five groups from high to low indicate that roughly 55 percent of households change income groups over any given decade. About half of those in the bottom 20 percent move up. Nevertheless, roughly two thirds of the top 1 percent remain there over the same period. This data is useful but somewhat misleading. Upward and downward income mobility is closely linked with age. For example, in 2024, households headed by someone 44-54 years old reported the highest median income at $116,800, while those over 65 averaged less than $57,000.
The reality is that the economy is an ever-changing process of continuous innovation and “creative destruction.” New industries create high earners and generate temporary monopolies with above-normal profits. At the same time, some industries decline and workers are displaced.
What is the best response to witnessing outrageous displays of wealth for some along with an affordability crisis for others? If a nation is serious about avoiding control by oligarchs, it must tolerate failure in certain industries but in no way guarantee long-run profits. High profits should not be used to stifle competition, direct government policy or block upward mobility.
Does current policy actually encourage oligarchic behavior?
“Too Big to Fail” describes a corporation, financial institution or industry so large that its collapse is believed to threaten the broader economy, prompting government intervention. When corporations realize the government will rescue them, they take on excessive risk.
In 2008 The Federal Reserve stepped in to save the entire financial sector by buying up the assets of distressed industries. This temporarily suppressed interest rates which increased the outstanding value of stocks, bonds and other financial assets- concentrated largely among the wealthy — and fueled social resentment. Over time, that monetary expansion resulted in inflation, creating an affordability crisis.
“Zombie” companies — firms that, over three or more years, fail to earn enough profit to cover interest payments on their debts — grew rapidly in the early 2000s together with the few believed too big to fail. When the FED buys debt issued by these firms, it distorts competitive credit allocation. This protects the high salaries of existing CEOs and reduces their risk. Easy money fuels the rise of giant firms and keeps heavily indebted zombie firms alive at the expense of startups.
Ironically, the policy response to firms “requiring” intervention resulted in higher interest rates to control inflation and more regulation — both of which disproportionally burden smaller companies. Only companies with armies of lobbyists and lawyers can understand and manipulate the massive additional rules created by government.
Every industry has a tendency to seek preferences. In his farewell address, President Joe Biden warned that an oligarchy was taking shape in America aided by a tech–industrial complex. Similarly, Eisenhower, in his own farewell address decades earlier, issued the same warning about the military-industrial complex. The antidote in both cases is the same: genuine competition, tolerance for business failure and the unobstructed entry and exit of firms in the marketplace.
A common assumption holds that low import barriers benefit wealthy capitalists at the expense of working Americans. In fact, tariffs foster oligarchy, as seen in the long-term decline of nations that protect certain industries. The issue here, however, is how the wealthy influence policy. The telling sign of oligarchic nations are tariff schedules that unabashedly give preferences to producers threatened by imports.
Is it correct to say that Americans reject elite leadership and prefer a system in which advancement depends on demonstrated potential? If so, universities, corporations, professional practices and entertainment foster careers based on this conception of merit. However, a teenager who loses a college athletic scholarship may suspect his family’s inability to host recruiters played a role. He may have a point. Operation Varsity Blues — the 2019 criminal conspiracy in which wealthy parents bribed coaches and officials for their children’s admission to several top American universities — raised awareness of the problem. A society is headed in the wrong direction when young people, in particular, think that who you know rather than merit or the rule of law determines outcomes.
Can the U.S. in general be characterized as an oligarchy? Compared with most other countries, probably not.
The Heritage Foundation’s Index of Economic Freedom scored 184 countries on Government Integrity. Bribery, nepotism, cronyism, patronage, embezzlement and graft corrupt institutions. In 2026, the U.S. earned a grade of 77.1 out of 100; 22 countries scored higher. This result is fairly consistent with other studies measuring oligarchy.
Concerns on both sides of the political divide are legitimate Those on the left fear the control of wealthy individuals and corporations over public policy. Those on the right fear the inability of individuals and private institutions to resist an entrenched coercive government elite.
A common commitment would begin with preserving constitutional checks and balances in place and maintaining genuinely open competition. Free and fair elections are the foundation. However, rebuilding institutional trust is equally important. This requires something like the “broken window” theory in fighting crime. Small acts of favoritism invite larger ones. The question is whether or not Americans across the political spectrum are willing to hold each other accountable and flag down preferences wherever they appear.
Disillusioned younger Americans leaning towards socialism need to see — and learn how to draw — a clear line between public and private interests.
Maryann O. Keating, Ph.D., a resident of South Bend and an adjunct scholar of the Indiana Policy Review Foundation, is co-author of “Microeconomics for Public Managers,” Wiley/Blackwell.
Comments...