In 2006 two economists turned their critical faculties on a surprising phenomenon: diplomatic parking tickets in New York City. The pair found remarkable variation among the diplomatic corps of different countries. Kuwait’s UN delegation led the pack, racking up an astounding 246 tickets per diplomat between 1997 and 2002. At the other end of the spectrum, Denmark’s diplomats didn’t get a single ticket. The economists discerned that the number of parking tickets per delegation tracked with Transparency International’s corruption index. Diplomats from high-corruption countries like Kuwait got loads of tickets; those from low-corruption countries like Denmark got few or none.
What the economists failed to note is that corruption itself tracks with another phenomenon–a nation’s level of economic inequality. Dramatically unequal countries like Kuwait tend to be hideously corrupt. Countries like Denmark–by most measures, the most economically egalitarian country in the world–tend to be honest and transparent. Because of the principle of diplomatic immunity, even the careless Kuwaitis were not technically breaking any laws. Still, their parking violations speak volumes about their sense of social cohesion, or what strangers owe one another as members of civil society.
It’s this type of elite misbehavior–self-serving though not always technically illegal–to which David Cay Johnston turns in Free Lunch. Johnston is a Pulitzer Prize-winning tax reporter at the New York Times. His recent articles have exposed the gaping economic inequality of George W. Bush’s America and given the lie to the apologists’ explanation that the new inequality stems from globalization or increasing returns to education. His analysis of tax data, which he recapitulates in Free Lunch, shows that it is not merely the poor and middle class who are being left behind. Even those Americans in the ninety-fifth and ninety-ninth percentiles on the income scale haven’t received outsized economic benefits over the past twenty-five years. The only people leaping ahead in winner-take-all America are in the top 1 percent–and more specifically the top .1 and .01 percents. In a sense, it’s not surprising to see Johnston’s work in the Times. Even its well-educated readership is just treading water in this economy. The big winners read the Wall Street Journal.
Johnston’s contention is an audacious one: the level of inequality and corruption in contemporary America puts us in league not with our putative economic peers, Canada, Europe and Japan, but with Brazil, Mexico and Russia, countries “in which adults have the right to vote, but real political power is wielded by a relatively narrow, and rich, segment of the population.” And, as in these unequal “democracies,” American elites routinely raid the public purse rather than rely on the free market to succeed. Since the “Reagan revolution,” and under the guise of privatization, deregulation and “market-based solutions,” wealthy interests have set up a system that Johnston dubs “corporate socialism,” in which they succeed through monopoly, public subsidy and even outright theft rather than through competition. And this rigged system, Johnston argues, is what’s driving the new inequality off the charts. “Subsidy economics,” he writes, “is at the core of the economic malaise felt for so long by a majority of Americans.”
Early in Free Lunch, Johnston’s lumping of the United States with Brazil, Mexico and Russia sounds inflammatory, even irresponsible, but the more one reads of his litany of plutocratic shenanigans, the less far-fetched it sounds. Johnston’s story of an oligarch getting $100 million in corporate welfare to open a call center filled with dead-end jobs in a frozen postindustrial city and then getting laudatory coverage in the local paper, which said oligarch owns, sounds right out of Putin’s Russia. But the Frost Belt city isn’t Vladivostok, and the oligarch isn’t Boris Berezovsky–it’s Buffalo and Warren Buffett.