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I want to tell you a story. Miami, 1973. An executive from a bank in the Bahamas is flying in to go on a date. Wait, actually, I'm going to let Adam tell the Miami story. Adam is my producer, who, a few months ago, I asked to look into the word 'oligarchy.' This concept that I hear about a lot lately, but I don't really understand what it means. And we've been talking. A lot. Good afternoon, Adam. Why don't you take me through where you're at. - Maybe what this project really is, is us weekly checking in about rich people for the rest of our lives.
- Could be. Do you mind if I burn some Saudi incense while we talk? - What. We'll obviously sort of figure out what, like. are you just eating a bell pepper whole? - Yeah. - [Adam] Miami, 1973. So this guy is the VP of a bank in the Bahamas, and he is in town on business. And while he's there, he has a date with this young woman. - [Johnny] Okay. - [Adam] The woman picks him up at the airport for dinner, but first they make a stop at her apartment where he leaves his briefcase. And what the man doesn't know is that the woman is a private investigator.
And the friend who set them up is an informant for the IRS, the US's tax collection agency. He's an informant for a division of the IRS that back then was called the Intelligence Unit. - [Johnny] Nice. - [Adam So they get back in the car, they continue on to dinner, and the friend who set them up, the informant, he enters the woman's apartment, takes the briefcase, and brings it to some IRS agents and they start to photograph everything inside the briefcase. Once they're done, they put everything back, they send the informant back to the apartment with the briefcase.
He leaves the briefcase there exactly as it was. Couple comes back from their date, guy has no idea that anything happened, takes his briefcase, flies back to the Bahamas. Inside those briefcase files, the IRS agents basically find exactly what they were looking for, which is a list of the bank's clients, the people who are using this offshore bank in the Bahamas to evade taxes. - [Johnny] Okay. - [Adam] And, as they also expect, the list includes multiple known figures in organized crime. But the vast majority of the hundreds of names on the list are not known criminals.
Instead, they realize that they are looking at a list of some of the richest people in America. And the investigation becomes this historic turning point. US investigators realize the degree to which the richest people in the US were moving and hiding these massive amounts of money from the government in order to avoid paying taxes. This Intelligence Unit basically realizes, we've been trying to go after organized crime for tax evasion. We haven't even touched the 0.1% in the country. That may be where the big money is in terms of collecting these unpaid taxes, right?
So here's what happens next. The IRS has a new director, and when this new director learns about this investigation, he steps in, he personally stops it from happening. - Whoa, whoa, whoa. So the new head of the IRS doesn't like that there is a crackdown on rich people hiding their money from the government? - Yeah, this is like a former elite tax lawyer, and he basically is like, this is not a proper use of the IRS's resources.
We shouldn't be spending all this time going after rich people. I'm shutting it down. And not only am I shutting it down, the Intelligence Unit is getting refocused and renamed. It's now going to be called the Criminal Investigation Division. In other words, we're gonna be focusing on like "typical crime," not ultra rich tax evasion. The US decides at the very top, basically to turn a blind eye to the ways that the ultra rich are avoiding taxes. - Whoa. In 1973, the year of that Miami briefcase heist, the richest 0.1% of Americans had 9% of the country's wealth.
Today, they have double that. A group of Americans that would fit inside a double decker bus has as much money as half the entire population. And listen, I understand that the super rich live in a completely different universe, we've made one or several videos about that. But today, we're going to do something else. We're going to understand why it's so hard to change. The very weird reality is, whether we vote for liberals or conservatives, the world keeps getting more and more lopsided, not less. And I know you know this.
Like, you don't need this chart to tell you. You can feel it. The rich are getting richer, and you aren't. And you feel like you can't really do anything about it. - [Adam] So that story about the briefcase, we heard it from this professor, who, a few weeks ago, sent us this email. He had just gotten done watching one of our old videos, and he sent us this like, quick note, really short, quick note, to let us know that we had left a couple things out. - Man, yeah, that short note. - It was the video that we made about the creation of the US Constitution.
(US national anthem plays) And basically what he wanted to tell us was that there is an another way to look at that story of the founding of the United States. And in his words, it's the story of a clash between democracy and oligarchy. - Oligarchy. - Oligarchy. - I've been hearing this word a bunch lately. I remember learning about it in school. It comes from this root word 'olig,' which means like, few or small in number. And '-archy,' which means like to rule.
It's a system where a small group of people rule. My other association with oligarchy is like, Russia. Rich oligarchs who control Russia's industries, like telecoms, and oil, and whatever. And the reason we're hearing it all the time lately is because of these guys here in the US, our billionaires. Or more specifically, these centibillionaires. Guys who have more than $100 billion, the richest of the rich in the entire world. - Bezos, an oligarch. - Zuckerberg, one of the oligarchs. - Musk is an oligarch. - But Adam is telling me that there's a deeper story here.
- If we wanna understand oligarchy, they're like the tip of the iceberg. - That there's actually something going on that is harder to see, but much more important to understand, and much more powerful than I ever imagined. And once you understand it, you start to see it everywhere. And help me out - what's everyone's favorite subject here? Money! All right! - [Adam] Okay, this is Kevin Trudeau. He was like a 1990s infomercial superstar. - [Narrator] Mega Memory, featuring Kevin Trudeau.
- [Adam] He was a bestselling author. He was a superstar pusher of quack pseudoscience, which is to say he was basically kind of a scam artist. - Your wish is your command. Love that. - He was sort of like a catch-all infomercial guy. He was a classic infomercial pitchman, basically. - Knowledge is power.but only if you can remember it. - And he is easy to laugh at, but he also got insanely rich. It's disputed how much money he was actually worth, but it's somewhere in the range of a few hundred million dollars is what he eventually.
- Damn. - He built this fortune. - Few hundred million dollars in like, what is this, the '90s or something? - Yeah. He got real successful off these infomercials. He was a joke, but he was a rich joke. And eventually the US government caught up with him, and the government sues him, and eventually they jail him and order him to pay back almost $40 million. As this is all going on before they issue that ultimate judgment of this is what you have to pay back, he knows what's coming. And he's like, "Must get money out of the US and into banks overseas."
"Every company needs accounts offshore!" - [Johnny] This is this guy typing this right before he goes to jail. And the government demands that he pays a bunch of money. - So once the government does that though, it's too late. His money managers have already moved all his money to Belize, and Lichtenstein, and Seychelles, and Mauritius. Like it's all gone, right? And it literally says in the filing, it was beyond the FTC's reach, beyond the government's reach.
The United States just literally did not have the jurisdiction to touch. So he had been completely successful in hiding his money from the government. He said, "I got no money." - Okay, wait, this feels like we're talking about offshore tax havens, or like, hiding your money. I thought we were making a video about oligarchy. - This is a fair question. We are talking about oligarchy, but not because Kevin Trudeau himself is an oligarch.
It's kind of questionable whether he was, right? The reason we're looking at him this early in the story is because he gives us a very important feature of oligarchy, - Which is what? - It's that, wealth, at a certain level, it can give you the power to evade your own government. And that idea is basically going to be what we look at for this entire first part of the story. Part one is going to be about the way that the ultra rich use that power, which is they use it to stay rich. That is kind of definitionally what oligarchy does.
- How the rich use power to stay rich. Okay. - And then part two is going to be this other question, we're going to step back a little bit, and we're going to ask, sort of, okay, this is what oligarchy looks like. Why can't we, the people, seem to do anything about this, right? Like, we live in a democracy, we have power. Why does the power of the rich seem so ingrained that it seems like our political system like, cannot change that? And that's going to require us to look back in time a couple hundred years. - Okay, so, why the system has such a hard time reining this in. - So first is the machinery that makes that happen.
AKA, the people who helped Kevin Trudeau move all that money, because they, those people, they were part of something big and important. Something that scholars call- - This wealth defense industry. - Wealth defense industry. - The wealth defense industry. A loose network of millions of lawyers, accountants, lobbyists, tax experts, political operatives, money managers, think tanks, estate planners, all working for one simple goal: to keep the government from taking rich people's money. - You don't like taxes, you don't like certain policies, you move around the globe. And the wealth defense industry offers all of those services
to be able to do that. - That's Jeffrey Winters. He's the guy who emailed us. Literally wrote the book on oligarchy. Has a new book that just came out that is about oligarchy today. - A lot of the stuff in this video is coming from Winters's new book on oligarchy. It's called "The Blind Spot." We did read more than one book for this video, but Winters is kind of the oligarchy guy. And he has kind of a unique way of thinking about oligarchy. And it starts with this idea that wealth doesn't buy you power.
Wealth is itself a type of power. If that makes sense. - People are empowered in different ways, and one of the ways is concentrated wealth. Those people who are empowered in that way, are oligarchs. - This is like a different definition from what a lot of modern scholars would tell you. A lot of them will tell you more broadly, oligarchs are just people who are wealthy and powerful. - Oligarchy is about the marriage of political and economic power. So the blending of political and economic power.
- But Winters is more specific. He says that wealth is power. And what that means is that we have to kind of shift what our idea of oligarchy is. - Yeah, because I'm starting this video, candidly, with what I learned in school. You're learning about the different types of governments. Oligarchy is a type of government, we learn, it's the rule by a small number of people. - He is saying you have to let go of that idea of "a government ruled by a small group of people" in two ways.
Number one, it's not just anyone. It's not just a group of randomly selected 10 guys who are running a government. Oligarchy, this goes back to Aristotle, oligarchy is specifically about the rich. That's the first thing. Second thing is you don't have to be running a government. Oligarchy means rule, but that can just mean power. It can just be the power held by the rich. - They don't necessarily need to be in an official role, but nonetheless, exercise outsized power for their own personal interest, their own personal wealth.
- So if oligarchy isn't rich people running a government, what does it actually look like? - So for the most part, it looks like this obsession that extreme wealth gives you. It gives you power, but it also gives you this specific obsession with protecting that power. - Throughout history, if you have an enormous fortune, others are threatening it. Other oligarchs threaten oligarchs. So one way that the wealthy get much wealthier in feudal times, for example, is to knock off other oligarchs and take everything they have.
- In other words, oligarchs in these days had to do literal wealth defense. Like physical. - What happens in the modern state is that for the first time, all of the defenses of wealth and property are actually in place by an armed state. That's what's different. Oligarchs are willing to give up their role as rulers and being armed, in exchange for a very strong guarantee from the state to do those functions, which allows oligarchs to appear as simply wealthy. Not needing to be political, not relying on coercion, - But just because the state technically is meant to protect your wealth and your property for you, it doesn't mean that your wealth is completely safe.
- [Winters] States can be redistributive, they can use taxation and other kinds of policies to reduce the overall wealth of oligarchs, and redistribute it in society. - So historically, being an oligarch meant having to use your power to defend your wealth. This way. Today, being an oligarch still means using your power to defend your wealth, but now you're trying to defend it against this, against the government trying to tax you. So my next question is, what does this actually look like today? (upbeat music) - Banking bombshell causing shock waves around the world.
- [Reporter] Richest, most powerful people on the planet. - Hiding their money in an effort to avoid taxes. - Global shadow financial system for the rich. - Secret offshore accounts. - Money laundering, - Widespread corruption and tax evasion. - Panama. - Panama. - Panama Papers. - I remember the Panama Papers story breaking like a decade ago. - Yeah, it was huge. - And I think the reason that I didn't understand it is, it was necessarily a very complicated story.
It involved the analysis of just like, terabytes of data and the mapping of connections. The Panama Papers were the leaked documents of this one company, based in Panama. They were called Mossack Fonseca. Basically a one-stop shop for wealth defense. They served lots of different types of people, so there were criminals among their client base. There were also politicians. There were also like, just regular old millionaires, right, who wanted to use them to set up a trust or something. But a huge part of their client base was oligarchs.
- The key thing about tax avoidance is you can only afford to do that once you've amassed a certain amount of capital. - An echelon of services that is only available to the richest of the rich. At the core of what these sort of major players in the wealth defense industry are doing, it's actually not that hard to understand. If you imagine any kind of asset, it can be money, it can be property, it can be stock or whatever. The government can only tax an asset if it knows who owns it because you can't tax nobody. And so the job of the wealth defense industry is to muddy the link between an asset and its owner.
You can see the asset but you don't know who owns it. And you can see the rich person, but you don't really know what they own. The point is that the connection between asset and owner runs through a maze that is impossible to navigate. - [Hoang] The webs are different every time. - These shell companies, you can't emphasize how important they are, to everything from campaign finance and financial secrecy and offshoring, to the rise of oligarchy.
They are this kind of core ingredient that touches on everything. - It sounds like this is supposed to be shadowy and difficult. I would love to understand at least a teaspoon of how these people hide their money. - So, it's. the whole thing here is that it's complicated. - This is sort of like what somebody laid out on a napkin for me. On a basic level, you have investors or limited partners, and their CITI-fund administrator.
All of this comes down to a Cayman fund. - Cayman? - Right? - [Johnny] Oh, Cayman Islands. There's a management agreement with an investment manager. .this subsidiary in Hong Kong. Private placement memorandum. It's structured to have investments in Russia, Africa, Ukraine, Southeast Asia. Every single person only has a view of the structure that they worked on. - Okay, well, I didn't understand any of that.
Okay, so they're hiding their money, they're doing it super well. How much are we talking here? - The amount of money that governments around the world basically don't get to collect in taxes, globally, it's about half a trillion a year. Right, and that's not the amount of money that's like offshore. That amount of money is like, you know, between 10 and 15 trillion, right? We're just talking about the money that would be generated by that money that governments could collect in taxes that they could use to fund programs to help their people: Half a trillion every year they're losing out on. In the US alone,
it's in the neighborhood of like 100 billion that we miss out on every year. It's not remake the United States government money, but it is a couple government agencies several times over. And in 2001, they determined that the average American's paying 15% more in taxes because of the taxes the ultra rich aren't paying. - The whole problem is anything that's not being paid that should be paid. I mean, that's basically what the honest taxpayer is making up. Which basically means that everybody is paying 15% more.
- That's 25 years ago, and I got news for you. The ultra rich pay less in taxes than they did 25 years ago. So that number is almost certainly more than 15% today. - So we pay more in taxes because these guys hide their money from the government. Wow. - Now to be 100% clear, wealth defense encompasses a lot more than just tax evasion. When these guys do wealth defense, it does look different, right? Like the world's 40th richest guy, very rich, billionaire, the state that he lived in was going to raise taxes on the rich.
He spent a few million dollars on an ad campaign to defeat the law. It worked. Now he pays way less in taxes because of it. Or there's this Australian mining billionaire. Australia put a new tax on mining. So he started his own political party, got a few people into Parliament. Parliament repealed the tax. These things are wealth defense too. But they are like one part of it. And what Winters and people like him say is that the oligarchs, the people whose wealth gives them power, and whose power they use to defend their wealth, right?
It's not just Bezos and Zuckerberg. It's a class of thousands upon thousands, most of whom you have never heard of before. - Not long ago, Elon announced that SpaceX is acquiring xAI, which could create the most powerful tech company in the world. And as a handful of billionaires continue to expand their influence across AI, media and geopolitics, the line between corporate and government power is starting to blur in strange and kind of dangerous ways like we've never seen before. That's kind of why we're making this video.
These shifts are happening incredibly quickly, and the stakes couldn't be higher. Who controls the technology, who shapes the information we receive, who actually holds the power and how the world is changing because of it has become harder than ever to follow through the noise, which is why I've been partnering with Ground News, who's today's sponsor. I've partnered with them for over a year. Ground News is an app and a website that pulls thousands of articles from all around the world, and it organizes them by story.
It breaks them down by bias, reliability, and who owns the sources you're reading. Ground News has been recognized by the Nobel Peace Center for advancing media literacy. And here's why that matters. Take the story we were just talking about with this big merger. This was covered by over 400 outlets, all with different angles. With Ground News, you can look at them all in one place. You can filter by ownership, factuality, location. This allows you to see the full context before you decide what to think.
Like take these two, you have this left-leaning outlet that focuses on the scale and concentration of wealth and power. Framing this merger as part of Musk's growing corporate empire ahead of a potential public offering. Whereas this right-leaning outlet focuses on innovation and ambition, framing this merger through Musk's goal of accelerating humanity's future. Same story, two totally different angles. Every outlet chooses their narrative and leaves out the bits that goes against that narrative.
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With that, let's get back to our story on oligarchy. (upbeat music) - I almost automatically have this picture of like, okay, this industry is doing so much damage to our society in a way, it must be masterminded by a few nefarious people, by a cabal. And the bottom line is that if you want to picture like, who are the workers in this industry, the best way to picture it is to go to Shutterstock, and type in financial service worker. And that gives you the perfect picture of who is working in this industry. It's just this guy. - Now we know what he is doing. He's just, he's setting up the shell company. - Yeah, this one actually I think has a tough client, cause she gets kind of frustrated at this point.
- And probably like, if this pays well, which I imagine it does, you're actually attracting some of the best minds to go protect people's wealth. - I mean this is what Kimberly Hoang told me, right? She teaches a lot of students who are there because they're like, the smartest of the smart, not because they're the richest of the rich. And those people are like, listen, I'd love to work for a public interest law firm, but like. - Even at the age of 21, they're like, well, how can I live a comfortable lifestyle?
Well, to go work in the private sector, to lend your talents and your brain to the private sector. And most students are pragmatic, right? - And part of why I wanted to pull this stuff is that the- - He just had a big idea. - I mean this guy just came up with like the thousandth iteration of the shell company maze structure that he came up with that day. These are not people who see themselves as doing bad things. And I don't know, maybe they aren't. These are just people with jobs.
This is how I kind of look when I do my job. - Many of the people that I study, they'll say, "Well yeah, that's all true. But if the systems were different, I would do it differently. I'm just a cog in the system. Until the systems change, this is how I have to do business." - These guys get really good at stuff, and probably way better than the government gets good at enforcing stuff. - The state in the United States now doesn't have the capacity to pay regulators the salaries that they can make in the private sector.
- So, the big lesson for me, the big reframe that I'm having right now is like, oligarchs are not just people who like, buy elections and squash tax reform. It's actually a lot more vanilla. It's like, people who can afford to hire these armies of wealth defense soldiers who help hide their money from taxes. It's like, way more widespread, and way quieter, and way harder to actually see and track down. - Right, and the thing that Winters wanted us to understand is that this level of wealth, it gives these people power whether or not they choose to use it.
You can buy an election, you can make an effort to pay zero taxes, or you can not do those things. - I would argue all of them are oligarchs, whether they're active or not. They can turn on that power anytime they want. And it's that capacity they have that we don't have, which distinguishes us from them. - There's a YouTube channel that has posted one viral video and never posted again. They posted it in 2012. You've probably seen it.
It basically visualizes how people believe wealth is distributed. They believe that the top have more wealth, but like around this much. And then they believe that it actually should be distributed more like this. And then the video shows how wealth is actually distributed. Whoa. The question for me is like, the majority of us are down here, right? Why can't we do something about this? - Yeah, so this is where we gotta talk about this study. This is the study that we've already talked about in another video. And when it came out in 2014, it was like a gigantic bombshell.
- [Narrator] Two political scientists looked at almost 2,000 policy cases over 20 years. They found that average citizens' preferences have essentially zero estimated impact upon policy change. - To be clear, a bombshell among like 43 nerds at a conference in Southern California. - Yes. It was covered by exactly one mainstream news show for about three minutes, and then never spoken of again. But. In the world of political science, this changed everything. Okay, so let me show you what it actually says, right? What that middle chart is showing us is that for what they call economic elites or what you could call the ultra rich, the more that the ultra rich want something,
the more rich people want something, that's the horizontal axis, the more likely it is to happen in terms of policy decisions. So like if 100% of rich people want a certain policy thing to happen, you know, it's very likely to happen. There's a correlation between rich people wanting something to happen in terms of policy and it happening. And if you go to the top chart, that's showing that exact same thing, but for everybody else, not the rich people. - [Johnny] And it's totally flat. it's like the more the average person wants it, it doesn't change the likelihood at all.
- It barely makes a difference in terms of policy outcomes what average citizens want. - A sprawling data set highlighting this economic elite that is able to have all kinds of outsized influence on policy decisions, even if they're not politicians themselves. - The problem with that is, wealthy people's interests are not always aligned with the interests of ordinary people. You know, mic drop. No kidding. - This was a huge deal, because basically the conventional wisdom in political science had been, in a democracy, if something is more popular, it's more likely happen.
It's not a sure thing, but the more popular something is, probabilistically, it's more likely to happen. And this was basically saying, well, yeah, but if you pull apart the ultra rich and everyone else, then you actually see that's not the case. - Is the implication here that like, democracy is not a thing, that it's all fake? - What the study is basically saying, is it's not saying your vote doesn't matter, it's saying that your vote can matter as long as you're not in conflict with the ultra rich on something. In other words, if the ultra rich all agree that they want something, and all the, everyone else agrees that they want something else, guess who's going to win pretty much every time, right? But, that's not every issue.
There are a lot of issues on which the ultra rich as a class either don't care or they don't agree with each other. And a good way to think about this is to sort of like, visualize, to picture the wealth pyramid. As a triangle. In reality, it's more like, it looks more like the Space Needle or the Eiffel Tower. You sort of have to like squish it, like it goes like that. Pretend it looks like a regular triangle, right? And sort of, one way to think through like, different issues in society, different political issues, whatever, is that you can think about them as having, A, a vertical dimension, right? Which is to say, if the rich are at the top and everyone else is sort of at the bottom of the pyramid,
the vertical dimension of some kind of issue is what deals with any kind of conflict or tradeoff between the very wealthy and everyone else. The question of higher taxes on the wealthy is the most obviously vertical question in politics, right? But issues can also have a horizontal dimension. That is like, something that deals with the differences among the rest of us. - [Johnny] Like abortion, religion, basically culture wars. - You might call it like, the things on which we fight each other. And the truth is that on these issues, on issues that have a heavy horizontal dimension, we do have a lot of freedom
to determine the outcome as voters. - They're like, you guys fight about marijuana legalization. As long as you don't talk about taxes, that's fine. - And it turns out, keeping people heavily focused on that left and right of you dimension, who's getting what down the street, or at my place of work, distracts them from an ability to all say, well, instead of what divides all of us, what actually unites us? And that is the fact that we don't have much, and others at the top have a lot. - Immigrants are taking our jobs. - We have a problem with white supremacy.
- This transgender movement, this LGBTQ. - The right wing mob. - Our number one political enemy is women. - A lot of these Republicans are dumb as sh*t. - The truth is that every single one of those statements is one that oligarchs are very comfortable with you making. And it's not because they all represent the same political view, they extremely don't. But it's because of who they all don't point the finger at. And what Winters would say is that is the exact reason why our politics, as practiced by our leaders, as practiced by our media, allow such an open playing field.
- What's so unique about our era is that we have what I call participatory inequality. We actually have real freedoms. Democracy is not fake, it's not a sham, but it's very limited. - Democracy is real, oligarchy is real, they coexist. We live in both systems at the same time, right? It is a balance, it's an old balance. And if things are feeling different to you right now, if the last 10 years, you're all of a sudden feeling like people who are worth $100 billion or more, they seem like they're really everywhere, and they seem to really be controlling everything. And you know, they're buying these political campaigns, and they're standing behind the president at the inauguration.
If it feels new, what Winters would actually say, is that it's not just that oligarchy just showed up, is that it's getting more obvious. - We're in a moment of what I've called in-your-face oligarchy. It is so visible. I think partly what's happening is that people are beginning to say there's something that isn't horizontal about this. There's something vertical about it. And the last time oligarchs have been this visible, this clearly present, was the Gilded Age.
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You can go check it out at newpress.com. The link's in the description. Let's get back to it. These guys. You may not recognize all of their faces, but you know their names. Rockefeller, Carnegie, Vanderbilt, Duke. These are guys who made huge amounts of money in oil, railroads, steel, banking, real estate, tobacco. They built huge empires in these industries like over 100 years ago. And in many cases, they consolidated full monopolies over these industries.
- Basically the same dynamics that we're seeing right now, increased monopolization, lack of actual taxation, or success in implementing taxation. - Lots of brand new technologies and businesses getting in on them, making some people incredibly rich, all while there was very little government regulation. And the wealth concentration that it produced was gigantic. By the late 1800s, the richest 1% of Americans owned half the country's wealth. These were these era's oligarchs. And their wealth defense wasn't these stock footage guys, it was government corruption.
Paying off local judges, and US senators, and entire state governments to do their will. Which is why they became known as the robber barons. Back then, they used another Greek word, plutocrats. Today we use oligarch. But all of this inequality, and corruption, and unconscionable labor practices, all of this poverty at the other end of the pyramid, it eventually produced a backlash. In 1877, railroad workers went on strike in West Virginia. It turned into a massive uprising that spread almost to the entire country.
It was the beginning of years of mass strikes, labor agitation. And this wasn't just strikes, this also gave way to populist politics. People who came into government looking to reform the system. (dramatic music) - The very visibility of oligarchs then generated a backlash, generated a kind of politics of limiting the power of the few. - And in 1890, Congress finally passed a major anti-monopoly law. And then in 1894, we got the federal income tax. The federal government now has the power to take the money from the top that is highly concentrated,
and redistribute it to the rest of the country. This was a very big deal. But here's what happens next. Less than a year after the income tax law is passed, the US Supreme Court steps in and votes, five to four, that it's unconstitutional. Struck down. Eventually, the Gilded Age would give way to what we call the Progressive Era, when reformers gained more power in the US, and they tried to right a lot of the wrongs of the Gilded Age. Strong anti-monopoly laws, campaign finance laws, constitutional amendments that let us vote directly for our senators for the first time, which, we couldn't do that before. And finally, we did get an income tax.
We had to do it via a constitutional amendment. That was 1913, nearly 20 years after Congress had first passed it. And now look what happens. This line is the income tax for the top earners in the country. And this line is the concentration of wealth among the 0.1%, the top 0.1% in America. Watch what happens. Okay, play the graph. (upbeat music) Look at this graph, look, look. The income tax goes up. This huge wealth inequality goes down.
- The golden age of American capitalism. 1950s, 1960s, 1970s, where a lot of people made a lot of money, but it wasn't concentrated to the same degree that it is now. (upbeat music) - Okay, hang on. I want to just go back because we got the income tax, and it fixed a lot of things, and it was transformative. But I just want to like, review part of that story. 1894, Congress passes the income tax, it goes into effect, it becomes law. 1895, Supreme Court overturns it, says this is unconstitutional. So it's a five-to-four decision, which means that five men overturn the representatives of the entire country,
and then it takes almost 20 more years, like a whole generation passes before we're able to actually get that law via constitutional amendment, which is insanely hard, to pass a constitutional amendment. - The only way to stop the Supreme Court, which had made this decision in favor of oligarchs, was to change the Constitution. There was no other way. - And this is the thing that Jeffrey Winters emailed us about. He wanted us to understand that the American system, where five men can overrule the will of millions like this, this is very, very deliberately designed.
This is an example of how oligarchy is baked into the system to begin with. And to understand what he wanted us to know about this, we have to go back even farther in history to the beginning of the United States. So, here's Jeffrey Winters's email. Short email, as we've said. Real quick note he dashed off. Love this guy. He had just watched this video about how the American federal government was designed. And I would love if every viewer paused and went to watch that video. But if you're not gonna do that, all you need to know to understand the point that Winters wants us to understand is sort of two things.
Number one, the federal US government, it's split into three sections, right? Congress, the president, the federal courts. So, Congress, bicameral, split into two houses, right? Lower house, the House of Representatives, this one is voted on directly by us. We get to vote on who our representative is, and they represent us directly in the House of Representatives, right? The Senate, today, we do the same thing. Today, we do vote for who our senator is. But for the first 100-plus years of the United States, it was not that way.
The way it's written in the Constitution is, the state government, the state legislature gets together and they decide, this is who New York's senator is going to be. So it's not democratically elected, it's decided upon by the state. The president, chosen by, famously, the Electoral College, which today, again, has a connection to how we vote in each of the states. But at the time, didn't really. It was supposed to be the electors, a wise group of men who was going to decide who the president was. And then you have the federal court system and the judges who sit in the federal court system are selected by the president,
and they're confirmed by the US Senate. And the second thing you have to understand, is that for any law to exist in the American system, all these bodies have to align. So both houses of Congress have to agree to pass a law. If either of them disagrees, it doesn't pass. The president can always veto a law that he doesn't like, and the court system can always decide, this is unconstitutional, this law is actually not allowed. So there's a lot of different ways a law can fail in the American system. And what we learn about in school is that's called checks and balances. Another way of saying that is that it spreads power around multiple bodies. And this is what we say in our video.
- Spread around so doesn't get centralized around a king. - Yes. But what Winters was emailing us about, what he was saying, is that if you look at who's actually choosing who gets to be in these different bodies within the federal government, distributing power among them is not really spreading power around, because only this one part of it is designed to be responsive to the democratic will of the people, and the rest of them are chosen by other powerful people. - The Supreme Court's role is to make sure democracy can't do certain things. And the function of the Senate is to block what the House does. That's its historic function.
- Winters's whole theory of the founding of the United States, is that the Constitution, the American Constitution, doesn't spread power around. It is consolidating power with rich people. - So in that Constitution video, I remember taking great pains to go into these transcripts and really emphasize what these guys were saying, what they were saying in that room to sort of tell our story. And you're telling me that like, there's an alternative set of quotes that like, tells this other story that these guys were actually designing an oligarchy.
What were they saying? I'm curious what those are. - It's true, like you can go into the transcripts of the Constitutional Convention, and you can tell two different stories. Which of those stories is correct? They're probably both correct. But so let's look at this one, right? So you have James Madison warning that, under democracy, poor and working people, or as he says, "Those who labor "under all the hardships of life, "and secretly sigh for a more equal distribution." That under democracy, those people are going to outnumber what he calls, "those above the feelings of indigence." So rich people, right? And that, "power will slide into the hands of the former."
In other words, democracy might not give rich people enough power. Or there's another one, another founder, he basically reminds his colleagues, he's like, guys, remember, a big reason that we created the Senate, "was to secure the rights of property." This is another one saying, "the evils we experience flow from the excess of democracy." I don't know if any of these things is a smoking gun, but to me, what it sounds like it adds up to is, they weren't just sort of like ideologically skeptical of a democracy that hadn't been tried before. They were specifically skeptical of regular working and poor people having too much power.
It is this idea of a tyranny of the majority, that you need to balance out the majority with something else. And this is a core part of America's system of government. And I don't think it's wrong. It's just that Winters says there's another way to look at it. What he says basically, is that is a big part of why it's important to talk about the US, even though oligarchy is a global system. - The United States in the 1780s set the model for how oligarchy and democracy were going to coexist. Many of the limitations on what democracy could do were thought up, put in place institutionally in the United States, and that really became a model
for democracies around the world. - So what Winters would call the oligarchy that's baked into our system, this idea that you can't have a tyranny of the majority, that you have to have these tempering forces that counterbalance what the majority wants, we definitely exported that. - It coexists with a true democracy, with a place where regular people do have a voice. But there's a tension and a spectrum between oligarchy and democracy. That's like a slider that goes back and forth. And we, as we've seen that one graph that dips down when the income tax comes in, and then comes back up, we're just sliding back and forth on that spectrum.
- And again, the point is not that like, oh, the US is an oligarchy at heart. No. It's that the US is both of these things, and globally, if you live in a democracy, you almost certainly live in a system that is both of those things. The US is not unique in this sense. We're Americans, we like to talk about America, but the US is also important to talk about in this story because of our role in the formation of what modern democracies look like, in our role in terms of the concentration of wealth that we have here, et cetera. At our founding, in our source code, oligarchy is right there. So is democracy, but they're both there.
- We have within our reach, a far more healthy society. But inequality tears at the fabric of society. It wears it thin, and it increases those conflicts horizontally among us. - Okay, so now what? Like what does all this mean? What can we do about it? First, let me just state plainly what I see as wrong here. It may be different than what you see as wrong here, but my read in all of this is that it's not actually bad to have rich people in a society.
Someone who invented something, started a business, whatever, fine. Get rich, sell your stuff, get customers, get rich, buy cool stuff, whatever. The problem I think we can all agree upon is that when a small group of the top rich people in a country play by different rules to protect their money, that's wrong, that's unjust. That's money that belongs to all of us according to our laws. That's oligarchy. Rule by a few in the interest of those few. And it happens through all this boring paperwork. It's invisible, it's hard to track down. And it's incredibly hard to change.
- I teach a lot of 19 and 20 year olds, and one of the things that scares me the most about that is, if they think politicians are greedy and corrupt, then they're not going to participate. And if they don't participate, there are no democratic guardrails that prevent the rapid concentration of wealth and power into the hands of a few. And I think that's precisely what oligarchs want. They want a paralyzed and cynical body politic. - But there actually are a few things that we could change right now. First, we actually have laws that would help this.
- [Adam] So we have something called the Corporate Transparency Act. It is a law on the books. - Like we have a law that actually bans anonymous shell companies. - [Adam] It created a whole reporting system inside the US Treasury Department. And then in 2025, the treasury suddenly made a rule that every US company is exempt from it. - Simply having transparency in this realm would have been a massive setback for oligarchs. - Next, let our government actually investigate financial crimes of the ultra rich.
Right now, the government can't really investigate super-rich people, because super-rich people have armies of wealth defense professionals hiding their money for them. We just don't have enough resources to actually fight that fight. So instead, the IRS ends up going after like your rich dentist neighbor, instead of going after the billions that are being stolen away by oligarchs. Properly funding the IRS, an agency that every single person in this country hates, is actually something we should do so they go after the right people.
- Experts also talked to me about a wealth tax. So let's not just tax income, let's tax the actual wealth of the richest people. - Average citizens are already paying a wealth tax. - It's called a property tax. It's assessed by the government, you pay it annually. - But listen, for this to really change, it's going to have to be something deep and structural. Something that changes in the DNA of our country, how our system works.
- Much deeper structural transformations that would really change the way wealth power and its political influence would be felt. - And Winters in particular can get kind of radical here. - One is, eliminate all senates. Now someone would say, how do you do that? It's in the Constitution. And what I'm saying is, during ruptures, things which one would think are not possible, become possible.
- I don't know if we need to go that far. I don't know, maybe, who knows? But there is another way of looking at this, which is that we can also tell ourselves different stories. - Would it be possible to disrupt this link between being rich and being good? So many people take for granted that you need to run the government like you run a business. It's not true. They're not the same things. - But remember, we've done this, a version of it. We've made this kind of change once before.
We were in a situation where a few rich unelected dudes controlled the whole society. And look, we reversed it. But you know what? That didn't happen all at once. It happened because, for decades, people were talking about it. They were clamoring about something being wrong, calling it out, stewing on solutions, not letting this be normal. And then it took a catastrophe, a World War, a Great Depression, to create the opening for those ideas to actually take root. - The idea is that what seems absolutely ridiculous, undoable, not feasible, is actually possible during crises, during ruptures. And the key question is, are you ready?
- Which means, today, we need to be looking at this stuff. We need to be questioning it, questioning our beliefs about it so that when the moment is right, we'll be ready to upgrade our society to one that is hopefully a little more equal and a little more fair. Stories like this one look very different depending on where you read them. Ground News helps me see those perspectives side by side. Go to ground.news/johnnyharris for 40% off the unlimited access Vantage plan to see for yourself.
