After the Crash

Dispatches From a Long Recovery (Est. 10/2024)

After the Crash

Billionaires are a Sign of Economic Failure

Inherited wealth and crony capitalism have created an aristocratic class that undermines social mobility and democracy

By Max Lawson

Source: Inequality.org

The New York Times published an editorial comment on its front page in January 2019, provocatively entitled “abolish billionaires.” The editorial raised a serious question: what if instead of being a sign of economic success, billionaires are a sign of economic failure?  In what ways can the boom in billionaires, and the dramatic increase in extreme wealth generally, be harmful?

To answer this question, we need to understand the origins of billionaire wealth, and to understand how that wealth is used once it is gained.  The answer to both these questions I think rightly casts doubt on the value of the super-rich in our society.

Approximately one third of billionaire wealth comes from inheritance. It is very hard to make the case for the economic utility of inherited wealth, and instead there is a strong case for the fact that it undermines social mobility and economic progress. It creates instead a new aristocracy who are rich simply because their parents were rich which is hard to see as a good thing.

Whether inherited or secured in other ways, extreme wealth takes on a momentum of its own.  The super-rich have the money to spend on the best investment advice, and billionaire wealth has increased since 2009 by an average of 11 percent a year, far higher than rates ordinary savers can obtain.

Bill Gates is worth nearly $100 billion dollars in 2019, almost twice what he was worth when he stepped down as head of Microsoft.  This is despite his admirable commitment to giving his money away.  As Thomas Piketty said in his book Capital in the 21st Century, “No matter how justified inequalities of wealth may be initially, fortunes can grow beyond any rational justification in terms of social utility.”

My Oxfam colleague Didier Jacobs calculated a few years ago that another third of billionaire wealth comes from crony connections to government and monopoly.  This could be for example when billionaires secure concessions to provide services exclusively from government, using crony connections and corruption.  The Economist has developed a similar measure of crony capitalism with similar findings. What is clear it seems to me is that corruption and crony connections to governments are behind a significant proportion of billionaire wealth.

Almost all sectors of our global economy are also now characterized by monopoly power, as is detailed by Nick Shaxson in his great new book, the Finance Curse. Whether food, pharmaceuticals, media, finance, or technology, each sector is characterized by a handful of huge corporations.

Decades of largely unquestioned mergers and acquisitions, where corporations have bought up competitors, have led to this.  Historically, and especially in the United States in the early part of the 20th century, monopoly power was rightly viewed as a serious threat to the economy and to society, and steps were taken to break up monopolies.  It was President Franklin Roosevelt who famously said that “government by organized money is just as dangerous as government by organized mob.” However, in recent decades, neoliberal economics has led a much more benign view of monopoly power, and very little action is now taken to dismantle them. I think this is a key distinction between neoliberalism and classical liberal economics.  These monopolies impose hidden monopoly taxes on every consumer, as it enables these companies, and their wealthy shareholders, to extract excessive profits from the market, directly fueling the growth in extreme wealth at the expense of ordinary citizens.

The actions of corporations, including the move towards monopoly, are driven by a relentless focus on ever-increasing returns to shareholders — shareholders who are primarily the very same extremely wealthy people.  Our new Oxfam paper on the “Seven Deadly Sins” of the G7, released this week, shows how returns to shareholders have increased dramatically whilst real wages have barely increased.

Behind corporate power and corporate actions is increasingly the power of super-rich shareholders.

Once billionaire wealth is accumulated, the way it is used also casts doubt on how useful it is to have billionaires.  The super-rich use their wealth to pay as little tax as possible, making active use of a secretive global network of tax havens, as revealed by the Panama Papers and other exposes.

One ground-breaking study that made use of this leaked information showed that the super-rich are paying as much as 30 percent less tax than they should, denying governments billions in lost tax revenue, that could have been spent on schools or on hospitals.  The super-rich are supported in this by the Society of Trust and Estate Practitioners (STEP), a secretive organization of over 20,000 wealth managers that actively pressures governments to reduce taxes on the richest.

Billions are not just used to ensure lower taxes. They can also be used to buy impunity from justice, to buy politicians, or to buy a pliant media.  The use of “dark” money to influence elections and public policy is a growing problem all over the world. The Koch brothers — Charles and the recently deceased David — two of the richest men in the world, have had a huge influence over conservative politics in the United States.

Another recent Oxfam study  showed the many ways in which politics has been captured by the very rich in Latin America.  Many of today’s new breed of nationalist, racist leaders have substantial financial backing.

This active political influencing by the super-rich directly drives greater inequality, by constructing reinforcing feedback loops, in which the winners of the game get even more resources to win even bigger next time.

For all these reasons, I think there is a strong case to be made that rather than being celebrated, as one U.S. commentator recently said, “every billionaire is a policy failure,” and that in particular if we are to end poverty and build fairer societies, we need to bring an end to extreme wealth.

How 90% of American Households Lost an Average of $17,000 in Wealth to the Plutocrats in 2016

By Paul Buchheit

Source: Information Clearing House

America has always been great for the richest 1%, and it’s rapidly becoming greater. Confirmation comes from recent work by Thomas Piketty, Emmanuel Saez, and Gabriel Zucman; and from the 2015-2016 Credit Suisse Global Wealth Databooks (GWD). The data relevant to this report is summarized here.

The Richest 1% Extracted Wealth from Every Other Segment of Society 

These multi-millionaires effectively shifted nearly $4 trillion in wealth away from the rest of the nation to themselves in 2016. While there’s no need to offer condolences to the rest of the top 10%, who still have an average net worth of $1.3 million, nearly half of the wealth transfer ($1.94 trillion) came from the nation’s poorest 90% — the middle and lower classes, according to Piketty and Saez and Zucman. That’s over $17,000 in housing and savings per lower-to-middle-class household lost to the super-rich.

Put another way, the average 1% household took an additional $3 million of our national wealth in one year while education and infrastructure went largely unfunded.

It Gets Worse: Each MIDDLE-CLASS Household Lost $35,000 to the 1% 

According to Piketty and Saez and Zucman, the true middle class is “the group of adults with income between the median and the 90th percentile.” This group of 50 million households lost $1.76 trillion of their wealth in 2016, or over $35,000 each. That’s a $35,000 decline in housing and financial assets, with possibly increased debt, for every middle-class household.

Housing Wealth for the 90% Has Been Converted into Investment Wealth for the Plutocrats

In the 1980s, the housing wealth of the bottom 90% made up about 15 percent of total household wealth (Figure 8 here and Page 41 here).

In the 1980s, the corporate equities owned by the richest .01% made up about 1.2 percent of total household wealth (Figure 8 here).

Housing was 12 times greater than super-rich stock holdings back then. Now they’re nearly equal. The home values of 112,000,000 households have been reduced to just over 5 percent of total wealth, while the stocks and securities of the richest 12,000 households are approaching 5 percent of total wealth. Our homes have turned to dust, and the plutocrats have turned the dust into gold.

Even the Wages of the Poorest Americans Have Been Transferred to the Plutocrats 

It’s bad enough that the poorest 50% of America have no appreciable wealth, but their income has not increased in 40 years (see Table 1 here). More evidence comes from Pew Research.

As Piketty, Saez, and Zucman note, the richest 1% and the poorest 50% “have basically switched their income shares.” They explain, “We observe a complete collapse of the bottom 50% income share in the US between 1978 and 2015, from 20% to 12% of total income, while the top 1% income share rose from 11% to 20%.”

Making America Great for 1% of Us 

In his book, Glass House: The 1% Economy and the Shattering of the All-American Town, Brian Alexander describes today’s America through the lens of his hometown of Lancaster, Ohio, which had been a leading glasswares manufacturer. But the town started falling apart in the 1980s. A major glasswares company was bought up with borrowed money by private equity firms, which then cut jobs and wages, allowed manufacturing facilities to fall into disrepair, stopped contributing to pensions, moved company headquarters out of state, and demanded tax breaks to keep the glassware plant in Lancaster.

Capitalism as usual. Yet 59 percent of Lancaster’s county voted for Trump. Alexander explains that the people of Lancaster “remained captured by an ultra-conservative, anti-tax philosophy that prevented them from raising funds to repair the crumbling streets..”

Delusions persist about the power of the market and the dangers of governing ourselves. The business media has conditioned us to fear the words ‘social’ and ‘public,’ as if they connote evil or ineptitude or anti-Americanism. But the public good depends on cooperation. Society fosters individual accomplishment, not the other way around.

The obscene transfer of wealth and income to the plutocrats won’t end until we demand a return to the Commons, where we work as a society rather than allow predatory plutocratic individuals to control us. There are 112 million households in America that are giving thousands of their hard-earned dollars to the 1%, and we have finally begun to fight back, together, as a massive force of Americans who refuse to let the theft continue.

 

Paul Buchheit is a writer for progressive publications, and the founder and developer of social justice and educational websites, including: UsAgainstGreed.org, PayUpNow.org, and RappingHistory.org. This article was first published at Common Dreams

Skynet Ascendant

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By Cory Doctorow

Source: Locus Online

As I’ve written here before, science fiction is terrible at predicting the future, but it’s great at predicting the present. SF writers imagine all the futures they can, and these futures are processed by a huge, dynamic system consisting of editors, booksellers, and readers. The futures that attain popular and commercial success tell us what fears and aspirations for technology and society are bubbling in our collective imaginations.

When you read an era’s popular SF, you don’t learn much about the future, but you sure learn a lot about the past. Fright and hope are the inner and outer boundaries of our imagination, and the stories that appeal to either are the parameters of an era’s political reality.

Pay close attention to the impossibilities. When we find ourselves fascinated by faster than light travel, consciousness uploading, or the silly business from The Matrix of AIs using human beings as batteries, there’s something there that’s chiming with our lived experience of technology and social change.

Postwar SF featured mass-scale, state-level projects, a kind of science fictional New Deal. Americans and their imperial rivals built cities in space, hung skyhooks in orbit, even made Dyson Spheres that treated all the Solar System’s matter as the raw material for the a new, human-optimized megaplanet/space-station that would harvest every photon put out by our sun and put it to work for the human race.

Meanwhile, the people buying these books were living in an era of rapid economic growth, and even more importantly, the fruits of that economic growth were distributed to the middle class as well as to society’s richest. This was thanks to nearly unprecedented policies that protected tenants at the expense of landlords, workers at the expense of employers, and buy­ers at the expense of sellers. How those policies came to be enacted is a question of great interest today, even as most of them have been sunsetted by successive governments across the developed world.

Thomas Piketty’s data-driven economics bestseller Capital in the Twenty-First Century argues that the vast capital destruction of the two World Wars (and the chaos of the interwar years) weakened the grip of the wealthy on the governments of the world’s developed states. The arguments in favor of workplace safety laws, taxes on capital gains, and other policies that undermined the wealthy and benefited the middle class were not new. What was new was the political possibility of these ideas.

As developed nations’ middle classes grew, so did their material wealth, political influence, and expectations that governments would build am­bitious projects like interstate highways and massive civil engineering projects. These were politically popular – because lawmakers could use them to secure pork for their voters – and also lucrative for government contractors, making ‘‘Big Government’’ a rare point of agreement between the rich and middle-income earners.

(A note on poor people: Piketty’s data suggests that the share of the national wealth controlled by the bottom 50% has not changed much for several centuries – eras of prosperity are mostly about redistributing from the top 10-20% to the next 30-40%)

Piketty hypothesizes that the returns on investment are usually greater than the rate of growth in an economy. The best way to get rich is to start with a bunch of money that you turn over to professional managers to invest for you – all things being equal, this will make you richer than you could get by inventing something everyone uses and loves. For example, Piketty contrasts Bill Gates’s fortunes as the founder of Microsoft, once the most profitable company in the world, with Gates’s fortunes as an investor after his retirement from the business. Gates-the-founder made a lot less by creating one of the most successful and profitable products in history than he did when he gave up making stuff and started owning stuff for a living.

By the early 1980s, the share of wealth controlled by the top decile tipped over to the point where they could make their political will felt again – again, Piketty supports this with data showing that nations elect seriously investor-friendly/worker-unfriendly governments when investors gain control over a critical percentage of the national wealth. Leaders like Reagan, Thatcher, Pinochet, and Mulroney enacted legislative reforms that reversed the post-war trend, dis­mantling the rules that had given skilled workers an edge over their employers – and the investors the employers served.

The greed-is-good era was also the cyberpunk era of literary globalized corporate dystopias. Even though Neuromancer and Mirrorshades predated the anti-WTO protests by a decade and a half, they painted similar pictures. Educated, skilled people – people who comprised the mass of SF buyers – became a semi-disposable under­class in world where the hyperrich had literally ascended to the heavens, living in orbital luxury hotels and harvesting wealth from the bulk of humanity like whales straining krill.

Seen in this light, the vicious literary feuds between the cyberpunks and the old guard of space-colonizing stellar engineer writers can be seen as a struggle over our political imagination. If we crank the state’s dials all the way over the right, favoring the industrialist ‘‘job creators’’ to the exclusion of others, will we find our way to the stars by way of trickle-down, or will the overclass graft their way into a decadent New Old Rome, where reality TV and hedge fund raids consume the attention and work we once devoted to exploring our solar system?

Today, wealth disparity consumes the popular imagination and political debates. The front-running science fictional impossibility of the unequal age is rampant artificial intelligence. There were a lot of SF movies produced in the mid-eighties, but few retain the currency of the Termina­tor and its humanity-annihilating AI, Skynet. Everyone seems to thrum when that chord is plucked – even the NSA named one of its illegal mass surveillance programs SKYNET.

It’s been nearly 15 years since the Matrix movies debuted, but the Red Pill/Blue Pill business still gets a lot of play, and young adults who were small children when Neo fought the AIs know exactly what we mean when we talk about the Matrix.

Stephen Hawking, Elon Musk, and other luminaries have issued pan­icked warnings about the coming age of humanity-hating computerized overlords. We dote on the party tricks of modern AIs, sending half-admiring/half-dreading laurels to the Watson team when it manages to win at Jeopardy or randomwalk its way into a new recipe.

The fear of AIs is way out of proportion to their performance. The Big Data-trawling systems that are supposed to find terrorists or figure out what ads to show you have been a consistent flop. Facebook’s new growth model is sending a lot of Web traffic to businesses whose Facebook followers are increasing, waiting for them to shift their major commercial strategies over to Facebook marketing, then turning off the traffic and demanding recurr­ing payments to send it back – a far cry from using all the facts of your life to figure out that you’re about to buy a car before even you know it.

Google’s self-driving cars can only operate on roads that humans have mapped by hand, manually marking every piece of street-furniture. The NSA can’t point to a single terrorist plot that mass-surveillance has disrupted. Ad personalization sucks so hard you can hear it from orbit.

We don’t need artificial intelligences that think like us, after all. We have a lot of human cognition lying around, going spare – so much that we have to create listicles and other cognitive busy-work to absorb it. An AI that thinks like a human is a redundant vanity project – a thinking version of the ornithopter, a useless mechanical novelty that flies like a bird.

We need machines that don’t fly like birds. We need AI that thinks unlike humans. For example, we need AIs that can be vigilant for bomb-parts on airport X-rays. Humans literally can’t do this. If you spend all day looking for bomb-parts but finding water bottles, your brain will rewire your neurons to look for water bottles. You can’t get good at something you never do.

What does the fear of futuristic AI tell us about the parameters of our present-day fears and hopes?

I think it’s corporations.

We haven’t made Skynet, but we have made these autonomous, transhuman, transnational technolo­gies whose bodies are distributed throughout our physical and economic reality. The Internet of Things version of the razorblade business model (sell cheap handles, use them to lock people into buying expensive blades) means that the products we buy treat us as adversaries, checking to see if we’re breaking the business logic of their makers and self-destructing if they sense tampering.

Corporations run on a form of code – financial regulation and accounting practices – and the modern version of this code literally prohibits corporations from treating human beings with empathy. The principle of fiduciary duty to inves­tors means that where there is a chance to make an investor richer while making a worker or customer miserable, management is obliged to side with the investor, so long as the misery doesn’t backfire so much that it harms the investor’s quarterly return.

We humans are the inconvenient gut-flora of the corporation. They aren’t hostile to us. They aren’t sympathetic to us. Just as every human carries a hundred times more non-human cells in her gut than she has in the rest of her body, every corpora­tion is made up of many separate living creatures that it relies upon for its survival, but which are fundamentally interchangeable and disposable for its purposes. Just as you view stray gut-flora that attacks you as a pathogen and fight it off with anti­biotics, corporations attack their human adversaries with an impersonal viciousness that is all the more terrifying for its lack of any emotional heat.

The age of automation gave us stories like Chap­lan’s Modern Times, and the age of multinational hedge-fund capitalism made The Matrix into an enduring parable. We’ve gone from being cogs to being a reproductive agar within which new cor­porations can breed. As Mitt Romney reminded us, ‘‘Corporations are people.’’

On the Meaning of “Middle Class” and the State of the Middle Class

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By Dr. Nicholas Partyka

Source: The Hampton Institute

When politicians talk, one of the recurring themes about which they spew platitudes is the economy. It would be the subject of another essay to unpack what is meant by “the economy” when politicians and other capitalist elements use that term. This aside, in discussing the economy there is a phrase that politicians use with such alacrity that it has become trite. This phrase is, “middle class”. Politicians, pundits, and social commentators deploy this term in many contexts, but almost always appealing to its ubiquity of membership, critical role in democracy, and moral virtue in their speeches. These constant references to the middle class in the popular political discourse have rendered this term impenetrably vague. If we listen to politicians then one would be led to believe that most Americans are members of this middle class, whose health and prosperity the politicians never tire of proclaiming as their highest priority. Speeches are one thing, reality another. Let us interrogate this concept of the “middle class”, and see what to make of this notion that plays such a prominent role in American political discourse on the economy.

With an election year looming, and a Presidential election at that, with their seemingly always lengthening election cycle, the phrase “middle class” will only be heard more and more frequently from now until after November 2016. The President’s recent invocation of the phrase “middle class economics” is only the latest salvo between the two dominant capitalist political parties, as they try to position themselves in the public’s mind as the true defender of – the almost apotheosized- middle class. Candidates and their supporters will be arguing more and more vigorously about which party, or which policies, will do more to help this middle class. About the only thing that candidates from both parties will agree on is that the middle class is in trouble, and that economic policies should be designed which maximally promote the welfare of this class. The two major political parties in this country have divergent views about what kinds of policies best aid this alleged middle class. However, both parties are attempting to win votes by claiming to be champions of the middle class, a class with which a great many Americans still continue to identify themselves.

We’re going to explore two distinct, but interrelated questions in what follows. First, we’ll want to know, Who and how many, people are middle class? Second, we’ll want to ask, What does it mean to be middle class? The answers to these questions will likely have to be made relative to particular societies at particular times; though some generalization is possible. To begin we’ll look at what it has meant historically to be middle class. Then we’ll look more in depth into the meaning of being middle class in the contemporary American context. What we will find is a great deal more confusion and ambiguity about this notion of a “middle class”. So much so that we should start to wonder if this notion retains any usefulness.
The Middle Classes, Historically

For most of history being middle class simply meant occupying, however tenuously, a social status that was between that of a slave and that of a noble. Basically, the middle class was composed of everyone who was not technically a chattel slave, and lacking the noble pedigree of a true aristocrat. In most societies of the ancient world this simple definition would indeed make most people middle class. However, this understanding glosses over the highly variegated nature of socio-economic positions possible between technical chattel slavery and blue-blooded nobility. For instance, debt bondage and serfdom, both forms of un-free labour, would not cause one to be dropped from the middle class on this accounting. For example, in the ancient world slaves were often employed as overseers, that is in a management capacity. It would not have been uncommon for slave overseers to sometimes direct the labour of technically free men.

We can see in certain socio-political cleavages that splits have occurred in many contexts between the lower ranks of these middle classes and the higher elements of this class. Middle classes have struggled against entrenched aristocracy and nobility at many points in history for social advancement and political inclusion. However, almost always, in the critical moment, the higher elements of these middle classes would betray the interests of the lower elements, whose bodies, blood and ballots had been used to gain them inclusion. Marx would come to call these “higher elements” of the middle classes petit-bourgeoisie, signifying the much greater material, and indeed much more importantly, aspirational affinity with the bourgeoisie than the proletariat.

Two examples will suffice here. In ancient Greece we see the demos, or “the people” engaging in political struggle for inclusion in the political life of the polis. But who is this demos? First, Greeks used the word demos in two distinct ways. In one sense, we might call the wide sense, it meant the whole citizen body of city-state in general. In the narrow sense, on the other hand, the demos meant the ‘common people’, the ‘lower classes’, the aporoi, the propertyless. This group included a very wide range of socio-economic and political situations, and certainly contained an upper and lower group. The main cleavage within the ranks of the demos is between the better off elements and those struggling to get by. It goes without saying that slaves would not be counted among the demos. Those who are struggling are more, or in worst case entirely, dependent on others for their livelihood. The Greeks called Thetes and Banausoi. The former we might call day-labourers or wage earners, the latter we could translate loosely as artisans. These were the lowest two of Solon’s five social classes, and while not slaves, were subject to various kinds of forced labour. Though some artisans and merchants could be quite wealthy, most were not. Most merchants, as opposed to retailers, though were likely to be foreigners, and thus not eligible for citizenship.

When we focus on the internal political conflicts of the Greek polis of the Classical period (roughly the 5th and 4th centuries BC), what we see is a struggle over citizenship, that is over access to political participation in government. While the socio-economic and political realities of the ancient world are complex, in the main the conflicts were between an urban middle class of mainly artisans and middling farmers on the one hand, and the traditional land-owning oligarchy which monopolized political power on the other.[1] The political struggles over demokratia in this period revolved mainly around whether or not the banausoi and thetes should be given citizenship rights. Chiefly important among the rights of citizens were the right to vote in the Assembly, to hold public office, the serve as a juror in the dikasteria, to bring matters before the courts; at Athens in particular, citizens would be entitled to receive a share in any disbursement of the polis‘s dividends from the proceeds of the Laurium silver mines.

The demos was the main agent of social change in the ancient Greek polis, the traditional aristocracy certainly saw it this way. They saw “middle class” elements as being too politically ambitious, which is in part why they deploy the term pejoratively. By “middle class elements” the traditional aristocracy would have lumped together both very wealthy artisans, and much more humble enterprises, all of whom were united in not being aristocrats by blood lineage. Wealthy merchants and artisans might themselves employ slaves both for carrying out production, as well as the overseeing of this work, but they lacked the “best” kind of background. This made them unsuitable for political participation in the eyes of established elites. Smaller artisans and merchants, who didn’t have exorbitant wealth to recommend them, would have been thought only the more unsuited to political life.

All of the main institutions of Classical Greek demokratia were devices designed to help poor and working-class free men defend themselves from the depredations of their richer counterparts. Rule by majority vote in an Assembly, ekklesia, open to all citizens; freedom of speech, parrhesia, in the assembly; large popular courts of law, dikasteria, composed of fellow citizens; rule of law, isonomia, as passed by the Assembly and administered in the courts; the belief that political power should be scrutinized, subject to euthyna, are all practices that helped the aporoi defend their highly precarious social position from the predatory behavior of wealthy citizens. As one eminent scholar describes, “Since the majority of citizens everywhere owned little or no property, the propertied class complained that demokratia was the rule of demos in the narrower sense and in effect the domination of the poor over the rich.”[2]

In the ancient Greek polis political participation was usually restricted to those native adult men who could meet a certain property qualification. In the main, in order to be a citizen one had to possess enough wealth to afford to outfit themselves with the hoplite panopoly. This was the complete set of armaments associated with the heavy armed infantry. If one could afford to buy one’s own armor, and afford the leisure time to learn to fight as part of a phalanx formation, then one was considered worthy to participate in the political life of the polis. The idea being that if one was wealthy enough to afford the hoplite panopoly then one had enough of a stake in the success and survival of the polis to be entitled to a role in the government of the city-state. Those “old money” and nouveau riche aristocrats who were wealthy enough could afford to outfit themselves with horses as well as more ornate armor and weapons, and thus the traditional prestige associated with the cavalry. The question of democracy in the ancient Greek world, was thus a struggle over the inclusion of those who could not afford the traditional citizenship qualification based on the connection of wealth and military service, and who because they were not slaves could make legitimate claims to be entitled to such inclusion.

Renaissance Italy serves as another great example. In the rise of the classic northern Italian city-state podestaral form of communal government there was employed in the popular political discourse a term, the popolo. Loosely translated, it means the people. However, once again we’ll see that this notion of the people actually covers over a major divergence within between well-off members and working-class members. As one scholar claims, “When, therefore, the long and venomous struggle broke out between the popolo (the “people”) and the nobility, the popular movement drew its force and numbers from the middle classes, not from the poor, the day labourers, or the unskilled”.[3]

The political conflict in 13th century northern Italian city-states was, much like in the ancient Greek world, fundamentally about participation. Beginning in the 12th century, a political conflict between church and secular authorities saw the rise of communal governments in all the major Renaissance city-states in northern Italy. At the time, this form of government was identified with the self-government of local magnates and aristocrats instead of more alien authorities imposed by church leaders in Rome. In this early phase of commune government, “The nobility dominated the consulate, manipulated the general assembly, and ruled the city, except where the emperor successfully intervened, as at Vicenza, Siena, and Volterra, or where the political power of the Bishop persisted.”[4]

It was against this restricted form of government that the political forces of the popolo were arrayed in the 13th century. By organizing for combat against the military forces of the nobility, the popolo was able to seize power in the commune and change the structure of commune government, in that it was able to secure more participation for those in its ranks; or more correctly, some of those in its ranks. The popolo, much like the demos, was a class composed of better off artisans, tradesman, merchants, et cetera. It was a class of persons who had to work for a living, that is they had to do physical labour themselves to achieve their subsistence. These people were free, in that they were not slaves or serfs, but were not aristocrats, they did not possess the right kind of lineage. Political participation was at this time still restricted to those who did have the proper kind of aristocratic genealogy.

Much as in the case of the ancient Greek world, the main political cleavage in the Renaissance northern Italian city-state between the popolo and nobilitas largely concerned the way individuals made a living. Nobles owned large landed estates, and derived their wealth and status from being able to control the labour of others, i.e. vassals and serfs. Those who were not aristocrats could be wealthy, could own land, but typically had to work themselves. That is, the typical member of the popolo could not control the labour of others to the same extent that a noble could. The political conflicts of the 13th century were not simplistic conflicts between land owners and merchants, the reality was much more complicated than that.

Both popolo and nobilitas would be distinguished from a day-labourer in that they would be considered independent in the right sort of way, they would be considered the people who had real freedom. What distinguishes the position of the poorest classes is that they are dependent on others for their livelihood. Thus, for example, the serf is dependent on the lord, the tenant farmer on the land-owner, and the day-labourer on the employer who pays him. These kinds of people would have been considered not really free in the right way, especially politically. Though all God’s children would have been understood to be free, some were not considered free enough to be worthy of inclusion in government.

In what would become an unfortunate recurring tendency, once the leading – i.e. the wealthiest- elements in the “middle class”, the popolo, achieved inclusion in communal government, they allied with the old aristocracy and turned against the lower, more ‘middling’ elements in the popolo to suppress their continued agitations for further liberalization of political participation. Thus, as one scholar puts it,

“Up to about the middle of the thirteenth century, it was in the interest of bankers and -long-distance traders to batter the entrenched communal oligarchy with an eye to loosening the political monopoly of the old consular families, mostly of noble lineage… But after about 1250 or 1260, having fully achieved their aims and in fact now menaced by the political ambitions of the middle classes, they broke with the popolo, thereby dividing and undermining the popular movement”.[5]

With the erosion of nobility and its traditional privileges across Europe and North America from the 17th century onward, as well as the formal abolition of chattel slavery in these societies, this traditional understanding of middle classes is not sufficient for the world we inhabit. Being neither a slave nor a noble will not help many locate their social position in contemporary societies, when these societies do not formally legally recognize slavery or nobility. As capitalism remade societies across western Europe and North America in this same period, it reshaped the nature of the classes that composed those societies. Thus, a new way to understand what the middle-class is will be needed.
The Idea of the Middle Class in Post-WWII America

There are some who are reluctant to define the middle class using income measurements. The alternative proposed by many of these critics is a more aspirational definition based on consumption. This definition is based on both the level and the kind of consumption desired by individuals who aspire to be middle-class, ie. who desire to live what is deemed a middle-class lifestyle. Most of the essential features of this conception of the middle class are derived from the experience of Americans post WWII. The vast pool of purchasing power accumulated by US citizens during the war led in the post-war period to rising standards of living for a wide swath of the population. The patterns of consumption, the norms and values, of what we today consider definitional of the middle class in America were originated to a large extent in this period.

It was in this period that the idea of the “American Dream”, as it is currently understood, originates. This post-war vision of increasingly wealthy Americans achieving higher material standards of living is the well-spring of many of the elements of middle-class-ness that we take for granted. The conception of middle-class-ness as consisting of things like widespread home ownership, ownership of a motor vehicle or vehicles, stable long-term employment, ability to send children to college, take a family vacation, et cetera, was born during this era.

If we try to understand the middle class this way, we should investigate what the patterns of consumption for a middle-class individual, or family, today requires in terms of income, and how many Americans actually possess the financial means to afford this lifestyle. According to one recent report, it was estimated that a middle-class “American dream” lifestyle would cost $130,000 a year for a family of four.[6] The median income for individual income-earners in the US in 2013 was around $52,000, not even half of that estimated cost. According to a 2010 study by the Commerce Department only a family with two income-earners in the 75th percentile or above could afford the middle-class lifestyle described in the previous report. [7] According to data from a 2014 report by the Congressional Research Service only around 20% of American household could afford this price tag of a “middle-class” lifestyle.

If one takes only the items listed as “essential” in the report cited in the previous paragraph the total cost of a middle-class lifestyle, which is still above the current median income. This accounting clearly leaves out other important expenses, like taxes, that one will incur, as well as makes impossible any expenditure on important items like savings, and recreation. Now, of course food prices change, and fuel prices change, and these effect how wealthy consumers feel, as decreases in food and fuel costs can be transferred to increase consumption of “extras” like college savings for children, or family vacations. One should also note that this report categorized cell phone and internet expenditure as an “extra”. In today’s world these things are properly considered more akin to utilities, they are essentials for living.

Clearly, the level of income needed for achievement of a characteristically middle-class, or “American dream”, lifestyle is out of reach for a great many individuals and families. This is likely part of why the percentage of those identifying themselves as lower-class, or lower-middle class in recent surveys has increased.[8] Indeed, even a family with two income-earners, in the 25th percentile only has an income about equivalent to the median. Meanwhile, as of 2010, an individual income-earner in the 50th percentile only made around $25,000. The rising costs of college, the continued stagnation of wages – especially at the lowest ends of the labour market – as well as the reductions in employer-based pension and benefit programs for most workers have a contributed to making the mid-twentieth century American vision of middle-class existence more and more out of reach for large swaths of Americans.

The post-war American experience, if put in proper context, is the product of a historically unprecedented epoch. According to the research presented by Thomas Piketty in his book Capital in the Twenty-First Century, the middle part of the twentieth century was the only time in the last 300 years that his law of capital (r>g) was reversed.[9] This was a special period in which the growth rate exceeded the return to capital, and thus workers received increasing wages, and increasing purchasing power. It was in this historically unique period that the main expectations, norms, values, and status symbols of modern American “middle-class” lifestyle were born.

If we look the heyday of the American middle class in the 1950s and 1960s what we see is a transformation of American society born of a historical accident. Piketty’s research demonstrates that income inequality in the US basically plateaued over these decades, after decreasing sharply during the period from 1913-1945, that is the period of the World Wars and the Great Depression. What the French call “les trente glorieuses”, and others have called a pax Americana, was the direct result of the tumult of the wars and economic crises of the first half of the twentieth century. Workers in the western world generally experienced a boom, in that they experienced rising living standards, wages, and benefits. In Europe these benefits often took the form of national programs, while in America they were largely employer-based; healthcare and retirement are good examples. It was in this environment of rising levels of access to material consumption that the dominant aspects of the outlook of the middle class in America took shape.

Without the devastating effects of two world wars and an economic depression of immense scale, governments, especially in the US, would not have made the concessions that they did to workers, to organized labour in particular. The need to secure consistent, reliable production of vital war supplies, which might be disrupted by labour agitation, inclined the US government to enter the fray of industrial warfare on the side of workers during the First World War; at least to the extent required to ensure production for war. The Great Depression was an important cause of the establishment of the main pillars of the American welfare system in the 1930s. Labour unions achieved even greater privileges during the Second World War, as the leadership of organized labour organizations were increasingly co-opted by the corporate interests they were supposed to oppose. As a result of the need to take sometimes drastic measures to fight two wars and a titanic economic depression the US government enacted policies which resulted in a reduction in income inequality. This reduction in inequality combined with rising levels of material consumption, due to workers increased ability to bargain collectively with the support of the legal apparatus of the state, define this unprecedented period in economic history.
Middle Class Confusion

Clarification about the meaning of “middle class” is especially important because Americans seem to be confused about this notion of “middle class”, about who is in it, and what it means to be in it. It is a well-know and, much commented on, phenomenon in American political culture that almost everyone tends to perceive themselves as “middle-class”. What makes this fact interesting, and thus worthy of the decades of commentary and analysis it has received, is the startling economic inequality that coexists with this perception.

Though the rates of self-identification with being middle-class have varied over time, a healthy portion of Americans still identify as being middle class. Even now, after decades of erosion in the position of workers due to stagnating wages, reductions in benefits, cuts to social programs and education, increasing international competition, and the shifting of various kinds of work to the global south and other peripheral economies, as well as more recently the effects of the 2008 financial crisis, 44% of people surveyed in one recent survey self-identified as being middle-class. [10] Indeed this figure has fallen over the years of the Great Recession, self-identification as middle-class fell from 53% in 2008, to 49% in 2012, and then to 44% in 2014. Thus, even in bad times, as a great many people are still struggling, a great many people continue to perceive themselves as middle-class.

There is no one universally accepted way to define the middle-class. Perhaps this is part of the reason why politicians are able to make so much political hay with it. This is also part of how it is possible for a great many rather wealthy see themselves as middle-class at the same time as many of the working poor. It is also part of how many super-wealthy individuals come to perceive others less wealthy than themselves, though still obscenely wealthy, as ‘merely’ middle-class.[11] This lack of a consensus about a definition is certainly one of the reasons there is so much confusion about the middle-class, and who belongs to it, and how one belongs to it.

Conventionally, the middle is understood as everyone in the second, third, and fourth income quintiles. Basically, everyone who is not in the top-fifth or the bottom-fifth of income earners is defined as middle-class. In America today this definition of middle-class is roughly equivalent to those earning between $30,000 and $80,000 a year.[12] This is quite a large middle-class. One might think that it is rather too large. Indeed, how can one assimilate the experiences of an individual, or even more a family, living on $30,000 to one making $80,000? One could, I think quite properly, say that these two sets of experiences are so incommensurable materially as to make them awkward members of a common middle-class. Let us note in this connection that the federal government defines the poverty threshold for a family of four as a bit less than $24,000 a year. So, it would seem hard to think the experiences of family living on about 25% more than the poverty level would be anything like those of a family making more than two and a half times that amount.

That this conception is too wide to be very useful, and for the reasons I alluded to, is admitted by the fact that, at least colloquially, we have adopted the distinctions between ‘upper’ and ‘lower’ middle class. This distinction testifies to the difference in material position of individuals, or families, in the upper and lower ends of the middle. The lifestyle, the patterns of consumption, level of access to opportunity, and much else, varies so much between these groups that the distinction suggests itself, and is so patently apparent that no one questions its propriety.

Perhaps then we should narrow our definition of middle-class to only the third income quintile. This understanding of middle-class would include those making roughly $40,000 to $65,000. Even the top end of this range would still be half of what one estimate suggests a middle-class lifestyle would cost. Moreover, only about 15% of income earners would count as middle-class on this way of understanding the middle class. [13] This fact would certainly seem inconsistent with the widespread perception that the middle-class is the numerically largest class. Even if we expand back to our original range of $30-80,000, only about 40% of income earners would be middle-class. While this figure has the virtue of appearing to match up quite closely with the level of self-reported identification as being middle-class, it suffers from the vagueness we noted above. The upper limit of the 4th income quintile is north of $100,000. I do not think it is a stretch to say the material circumstances of a “middle-class” family making anywhere from the median to the upper limit has much in common with those families earning closer to the lower threshold of “middle class”.

By several ways of trying to understand the middle class we come up with results that fall short of matching our expectations and common perceptions. We seem to end up with either an unhelpfully expansive notion of the middle-class that encompasses individuals and families with greatly divergent material circumstances. Or, one ends up with a more precise statistical conception of the middle class, but wherein fewer persons are understood to be middle-class than commonly report being so in surveys. Part of explaining this confusion about the middle-class is the fact that Americans are either unaware or deeply confused about the nature of the distribution of wealth in this country. Many people report feeling like they are middle-class, but only as a result of ignorance or confusion about the nature of wealth inequality in America. Indeed, it would be crazy to deny that part of one’s perception of class position is the relative position of others. Were more Americans aware of the real nature of the distribution of wealth they would likely feel less middle-class, and more lower-class. According to the results of one recent research study, a representative sample of Americans reported thinking that the share of total income possessed by the middle class in America, i.e. the second through fourth income quintiles, was just north of 40%. Respondents also reported thinking the third income quintile alone possesses over 10% of total national wealth. In fact, the real share possessed by the first through fourth income quintiles combined is less than 20%, and the third quintile alone possesses closer to 5% than greater than the 10% that was reported.[14]

Another important aspect of the explanation for why there is so much confusion about the middle class is the confusion individuals face given their precarious position in the socio-economic hierarchy. Given how much inequality has risen over the last few decades there has been an increase in the perception that the post-war American middle-class lifestyle is out of reach for a great many hard-working people. Rising inequality combined with the effects of a calamitous financial crises, followed by years of recession, caused many to report falling in social class. The youngest cohort especially was hard hit, with now 49% reporting being in the lower or lower-middle class. It also caused many who identify as middle-class to feel this status increasingly precarious. Indeed, according to a Pew Research study from 2014 almost as many Americans reported being lower-class as middle-class, and the spread between the two was a mere 4%.[15]
The Working Class

We have seen now that this notion of the “middle class” is highly problematic. When we attempt a rational accounting of it, what we find is that our social reality confounds many of the expectations that most Americans have when they talk about the middle class. We find that though many Americans report in surveys that they are middle-class, the middle class is small, and shrinking. Once we distinguish upper from lower in the middle class, the true middle is really a small part of the income spectrum. One cannot get too far below the median income for one to be more lower class than middle class, nor can one get too far above without becoming upper-middle, or even elite. For instance, $100,000 in income would put one at the upper limit of the fourth income quintile, while an income at or above $150,000 would place one among the top 10% of income-earners. One cannot thus get too far beyond the $80,000 average income of the fourth income quintile without ending up less middle class than upper class.

If we judge belonging to the middle class as a function of ability to consume, then again we find that the traditional middle-class lifestyle ideal is increasingly out of reach for large swaths of the American population. What we see now is that we need a new way to think about class, about the socio-economic positions that people occupy and how these are best described. Getting a handle on what class one belongs to is important, especially in these election cycles, as appeals for votes are made to members of the various social classes that compose the electorate. How is one to know which kind of candidate or policy to vote for if one does not know what candidates or policies will advance their interests? And how is one to know what will advance one’s interests if one does know have an accurate understanding of their own socio-economic reality?

Rather than muddle on with this vague notion of a middle class, we should substitute a new understanding of class and class relations. This understanding of class should emphasize the role that working conditions play in determining socio-economic position, or class. This understanding will of course have much overlap with the dominant income-based understanding. For indeed, working conditions and wage rates are often highly correlated in market economies, that is, typically the lower the pay the worse the working conditions (in one form or another) and vice versa. When we take the kinds of jobs people work into account, the picture that emerges is one which demonstrates the importance of thinking in terms of a working class rather than a middle class. When we start putting working conditions in the forefront of our conception of social class we gain a much accurate, and explanatory conception of class.

One example that helps demonstrate this need for an understanding of class based on working conditions is the practice of “flex-time”. In the upper end of the labour market this concept is instantiated by programs that allow workers to do their work on their own schedule, freeing workers of the need to always be in the office during the traditional working day. This allows workers to achieve a better work-life balance, by having more flexibility with the time they need to devote to work. On the lower end of the labour market flex-time typically takes the form of on-call forms of scheduling. This is an extension of the logic of the “just-in-time” inventory management systems that have come to dominate manufacturing industries, and applied to the labour force of a variety of businesses, but especially retail firms. The idea, in both cases, is to only have as much as it needed of both on hand at any one time, so as to free up capital from unnecessary investment in extra stock or extra labour.
Conclusion

Have middle classes existed in history, yes. Did a middle class exist in the US during the middle part of the twentieth century, yes. However, in both cases these answers must be qualified, if the nuance of reality is not to be lost. Yet, in appending these qualifications we change the nature of the answers, and thus must come to see the original answer as importantly flawed. In both cases we find the reality of the middle class(es) does not match up with our modern expectations and perceptions about the middle class. In the first case, one might be subject to various forms of un-free labour despite still being technically not a slave, and thus free but by no means rich, or even independent. In the latter case, we find that this ideal of the middle class was quite restricted, and the alleged golden age of its reign was certainly not seen as such by the many marginalized groups of that era. We also see that its very existence occurs because of the confluence of historical circumstances that would be near impossible to re-create.

The idea of being “middle class” is also a source of confusion when compared to modern thinking about the middle class, and its role in society. Indeed, much of the meaning of being “middle class” has always involved poor people, those who work for wages for a living, aping the consumption trends of their ‘social betters’. Thus, even while during the classic 19th century hay-day of industrialization the middle class, ie. the petit bourgeoisie, was fairly small it nonetheless transmitted its social norms, consumption patterns, taste in art and décor, to those below them on the social ladder. It was not this middling class, but rather the working class, the proletariat, whose consumption, aping the middle class above them, drove the rise of a “middle class society”. This process of transmittal of social norms, values, and patterns of consumption is eloquently detailed by Thorsten Veblen in his Theory of the Leisure Class.

Today, this notion of the middle class, a remnant of the mid-century post-war Pax Americana, stands in the way of proper thinking about the role of class in society and the role of class in individuals’ lives. We need to be free of this notion if we’re going to able to correctly perceive how class works, and how it has changed. Remember that this notion of the middle class in post-war America was built on stable, long-term employment, with benefits, and pension plans, that paid enough to own a home, buy a car, household appliances, vacations, college educations, and more. In today’s economy these kinds of employment features of increasingly harder to come by for increasingly large segments of the labour market.

What one finds is that as automation increases, and as services increasingly dominate over production, more and more workers are forced into ever more precarious forms of employment. These tenuous relationships serve employers desire for flexibility, ie. ability to (re)move capital quickly, but increase burdens on working class people; especially on their time. Instead of thinking of themselves as “middle class”, these workers should more correctly perceive themselves to be part of what Guy Standing calls the Precariat[16]. The Precariat is already a class in-itself, but the ideology of the middle class in the US prevents it to a great extent from developing into a class for-itself. Opposed to this class is what Standing calls the Salariat, that is, the minority of a firms’ workers who are central to operations. These are core workers who typically earn a salary, have benefits, sick time, vacation days, and many of the other trappings of the fabled American middle class lifestyle.

Politicians will continue to talk in speeches, interviews, and the like about a middle class that supposedly exists in America, and how they will do the most to help it, typically by enacting the policies that will allow it to flourish. From what we have seen here working class people should no longer be duped into thinking that those politicians are addressing them. The rhetoric that dominates our politics simply does not match the reality of the contemporary economy, in particular the labour market. When we adopt a more appropriate view of class we see an economy characterized not by a broad-based and prosperous middle class, but rather by increasing inequality. We see a labour market where trends in job conditions and benefits very much resemble those in real wages. When we adopt a different view of class we see a very different answer to the question, Is there a middle class in America? No, not in a way that matches the mid-century American ideal.

Notes

[1] For a thorough analysis of the political and social conflict in the ancient Greek world see, G.E.M. de Ste. Croix’s The Class Struggle in the Ancient Greek World. 1981. Cornell University Press, 1998.

[2] De Ste. Croix 1998, 284

[3] Martines, Lauro. Power and Imagination; City-States in Renaissance Italy. 1979. Vintage Books, 1980; 40.

[4] Martines 1980, 29.

[5] Martines 1980, 61

[9] In Piketty’s equation (r) = after tax rate of return to capital, and (g) = the rate of growth of per capita income, a proxy for economic growth. For further information about Piketty’s research see my review of his book for The Hampton Institute.

[16] See his book, The Precariat: The New Dangerous Class. Bloomsbury Academic; 2011.

Inequality Has Been Eliminated

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By Chad Hill

Source: the Hipcrime Vocab

Have you heard? Inequality has been eliminated.

What? You didn’t know that? Well, certain “professional” economists have proved it is true.
You may wonder, when you drive around your town, why formerly occupied strip malls lie abandoned, and the only local businesses are Cash-For-Gold, Payday Loans, Dollar Stores, and tattoo parlours. You may ignore the people standing near freeway exits with signs begging for work or money (these have exploded where I live), or the people rolling around shopping carts with all their worldly possessions, or the people living in their cars. It’s all an illusion. Detroit? Chicago? Merely a mirage.

You may wonder at all the empty, shuttered factories, or the fact that the Wal-Mart Super Store is the town’s biggest employer, or that “help wanted” signs seem to appear only in the local Arby’s or Home Depot (or my favorite “owner operators wanted”). You may puzzle at the foreclosed homes stripped of copper and being overgrown with weeds that litter towns from coast to coast. The entire neighborhoods that lie empty and abanadoned? Another mirage, silly. The crumbling roads and local governments “tightening their belts?” Not happening.

Not happening. Nope, none of it.

You may have heard stories about people thirty or forty years ago with high-school educations being able to get jobs that supported families, allowed them to buy a house and save money. You may have heard about people able to save up enough to go to college by just working a summer job. You may have heard of people twenty or thirty years ago with full-time jobs that had benefits such as paid vacations and health care, which are now being stripped away job by job. You may have heard about something called a “union.”

False. All false. The world is getting more equal every day thanks to globalized corporate capitalism. The economists told me so.

You may even know people who have lost their job and are unable to find another one because employers discriminate against the unemployed. You may know someone with huge debt burdens because the cost to train workers is borne entirely by the workers themselves, and you have to go tens of thousands of dollars into debt just to get a job at all. Or you may know someone who was foreclosed upon, or drowning in debt due to an unforeseen circumstance or medical emergency. You might know people who’ve had to take jobs with much lower pay and benefits than the ones they had before. You may know people working brutally long hours, or denied extra work time so that they don’t qualify for health care benefits. You may know people who have used food stamps to feed themselves or their families, even though they work full time jobs. You may know older people who have to work because they can’t afford to retire.

They all deserve it. All of them. They’re all lazy. Laziness has exploded since 2008, don’t you know. Everyone gets exactly what they deserve. It’s never been  better time to be a worker under capitalism.

You may look on the outrageous fortunes spend by the rich and conclude that they are reaping more and more benefits by breaking wages and shipping jobs overseas. Don’t you believe it! Their riches are making everyone better off. Just look at Bill Gates! He gives money to poor people in Africa. And Steve Jobs. He invented the iPod in his basement, or something. Soaring CEO salaries are great. The bailouts were all paid back. And the soaring stock market prices will make everyone rich! Don’t worry about the costs for food, housing, education and transport. The “free market” will take care of it all and unleash abundance, but only if the “job creators” don’t have to pay taxes. Those trust fund kids getting unpaid internships and getting jobs downtown – that’s just a natural part of capitalism, it has nothing to do with inequality. The fact that entire cities are unaffordable for people making less than six figures? College and health care costs? Forget about it. Nothing to do with inequality, which, by the way, has been going down, not up. Besides, even if it were going up, inequality doesn’t matter, what matters is that life is getting better even for people even at the bottom. They love being in debt and working for minimum wage! And besides, the life for the average person is getting better and better the more riches the wealthy and powerful accumulate. After all we have smart phones. SMART PHONES!!!

All those people protesting around the world? They just don’t understand capitalism.

You may even have read books and articles asserting that we are a “winner-take-all” economy, a “servant economy,” or something like that. Not true! Those books and articles were all written by “leftists” and “liberals” who don’t understand science and statistics. Articles like this are just sensationalism by liberals who hate our freedom:

76% of Americans are living paycheck-to-paycheck (CNN)

The Middle Class Is Steadily Eroding. Just Ask the Business Community (NYT)

The Financial Vulnerability of Americans (House of Debt)

Employment Down, Profits Up: The Aftermath of the Financial Crisis in 1 Graph (The Atlantic)

‘Happy Days’ no more: Middle-class families squeezed as expenses soar, wages stall (Wall Street Journal)

A Dozen Facts about America’s Struggling Lower-Middle-Class (Brookings)

America’s Sinking Middle Class (NYT)

Why So Little Media Coverage of How the Rich Are Becoming Richer and the Middle Class Wages are Being Squeezed? (Naked Capitalism)

RIP, the middle class: 1946-2013 (Salon)

Yep, Being a Young, American Adult Is a Financial Nightmare (The Atlantic)

Ripping Off Young America: The College-Loan Scandal (Rolling Stone)

Median CEO Pay Just Topped $10M for the First Time (Slate)

Upgrade or Die (George Packer)

San Francisco’s Income Inequality Rivals that of Developing Nations (Vanity Fair)

Gap Between Rich And Poor In Manhattan “Rivals Sub-Saharan Africa” (Gothamist)

How did the economists come to this conclusion, you ask? Well, Piketty made a few spreadsheet errors. And thanks to that, the professional economist caste can breathe a sigh of relief that all of the things I named above don’t exist, and happily go back to their blackboards and spreadsheets in their corporate-funded free-market think-tank cubicles and university offices.

Because inequality is entirely dependent upon r being greater than g. That is, the rate of return to capital (yes, let’s just argue about what constitutes “capital,” that will make this whole thing go away), must be greater than g, the rate of growth of the economy. Because, heaven knows, it’s not like workers could ever get paid less than the growth of the economy, right?

Right?

Read the full article here: http://hipcrime.blogspot.com/2014/06/inequality-has-been-eliminated.html

Piketty, Meet Orwell: Why Modern Oligarchy MUST Turn Fascist

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By Patrick Walker

Source: OpEdNews.com

If Frenchman Thomas Piketty, for all his brainiac academic wonkiness, has become a U.S. publishing sensation and economics rock star, it’s not merely due to his high-profile promoters. Granted, Piketty touters like Paul Krugman and Joseph Stiglitz carry high-brow clout (rather justified, given their own economics Nobel Prizes), among both fellow economists and intellectually serious progressives; it’s hardly surprising they help set intellectual fashions. But the deeper reason Piketty crossed the Atlantic so well is his timeliness: he had an economic message America’s most politically aware citizens were desperately waiting to hear.

For me (and, I suspect, for millions like me), the translated Piketty message–and I mean translated not just from French to English, but from economics to political activism, is this: your governance is illegitimate, and you now have the go-ahead signal to REVOLT. Not that many of us weren’t ready to revolt anyway (Occupy Wall Street, the anti-XL pipeline movement, and the food service workers’ strike were among the most prominent foreshocks), but the point is that Piketty gave us a new intellectual legitimacy. All true idealists are at some level truth seekers, and nothing gives us the needed conviction to go overturning the social order (a task people of conscience don’t undertake lightly) than indisputable evidence that the current order is illegitimate–a menace to the common good.

Having been irreversibly persuaded ourselves of the need for revolt, we feel free–in good conscience and citing the same evidence that persuaded us–to spread the message of revolt.

Piketty gave us the needed evidence–and as I mean to argue passionately here, Orwell closes the deal. I mean to say the twentieth-century Brit has “crossed the pond” perhaps even better than Piketty, and that we’ll fail to grasp the truly sinister implications of Piketty if we don’t make Orwell his required intellectual “diet supplement.” All modern oligarchic governance must end, in Orwell’s unforgettable image, in “a boot stamping on a human face forever.” Nothing less is at stake in our call to radical action.

Before proceeding, I wish to make one point of intellectual clarity. Careful readers will perhaps have noted that what I called illegitimate, in light of Piketty, is our governance. Now, I could easily have chosen a more familiar word, like government or system or society, but I fear that in doing so, I would have lost needed precision. Even a qualification like political system might not do the trick. For by governance I mean something wider than government and narrower than society, and wish to avoid (for now) distracting questions about the adequacy or legitimacy of the political system bequeathed to us by this nations’ founders. By governance, I means the whole collection of institutions, organizations, laws, and practices that determine how we are actually governed. So in the term, I very much intend to include the media, police and military, political parties, PACs, and other interest groups. Everything variable, in short, that enters the equation of how our nation is governed. It’s the final result of that equation–summarized in the word governance– that’s now provably illegitimate.

As I feel no shame (but rather, great pride) in saying, I write as a tribal progressive–NOT as a tribal Democrat. In fact, it’s my being a tribal progressive that frees me of the intellectual blinders necessarily entailed by being a tribal Democrat. For no tribal Democrat is intellectually equipped to grasp the illegitimacy of our governance, which is clearly–in a system monopolized by two parties–a bipartisan affair. Not that any sane person would say that both parties share culpability equally; anyone who fails to properly assign greater blame to Republicans has respected, heavyweight constitutional scholars like Thomas Mann and Norman Ornstein–writers long noted for their nonpartisan balance and objectivity–to answer to. Their deservedly popular book It’s Even Worse than It Looks places the lion’s share of the blame for Congressional dysfunction (the piece of the illegitimacy puzzle they deal with) squarely on right-wing extremism. But our governance is scarcely a matter simply of Congress–or of one party. Any thorough analysis of our current illegitimacy would have to include Congressional Democrats, the Supreme Court, President Obama, the “shadow governance” of the Deep State, and the maggot swarms of lobbyists who descend on Washington daily. And that’s just the tip of the iceberg. But it’s hardly my purpose to sort out in depth the agents responsible for our gravely dysfunctional oligarchy, but rather to spotlight its grievous, jackboot-trampling-face consequences. For, as I intend to prove, oligarchs can ultimately rule us in no other way.

Now, my calling myself a “tribal progressive” is something of a joke, modeled of course on the notion of unthinking, party-line-towing tribal Democrats and Republicans. In fact, I also self-identify as an intellectual and truth seeker, and therefore as someone for whom–as for Orwell–there’s something deeply sinister in the notion of a banned or off-limits book. Consequently, I’ve been known to indulge myself in authors and works whose reputation among the politically correct Left is, to put it mildly, dubious. Hence, I’ve read with pleasure Friedrich Hayek’s Road to Serfdom, a thoughtful and thought-provoking work once favorably reviewed by no less a lefty idol than John Maynard Keynes. And I’m now reading Francis Fukuyama’s The End of History and the Last Man, a work bearing even the sulfurous stench of favorable reviews by adoring neocons. Yet, it’s reading Fukuyama that–far from reinforcing my faith in current U.S. governance–has, in conjunction with Piketty, obliterated all sense of its legitimacy. In fact, it’s because of Fukuyama (a learned, thoughtful author unfortunate in his associates and admirers–perhaps culpably) that I consider the whole question raised by Picketty as one of legitimacy.

And it’s the crucial question of legitimacy–the very heart of governance–that forcefully links Piketty to Orwell.

So here we’ve reached the heart of my topic. As Fukuyama deeply understands, the very survival of a political system or government depend on its legitimacy in the eyes of enough of its citizens. Crucially, not all of its citizens, indeed not even a majority, but enough citizens wielding the means of force and control to keep the doubters of its legitimacy in line. Hitler, as Fukuyama for example notes, was never elected by a majority, and probably never even freely supported by one. Little matter; the millions of Nazi supporters he did have were able to acquire near-monopoly of the means of force and control in German society, with the lethal consequences known to history. The complacent, misguided souls who cowishly nod their heads to Sinclair Lewis’s famous title statement “It Can’t Happen Here” probably fail to grasp that fascists’ required legitimacy is a minority matter; they certainly fail to grasp that Lewis himself believed it could. The it of course being U.S. fascism–and I believe it’s not only possible, but largely in place, and inevitable if we don’t soon change course.

Why? This is where Piketty’s strongly argued thesis about the nature of capitalism meets the brutal rubber of Orwell’s fascist road. See, Piketty’s central thesis is that the very nature of capitalism, because rewards to capital owners normally accumulate faster than general economic growth, is to produce oligarchic societies. Unless, says Piketty, extraordinary circumstances or government intervention–like high taxes–bring the rewards to capital in line with everyone else’s benefits from the economy. Now, the extraordinary circumstances, like world wars, are hardly desirable, and even depend for much of their effect on giving society a compelling rationale to tax the very rich. But as Piketty is keenly aware, extraordinary circumstances are by definition rare, and barring them, capital-owning oligarchs possess powerful means for thwarting government correctives to natural capitalist inequality. Like, say, buying the governments that would implement those correctives. Which clearly describes our current U.S. predicament–especially after the Supreme Court, itself an oligarchs’ plaything, has made buying our government infinitely easier.

So where does Orwell come in? The quick-and-dirty answer is, in vividly detailing the thoroughly modern, technology-based methods by which a tiny minority, hell-bent on exploiting a majority, recruits a critical mass of supporters (only a minority–though of millions–is needed) to keep the exploited majority at bay. In other words, as the word supporters clearly implies, the tiny minority (in our case, capitalist oligarchs) recruits just enough people who believe the exploitative governance of a majority by a capitalist minority is legitimate. And uses those millions of recruits to hold the exploited majority in terror. For once the majority gradually awakens to the illegitimacy of their exploitation by a handful of oligarchs, only a sizable minority (say, millions) of brainwashed or paid-off recruits wielding powerful modern weaponry, can keep the awakening majority from turning on the oligarchs. In other words, only a fascist government–one that recruits by technologies of propaganda and reigns by technologies of terror–can ultimately serve the aims of modern oligarchs.

Now, Piketty’s own historic examples might seem to refute the notion of oligarchs needing the modern Orwellian toolkit, but citing such historical counterexamples is shallow, and does not account for the fact that times–and above all, technologies–have changed. The key notion is that Orwellian methods are serving the aims of modern twenty-first century oligarchs, not those of nineteenth century France or England–a golden age for oligarchs Piketty often cites. In fact, today’s oligarchs require an economically richer, better-educated populace of servants than their nineteenth century counterparts; and even where they don’t strictly require it, such a populace is a fact on the ground they simply have to deal with–and control.

So, for example, even your average Walmart or McDonald’s peon needs to be–and in fact is–more literate and economically better off than your average eighteenth-century peon (or factory drudge) pure and simple. While condemning large segments of the population to unthinking drudgery (with no leisure for thoughtful politics) remains a perennial part of the oligarch toolkit, it simply can’t play the same role in population control it did when the drudges weren’t even allowed to vote. And of course, with legions of the unemployed poor, often replaced by cheaper foreign workers or robots, now having leisure for politics (if not necessarily thoughtful politics), the old-timey oligarch trick of denying the franchise is quickly making a comeback. But sadly for oligarchs, big enough segments of the U.S. population consider this trick illegitimate that it can never come anywhere close to being the chief means of control. So again, this is where Orwell comes in–and even building support for denial of the franchise requires massive Orwellian propaganda. Oligarchs must thank God every day for a critical mass of fearful, resentful racists and xenophobes–which clearly describes much of the Republican Party’s base.

Of course, racism and xenophobia are the hardly only Orwellian propaganda tools for recruiting oligarch lapdogs, though it must admitted they have served –and will long continue to serve–Republican oligarchs admirably. Patriotism, especially of the self-interested zero-sum variety where foreigners’ agendas and competition for resources and market share make them a threat to “our way of life,” has admirably served oligarchs from both parties. This has been especially true of fossil fuel oligarchs, who’ve successfully brainwashed Americans on the “energy independence” necessity of fossil fuels–even though our nation has been dramatically affected by the global climate harm these outmoded fuels are causing. And fossil-oligarch propaganda is remarkably adaptable; fossil fuels’ role as geopolitical muscle can be stressed now that large-scale plans for export prove the energy-independence argument was always hogwash.

But neither propaganda nor force exhaust the control tools in the oligarch toolkit; the fact is, there are certain “oligarch support industries” that have distinct trickle-down benefits. Not that trickle-down economists ever worked in the manner its ideologues proposed; in fact, the successful trickle-down depends on Big Government in a way that would have horrified trickle-down economics’ original small-government proponents. Understanding the mechanism involves understanding what I mean by “oligarch support industries”; by and large, I mean the industries, based on force and spying, that either distract attention from oligarchs, or potentially crack skulls on their behalf, once the legitimacy of their governance has been shaken in the eyes of large segments of the population. Offhand, I’d say this constitutes all branches of the U.S. military, mercenaries, and military contractors; government and private surveillance organizations; and police and private security organizations. Now, no one ever went broke serving the needs of the rich; in fact, providing oligarch support industries has become a huge U.S. business sector. But the very hugeness of that sector has swollen well beyond meeting oligarch needs, and can only be attributed to a perverse (perverse because it depends on Big Government) form of trickle-down.

See, precisely because no one ever went broke meeting the needs of the rich–and protecting their sorry asses in case the legitimacy of their governance breaks down is a huge oligarch need–investors in oligarch support industries soon become–if they weren’t already–oligarchs themselves. Now, a standard part of Piketty’s model is that oligarchs spend a portion of their vast wealth to buy government, in order both to protect and expand their already excessive wealth. Unsurprisingly, oligarchs created by oligarch support industries behave in exactly the same way: they invest heavily in lobbying government to support and expand their industries. Now, since the oligarch support industries in question straddle the public and private sectors, the lobbying successfully expands jobs–essentially, spying and potentially cracking skulls, both inside and outside our government. In no other case I can think of has “trickle-down economics” been so wildly successful. And even without oligarch propaganda, the overly swollen leagues of soldiers, spies, cops, rent-a-cops, and surveillance and weapons manufacturers–by now swollen well beyond the original protection needs of their oligarch employers–have a vested interest in serving oligarchs both inside and outside their industries.

And of course–though legally and morally this is not supposed to be the case–one must include many elected officials, elected and unelected judges, and journalists in corporate-owned media–as unofficial members of the oligarch support industries. While Republicans are clearly worse, it’s clear once again that these illegitimate members of the oligarch support industries are bipartisan–as was most recently proved by the eleven Democrat Senators (let’s brand them “the Keystone Eleven”) who were ready to surpass even Obama’s service to fossil fuel oligarchs by taking approval of the environmentally insane Keystone XL pipeline out of his cowardly, dithering election-year hands. Clearly, these Democrats are prepared to use the fascist jackboot against conscientious Americans on behalf of fossil-fuel oligarchs, since thousands of heroic citizens are pledged to civil disobedience against the unconscionable pipeline.

While the “boot stamping a human face” approach, backed by fascist pro-government courts, has already been used against Occupy Wall Street, I suspect approval of the XL pipeline will show us fascism–Orwellian brutality supporting Piketty’s increasingly dominant oligarchs–in its most blatant form. This will be, of course, because enough conscientious citizen have seen through oligarch propaganda to realize oligarch agendas threatens humanity’s very survival. So bipartisan is the push for pro-oligarch fascism that eleven Democrats openly decided noble Keystone protesters deserved Orwellian brutality.

Until we widely disseminate the fact that Orwell is other side of Piketty–that a “boot stamping on a human face forever” is the logical conclusion of runaway economic inequality–we’ll never (until we’re ALL destroyed by climate change) see an end to illegitimate oligarch rule.

Lara Trace Hentz

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