The discussion of “class in America” has recently gone mainstream. The New York Times, The Wall Street Journal and The Los Angeles Times each ran series examining income stratification and class mobility in the United States.
In the first WST article, David Wessel reported, “As the gap between rich and poor has widened since 1970, the odds that a child born in poverty will climb to wealth — or a rich child will fall to the middle class — remain stuck. … Although Americans still think of their land as a place of exceptional opportunity — in contrast to class-bound Europe — the evidence suggests otherwise.” Wessel quotes a Chicago Federal Reserve economist regarding upward mobility: “The apple falls ever closer to the tree than we thought.”
The common thread running through these series is that the rungs up the income ladder (the politically acceptable definition of class) have been greased. Jenny Scott and David Leonhardt in their contribution to the NYT’s series write that “it appears that while it is easier for a few high achievers to scale the summits of wealth, for many others it has become harder to move up from one economic class to another. Americans are more likely than they were 30 years ago to end up in the class [i.e. income bracket] into which they were born.”
In recent testimony before the Joint Economic Committee, Federal Reserve Chairman Alan Greenspan expressed concern about the implications of income gains going exclusively to the top quintile, with the lion share going to the top 2 percent, according to the Congressional Budget Office.
New York Times columnist Bob Herbert observed: “The war that nobody talks about — the overwhelmingly one-sided class war — is being waged all across America. Guess who’s winning. … The rich are freezing nearly everybody else in place, and sprinting off with the nation’s bounty.” Another Times columnist, Paul Krugman, writes that “Since 1973 the average income of the top 1 percent of Americans has doubled, and the income of the top 0.1 percent has tripled.”
In an interview with CNN’s Lou Dobbs, the billionaire Warren Buffet commented, “The rich people are doing so well in this country. I mean we never had it so good. … It’s class warfare; my class is winning.” Buffet went on to observe, “right now corporate profits as a percent of GDP in this country are right at the high. Corporate taxes as a percent of total taxes are very close to the bottom.” The next day, Dobbs, responding to a comment his guest Bill Moyers made regarding inequality in the U.S., blurted out: “For the life of me Bill, I can’t discern the difference between the two parties. They both, it seems, [are] owned lock, stock and barrel by corporate interest.”
While recent attention to the concentration of wealth, as well as to rapidly growing inequality, is welcomed over being ignored or dismissed, it doesn’t help us get to the root of the problem. For this, we have to examine the radical changes in the composition of capital over the past 30-plus years.
Unproductive branches of capital, notably finance and commercial, plus state-financed enterprises (e.g. a privately operated military industrial complex and government-operated bureaucracies delivering vital services) grew in the post-World War II decades. In a purely economic sense, the operation of these activities were unproductive, that is, unproductive of surplus value, the stuff from which profits are made.
If the pace of unproductive activity were to grow more rapidly than increases in the rate of exploitation, it would cause profits to slow, or worse, result in what was call “stagflation” in the 1970s. Under these conditions, it fell to those who personified capital to use their corporate and state positions to make the necessary adjustments to raise profits, but without fanning inflation.
Their solution was to limit income gains to the top quintile, preferably to the top 1 or 2 percent. What was their strategy? It included radically cutting the taxes of those in the top income brackets in order to “starve” government; outsourcing production to low-wage countries; keeping the minimum wage below the poverty level; weakening labor; cutting or eliminating health benefits; creating a part-time workforce; ending welfare; denying workplace rights for immigrants; and encouraging debt while eliminating bankruptcy protection for consumers.
As Paul Krugman wrote in a recent New York Times op-ed: “Almost every domestic policy seems intended to accelerate our march back to the robber baron age.”
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