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America’s Metastasizing Class Wars


Class wars are the inevitable result of an economic system in which ‘anything goes if you’re rich enough and winners take most’.The traditional class war has been waged between wage-earners (who sell their labor) and their employers (owners of capital and the means of production). These classes have been assigned various names (proletariat, bourgeoisie, capitalists, etc.) but these broad class definitions don’t describe all the class conflicts emerging in the modern U.S. economy.

Before we dig deeper, let’s stipulate that ownership of various forms of capital still defines class: the wealthy live off unearned income skimmed from capital and everyone else lives off earned income from selling their labor. (Those without either source of income become dependents of the State).

What you own or don’t own defines your class interests, but these have been fragmented into a multitude of sub-classes. Six years ago I took a stab at defining America’s Nine Classes: The New Class Hierarchy (April 29, 2014), to which I would now add the tenth class, gig economy precariat, who paradoxically may own one of the means of production such as the car needed to become an Uber driver, but the precariat doesn’t own the controlling means of production, which is the Uber platform.

As a consequence, all the profits flow to the owners of the platform.

Soaring Income Inequality

Soaring Income Inequality

- Click to enlarge

Since the gig economy is not traditional hourly employment, there is no employer-provided security at all.

1. The Deep State.

2. The Oligarchs.

3. New Nobility.

4. Upper Caste.

5. State Nomenklatura.

6. The Middle Class.

7. The Working Poor.

8. State Dependents.

9. Mobile Creatives.

To which we add a new category of the working poor who lack even the minimal security of the conventional Working Poor (such as Amazon fulfillment center workers):
10. Gig economy precariat.

For the purposes of today’s discussion, let’s focus on the conflicts between four classes:

1. The Central State, which includes the elected government, the permanent Deep State, the Federal Reserve and and the managers/technocrats who run the State Nomenklatura.

2. The owners of Capital and political influence (The Oligarchs and New Nobility).

3. The Upper Caste, the top 10% of the private sector.

4. The lower classes of wage-earners and state dependents.

It comes as no surprise that there is no class conflict between the State and the Oligarchs / New Nobility since ours is a state-corporate system in which the state enforces the privileges of the super-wealthy /corporations, as the political class depends on the owners of capital for campaign contributions. In return, the super-wealthy and corporations are awarded tax breaks and subsidies which lower their tax burdens below the rates paid by wage-earners.

The conflicts between the Central State and the Upper Caste which pays the majority of income taxes are sharpening. While Social Security taxes weigh heavily on lower-income workers, the bottom 50% pay almost no federal income taxes and those between 51% and 89% pay a modest percent of all income taxes.

Unlike the managers/technocrats of the State Nomenklatura who are guaranteed benefit and pensions (since the state can always print the money to pay them), the private-sector Upper Caste must rely on 401Ks and their own private wealth–all of which is exposed to the hazards of state actions (raising taxes, firing up inflation, etc.) and whatever market forces are still outside the control of the Federal Reserve.

The Upper Caste resents the heavy taxes they pay as the state fails to provide even the basics of security and infrastructure. From the point of view of the Upper Caste, the state provides substandard education for their children, potholed roadways, modest Social Security and no healthcare until retirement (Medicare).

Upper Caste entrepreneurs resent the heavy regulatory burdens and the privileges lavished on corporations and the super-wealthy.

The Upper Caste also resents the Oligarchs and New Nobility who pay a lower percentage of their income in taxes. The Financial Aristocracy can work the tax system to report income as capital gains (a much lower rate than earned income) and use a vast cornucopia of tax breaks and subsidies to reduce their tax burden.

The wage-earning lower classes resent the Upper Caste and the Oligarchs for obvious reasons, but they also resent the State dependents, many of whom live better than those working one of America’s tens of millions of low-paid, few-benefits jobs.

You might expect State dependents to love their servitude, but they have reasons to resent the State as well. Dependency breeds resentment, and this is exacerbated by loads of paperwork (imposed to weed out fraud and scammers) and the general inadequacy of many state benefits.

Meanwhile, the state managers/technocrats and politicos live in the same bubbles as the New Nobility. (The Oligarchs live in a much more rarified bubble, of course.) For these Protected Few, the system works great for me so it must work great for everyone else. Alas, it only works for the top slice of American society which vigorously maintains the bubble separating it from the coarse realities of the bottom 80%.

In summary, class wars are the inevitable result of an economic system in which anything goes if you’re rich enough and winners take most. While the working poor are recruited to fight and die in the Imperial Project, the super-wealthy focus on philanthro-capitalist foundations which are simply non-profit extensions of their for-profit power.

Social Mobility between classes has decayed, and people grasp this. Go ahead and do all the right things–borrow a fortune to get a college degree, build your resume with low-paying jobs working ridiculous hours, and so on, and eventually conclude you’re a precariat just like everyone else. Maybe a better paid precariat, or maybe a poorly paid precariat, but that narrow band is all the Financial Mobility you’re ever going to get.

The winners in this system are protected by the State, while the losers are stripmined by crushing taxes or humiliated by their abject dependence on the state. Even if they don’t understand the exact mechanisms of financial control–the Federal Reserve’s bag of tricks, for example–they understand the rich get richer and the state protects them from the lower classes.

The danger to the state is not who rebels but who opts out. Outright rebellion suits the state, as it can turn its monopoly on force on the citizenry. But when those keeping everything glued together have had enough and find a way to quit, the entire system starts unraveling in ways the state is powerless to stop.

If the Upper Caste starts opting out, the private sector loses its tax donkeys and managerial expertise. If what remains of the middle class opts out, what’s left of America’s civic glue disappears.

If the working poor opt out, the scut work required to provide the upper classes with their comforts will not get done. (Hey, Mr. State Bureaucrat and Mr. Financier, here’s a saw and a knife. Butcher your own meat.)

Those trapped in the lower reaches of America’s class system might decide to follow Johnny Paycheck and Take This Job And Shove It (2:31). Becoming a dependent of the State is looking better all the time.

State Nomenklatura managers/technocrats also have reasons to opt out. Their efforts to keep the whole thing glued together are not appreciated, for as I’ve noted here before, governing in an era of unraveling discord is no longer fun.

Conflicts within the upper reaches of the Deep State are also deepening as those seeking to extend the status quo regardless of cost are meeting resistance from camps who recognize the impossibility of maintaining the current trajectory of soaring inequality and the infinite demands of the Imperial Project.

There’s only so much inequality and unfairness an over-promised populace can bear, and America is well past that point.

To those who claim “people can’t afford to quit,” just watch. Those who’ve had enough will find a way to opt out. There’s plenty of woodwork to disappear into.

Here’s a chart of the Oligarchy and New Nobility’s skim of virtually all gains in the economy. Anything goes if you’re rich enough and winners take most.

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Charles Hugh Smith
At readers' request, I've prepared a biography. I am not confident this is the right length or has the desired information; the whole project veers uncomfortably close to PR. On the other hand, who wants to read a boring bio? I am reminded of the "Peanuts" comic character Lucy, who once issued this terse biographical summary: "A man was born, he lived, he died." All undoubtedly true, but somewhat lacking in narrative.
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