Banish the Bloated Overclass

Twenty years ago it was risky to point out the growing inequality in America. I did it in a New York Times essay and was quickly denounced, in the Washington Times, as a “Marxist.” If only. I’ve never been able to get through more than a couple of pages of Das Kapital, even in English, and the Grundrisse functions like Rozerem.

But it no longer takes a Marxist, real or alleged, to see that America is being polarized between the super-rich and the sub-rich everyone else. In Sunday’s New York Times magazine we learn that Larry Summers, the centrist Democratic economist and former Harvard president, is now obsessed with the statistic that, since 1979, the share of pretax income going to the top 1 percent of American households has risen by 7 percentage points, to 16 percent. At the same time, the share of income going to the bottom 80 percent has fallen by 7 percentage points.

As the Times puts it: “It’s as if every household in that bottom 80 percent is writing a check for $7,000 every year and sending it to the top 1 percent.” Summers now admits that his former cheerleading for the corporate-dominated global economy feels like “pretty thin gruel.”

But the moderate-to-conservative economic thinkers who long refused to think about class polarization have a fallback position, sketched out by Roger Lowenstein in an essay in the same issue of the New York Times magazine that features Larry Summers’ sobered mood. Briefly put: As long as the middle class is still trudging along and the poor are not starving flamboyantly in the streets, what does it matter if the super-rich are absorbing an ever larger share of the national income?

In Lowenstein’s view: “…whether Roger Clemens, who will get something like $10,000 for every pitch he throws, earns 100 times or 200 times what I earn is kind of irrelevant. My kids still have health care, and they go to decent schools. It’s not the rich people who are pulling away at the top who are the problem…”

Well, there is a problem with the super-rich, several of them in fact. A bloated overclass can drag down a society as surely as a swelling underclass.

First, the Clemens example distracts from the reality that a great deal of the wealth at the top is built on the low-wage labor of the poor. Take Wal-Mart, our largest private employer and premiere exploiter of the working class: Every year, 4 or 5 of the people on Forbes magazine’s list of the ten richest Americans carry the surname Walton, meaning they are the children, nieces, and nephews of Wal-Mart’s founder. You think it’s a coincidence that this union-busting low-wage retail empire happens to have generated a $200 billion family fortune?

Second, though a lot of today’s wealth is being made in the financial industry, by means that are occult to the average citizen and do not seem to involve much labor of any kind, we all pay a price, somewhere down the line. All those late fees, puffed up interest rates and exorbitant charges for low-balance checking accounts do not, as far as I can determine, go to soup kitchens.

Third, the overclass bids up the price of goods that ordinary people also need – housing, for example. Gentrification is dispersing the urban poor into overcrowded suburban ranch houses, while billionaires’ horse farms displace the rural poor and middle class. Similarly, the rich can swallow tuitions of $40,000 and up, making a college education increasingly a privilege of the upper classes.

Finally, and perhaps most importantly, the huge concentration of wealth at the top is routinely used to tilt the political process in favor of the wealthy. Yes, we should acknowledge the philanthropic efforts of exceptional billionaires like George Soros and Bill Gates. But if we don’t end up with universal health insurance in the next few years, it won’t be because the average American isn’t pining for relief from escalating medical costs. It may well turn out to be because Hillary Clinton is, as The Nation reports, “the number-one Congressional recipient of donations from the healthcare industry.” And who do you think demanded those Bush tax cuts for the wealthy – the AFLCIO.

Lowenstein notes, that “if the very upper crust were banished to a Caribbean island, the America that remained would be a lot more egalitarian.” Well, duh. The point is that it would also be more prosperous, at the individual level, and democratic. In fact, why give the upper crust an island in the Caribbean? After all they’ve done for us recently, I think the Aleutians should be more than adequate.

Comments

[Chris]

Barb, why haven't you been picked up as a regular columnist for the NY times? I have a subscription, but I'm frankly sick of the elitist voice of the paper. They've had an open slot on their column calendar since John Tierney jumped ship, and I'm wondering why such a high-quality, intelligent writer like you hasn't taken his spot.

[roger]

well arent we comsumed with class envy this afternoon. there will be a ruling class and that stands to reason. it doesnt seem to matter to many on the left how much good these folks do.

[VJ]

roger posted:

"it doesnt seem to matter to many on the left how much good these folks do"

LIKE ?
.

[Hattie]

Barbara Ehrenreich consumed with class envy. That's a rich one, if I may be permitted a small pun.

[John Hurt]

Barbara:

Why do so many columnist pick on Walmart when the real Corporate villians are Big Oil and the Wall Street Financial institutions? You probably do not shop at Walmart, but if you do, answer this question. Do you feel Walmart is gouging you and other customers with high prices? Answer the same question the next time you fill up your car, go to the doctor or borrow money.

Walmart passes significant savings on to the customer, in fact that is the primary reason for their success.

Walmart has over 1.4 million employees and generates earnings of less than $9,000 per employee. Just for an example the company I work for spends an average of $8,000 per employee on medical coverage annually. How do you expect Walmart to have anything like a comprehensive medical plan, they would be out of business in short order and the average American consumer would be worse off.

[JP Merzetti]

well, there are Walmart lovers and haters -
but it's been stated to death, how much of a hidden cost we actually end up paying for all those "savings".....
The lovers seem to be in denial of that, for some reason -
If you check your hisstory, there was a time not that long ago when Retail operated at handsome profits, did not decimate the local economy, paid workers a living wage, and did not pass off social responsibilities to taxpayers.
Times have changed..........

[paperpusher666]

Forget the "super-rich" for a moment, satisfying as they might be as a target. Consider the alternative minimum tax (AMT), which hits a lot of families at $100K or so. When the change in rates was passed about 15 years ago, the income level where it kicked in wasn't indexed for inflation, as other income levels are. The result is to wipe away a lot of the benefit of the tax deductions that people get.

When you are subject to the AMT, you calculate your taxes due the normal way, and then recalculate it removing most of your itemized deductions and applying the AMT rate. You pay whichever total is higher. The effect is to impair the ability of the middle class to save or invest.

[roger]

andrew carnegie gave tremundous amounts of money and time to build thousands of public libraries. this is but one example of philanthropy by the wealthy ruling class. bill and melinda gates foundation is another example. now let me be clear on this point. this type of philanthropy does not excuse abuse in any form. on the other hand if there will exist a ruling class and it is apparent that there needs to be then i am inclined to cast my lot with those who have vision and wealth. let us not be so quick to assume as marx did that all wealthy is stolen from the masses. henry ford, while i am disturbed by his view of jews, created a company which employed millions of people and paid out billions of dollars in wages. these wages could be accessed by folks who had limited skills. these wages in turn allowed upward economic mobility. we are fortunate to live in these times and in the west. there are much worse circumstances in other parts of the world and in other times.

[buena]

But look at Ford now. Times have changed. And I don't care how many libraries Carnegie built, or even how many kids Bill Gates has helped with his foundation (though I think he's done a lot). Most of the "bloated overclass" DOES owe its fortune to the workers.

Yah, Barbara's just jealous of the rich. That's rich!

[Progressive_Libs_Are_Not_Either]

It is always a hoot to read fantasy from the reality-impaired leftist class warriors, with Babs leading the charge. Take two examples from her science fiction entry for June 12: the NYT's claim that of the poor writing checks to the rich and innovative financial engineering methods bordering on the occult.

Never mind, for the moment, the obvious lie that is the NYT claim of the poor writing checks to the rich to the tune of 7k. Think, for a moment, what the class warriors are trying to do. With relativism that would make Marx smile, the underlying implication in this intellectual fraud is that the poor are somehow entitled to wealth due some as of yet undefined and arcane notion of equality. Since when do the so-called poor have a claim on the wealth of any one individual? Sam Walton did not force anyone to work at his stores, and nor does he force anyone to shop there. National income is a measure of aggregate income and is not a proxy for how it should be distributed amongst its citizens. As for Walton's fortune being a coincidental byproduct of being a union-buster, one would suppose, Babs that the present financial health of the US automotive industry is not a coincidence either, given its joined-at-the-hip relationship with industry-busting unions. Rhetoric aside, Babs, show us the math that demonstrates the poor writing checks to the rich.

As for financial engineering, one would could completely ignore how innovative derivative markets the securitize risk, especially mortgage debt, has had completely zero effect on the poor. After all, with a credit score of 300, and a heavy tax burden to compliment that low Wal-Mart wage, who would loan money this type of person. The ignorance of Babs on even the basics of how mortgage risk is mitigated today, thereby enabling home ownership for millions, is beyond even a Feminist Studies major working third shift at Starbucks (it's not like there's demand for that skill, right?). As for checking fees, if people are not intelligent enough to keep their balance above zero, they deserve to pay a fine. However, with the bazillions Babs is making off selling uneducated gloom and doom (after all, who wants to hear good news?) perhaps she could share some her vast wealth with those of us remaining 70%.

[Virginia Heatter]

Thank you, Barbara!

[buena]

To Progressive Libs etc:

First of all, don't call her Babs.

Secondly, doesn't Bill O'Reilly have a blog you'd be more comfortable in?

Thirdly, the poor don't have a claim on the wealth of one individual. They do have a claim on a fair portion of the wealth they help create.

[donna]

It's always amusing when people start right in with the name calling, isn't it?

Let's watc h the rich righties shit themselves when nobody can afford to buy their products, even at WalMart prices...

Recessions hurt the rich as well as the poor, and income inequities lead to recessions - and depressions.

[Tim Worstall]

"Lowenstein notes, that “if the very upper crust were banished to a Caribbean island, the America that remained would be a lot more egalitarian.” Well, duh. The point is that it would also be more prosperous, at the individual level, and democratic."

Getting rid of the rich would make the US more prosperous? Good grief, where did you learn your economics?

[Philip Thomas]

Hmmm, bad economics mixed with a healthy dose of fascism, just the combination I loathe. Have a look at Zimbabwe for a recent example of what happens to an economy when you seize the "unjustly-owned" assets of the wealthy and distribute them amongst the "oppressed" underclass. The result is pretty far from prosperity and democracy.

[Millard Fullbore]

donna: Recessions hurt the rich as well as the poor, and income inequities lead to recessions - and depressions."

Have you never heard the phrase "discipline labor" in the same sentence with "recession"?

A falling tide leaves the blimps still floating.

[Ceci]

"A falling tide leaves the blimps still floating."
----------

Not always. I've stepped over quite a few of these "blimps" on my beach strolls. Sometimes they get carried in by a shifting/erratic current and vast numbers get stranded to dehydrate on the sand.

[lc2]

I find that poor and working class people are more down to Earth and generally have nicer things to say than their wealthy, hyper-educated, and/or culture-savvy counterparts ... and as the song goes, "In the end, only kindness matters." My spouse works in retail and his coworkers are far more generous, quick to smile, and genuinely interested in making conversation than the snobby PhD's around here sipping their lattes at poetry readings and such. I mean what use is it discussing books (like frankly, Nickel and Dimed) with people who are only interested in exposing your ignorance and showing off how smart they are? I'd rather discuss more everyday issues like gas prices and rides at SixFlags with forthrightness and a lack of pretense any day. Although there are plenty of artistic/intellectual/literary types working thankless jobs too. I find the working class is by far the most diverse class in the U.S.

I've spent a lot of time in both worlds and I wish more people would hang for a bit w/people who WORK at, not just comment about, Wal-Mart and similar places ... you'd probably find more goodwill there than on college campuses where students are either tooling around in the SUV's that mommy doctor/daddy doctor bought them or jousting intellectually, most irony wins. More people on both sides of the class divide should do a little cross-cultural travel. (having said that, I personally haven't shopped at WM in many years and will never set foot in there as long as I live, barring a natural disaster which forces me to).

[lc2]

Btw, Barbara, I'm not including you in this group (people who only talk about, not hang w/, WM workers). You've got plenty of cred in my book, so to speak, haha.

As for the Waltons: I noticed when one of the sons died in a parasailing or similar kind of accident a few years ago, the obit noted that he was more or less a perpetual adolescent, having spent his adult life in increasingly exotic-localed (and probably increasingly dangerous) thrill-seeking activities. I guess when you've got it all, what's left? Your own foolhardiness, no doubt. No envy here ... something closer to pity. There is no mental or physical substitute for having performed a good week's work, particularly if there's a decent paycheck a the end of it.

[Progressive_Libs_Are_Not_Either]

Regarding ignorance like this '... the poor don't have a claim on the wealth of one individual. They do have a claim on a fair portion of the wealth they help create...' is it any wonder so many Americans are only worth minimum wages at Wal-Mart?

Sure they have claim on the wealth they help create: it's called wages, and they, in a personal choice between the labor provider and labor acceptor, engage in a private transaction as to what this price shall be. The simplicity and beauty of this transaction, Babs, is, in fact, why the market is so efficient and why (regulated) capitalism is remarkable in effectively allocated limited resources.

As a side note, Brian Till whines to no end about the job market for recent grads. A short look at the school he attends indicates that, sadly, most of the grads are engaged in fields with relatively low demand. After all, we moved down the cost curve on feminist interpretations of a cross-eyed Macbeth long ago. India and China are pumping out 100,000's per quarter and so it is logical to expect where there is demand, smart people will rise to fill supply. If there were some incredible value-add in an arcane liberal arts subject, it's evident those fields would be attracting more grads. As it were, one graduating in the aforementioned fields should be cheered for engaging in their dream, but society has no more an obligation to pay them a so-called living wage than they are obligated to work for free to help those less advantaged. It's a personal choice what one does for enlightenment, and your demands to conflate your enlightenment with a six-figure salary end at the labor supply and demand relationship.

[barbsright]

Wal-Mart just takes advantage of what is the sloppiest economy in the world. I have a degree in economics, and I am always surprised how many 'intelligent' people think the USAs' economy is the most competitive in the world. If it were a car it would need a complete overhaul. It is the equivalent of a gas guzzling SUV. We need it to be a Toyota hybrid vehicle. Until then it will be an old, oil burning, clunker. It really stinks.

[buena]

Wages such as are paid by Walmart -- and myriad others -- are NOT a fair share of the wealth the worker helps to create. They are a pittance. You can't live on them.

[Anarcissie]

It seems to me that something is missing from discussions of increasing wealth differentials like this one. Maybe more than one thing.

For starters, the wealth of people like Gates and Soros seem meaningless to me. They can't spend it on themselves and their friends, except for a very small part; they can't use it, except in ways dictated by the bureaucracies of banks, law firms, accountants, and governments. A really imaginative person might be able to get rid of five or ten million dollars a year, but after that it's all bureaucracy. In any case Gates and Soros are not very imaginative. They are not in power -- they are caught up in the wheels like anyone else.

So what function _do_ such people have? Why does so much wealth flow to them, when entropy, if nothing else, would distribute it more randomly?

I would suggest that their very important function is to waste utility.

The great problem of capitalism is its success: overproduction. There are various ways of getting rid of the surplus, violent ones like war and imperialism, jovial ones like the circus of consumerism. Yet it still piles up.

So here's another strategy: translate the wealth to money, and move it up the economic food chain. A thousand dollars is a fortune to a poor person: a whole lot of food and drink, maybe rent for a month and a half. It has very high utility. By diverting the money upward, its utility is destroyed. By the time you get to Gates and Soros, it's nothing. A thousand dollars is like pocket lint to them. Its utility has vanished into a comma on some report prepared by a bureaucrat about some other reports prepared some other bureaucrats.

At the end of the day, the bureaucrats drive home in their Volvos and worry about their jobs, wishing they were gods like Gates and Soros.

Meanwhile the poor person, who otherwise might be tempted to lay out on the $1000, goes back to work or crime or scavenging, and the whole system is saved for another day.

[Tim Worstall]

"are NOT a fair share of the wealth the worker helps to create. They are a pittance. You can't live on them."

But then if the worker isn't creating much wealth then a pittance could in fact be an entirely fair share of it.

[Anarcissie]

So, how much wealth does a Wal*Mart employee in fact create?