Once Down, Stay Down, Capitalism Rules

Upward mobility; a capitalist myth

By Micheal Lind

One of the fallacies exposed by the Great Recession was the idea of the mass upper middle class. During the bubble economy, both progressives and conservatives praised the graduation of most people from the working class to a new elite that included the majority of us.

The center-left and center-right defined this alleged new class somewhat differently.

America’s progressive elite, based it on the educational profession, civil service and nonprofit sector. America’s conservative elite based it in business and banking.

Elite progressives and elite conservatives share the assumption that the ideal society is one in which most Americans would be more like them, in owning educational credentials (progressives) or capital (conservatives).

The elderly in America can remember a long-distant era when progressive thinkers included leaders of organized labor and small-town populist politicians. But nowadays progressive politicians and strategists tend to be affluent meritocrats who got where they are by making good grades at highly selective schools.

Their narrow personal experience leads many elite progressives to equate social mobility and increases in income with obtaining academic credentials like their own.

While New Deal labor liberals and populists wanted to promote unions and a living wage, many members of the new breed of Ivy League-educated liberal technocrats prefer an alternate plan: send everybody to college.

Progressives love to claim that education is the key to upward mobility. But this is based on an obvious fallacy.

The "college premium" that results in higher incomes for college graduates is the result of the relative scarcity of college degrees.

If everyone had a B.A., then the value of a B.A. in generating high wages would drop. We know this to be the case, because access to college has expanded more rapidly in Europe, where the gap in wages between the college-educated and the rest as a result is smaller than in the U.S.

Nor is there any basis to the claim, repeated by politicians and pundits of both parties, that most of the jobs of the future require a college education.

Some have claimed that the millennium of the credentialed class has already arrived.

In a 2008 paper titled "The Decline of the White Working Class and the Rise of a Mass Upper Middle Class," the leading political analyst Ruy Teixeira and the scholar Alan Abramowitz argue that the key factor in contemporary American politics is the expansion of the highly educated, white-collar professional sector.

But they reach this conclusion only by truly heroic feats of definition. They are able to claim that 54 percent of the American people are college-educated only by combining the 29 percent who had B.A.’s in 2007 with the 25 percent who had "some college."

Taking a different approach and combining the "some college" crowd with high school graduates produces a more recognizable picture of an America with a majority of workers who have less than a four-year college degree.

The definition of "white-collar jobs" used by Teixeira and Abramowitz is even more generous, including "clerical" and "sales" along with professional. Do receptionists and shoe-store sales clerks in the mall really think of themselves as being in the same social class as doctors, lawyers and corporate executives?

Conservatives of the bubble economy era had their own mass upper-middle-class fantasy. In their version, membership in the mass upper middle class depended not upon educational credentials but upon ownership of capital invested in the stock market.

By the beginning of the 21st century, according to some calculations, a majority of Americans had private retirement accounts or employer pensions that were invested in stocks and bonds.

In the pages of the Wall Street Journal and elsewhere, conservative intellectuals declared that this made the United States a "nation of capitalists," an "investor society" based on "universal capitalism."

Defining janitors with 401K’s as "capitalists" is a kind of social promotion comparable to the elevation by progressives like Teixeira and Abramowitz of shoe-store clerks who dropped out of college into the "mass upper middle class."

Genuine capitalists derive most of their income from the return on their investments or savings, not from labor. By this definition, there are hardly any capitalists in the U.S.

Most of the rich are the "working rich," who derive most of their income from wages or professional fees, not from investments. We are a nation of wage earners, some paid well and others poorly.

A majority of Americans may have some money invested in the stock market, usually through employer pension plans or 401Ks, but it is very little indeed. Forty-three percent of Americans have less than $10,000 in retirement savings and 36 percent contribute nothing to retirement savings at all.

Thanks to two stock market collapses in less than a decade, most Americans will be more dependent on Social Security in retirement than ever. So much for the "nation of capitalists" and "the investor society."

At least the credentials touted by the center-left and the stocks and bonds touted by the center-right could be described with some plausibility as income-generating assets. During the bubble years, houses also began to be seen as income-producing assets, as well as symbols of membership in the suburban upper middle class.

For a generation, most Americans have been told by left, right and center that they would be failures if they ended their educations with high school, worked hard, saved cash for emergencies and bought modest homes they could afford.

They have been told that to succeed in life they need to ape the lifestyles of the upper middle class that provides most of America’s politicians, pundits and scholars.

The result has been an experiment in social engineering that has gone horribly wrong: the creation of a faux mass upper middle class.

Millions of Americans who by objective standards belong to the working class or lower middle class have persuaded themselves that they are part of the professional-investor elite, because they have worthless degrees from diploma mills, negligible amounts invested in stocks, and suburban trophy houses they cannot afford.

For the college graduates at Starbucks working to pay off student loans for degrees that they will never use, as for the millions of Americans who are now "underwater," owing more on their mortgages than their houses are worth, the American dream has turned into a nightmare.

But many have profited from the peddling of the dream of the mass upper middle class.

The claim that everyone should go to college served the interests of the educational-industrial complex, from K-12 to the universities.

That now serves as an important constituency of the Democratic Party. (Along with Wall Street investment banks, universities provided Barack Obama with his largest campaign donations.)

And the claim that everyone needs to pour money into the stock market, to be managed by banks and brokers who fleece their clients, served the interests of the financial-industrial complex that has replaced real-economy businesses as the dominant force in the Republican Party.

Both the educators and the brokers have successfully lobbied Congress to subsidize their bloated industries, swelling them even further, by means of tax breaks for student loans and personal retirement savings.

The big losers have been the millions of working Americans whom many Democrats and Republicans alike have persuaded, against their interests, to indulge champagne tastes on beer budgets.

The alternative to the mass upper-middle-class fantasy peddled by Republicans and New Democrats is a return to the older New Deal liberal approach, based on high wages and adequate social insurance.

Working Americans should not need to go into debt to obtain college diplomas, in order to share more of the gains of national economic growth in the form of higher wages.

And there would be less pressure on working Americans to gamble with their money in the stock market, if Social Security, like public pensions in the rest of the world, replaced a higher percentage of pre-retirement income than the 30-40 percent it replaces today.

An America with a college-educated professional class majority was always a fantasy. So was an America with a majority of affluent day traders.

The America we need is one in which all Americans are paid a living wage and guaranteed a comfortable retirement -- even if they didn’t go to a university and don’t own stocks and bonds.

Unfettered Capitalism for the Rich

Rich fight to return workers to poverty

By Barry Grey

The past several months have witnessed a shift in social policy by the international bourgeoisie even further to the right, marked by a turn from economic stimulus policies to brutal austerity measures.

In the name of deficit reduction, the ruling classes of all the major capitalist countries are carrying out a frontal assault on the past social gains of the working class. The long-term aim of these policies is to eliminate the welfare state, reestablishing the competitiveness of the older capitalist powers by slashing workers’ living standards to the level of their impoverished counterparts in emerging economies like India and China.

That the living standards of the world’s people are to be equalized downward, rather than upward, is an indictment of the capitalist system.

The “Big Society” speech delivered Monday by British Prime Minister David Cameron exemplified this shift. It was a manifesto for a return to Dickensian conditions of working class poverty.

Seeking to camouflage the brutal implications of his plan to impose between 85 and 100 billion pounds in social cuts over the next four years, Cameron described his “Big Society” as a “huge cultural change” that will “empower” and “liberate” people. It will supposedly achieve this by privatizing and gutting government-run social services.

There has been a shift from the stimulus policy of 2008-2009, centered on the plundering of national treasuries to bail out the banks, without providing any serious relief to the working class.

The austerity programs of today coincided with the 750 billion euro bailout fund announced in May by the European Union and the International Monetary Fund. The fund was established to stave off default by euro-zone countries such as Greece, Portugal and Spain and the threatened collapse of the euro.

It represents yet another massive transfer of public funds to the big banks. As Mohamed El-Erian of the bond investment firm Pimco put it:

“Through the ECB [European Central Bank], EU and IMF, the official sector has stepped in with its balance sheet to assume liabilities previously held by the private sector, thereby allowing private investors to exit in an orderly fashion.”

When the fund was established, the major European governments agreed that the cost of offloading the banks’ bad debts would be borne by the working class in the form of savage cuts in social programs, jobs, wages and pensions. Talk of stimulus to continue the “recovery” was dropped and replaced by the universal demand for “fiscal consolidation.”

The shift was signaled at the G20 finance ministers meeting the first week of June and formally ratified at the G20 summit meeting held at the end of the month in Toronto.

In working out its class policy, the bourgeoisie was emboldened by the experience in Greece, where the social democratic PASOK government has been able to push through a series of austerity measures in the face of massive popular opposition.

In Greece, the ruling class has relied on the trade unions to contain and dissipate working class resistance by means of token one-day strikes and protests.

The trade union bureaucracy has, in turn, been provided crucial assistance by the petty-bourgeois “left” organizations such as the Stalinist Communist Party and Syriza, which have insisted that popular opposition to the social cuts be subordinated to the unions.

The experience has been the same in Portugal and Spain, where social democratic governments have announced one set of social cuts, layoffs and wage cuts after another, and mass working class opposition has been suppressed by the unions.

A series of political changes have been carried out corresponding to the shift in economic and social policy and reflecting the growth of international tensions. In May, the Conservative-Liberal Democrat coalition government headed by Cameron was installed in Britain.

At the beginning of June, the same week as the G20 financial ministers meeting, Japanese Prime Minister Yukio Hatoyama resigned and was replaced by Naoto Kan.

He immediately announced an austerity program that includes a doubling of the 5 percent sales tax, combined with a cut in the corporate tax rate from 40 percent to 25 percent.

At the end of June, Australian Prime Minister Kevin Rudd was ousted in a coup within the Labor Party apparatus and replaced by Julia Gillard.

In addition to reaffirming Australia’s commitment to the US occupation of Afghanistan, Gillard immediately scrapped a proposed tax on Australian mining companies and announced a turn to austerity policies.

In Europe, sweeping budget-cutting programs have been announced from Ireland in the west to Eastern Europe and Russia. Germany, economically the strongest European state, is imposing 80 billion euros in cuts. France has announced sweeping cuts in pensions and a 10 percent reduction in local government budgets.

The 750 billion euro rescue package and the launching of austerity programs to make the working class pay for it have revived the European bourgeoisie’s self confidence—at least for the present.

The euro, which fell 15 percent in relation to the US dollar in the first six months of 2010, has rebounded sharply over the past two months. Hovering around $1.30, it has recouped 10 percent of its loss.

While the Obama administration has been at odds with Europe over the timing and pace of European austerity measures, it has made a similar shift from stimulus to deficit reduction.

It has abandoned even its paltry proposals for new federal aid to the states. The weeks-long delay in extending federal jobless benefits for the long-term unemployed is the preparation for ending them completely.

The administration and the Democratic leadership in Congress are tacitly encouraging a “debate” on jobless benefits.

Aid to the unemployed is being depicted as a “disincentive to work” and a “new entitlement.” This PR ofensive is an attempt to condition public opinion for depriving millions of laid off workers of any source in cash income.

In the US and internationally, mass unemployment is being used to bludgeon workers into accepting poverty wages and brutal speedup.

The international bourgeoisie is proceeding in a highly conscious manner to intensify its war against the working class.

It is keenly aware of the crucial service provided by the trade unions in stifling the resistance of the working class.

In his recent television interview over the Bettencourt scandal, French President Nicolas Sarkozy made a point of praising the unions for their “responsible” role in the economic crisis.

The ruling class is likewise well aware of the critical political role played by the various petty-bourgeois pseudo-left organizations, such as the Communist Party and Syriza in Greece.

Tere's also the CP and New Anti-Capitalist Party in France, the Left Party in Germany, the Socialist Workers Party in Britain, and the International Socialist Organization in the US.

The central concern of these organizations is the danger that the working class will enter into struggle outside of and to the left of the social democratic, “labor party” and trade union bureaucracies. They are above all determined to prevent such a development.