Jim Webb on the Class Struggle

There was a time when the upper middle class could feel their economic position was safely protected by Republican policies. In recent years Republicans got greedy as they devised policies to redistribute wealth from the middle and even the upper class to the ultra-wealthy. Those at the upper levels of corporate American fail to consider what would happen should the middle class disappear and there’s not enough people left who can afford their products–similar to how I fear the consequences personally if too few can afford to pay for health care.

Senator-elect Jim Webb discusses the class struggle in The Wall Street Journal, noting that white collar workers now share the risks with blue collar workers:

…the true challenge is for everyone to understand that the current economic divisions in society are harmful to our future. It should be the first order of business for the new Congress to begin addressing these divisions, and to work to bring true fairness back to economic life. Workers already understand this, as they see stagnant wages and disappearing jobs.

America’s elites need to understand this reality in terms of their own self-interest. A recent survey in the Economist warned that globalization was affecting the U.S. differently than other “First World” nations, and that white-collar jobs were in as much danger as the blue-collar positions which have thus far been ravaged by outsourcing and illegal immigration. That survey then warned that “unless a solution is found to sluggish real wages and rising inequality, there is a serious risk of a protectionist backlash” in America that would take us away from what they view to be the “biggest economic stimulus in world history.”

Conservatives often write as if the choice was between laissez-faire capitalism from Republicans vs. socialistic economic policies from Democrats. In reality, Republican economic conservativism has little to do with the views of Adam Smith, Hayek, or von Mises. Republicans support decreased regulation when they find it to be to their benefit to allow the fox to guard the hen house. Otherwise the hallmark of Republican economic policies is to redistribute wealth to their political supporters among the ultra-wealthy. Those who benefit from such government-assisted redistribution of wealth to the ultra-wealthy are then hailed as capitalist heros by many conservatives.

When Webb addresses the politics and the role of Congress, I wish he had discussed more the political policies which led us to where we are, and what he would recommend be done in the next Congress. There’s a limit to what can be discussed in one op-ed, and at least he does dicsuss how Republicans distract from discussion of the actual issues:

The politics of the Karl Rove era were designed to distract and divide the very people who would ordinarily be rebelling against the deterioration of their way of life. Working Americans have been repeatedly seduced at the polls by emotional issues such as the predictable mantra of “God, guns, gays, abortion and the flag” while their way of life shifted ineluctably beneath their feet. But this election cycle showed an electorate that intends to hold government leaders accountable for allowing every American a fair opportunity to succeed.

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18 Comments

  1. 1
    yucca says:

    do you really think that the american middle class is in danger of disappearing? and where would 300million people go? to mars?

  2. 2
    Ron Chusid says:

    Yucca,

    You’ve never read anything before discussing the middle class “disappearing?” When people write of the “disappearing” middle class, this is shorthand for policies which bring about the increased concentration of wealth in a small number while decreasing the wealth of what is now the middle class. Nobody is speaking of either actual people disappearing (such as to Mars) or saying that the middle class will totally disappear.

  3. 3
    yucca says:

    i know ron (if i may), i know… i was just joking… the point in question being: the american dream, successful or otherwise, is exactly the middle class. what i think democrats (like you?) should be worrying about is the alienation of ploretariat and underploretariat. the us development has been such, and it is such, that the middle classes are all right – indipedently from what is happening and will happen at the top of the scale. what has been sacrified, in those years, are the marginal folk. and a society that looks at progress, development, and modernity as their ideals cannot afford to leave the marginal alienated part of the community behind.

    the middle class is productive, and as such it will survive. the problem, in a liberal society that embraces capitalism, are the unproductive. can the democrats do something for them? can they be reintagrated into society?

    anyway, you have earned yourself a link comrade:-)

  4. 4
    Ron Chusid says:

    yucca,

    The unproductive are definatley a major challenge. It is unfortuante that this is often seen as a left v. right issue. The traditional leftist interest is obvious, but this should also be a concern for conservatives who are interested in the economic competitiveness of the nation. There will always be some, such as the seriously disabled, who cannot be entirely reintegrated (although accomondations can decrease this number) but the fewer who are left not reintegrated also reduces the need for the welfare state, which should please conservatives.

  5. 5
    janet says:

    Every year we drive from Seattle to Helena, Montana. What bothers me and what is obvious by observation is that the small towns in between are completely run down. It did not used to be this way 40 years ago. You could pull into a small town and find a great local cafe for a good meal and now things are all boarded up. What has happened? The people left in these towns are poor and barely making it. And it is not just between Seattle and Helena–I think it is this way across the nation.

  6. 6
    Ron Chusid says:

    It sounds like, at least in these small towns the middle class has disappeared.

  7. 8
    battlebob says:

    When we replace manufacturing jobs with service jobs then the middle-class disappears.
    In our area, there are constant layoff announcements. Manufacturing jobs such as auto and other heavy industries generate about seven jobs each. They are of varying pay level and job skill. Each service job generates less then two jobs each of generally lower technical skill and job pay. Dumbya crows about his job creation numbers and economists cannot figure out why things are so bad. The reason is job creation is lower because the jobs that are created do not generate other jobs. The ones that are created pay less so folks spend less. This causes massive short-term debt.
    Per a Bubba speech recently, roughly, every seven years a technological breakthrough needs to take place. During his term, the internet technology took off. If you roll the clock backward, the development of PCs, operating systems and applications fueled an earlier economic rush.

    What Bubba did is align capital, government and business. He gave tax credits for new plants and equipment, and research. More education and job training expenses were written off. However, he did not do anything to stop the flow of capital off shore. There was so much capital in this country it was not missed. Yeah, right.
    It was standard supply-side fare. Make up the loss of jobs and capital by creating many more jobs then can ever be lost.

    So along comes Bush who does not understand the need for partnerships between government and business. Bush squelches the creation of new jobs by increasing the rate capital flows off shore via tax cuts for the rich. Usually tax cuts for the wealthy generate new jobs because the tax cut savings are invested back into the economy. It did not happen in this case as the money was invested in companies that moved operations off shore. After 911, Bush should have Bubbaized the economy to increase job creation. Instead, he was content to allow jobs to exit the country taking their capital with them. The winners are the wealthy who invest in companies that move off shore. Also, the increase in energy needs ramped up the cost of energy. I do not blame the Wal-Mart’s and Exxon’s of this world. They are taking advantage of the business climate given to them; or rather they bought. The real culprit is Bush who constantly allows the wealthy companies to take advantage of others. At some time, the playing field needs to be leveled or too many people are not allowed to participate.
    Therefore, this should be the Dem strategy. Find the next big thing, which will probably be energy or biology driven. Create a business climate that allows the creation of capital and therefore jobs in this country. Sen. Kerry is working to grow the small business engine to create jobs that never leave. The problem is Europe, having the advantage of not having Bush, are moving ahead of us already in alternate energy. The first one in on a new breakthrough reaps about 70% of the rewards. We have a lot of catching up to do.

  8. 9
    kj says:

    “Therefore, this should be the Dem strategy. Find the next big thing, which will probably be energy or biology driven. Create a business climate that allows the creation of capital and therefore jobs in this country.”

    Alternative energies (regional). R&D, new university programs, new areas for students, new jobs for white collar professionals, new manufacturing jobs, healthcare attached. And as always, the “happy surprises” that come with R&D.

    The last couple of years in the Missouri the buzz is biotechnology and “biopharm” (biofarm). It hasn’t exactly taken off gangbusters, there remains suspicion around genetically altered crops.

    Lou Dobbs had a commentary posted on the CNN website titled “I’m a populist, deal with it.” (Don’t know if yucca would care to read. 😉 Maybe!) “Therefore, this should be the Dem strategy. Find the next big thing, which will probably be energy or biology driven. Create a business climate that allows the creation of capital and therefore jobs in this country.”

    Alternative energies (regional). R&D, new university programs, new areas for students, new jobs for white collar professionals, new manufacturing jobs, healthcare attached. And as always, the “happy surprises” that come with R&D.

    The last couple of years in the Missouri the buzz is biotechnology and “biopharm” (biofarm). It hasn’t exactly taken off gangbusters, there remains suspicion around genetically altered crops.

    Lou Dobbs had a commentary posted on the CNN website titled “I’m a populist, deal with it.” (Don’t know if yucca would care to read. 😉 Maybe!) http://www.cnn.com/2006/US/11/14/Dobbs.Nov15/index.html

  9. 10
    battlebob says:

    KJ,
    The mantra in the business community now is risk avoidance. Risk is defined as the unknown. So when a project is proposed, the most important aspect is what is the risk?
    This is how the government was able to do the large defense and space projects. The taxpayers absorbed the risk. Having been in this arena, we could pursue a design loaded with unknowns. If we ran into a dead end, try another path. The money spend was chalked up to experience for future projects.
    Because of the demand for ultra-short term profits, companies cannot afford risk. They cannot afford to eat the cost when things do not work out.
    Bush proposed privatizing government design organizations such as NASA and JPL. The idea was immediately and quietly squelched because private industry refuses to do it.
    So what Dems should do is allow R&D to be written off. This is another thing Clinton did which fueled the economy in the ‘90s.

  10. 11
    kj says:

    “So what Dems should do is allow R&D to be written off. This is another thing Clinton did which fueled the economy in the ‘90s.”

    So risk avoidance is what happened to Yankee Inqenuity and American Innovation? At least some of defense and NASA technologies came back to us as benefits In R&D “the law of unintended consequences” generally works in society’s favor.
    I don’t know beans about money or business, but I do know the last quarter profit thing killed.

    We’re (America) not looking to the future. We’ve lost our sense of adventure and exploration. That’s something that isn’t being passed on to the generations behind us. IMO.

  11. 12
    kj says:

    We’re in hoard mode. And I can’t blame anyone for feeling that way. Taking risks is scary. So much easier to wrap our heads in blindfolds and pretend the status quo is fine and nothing has changed since JFK.

    My temperment is to take risks. “Wing and a prayer.” I don’t know any other way to live and there are times when I don’t understand the mind-set of America’s billionaries when they have enough for more than seven generations, and they won’t fund new R&D. William Pauly was a backer for one of the first supercomputer companies. Now everyone has a gigaflop. Unreal.

  12. 13
    battlebob says:

    Risk avoidance is the buzzword because most company stock is owned by institutions. When you fund your 401K and buy equity mutual funds, you now own a piece of the companies purchased by that fund. The fund manager is chartered to grow the fund to make him and his clients rich.

    If stocks within the fund do not perform, they are sold and the prices of those stocks drop.

    When that happens, the shareholders of the company whose stock price is dropping get angry and start to demand changes.
    They sell and those who run the company loose money(on paper; not for real).

    So those who run the company get rid of operations that do not generate money. R&D is by definition a cash loser because it is a negative on the balance sheet. So to improve the company positions, negatives on the balance sheet are removed. R&D is an easy target.

    That is why risk avoidance is so important to companies. They must keep performing to keep their stock prices up so big buyers keep buying them so your 401 k keeps going up so you keep investing in this fund.

    I lost every battle trying to keep research for future products while we were losing money in present operations. It is the easiest place for leaders under financial presure to perform now to cut.

  13. 14
    Ron Chusid says:

    battlebob,

    “Risk avoidance is the buzzword because most company stock is owned by institutions.”

    Another example of a point I touched on about how reality is different from the conserivative picture of business. While they see companies run by heroic Ayn Rand characters taking risks and deserving great rewards (ignoring all the government help they have received) the reality is as you describe.

  14. 15
    kj says:

    Somewhere along the line I lost a post! It was re: the supercomputer company I talked about above. Not only was it initially backed by William Paley, but was supported by government agencies (Arpa, Darpa). A workable link between private and public monies. And the people who worked for the company took pennies as salary, because they were so psyched to be involved with cutting edge research and technology. But the last quarter profit thing interfered, as I understand it, and it was as Battlebob described above. And yet, we all now have access to giga and teraflop technologies, which were once only a dancing angel dreams.

    It is so sad. I don’t know the solutions. Just like the co-op farmer owned ethanol plants in the Midwest… now is the time to sellout, and yet, many do not, because they want some control over the own market and the fruits of their labor.

  15. 16
    battlebob says:

    If I were king for a day.

    Pull R&D out of the expense side.
    Subtract R&D from Corporate Taxes. Corporate taxes are subtracted from Coroporate Income to give shareholder equity.

    There are provisions:
    -All R&D must be done in this country. Many companies in the drug industry are shoving their R&D off shore.
    – And no shell departments are allowed. Many companies have R&D companies with divisions in this country but all the researchis done off shore.
    – No foreign research work is allowed to get this benefit.

    Repubs are always clamoring to cut corporate taxes. Here is a way to do it that benefits everyone.

  16. 17
    kj says:

    battlebob,

    I don’t understand a thing you said, but I like it very much. 😉 Actually, I do understand. And it’s an excellent idea.

    I vote you King for the Day.

    We have to wise up and look past our forth quarter profits. Time has sped-up, but that doesn’t mean we have to become short-sighted in the process.

    (Apologies for grammer/typo’s above. Fingers moving too fast.)

  17. 18
    battlebob says:

    Another thing that really bugs me is the assertion that raising wages will raise inflation to the point of wrecking the economy.
    Nonsense.
    Labor hours are becoming a smaller and smaller part of the manufacturing costs.
    Let’s use an example.
    Suppose you go to Wal-Mart and spend $40.00 on a coffee pot.
    Most companies have a 100 percent mark-up to handle their own internal costs and profit structure. So this coffee pot actually costs Wal-Mart $20.00
    Well, suppose the labor cost of that coffee pot is only a dime as this pot is made in China by slave labor.
    So instead labor goes from a dime to fifty cents. We just raised labor costs by 500 percent.
    Suppose to control pollution, we demand China spend a nickel per unit for clean-up and new equipment..
    Now the price of this pot has risen fifty five cents.
    Now suppose we demand China supply health care to her workers. Be bold. Suppose we demand the supply a comprehensive benefit package. These packages cost about thirty percent of salary – for a large company. This adds another fifteen cents. (.50 * .3 = .15)
    So we boosted wages to.65 cents an hour from .10 cents per hour. We demand pollution expenses to be .05 cents per unit.. So what have we done? We boosted the price of the coffee pot from $20.00 to $20.70 cents. If Wal-Mart wants to keep their same profit margin, the new pot will cost $41.40 which is an increase of .035 %.
    I don’t think the economy will be wrecked.

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