The American Caste Society – In Class Warfare Money Rules

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The United States comes closest to the ideal of prosperity for all in a classless society. – Richard Nixon to Soviet premier Nikita Khruschev, 1959

I wish this could be said today, as it was said in 1959. The real prospect of the “American Dream” is more folklore than a reality for many Americans today. The notion that one can own a house, car, send their kids to college, and retire comfortably and financially secure has been lost to what I call the forgotten caste of America.

There have largely always been classes in America, some have made it big and others have went bust, it is in part what has built America into what it is today. Yet, in the greatest period of prosperity the classes in the United States were highly mobile and with hard work one could move from the lower to the middle, and with a little risk one had the chance to move into the upper rungs of society.

The picture today is much more grim. More and more it appears the “classless” high mobility system is eroding and being replaced by a caste system. The American caste system is holding down those at the bottom and is keeping them from reaching higher. The reasons are many, but the major one is the fact that the middle class is eroding. Government policies and business practices that have severely cut families financial security and has kept wages artificially low.

The fact is, if you were born poor you are most likely going to stay poor. If you were born rich, you will most likely stay rich.  The American dream has slipped out of many families hands. Today, America is classified as a “low-mobility country” where parental income is largely passed onto the children. Compared to peer countries, if you start out poor in America you are at a severe disadvantage.

Being born in the elite in the U.S. gives you a constellation of privileges that very few people in the world have ever experienced… Being born poor in the U.S. gives you disadvantages unlike anything in Western Europe and Japan and Canada. – David Levine, Economist UC Berkeley

There is growing, and disturbing, evidence that America has evolved into a caste society… with people at the bottom almost frozen there… and people at the top more and more frequently passing on the self-fulfilling advantages of high status to their children… Increasingly, privilege sustains privilege; poverty begets poverty. – Hedrick Smith

Income mobility OECD

Wages have stagnated for the majority of American families over the past 4 decades. Since 1973 the productivity of the U.S. workforce rose 80.1%. Average wages grew at only 4.2%, or 10% if we include benefits. So essentially, in 30 years, the middle class went nowhere. At the same time, corporate profits have skyrocketed. In 2007, corporate profits represented the largest share of national income since 1943- at the same time the share of national income that went towards working wages was the smallest since 1929.

The key reason executives are paid so much now is that they appoint the members of the corporate board that determines their compensation… so it’s not the invisible hand of the market that leads to those monumental executive incomes; it’s the invisible handshake in the boardroom. – Economist and Nobel Laureate, Paul Krugman.

America is no longer a true beacon of prosperity, it is a facade. The living standards of American households in the middle-class have fallen behind a dozen countries in Europe. Wages are behind these countries, while at the same time Americans work 350 more hours a year. People should be furious, we work longer hours, for lower pay, and have to compensate with a greater proportion of two income earner households (the largest of any advanced economy).

This year, more people will end up bankrupt than will suffer a heart attack. More adults will file for bankruptcy than will be diagnosed with cancer. More people will file for bankruptcy than will graduate from college…. Americans will file more petitions for bankruptcy than for divorce. – Elizabeth Warren, Harvard Law

What has contributed? Well, there are a lot of things. Largely corporate culture has changed over the past 50 years, cut has been the name of the game and instead of being interesting in stakeholders leaders have focused on shareholders. But even that has its limits. The middle class has seen a cutting of its benefits: pensions hardly exist  (401(k)’s have replaced them with low contributions), health-insurance while once almost universally covered is now usually only partially, labor laws and bargaining powers have been eradicated, and corporations have replaced citizens as chief lobbyists to the government.

All of this has happened while it has become easier for businesses to file bankruptcy, this has allowed companies to strip benefits, pay off creditors while eliminating retirees pension plans while issuing mass layoffs. It is now more profitable to claim bankruptcy and restructure an already profitable business by eliminating contractual gains made by employees. Furthermore, the corporate executives have fought to allow them to maintain their power at the company even when it fails. Laying off employees and restructuring your company is no longer seen as a personal failure but as a smart business decision to boost the stock value (for the short-term at least).

If you are unemployed, you may have something to blame. The system we have established has led what Stephen Roach, senior executive and former chief economist for Morgan Stanley, called, “the weakest hiring cycle in modern history”. (This was 2002 by the way… that means the 2008-2012 era has claim to that title now). During the current weak hiring cycle, we have seen companies sitting on a record amount of cash and profits soar. In 2010 corporations reached profit levels of $1 trillion, 28% higher than in 2009… Where did the money go? To their pockets.

And the assault is still on. Plans have been laid out for a Medicare voucher program, the idea is to remove government responsibility from the welfare of the lower-classes. Instead, it would put many middle-class and poorer class families at risk should they get sick. Instead of a guarantee of coverage, they would get a voucher that pays a maximum amount based on contributions. In all, the poor and the sick would suffer.

The American caste system is still in formation, tides can change, but we need broad popular support to see a shift. Keep this in mind, and when people chide “class-warfare” make light of their ignorance – because it’s real.

 

6 thoughts on “The American Caste Society – In Class Warfare Money Rules

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  6. Reply Robin Feb 4,2013 %I:%M %p

    Very sad, although I believe this is true. Manufacturing jobs have given way to service industry jobs which pay less, unions have eroded, and paychecks are not keeping up with inflation or the cost-of-living. It’s a trend that could turn-around, though it would take an extraordinary amount of support and interest at the top isn’t there, much of the American public is being sold a bill of goods and doesn’t have consensus how to fix the problem or agree that there even is a problem.

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