Russiagate, Ukrainegate and impeachment aren’t conspicuously economic issues. But they are, to a large extent, class issues. They are inside-the-beltway dramas about foreign policy arcana that are important to people who see their lots tied in one way or another to the established order. This includes, by degree, those of us who would like to make room for outside-the-beltway concerns like ending militarism, solving environmental crises, providing meaningful employment for all who want it and creating functioning healthcare and educational systems.
This isn’t to suggest that these are equivalent concerns. And in fact, they aren’t. Absent something akin to a revolution, the worst possible outcome for the connected insiders engaged in impeachment-tainment will be moving on to lucrative ‘careers’ working for private equity and / or investing their family fortunes in one world-ending enterprise or another. Four plus decades into the neoliberal overthrow of ‘managed’ capitalism, circumstances aren’t quite so universally advantageous for the rest of us. Rising global political unrest seems destined to bring this division to the fore.
Graph: Given four decades of bi-partisan political service to capital, the distribution of stock ownership is a good proxy for class divisions. The richest 10% of the population owns a bit over eighty-six percent of stocks, with over half owned by the richest one percent. Given the relation of wealth to political power, this distribution broadly defines the distribution of political power in the U.S. Source: Federal Reserve; Global Macro Monitor.
However deeply felt, the Trump / anti-Trump division diversion was dreamt up by establishment political marketers as cover for the remarkable similarities between the alleged opposition parties in their service to the oligarch class. The stock market has risen 350% since the first quarter of 2000 and 500% since Barack Obama entered office, while stock ownership has become even more concentrated. Recall that most of Wall Street would have disappeared in a puff of smoke in 2009 if it hadn’t been bailed out. To the studied bullshit that doing so ‘saved the economy,’ working class and poor people own a smaller percentage of stock market wealth today than they did in either 2000 or 2009.
Why this matters is that stocks are a proxy for the political and economic power of the rich and the professional class. These people are doing better than ever in both absolute and relative terms. And this has nothing to do with how much they produce. Corporate executives have given themselves stock options— ownership shares in the corporations they control, and had their corporations borrow money to raise the value of these shares. Government programs to boost stock prices have done exactly what they were intended to do— they made the rich richer.
This wealth ties to political control through the relationship of campaign contributions to legislative outcomes. The rich and the professional class have the money to make campaign contributions thanks in large part to government programs that boost the value of their stock holdings. Debate amongst economists is over the mechanics of how this is done, not whether or not it is done*. The oligarch’s ‘virtuous circle’ is wealth used to buy legislative outcomes that increases their wealth that then buys more control over legislative outcomes.
Graph: for those not versed in statistics, the near uniform relationship between the rise in family income and the proclivity to vote is another way of presenting correlation. Stated plainly, people vote relative to how much their wealth, power and prestige are tied to the political establishment. This means that battles within the political class— like impeachment, Russiagate and Ukrainegate, are between factions of the rich and professional classes, not amongst the American polity more broadly considered. Source: econofact.org.
The near uniform rise in the relationship of income to the inclination to vote (graph above) ties quite closely to the distribution of stock ownership. To the extent that political passions actually exist for or against impeachment, Russiagate and Ukrainegate, they are between competing factions of the rich and professional class who otherwise have highly aligned class interests. This makes sense in that the rich have a stake in policy outcomes that the rest of us don’t have, because they control the legislative process. This is to argue that policy outcomes have distributional consequences between the rich, hence the factional battles. These factions can be seen through Wall Street support for Democrats and extractive industry support for Republicans.
As Bernie Sanders has already demonstrated, when presented with truthful explanations of Medicare for All and a Green New Deal that includes a Job Guarantee, together with an explanation of the government funding mechanisms to pay for it, the unified class interests of the 90% are brought to the fore. This threatens political and economic control by the rich. Medicare for All would eliminate economic rents in the healthcare system. A Green New Deal would force producers to bear the environmental costs of their production. And a Job Guarantee would reduce or eliminate monopsony rents (excessive corporate profits) in labor markets.
This is to argue that the relevant divide for the left is between the rich and professional class and the working class and poor. As the graph below illustrates, no clear difference in policy outcomes between the establishment parties can be seen in the upward trajectory of the incomes of the rich and the largely unchanged poverty rate. Claims that one party or the other favors the rich or cares about the working class and poor aren’t evident from the data. And given the relationship between race, gender and class, this means that the claim that one party or the other is less racist or sexist also isn’t evident in the data.
Graph: Given the class positions of People of Color and women, government programs to improve the lots of poor and working class people would disproportionately benefit these groups. However, for four decades the bi-partisan political consensus in Washington has been to make the rich richer. Arguments that ‘markets’ explain income and wealth inequality ignore government funding for basic research, government financing of critical infrastructure, government bailouts when ‘private’ businesses run into trouble, government programs to boost stock prices and government tax policies that encourage economically destructive behavior. Source: inequality.org, Emmanuel Saez, U.S. Census Bureau.
The not-usefulness of the Trump / anti-Trump diversion has been to hide unified class interests behind manufactured class loathing. To the same extent that impeachment, Russiagate and Ukrainegate are battles between factions of the rich and professional class, the claim that racism, sexism and gender matters will be resolved through establishment politics that leave class differences unaddressed is a calculated diversion. In terms of class warfare against the working class and poor, establishment Democrats have been as dangerous as Mr. Trump and more politically effective.
Readers are invited to peruse the Race and Gender inequality graphs and data at inequality.org to view the evidence behind the comments in this paragraph. Between 1983 and 2016— a period of thirty-three years, and about equally divided between Democratic and Republican administrations, differences between white and black wealth grew wider, with blacks losing ground in both absolute and relative terms. If one applies a class view of race and gender to the graph above, the starting class position of blacks and women explains this outcome quite precisely.
And here’s the rub. Until class differences are addressed, this is exactly how future outcomes will unfold regardless of which party holds the White House. If the rich are disproportionately white, and government policies benefit the rich, then government policies will disproportionately benefit whites. In other words, the policy outcomes of (allegedly) anti-racist Democrats and racist Republicans will be equally racist in terms of being racially disproportionate. Differences in what Democrats and Republicans believe about race has no bearing.
This is neither to argue that racism doesn’t exist— it does, nor that it is of no consequence— it is. It is to argue that with the current relationship of race to class— and it has been quite stable for decades, the Democrat’s oligarch-friendly policies will produce the same racist outcomes as the Republican’s oligarch-friendly policies. To whack this hornet’s nest one more time, policies that address race without addressing class necessarily leave the political economy of racism both intact and undiminished. This places the Democrat’s use of identity politics somewhere between an internecine battle between the rich and plantation management of the easily distracted.
Many liberals and ur-Democrats are stuck with the idea that class divisions have little or no bearing on policy outcomes. This makes Elizabeth Warren’s policy proposals as ‘plausible’ as Bernie Sander’s based on their respective merits. Bullshit. Disempowering the rich is a prerequisite to any left forward political motion. Without a plan to remove ruling class control of the political system, policy proposals are little more than empty chatter. The problem for the 90% is political, not technocratic.
Which brings up the role of the professional class. If you want to understand the alternate universe it has entered, spend a long drive listening to NPR. This, my friends, is some crazy, crazy shit. And I write this with sympathy and love— these are my peeps, my bougie friends. But in class terms, they are gone. The two paths forward are to retake government for the people or revolution. In this sense, Bernie Sanders is the best friend the rich have because he is offering to retake government for the people. But the fuse if short. Robust implementation of all of his programs is the least that will save the establishment. But really, who needs a class whose sole contribution is to stand in the way of creating a functioning society?
* QE works as follows: The Federal Reserve buys financial assets— interest-bearing instruments, from banks that the banks then hold as reserves. QE is thus an open-market operation further out the yield curve. The effect, and the Federal Reserve’s intent, is to lower market interest rates.
Lower interest rates reduce the price of financial leverage. For instance, a home mortgage with 10% down is leveraged 9:1. As the price of financing a house falls, demand for housing finance rises. (From Q1 to Q2 below). Cheaper housing finance raises demand for both more and more expensive houses. Increased demand shifts the demand curve outward. (From D1 to D2 in 2nd graph). The rise in demand for houses leads to a rise in house prices. The same is true of the relationship between the cost of financial leverage and rising stock and bond prices.