Power and Class in the 21st Century

Photograph by Nathaniel St. Clair

The preeminence of capitalism, with various agglomerations of economically captured states, nominally private institutions such as corporations, and so-called markets, represents fundamentally different form and function of Western societies than existed only a few short decades ago. The singular nature of this organization, along with the sense that it represents a relatively fixed and external reality, is belied by the profoundly different ways that it is being lived. In other words, the question of whether or not history has ended is a function of where one sits in the existing order.

This isn’t to endorse the view that it has, far from it. But because it serves as the starting point for political challenges to capitalism, such as they are, it has to be addressed. That it is being lived differently by different people provides a clue that it isn’t ubiquitous in the sense asserted. The assertion itself is subtextual— a function of political and economic relations, not stated out loud in a way that most people might find convincing. This is its power, that political challenges are a response to capitalism, rather than the existential need to create the world that we inhabit.

Graph: Liberal icon Barack Obama was among the more faithful servants of capital while in office. ‘Americans,’ whatever that means, had wildly different experiences of his tenure, with the rich and PMC doing quite well, while those whose lives they have varying degrees of control over did poorly. Stock prices rose while employment plunged. The bitterness of current political divisions is at least partly an outcome of this difference. Data is smoothed using a two-year moving average to illustrate the trend. But it covers all of the years that Mr. Obama was in office. Source: St. Louis Federal Reserve.

The bitterness and rancor of current politics reflects opposing sides in a class war launched in the 1970s by wealthy industrialists, financiers and inherited wealth against organized labor and an imagined redistributive state. To be clear, the state is redistributive, with the overwhelming preponderance of its largesse going to the rich and their agents in the PMC. While government spending only constitutes a fraction of GDP, the economic value of government support for the rich and bourgeois finds measure in the value of the stock ‘market,’ which is now many multiples of annual economic production (GDP). It is owned almost exclusively by these classes.

The conundrum for the establishment political parties is between fealty to the ghosts of democratic political control and the reality that economic relations define the contours of most people’s lives. While the particulars ebb and flow with economic conditions, most people spend their working lives conforming to the dictates of employers. Political rights have little bearing on the whims of owners and bosses. The realities of at-will employment and the steep economic cliff between being employed and not being employed render liberal ‘rights’ moot. Lest this be explained away as the wrath of nature, power has not always been distributed thusly.

The cynical brilliance of the New Democrats of the 1990s lies in their realization that capitalist democracy is an illusion, and that political power is economic in nature. ‘Merit,’ the liberal explanation of the distribution of wealth, is a restatement of the religious claim that wealth is evidence of grace— that God hands out the paychecks. The ‘level playing field’ is a restatement of the neoclassical conception of an ever-present now where intelligence, ability and hard work make us all equal in our ability to achieve grace. Unleashing this capacity means favoring the meritorious while ‘freeing’ the poor from the shackles of economic dependence to compete in the mart of competitive commerce.

Graph: In the early 1980s, the Wilshire 5000 stock market index equaled 20% of GDP. In 2020, it equals 130% of GDP. This increase is a function of ‘multiple expansion,’ meaning that the growth in GDP since the 1980s explains only about 15% of the increase (in the relationship). The other 85% is the product of various types of government support for financial markets, from trade agreements to overseas wars to benefit the oil industry, to the privatization of technologies developed by government agencies (the internet), to direct bailouts and subsidies of finance. Source: St. Louis Federal Reserve.

In retrospect, the Democrat’s insight that finance would be ascendant while dirty industries, whose owners and executives support Republicans, wouldn’t, treats manufactured outcomes as self-generated when they are anything but. Dirty industries were (are) rendered fungible, and therefore mobile, by Wall Street. So-called free-trade agreements are contractual statements that set the terms by which dirty industries, made fungible through Wall Street financing, could be shut down in the U.S. to be re-opened in locales where labor is cheap and environmental regulations lax. Service to capital makes Democrats and Republicans a tag-team for capital.

As has been realized by nearly everyone but the loyal constituencies of the two capitalist parties— cooperation on issues constructive to capital and the rich constitutes 99% of what Congress does. American foreign policy supports arms and materiel makers, resource companies and infrastructure rebuilders. Domestic policy supports the makers and suppliers of goods and services. American agricultural policy supports industrial agriculture. For all of the criticism that the U.S. hasn’t had an industrial policy since the 1970s, capital and the rich have done quite well through the absence.

Lest this come as a surprise, what is described here is class warfare. Liberal economist and chief explainer for the neoliberal order, Paul Krugman, articulated the approximate means by which so-called free-trade would make some people better off while making other people worse off decades ago. A more precise way of ‘explaining’ this relationship is that some people, lets call them the owners of capital and their agents, made themselves rich— through outsourcing, regulatory arbitrage, and evading taxation and environmental regulations, by making workers poorer. This was the known outcome before NAFTA was passed.

Graph: Considered along with the graph at the top of this piece, the rich and the PMC did quite well during Barack Obama’s tenure in the White House. However, most people were left considerably worse off. This explains the rage of the PMC in asserting that the ‘little people’ failed them in the 2016 election. However, the electoral saw that people vote their economic interests explains the logic of voters quite well. The PMC supported Democrats while workers and the poor had nowhere to go. Source: Lambert Strether / nakedcapitalism.com; AP Graphic and Federal Reserve.

The ‘free-trade’ policies that both capitalist parties support are only made socially legitimate on their own terms through systematic redistribution that Republicans never supported and Democrats never created an institutional framework to facilitate and enforce. Without these, there never was a reason for the New Democrats to believe that their policies would achieve anything but making the rich richer by making working people and the poor poorer. The ‘net gain’ claimed by Mr. Krugman accrued to the rich and the PMC alone. The people who were economically displaced received a few weeks of ‘retraining’ for jobs that didn’t exist.

While this is well-trodden territory for those who lived through it, the ability of political marketers to muddy the analytical waters is impressive, and ultimately frightening. Unrestricted immigration was formerly the province of labor-intensive industries trying to lower labor costs. The idea that it is beneficial to immigrants ignores the living conditions to which immigrants are subjected, the absolute power that tenuous immigration status gives to employers, and the pass-along effects that tiered labor has in lowering wages more broadly. An argument for open borders can be made, but NAFTA and other trade agreements affected the mobility of jobs, not workers.

The idea of labor mobility— of open borders as it regards employment, has been debated for a couple of centuries at least. Why are none of the moral arguments regarding immigration informed by this debate? The implied premise is that people immigrate for economic reasons, but what are these reasons? Without them, the moral argument is a form of American exceptionalism implying that the world ‘loves us for our freedoms.’ The reality is as Paul Krugman put it: open trade creates winners and losers. Most of those immigrating for economic reasons formerly had livelihoods where they were. How moral is it to destroy the livelihoods of tens of millions of people and then offer for them to come to the U.S. to labor for poverty wages as second-class citizens?

The stilted political frame of the American left, in which liberal principles are alleged to be closer to left than Republican principles, is child-like in the sense that slightly more complex relationships offer a very different picture. Democrats support ‘clean’ Wall Street while Republicans support dirty industries. But ‘clean’ Wall Street is a full partner with dirty industries. Either directly through bank loans and financing, or indirectly through capital markets that Wall Street ‘manages’ for its own benefit, dirty industries are made fungible— convertible into their monetary value, through Wall Street. And this fungibility is air which neoliberalism breathes.

The political dividing line is between liberals who view the U.S. as an occasionally flawed force for good in the world, and internal and external victims of neoliberal political and economic relations and practices who find themselves on the wrong side of American power. Lest this read as a radical rant, Paul Krugman himself made the point that unless the ‘losers’ of the trade policies of recent decades are compensated for their losses, they have been wronged. They were not compensated. Peasant farmers in Mexico— amongst the immigrants being used as pawns in U.S. political discourse, had their livelihoods destroyed when industrial corn flooded Mexico after passage of NAFTA. There are a lot of victims of neoliberal policies.

Democrats, as well as Republicans, supported the state actions, agreements and institutions that provide national—and with it military, backing for policies enacted with clear knowledge that industrialists, financiers and the PMC would have their lots improved by taking away the livelihoods of tens of millions of workers. The American state sided with the rich in a class war against working and poor people. Economic sanctions, sold as ‘clean’ foreign policy because no bombs are dropped, overwhelmingly hurt the poor and powerless. And in fact, the concept of a ‘war of attrition’ is to make life so tenuous and miserable for the poor and powerless that they rise up to remove leaders deemed enemies of the U.S. by the war lobby, munitions manufacturers and administration hawks.

As a child of the Vietnam War who began working against the war at a tender age, in the decade before Richard Nixon was elected, the war was understood to be a liberal war. The ‘Best and Brightest’ slaughtered four million human beings based on political calculations that were known to be fallacious more than a decade before the war ended. Bill Clinton bombed Iraq for eight years before George W. Bush was appointed to up the body count and pointless destruction. Barack Obama oversaw U.S. support for the right-wing coup in Honduras and the destruction of Libya. Before he fell in line with war industry demands, Donald Trump was decried by liberals as a threat to American foreign policy. The complaint was that he wasn’t militaristic enough.

Rancor over electoral politics is so bitter and toxic in large measure because the PMC perceives itself to be both blameless for the social disintegration caused by neoliberal policies that it supports and facilitates, and as morally superior because of its ‘right’ beliefs, regardless of its actions. The distance between economic outcomes illustrated in the graph at the top of this piece is fairly well known by the 70% of people on the losing end of it. But economic segregation by class has left the PMC absolutely clueless about how most people actually live. Again, liberal explainer Paul Krugman explained the process by which they were being made richer by making other people poorer three decades ago.

Here’s the point: there is a rational explanation for why the PMC is contented with the existing order and much of the rest of the population isn’t. The rich and the PMC are benefiting from this order and the rest of the population isn’t. The second point: people aren’t necessarily knowledgeable in the political and economic reasons for this difference. None other than Hillary Clinton attributed the difference to personal virtue in a well-discussed speech she gave in early 2018. If the doyen of American neoliberalism— whose husband was a chief architect of the program, doesn’t know that economic policies result in economic outcomes, why would the writers at the New Yorker, the New York Times, or the accurate readers of State Department press releases at NPR?

At its most basic level, post-War liberalism in the U.S. is reactionary, and deeply rooted in the conservative premise that ideology, now tied to ‘character,’ determines history. To the extent that this is descriptively accurate, what does it matter if it is left or right? However, there is a plausible material explanation for the current divide between the PMC and the rest of the country. It is the difference in material outcomes during the Obama years. But what the PMC and bourgeois press have offered is that ideology is the only dividing line. And what hasn’t been tried is improving the material lots of the other 70% – 90% of the population.

This tie of ideology to character is a new, and reactionary, development. The history goes like this: following WWII the founders of neoliberalism had to re-sell capitalism to a public still suffering the effects of the Great Depression, and do so without granting the Marxist critique any room. Meanwhile, the conservative critique was / is that character determines one’s place in society. In recent history, identity politics was / is an effort to explain oppression outside of Marxist class analysis. Its categorical precepts are binary oppositions: racist, antiracist; sexist, antisexist; pro-immigrant, anti-immigrant, etc. The moral determination is: racists, sexists and anti-immigrants are bad, ergo, their opponents are virtuous.

In the narrow terms of virtue, so defined, there is an internal coherence similar to that of capitalism. How do we know that the rich are intelligent? Because they are rich. Across the arc of history, such proclamations are for local consumption only. Trying telling your enemies that you are virtuous and they aren’t to see if you find agreement. Back to the beginning: a minority of people did well under the last liberal government. Most people did poorly under the last liberal government. Speculative theories of relative virtue are hardly needed to understand why some people want liberal government to continue, while other people don’t.

The intended or unintended consequence of framing political difference in terms of relative virtue is that those being slandered don’t much appreciate it. The class argument, that neoliberalism disenfranchised a large class that isn’t going to take it lying down, gets to the point quite effectively. Unfortunately, this is America. It is mostly bourgeois academics and depe thinckers like yours truly that see these outcomes in class terms. What I can offer from a meaningful number of conversations is that liberal assertions of virtue don’t find many takers outside of the liberal echo chamber of the New York Times, The New Yorker and NPR.

Without implying a preference in the upcoming, because I have none (the horror!), it appears that the gods are now favoring Joe Biden. What will be a sight to behold, as predictable as the sun rising in the east and setting in the west, is tens of millions of #resistance eyes closing for a four- or eight-year hibernation as the other one of the two capitalist parties does what it does. Pundits will chide those concerned about the hard-right turn their candidate has taken that it is their duty to ‘hold his feet to the fire.’ Gratuitous wars will be launched and millions will die. Evidence of catastrophic environmental decline will accumulate. The phrase ‘somebody needs to do something’ will top the Google search list. And so it goes.


Rob Urie is an artist and political economist. His book Zen Economics is published by CounterPunch Books.