Capitalism and the contraction of the middle-class

The word Capitalist is one of the most misunderstood because it is interwoven with socialism when it resorts to monopoly and high risk/return ratio, whereas it is meant to involve competition and free enterprise, i.e. the ability of “little people” to set up and run a new venture at a small profit.

The leftist conception is that the corporate gangsters and their friends the banksters are what Capitalism is all about and only about, therefore the State should step in and “guarantee” education, medicine, jobs and a lifestyle for all, irrespective of position in society. What they fail to address is the question, “Who pays?” We are seeing the answer to that today in the UK. They also fail to address why the capitalist model is the one which has created the most developed societies.

The rightist conception is that unfettered enterprise somehow leads to healthy competition and enables anyone with initiative, drive and nous to run a little business, whereas the truth is that the natural tendency of medium sized business is to become big business and thus to monopolize areas of trading. Along with the collusion of similarly minded people at the top and when the State becomes interwoven with that, the resultant corrupt mess is global socialist/MIC/bankster oligarchy.

The best solution has to be somewhere in the middle, based on the classical liberal stance – that anything is fine, as long as it is not to the detriment of others but to the chagrin of we on the right, that does not happen naturally. It’s clear that the corporate gangsters, in their manipulation of markets to suit themselves, buying off the regulators and driving up prices but not wages, are detrimental to most of us and when States assist with impossible taxes and banks assist with driving prices up through credit, then people drop off the old middle-class in droves, to become the new paupers.

The solution does not involve throwing out the baby with the bathwater, as the socialists or left-liberals are so quick and ready to do. Increased State intervention is never a good solution for anything. Nor is localism because localism is hijacked by Common Purpose types and perverted into communitarianism, i.e. regionalized or local socialism, to further the agenda of the oligarchs.

It’s interesting that in this article by Charles Hugh-Smith, the first factor in the new educational outcomes for graduates involves confusion:

1. Confusion as your destiny.
2. Hierarchy: You must stay in class where you belong.
3. Indifference: Not to care about anything too much.
4. Emotional dependency: Surrender your will/rights to the predestined chain of command who can withdraw your rights.
5. Intellectual dependency: Curiosity has no important place, only conformity.
6. Good people wait for an expert to tell them what to do.
7. Provisional self-esteem: Your self-respect should depend on expert opinion– children should not trust themselves or their parents, but need to rely on the evaluation of certified officials.
8. Controlled society: Constant surveillance and denial of privacy–no one can be trusted, that privacy is not legitimate.

There is a logical problem here. Education and in particular, institutes of higher learning, should reflect the needs of the society’s business structure and direction, as well as reinforcing the heritage and traditions of that society – its underpinnings, as it were, as well as the pursuit of academic excellence for the sake of that excellence and for the reduction of ignorance.

Fine. What happens though when what is taught in these institutes is perverted, the appointment system for academics is perverted and all that students receive at that place is perverted? This is the situation today where these institutes are crammed with socialist/feminist/PCist types, whilst those who support their nation and its heritage get short shrift.

What happens when the principle of graduates filling places in industry is perverted by the cost of education in the first place – artificially bumped up to ridiculous levels and where the whole thrust of enterprise is away from productive technologies and towards the illusory bankster created wealth?

What happens when the very industry new graduates are feeding into is not one we should be pursuing?

Another important change in the early 1970s was the increasing flow of capital into the FIRE economy (finance, insurance and real estate), eschewing real-world investments as comparatively unprofitable. Some of this was due to globalization — steel, for instance, could be produced cheaper in East Asia than in America — but policies and regulations influenced this capital flow. For example, while the environmental regulations enacted in the U.S. in the 1970s have been a major success in terms of cleaning up the air, land and water we all share, in some cases they raised costs to the point that moving production overseas made financial sense.

The 1970s also saw the first beginnings of a loosening of financial regulations and the growth of credit and financial “innovations,” such as securitization and derivatives. Capital increasingly fled real production for finance, which became the key profit-center of corporate America. GM didn’t make money manufacturing autos; they made money selling loans to buy their cars. General Electric made more with its GECC finance arm than it did selling light bulbs and generators.

As a result, where finance and banking once generated a mere six percent of total U.S. corporate profits, by the height of the housing bubble in 2006 it was churning out 45 percent of all corporate profits. Indeed, U.S. “financial services and innovations” were the most heralded exports of the nation.

And who ends up getting squeezed? Why the middle-class of course, the former taxpayers of our society:

This represents a major change from the glory years of the great American post-war boom, when the modern middle class came into its own. Historically, income inequality reached a peak in 1929, just before the stock market crash, and declined all through the postwar boom decades of the 1950s and ’60s as progressive tax rates and restrictions on financial speculation limited the income of the upper class. Widespread prosperity in the post-war period raised incomes in the middle and bottom income brackets. But that trend reversed in the early 1970s, and income inequality has again reached the extremes last seen in 1929. By some measures, inequality is now more pronounced than ever before.

There really have been grand illusions created in the past four decades. Credit has simultaneously created the illusion of an upper-middle-class lifestyle for families, whilst actually occasioning huge debt per household and creating an ever accelerating descent to debt slavery and dependence on the State for sustenance. The illusion that the middle-class who dabble in what the big boys are dabbling in are actually getting anywhere:

The story of the middle class squeeze is complex, but its effects are not hard to see. Despite an increase in national wealth over the last 40 years, the wages and wealth of most of the U.S. population are flat at best. Owners of capital and the professional class, who make up the top five percent (or less), are the only ones who received the benefits of economic growth over the last few decades.

While some observers point to middle class ownership of stocks and bonds as evidence that this trend benefits the middle class as well as the wealthy, they fail to note that middle class ownership of stocks and bonds is a mile wide but an inch deep. The vast majority of households own less than $10,000 in stocks or bonds, including IRAs.

For decades now, the banksters, with their Venetian traditions, have maintained the illusion of the middle-class, whereas, in reality, they have being creating the preconditions for a new feudalism, with them at the top. This is not Capitalism in the least, in the sense many of us see capitalism – as free enterprise, combined with classical liberalism. This latter is what we want – the former is what we are getting.

3 comments for “Capitalism and the contraction of the middle-class

  1. June 9, 2011 at 8:18 am

    I agree with this analysis and remain puzzled as to why so many would-be libertarians align themselves exclusively with the right. Fascism lies at both ends of the bell-curve.

    • June 9, 2011 at 6:46 pm

      Indeed it does.

  2. Seun Abayomi
    June 15, 2011 at 7:43 pm

    Well written observation and very accurately reflects what has happened in the UK. Just recently posted that the use of the word billionaire is now so common it’s ridiculous.

    Where we are now is laden with a top heavy, power laden elite, a squeezed and somewhat ignorant middle and the lower income earners who need to hope altruism will fight their cause.

    In my mind capitalism has been proven to be fatally flawed. It’s saviour is there are no specifically better options.

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