Oligarchy, Economy, and the Middle Class.

6개월 전

I had a friend who wrote: "I am deeply concerned about our division of wealth. History shows it to be unsustainable."

I replied: There has never been such widely-held wealth as there is today. Never before in all of history has there been such a people as Americans with such a high standard of living. There weren't even 'masses' two hundred years ago, but now the majority of the masses are middle class.

He replied: "Really? Look at the 1950s and 60s. We are on a very slippery slope. Possibly the oligarchs were more concerned about communism as an ideology? Hence, better wages and benefits for those of us who Do The Work?"

My answer covered a lot of ground:

Are you really going to suggest that there was greater wealth distribution in the sixties and fifties? Seriously? Back then there wasn't much wealth to distribute!

After the Great Depression and World War 2 America's wealth was depleted. Sure, we were nowhere near the depletion that had taken place in war-torn European countries, but real net worth's, and savings of the average American were zip. The economy came roaring back and there were tons of great new jobs as industry returned to producing goods rather than bombs, but there was no vast reservoir of wealth among the middle class as there is today.

The fifties were no doubt a boon to the middle class, and JFK's supply-side tax cut gave a great lift to the economy of the sixties, but we were nowhere near where we are today in terms of median income (adjusted for inflation). Back then the separation from the rich upper classes and the middle class were much greater than it is today, and the standard of living for the middle class is much better today. Indeed it has been said that "we're all middle class now." The cost of the lifestyle of the masses is much more expensive than it was in the 50s, I'll certainly give you that, but the lifestyle that mass man buys today is a far higher standard of living than the one enjoyed by the mass man in the fifties.




Now, don't get me wrong, I do believe that the super rich are becoming differentiated from the upper class. They are a class that is growing even as the middle and upper classes are not growing. But I don't see it the way the typical progressive does. I don't see it as a zero-sum game where for some to win, others must lose. I don't for a minute believe that just because a small but increasing group of people are doing much better than before that others necessarily are doing worse than before. Nor do I believe that because there are more super rich and they are richer than ever, that the middle class hasn't been growing steadily and getting wealthier. That the super rich are getting richer does not mean that the middle class is getting poorer. The rich don't get rich at the expense of the poor.

However, the average mass man today is much different than his 50s counterpart. Today's mass man might make much more than the mass man of the 50s but he also is much more willing to go into debt to buy now what his father waited thirty years to pay cash for. Today's mass man is terrible at saving.

But it should be pointed out that even as he is in more debt, a far greater percentage of people today own stocks, mutual funds, have IRAs, and 401ks than ever before. Today's mass man makes much more but he also spends much more too. This is why the critique of consumerism has so much resonance to it. We inherently, intuitively know that man today is living beyond his means. But this does not mean his means are less today than they were back then. His ends are much different today. Back then he aimed to save and retire comfortably, today he wants to live comfortably with all the gadgets, entertainments, and luxuries, and he thinks less of his retirement.

Now, as to your remark that "Possibly the oligarchs were more concerned about communism as an ideology? Hence, better wages and benefits for those of us who Do The Work?" First let me ask what you mean by oligarchy? Do you mean the small group of elected lawmakers in DC or the huge bureaucracy which writes and enforces most of the rules and regulations that entangle enterprising entrepreneurs and the countless companies in the greatest economy the world has ever known? Or, by oligarchy, are you suggesting that there are only a few companies owned only by a few people and we are all just wage slaves to them?

If you are suggesting the latter, let me ask you, are you really suggesting that the titans of industry only raised wages for their employees because they feared America would go commie? Let me assure you that in a world in which there are plenty of people who are looking for work, those barons were not worried about finding cheaper labor elsewhere and they surely weren't worried that America was going to go commie. They were and are today mostly concerned with profit and productivity. If they can be more productive and more profitable by increasing wages for workers, they would. Again, it is not a zero-sum game.

The two most important things in a market capitalist system is that prices are determined by a free play between buyer and sellers and that competition is encouraged. Competition is not only good for the consumer, it is critical for the worker.

A worker is protected from his employers by the existence of other employers for whom he can go to work. An employer is protected against exploitation by his employees by the existence of other workers whom he can hire. The consumer is protected from exploitation by a given seller by the existence of other sellers from whom he can by. Why do we have a poor postal service? Poor long-distance train service? Poor schools? Because in each case there is essentially only one place from which we can get the service.

When workers get higher wages through the free market, when they get raises by firms competing from one another for the best workers, by workers competing against one another form the best jobs, those higher wages are at nobody's expense. They can come only from higher productivity, greater capital investment, more widely diffused skills. The whole pie is bigger-- there's more for the worker, but there's also more for the employer , the investor, the consumer, and even the tax collector.
— Milton Friedman, Free To Choose

The two greatest dangers to market capitalism, our constitutional republic, and our way of life are:

  1. Political centralisation

  2. Economic concentration

Political centralisation puts too much power in the hands of the people at the top.


As with any top-heavy structure, the tiniest mistake at the top causes massive problems for all who are below. Think of how unstable a mattress is when you turn it on its side, the slightest breeze could blow the whole thing over. But put it on its flat side and its so stable that it can absorb shock on one part of it without it affecting the others. Think of that commercial with a glass of wine placed on one side of a mattress while a bowling ball is being dropped on the opposite corner. It doesn't cause the glass of wine to loose its balance and spill because the structure is homeostatic; its more stable because it is not top heavy. The way we are running our government nowadays is like setting the mattress on its side, putting a glass of wine on the top, and throwing bowling balls at the centre.

Additionally, the entire top-heavy superstructure cares primarily about perpetuating its own power. Power high up in some far distant capitol cannot care as much about the little people as can a government here down own the ground locally where the leaders are "close enough to kick" when they are unresponsive.

Furthermore, when political power is concentrated, it does and cannot care about all the people, it looks to gratify those particular people whose votes can be bought by giving them the spoils of power. Most people just want to go about their business without the government interfering in their lives. It's the people who want hand-outs (whether they be corporatists looking for favourable regulatory treatment to advantage them at the expense of their competition, or people who want government grants, contracts, welfare, or entitlements at the expense of all taxpayers) that the massive bureaucracy in charge hopes to bribe in exchange for their votes.

Economic concentration is the other most dangerous thing which threatens our economy and our constitutional republic.


When competitive pressure is diminished because the big companies garner favourable regulatory treatment from lawmakers and regulators, not only are the consumers hurt by higher prices, poorer quality, and fewer choices, but employees in that sector are hurt because there are fewer companies where they can go do their jobs (See that Friedman quote) that might pay them better.

We must realise that vigorous competition is best for the little guy because he can find more places competing for his labor. Plus, since it is the little guy who struggles most to buy what he needs, we must realise that when there is more competition in the marketplace his spending dollar will go farther because more producers are competing to give him a better product at a lower cost.

Therefore, the single biggest danger to our economy and constitutional republic is the unholy alliance between big business and big government; when we have both political centralisation AND economic concentration. At that point you have the battle of the organised versus the unorganised (like the teachers unions against disparate local parents) or the rich against the poor (the mega-corporations can afford to give huge contributions to politicians to give them favourable regulatory treatment, but ma & pa businesses cannot give much at all). We've seen the evil wedding of big government and big business before. We know what real oligarchy is; in Communist Russia, National Socialist Germany, and Fascist Italy, and we've seen how it not only cares nothing for the Forgotten Man, it usually send him to the gulag if he doesn't do what the oligarchs want.

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