Editor's Note: The following is a guest post by Charles Hugh Smith with PeakProsperity.com.
In the modern era, the phrase Class War is rooted in the socialist/Marxist concept that the conflict between labor (the working class) and capital (owners of capital) is not just inevitable—it’s the fulcrum of history. In this view, this Class War is the inevitable result of the asymmetry between the elite who own/control the capital and the much larger class of people whose livelihood is earned solely by their labor.
In Marx’s analysis, the inner dynamics of capitalism inevitably lead to the concentration of capital in monopolies/cartels whose great wealth enables them to influence the government to serve the interests of capital. Subservient to capital, the laboring class must overthrow this unholy partnership of capital and the state to become politically free via ownership of the means of production, i.e. productive assets.
This Class War did not unfold as Marx anticipated. The laboring class gained sufficient political power in the early 20th century to win the fundamentals of economic security: universal public education, labor laws that prohibited outright exploitation, the right to unionize, and publicly funded pensions.
(The alternative explanation for this wave of progressive policies is that prescient leaders of the capital/state class ushered in these reforms as the only alternative to the dissolution of the status quo. Labor reforms began in Germany and Great Britain in the late 19th century Gilded Age, and another wave of reforms were enacted in the decade-long crisis of capitalism in the Great Depression.)
Though the conventional view is that this failure of capitalism to devolve as expected proves Marx’s analysis is without merit, it can also be argued that the state-capital partnership was far more flexible than early Marxists anticipated: sharing enough of the wealth generated in the industrial revolution with the laboring class to enable a stable, productive middle class benefited the state-capital class by creating a new strata of consumers (of goods, services and credit) who greatly enriched industrial and financial capitalists and the state, which could raise unprecedented sums in payroll and income taxes.
Basking in the luxury of hindsight, it’s easy for us in the present day to forget the often-violent struggles between labor and capital that characterized the early 20th century: anarchists bombed Wall Street, and the Powers That Be sent in armed forces to suppress efforts to unionize entire swaths of industrial workers.
While the middle class of professionals, small business owners, traders and entrepreneurs can be traced back to the birth of modern capitalism in the 15th century, the emergence of a mass middle class of tens of millions of wage-earners with the purchasing and borrowing power created by stable employment was a unique feature of 20th century capitalism.
In effect, the middle class was the Grand Truce in the class war: the state’s imposition of regulations and a social safety net on unfettered capital resolved labor and capital’s primary conflict by sharing the output of capitalism’s bounty.
Many assets had to be put in place to enable this vast distribution of wealth to tens of millions of laborers: a cheap, abundant source of energy (fossil fuels—coal, oil and natural gas), an efficient, accessible transportation network, a financial system that could extend credit to millions of households, and a government with the tax revenues and resources to fund public works that were too risky or out of reach for private-sector capital.
In the latter third of the 20th century, the permanence of this version of state-capitalism was unquestioned: laborers would always be able to enter the middle class, and opportunities for advancement would always be open to those with middle class access to education and credit.
There was no compelling reason to believe this consensus was about to fray and potentially dissolve, and no reason to think that rather than being a permanent feature of advanced capitalism, the middle class was a one-off based on cheap energy, surging productivity and the boost-phase of credit expansion.
But now income and wealth inequality are rising sharply, and capital is pulling far ahead of labor, which is creating a vast and quickly-widening divide between the classes.
Class Warfare: It’s More Than Just Income
Fast-forward to today, and an unexpected series of class wars are emerging as this longstanding social contract frays: social mobility has declined, fostering a divide between the traditional working class (also known as the lower-middle class) which finds itself increasingly exposed to the corrosive winds of globalization and neoliberal policies, and the upper-middle class of highly educated professionals and technocrats who have benefited from these policies, securing protected employment in higher education, government and Corporate America.
Commentator Peggy Noonan’s influential essay described America’s nascent class war as pitting the protected class—those with secure pay and benefits —against the unprotected class of those with insecure employment and benefits.
In other words, the divisive economic issue is not simply the quantity of each class’s income and wealth, but the quality of their respective economic security.
For example, if an unprotected household earns $80,000 in wages and $30,000 in benefits in a good year of full employment in benefits-rich jobs, and $30,000 in wages and no benefits in the following not-so-good year of zero-benefits part-time work, their average total earnings are $70,000 per year—a very respectable middle class income.
But compare the difficulties posed by losing healthcare benefits and getting by on a $50,000 decline in wages vs the secure $70,000 earned year-after-year-after-year by a protected household.
Consider the anxieties burdening the insecure household of two workers who cannot count on having benefits and full-time employment, who see their savings or retirement accounts built up in good years drained in bad years. Houses bought in good years are forced into foreclosure in bad years.
To take another example: compare the security of a tenured professor in higher education with the insecure zero-benefits earnings of an “adjunct professor” whose annual teaching contract is subject to cancelation or modification every year of his/her career.
Not only is the adjunct paid about half the salary of the tenured professor, when the adjunct nears retirement age, he/she has no pension other than Social Security, while the tenured professor has an ample retirement package of pension and healthcare coverage. Both taught the same courses, but one faces a sunset of poverty or the need to keep working far past the conventional retirement age of 65, while the other can retire comfortably and continue teaching or doing research for satisfaction rather than financial necessity.
Class Warfare: Economic and Cultural
This widening gap between the Protected and the Unprotected is not just economic; it's also cultural.
The Mobile Cosmopolitans who secure protected positions have little exposure to the challenges of the unprotected, whom they typically interact with only as an employer giving instructions to maids, nannies, dog-walkers, waiters, etc. Sociologist Charles Murray described this widening cultural gap in his 2012 book Coming Apart: The State of White America, 1960–2010.
Murray made the case that America’s cultural elite—the mobile, highly educated and largely urban upper middle class, i.e. the protected class—is a reservoir of the traditional values (marriage, attending church, setting goals, etc.) that are fading in working-class unprotected America.
Murray posited that various behaviors and associations characterize each class. The working class, for example, volunteers to serve in the U.S. military, while the elites are in civilian positions of power (for example, those who order the working-class volunteers into America’s permanent wars.) The working class attend NASCAR races, the elite class pursues cultural enrichment, and so on.
While many commentators view Murray’s conclusions as overly negative, the recent presidential election has heightened the cultural divide he described between Hillary Clinton’s “deplorables” (who President Obama chided for their attachment to “guns and Jesus”) and the self-described (and oh so morally superior) “progressives.”
(The word is in parentheses because I have suggested that these self-anointed “betters” are at best fake-progressives, as they support exploitive neoliberal policies that are anything but progressive.)
It’s painfully obvious that the economic division between protected and unprotected overlays all too well on Murray’s cultural divisions.
The upper-middle “progressive” class has the sort of social/financial mobility and security—both higher quantities of income and wealth and higher qualities of security--that are out of reach of most of the country's much larger number of unprotected households.
All the advantages that accrue to the upper-middle class—social mobility, access to higher education minus the crushing burdens of student loan debt, family and social connections that lead to lucrative careers, parents who can afford to give their offspring cars and down payments for homes—are accretive: each reinforces the others.
The intensity of life’s challenges is considerably different for each class. With higher income and greater security (such as having stable healthcare insurance), the protected class can afford to take better care of themselves; they have multiple layers of financial cushions against life’s inevitable difficulties such as layoffs, illnesses that require sick leave/costly procedures, auto accidents, etc.
For the protected elites, the intensity of these challenges is lessened by financial and social resources. Social connections lead to new employment in the same profession, gold-plated healthcare insurance covers most of the costs of illness, and ample auto insurance replaces the wrecked vehicle with minimum disruption.
Meanwhile, to the unprotected household, each of these difficulties is potentially devastating: a secure job may never be replaced, an illness may lead to bankruptcy, and the loss of a reliable vehicle may cripple the household’s ability to get to work and earn the money needed to buy another car.
The social contract of the 20th century established state-funded safety nets for those who experience layoffs and medical emergencies. But these programs were by and large designed to provide temporary aid to those who were “getting back on their feet.”
As the foundations of middle class mobility and security erode, these programs are now morphing into permanent, lifelong welfare systems. This is creating new social stresses and divisions.
The Pitchforks Are Being Sharpened
But this protected vs. unprotected isn't the only Class War that’s brewing.
In Part 2: The Class War Playbook we show why the shrinking resource pie—of cheap energy, of cheap debt, of labors’ share of the economy, of the low-hanging fruit of globalization—will soon cleave any mass movement into competing classes.
Our complex, interdependent civil society will spawn equally complex and interdependent class conflicts as a result. In short: there won’t be one class war, there will be many, raging across social, political and economic battlefields.
Understanding how these many wars will be waged is critical to surviving them intact.