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posted on 19 November 2015

The Class War Has Already Started

by Charles Hugh Smith, Of Two Minds

Here's what's obvious, but unacceptable: we need a new system.

Pundits and apologists are quick to chastise anyone who even speaks of class war, as if the words alone might spark what the pundits and apologists fear.

The pundits and apologists dread the words because they know the Class War has already started. The mainstream media's hope is that denial will somehow suppress the broader recognition that the fault lines in American society are cracking wide open.

Last week's entries explained why increasing wealth/income inequality is the only possible output of the current social- political -economic order. All the proposed "fixes"--more regulations, more taxes, more bureaucracies, etc.-- will fail because they are merely extensions of a failed system that optimizes inequality, monopoly, cronyism, stagnation, low social mobility and systemic instability.

Here is my delineation of America's nine socio-economic classes:

The Changing World of Work I: America's Nine Classes: Eight of the nine classes are hidebound by backward-looking conventions, neofeudal arrangements and a spectrum of perverse incentives and false choices.

A few commentators see the fault lines and understand the Class War is already rumbling. Correspondent Mark G. submitted these two articles as examples of the widening divides between various classes in the U.S.:

Are We Heading for an Economic Civil War?

How the widening urban-rural divide threatens America

In the first piece, Joel Kotkin describes the political capture of the Status Quo Imperial Democrats by the Left Coast media and tech culture of Silicon Valley and Hollywood, both of which have thrived in our hyper-financialized economy of 95% losers and 5% winners, and the Right Coast financiers, lobbyists, government bureaucrats and Wall Streeters who have benefited so handsomely from the hyper-financialization of the U.S. economy, politics, media and zeitgeist.

This Class War is illustrated by this chart: a tiny financial-political Elite (the top 1/10th of 1%) now own as much wealth as the bottom 90%:

The second piece describes the widening gulf between the wealthy cities vacuuming up global capital (NYC, San Francisco, West LA, Seattle, etc.) and opportunity-impoverished rural America.

But these gaping divides do not fully explain the many fronts of the Class War. We can add another fault line--the one between those exploiting institutions to validate their indignation and victimhood, and those far from the feeding troughs of universities and state bureaucracies.

The divide between those using the media and institutions to reward their indignation and victimhood crosses a variety of ethnic, religious and income lines, and as such it is a Cultural Divide with financial ramifications: one camp sees the Central State as the infinite feeding trough of benefits, lifetime employment, and power, while the other camp sees the Central State's limitless power as the primary threat to the well-being of the economy, nation and culture.

The first camp revels in Bread and Circuses, and demands more; the second camp reviles Bread and Circuses and sees the demanding crowd in the Coliseum as proof the nation is fracturing/falling apart.

Then there's the demographic divide between entitled retirees and the younger workers with stagnant incomes who must support the retirees "pay as you go" social programs (Social Security and Medicare).

As I have tirelessly explained for years, the Social Security/Medicare "Trust Fund" is a fiction, a ledger entry of non-marketable securities. When Social Security runs a deficit, the deficit is filled by selling Treasury bonds-- the same way any other program deficit is filled. The only way to pay for these programs is to increase the national debt. The "Trust Fund" is nothing but a propaganda Big Lie.

The younger workers are chained to a system that is completely out of whack with the real-world demographics of an enormous generation of retirees who are living decades longer than the population the system was designed to serve, with medical care costs that are the financial equivalent of a runaway train.

As painful as it might be to retiring Boomers, here's the perspective of those facing decades of taxes to pay for programs that can't possibly fund their retirement in the same fashion:

Baby boomers are what's wrong with America's economy: They chewed up resources, ran up the debt and escaped responsibility.

All of these fault lines result from one basic truth: the system is broken and cannot be reformed/fixed. As the pressures of a system that optimizes inequality, monopoly, cronyism, stagnation, low social mobility and systemic instability build, the fissures in our economy and society will widen.

Here's what's obvious, but unacceptable: we need a new system. Not a system modified with tiny tweaks and a feeding trough filled with borrowed money--an entirely new system designed from scratch to be sustainable and with opportunities to build capital for all. This is why I wrote A Radically Beneficial World--to start the discussion of what a new system could accomplish, not just for the top .01% or top 10%, but for all of us.

This entry is drawn from my new book A Radically Beneficial World: Automation, Technology and Creating Jobs for All: The Future Belongs to Work That Is Meaningful.

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