understanding class warfare

When we think of class warfare, we think of a political effort to pit the poor against the rich.  The premise is that someone who has more than you is your enemy, which I suppose would be correct if you intend to satisfy your own needs by means of "might makes right" -- by taking from them through force or coercion.

But, assuming that both you and he are capable of producing, free trade holds that someone who has more than you should be your friend.  They say that you can't get a job from a poor person, and it's hard to imagine a better relationship with a rich person than one which makes both of you richer.  It's certainly more productive than a relationship which seeks to make you richer by making him poorer.

An interviewer once asked Ayn Rand if it was okay for some men to have caviar while other men want for bread.  (For some reason, such questions seem more valid with a Russian flavor.)  If we know that caviar costs a hundred times as much as bread, then we can imagine that a hundred poorer men could buy bread with the money a single rich man might spend on caviar.

But money, bread, caviar -- even men -- do not really work this way.  A price is a balancing point between supply and demand.  While bread and caviar have their own balancing points -- prices -- which can be compared to each other, there is no direct translation between bread and caviar themselves. 

The price of bread is set by how much bread there is, and a poor man goes hugry because there isn't enough bread for everyone to get their fill.  The price of caviar is set by how much caviar there is, and most of us must go without because there is only enough for some men to get their fill.  The high price of caviar is the mechanism that enforces this reality.

More importantly, eating less caviar does not create more bread.  This is important because when one man eats caviar instead of bread, he does not somehow limit poorer men's access to bread.  However, the rich man's consumption of caviar is often (incorrectly) portrayed as decadent in light of how many men don't even have bread.  That fallacy is at the root of much leftist thinking.

Real class warfare's not bread and caviar.  And when we look more closely at it, we see something startling about who's at war with whom.

Consider the middle class family: An air-conditioned house, two cars, a refrigerator, a couple TVs, some cell phones.  Cable or maybe satellite service, ample clothing and food.  Even special food for their pets.

And who is a poor person?  Well a poor person is not someone who doesn't have caviar -- he's someone who doesn't have bread.  A poor person is not somebody who isn't rich, he's somebody who isn't even middle-class.  A poor person is someone who wants for the things the middle class has.  You're not poor if you don't have a Cadillac; you're poor if you don't have a car.

Prices are a balancing point between supply and demand, necessary because demand is always greater than supply.  A price is set at the level where products are being consumed at the same rate at which they're being produced.  Set prices too high, and goods accumulate on shelves.  Set them too low, and shelves go bare until the next shipment arrives.  This is basic economics.  Consumers are in competition for goods, and a price is something that discourages consumers until there are just as many people consuming as there are goods being produced.

The poor, then, are people who are losing the competition with the middle class.  Think about it: Society never says, "This poor man needs a Learjet."  You wouldn't raise money to help the family down the street because it can't afford caviar.  The poor aren't in trouble because they don't have money -- but they are in trouble if they can't get bread.  And you don't have to look in the rich man's pantry to see where the bread is actually going.  Poor people don't go without because rich people have a lot of money; they go without because the middle class buy up all of the goods.

So while we think of class warfare as a struggle between rich and poor, it's really a struggle between the poor and the middle class.  The rich are just scapegoats -- convenient scapegoats, since they do happen to have wealth.  Class warfare is based on the notion that we can settle a dispute over goods, between the poor and the middle class, by simply taking wealth from the rich -- the same wealth which is often the basis of middle class jobs.

What's surprising is that this is simply not that complicated.  It's easy to get hung up on money, and to see poverty as "a shortage of money."  But it's not particularly difficult to see the real issue.  The problem is that there's an entire movement of politically-motivated people who need you thinking about it in a certain way in order to advance their own agenda.  And while it may be beneficial for them if they can convince you to see things their way, it won't necessarily help you  -- or the poor, for that matter.

Truly solving problems starts with truly understanding them.  And the people who promise to solve the most problems never seem to explain them truthfully.

There are cheats and there are fools.  I can't do anything about the cheats -- they're going to lie to you forever.  But maybe together we can do something about the foolishness.

That's the John Galt Line.

Comments

[Lee]

Also, would we prefer the rich not to indulge themselves? The more they indulge (and spend) the more that middle class businessman can sell. The more he sells, the more employees he'll probably need in order to keep his business running. Thus that once poor man can use his talents to move himself out of the poor house.

[Edward Gravely]

I completely agree with just about everything stated in the previous article. However, as a liberal, I know that it is not class warfare to expect the rich to pay more in taxes than I do. Our nation, from the year 1952 til 1960 taxed the richest 1% at 91%, from 1961 til 1972 at 75%, and from 1972 til 1979 at 69%. The nation prospered, the middle class thrived with the investments in infastructure that made it very easy for middle class and lower class incomes to find and keep work.
When Republican Jesus(Ronald Regan) was elected he droped the tax rate on the top 1% to 28%. He then made major cuts to national programs set up for lower income people, such as welfare(which was needed) and federal funds to urban locations for paying police and firefighters etc. Also, under Regan the National debt tripled. We also learned the hard way that trickle down economics does not and has never worked. (Also, would we prefer the rich not to indulge themselves? The more they indulge (and spend) the more that middle class businessman can sell.)previously stated that in theory that if rich have more money they spend more money. This would seem logical and completely true however, Ayn Rand never forseen a day when the rich men in the U.S. who own the businesses would outsource everything to a communist country, thus eliminating the people this wealth would trickle down upon here in our country. Further more, when the taxes go down for the richest 1% who originally the most of the tax burden was placed, the middle and lower classes are blessed with the burden of making up the difference.
Ayn Rand did get one thing in Atlas Shrugged correct beyond my wildest dreams. "The sanction of the victim". Today the lower and middle class are being indoctrinated with the love of trickle down economics and no regulations. However, is it so hard to read a history book. After Regans 2 terms, his VP Bush, was inaggurated and left to clean the mess made-a recession, job losses, etc. He then raised taxes to 36% which did not stop the rich from getting richer but was beaten by Clinton who also raised taxes to 39% almost 40% and made welfare a new system, and made needed cuts where he could, and instituted new regualtions on manufacturing. Under this 12 yr tenure of tax raises and more regulations, the U.S. had its longest economic expansion in history.
Currently the tax rate on the top 1% of income in America is 35%. and capitol gains is 15%
Our infastructure is crumbling, manufacturing is moving to "the peoples states" because of lower wages and only because of lower wages,all while the richest 1% get wildly richer every year.
How about instead of all the stuff we do now, lets make it unprofitable to outsource american labour, which will lead to the rich getting richer. Lets raise the tax rate on the top 1% from 35 to 55 so that we can actually fund our government as well as our nation. And finally eliminate any difference between a income and a capital gain.
I promiss if all these things happen, not only will we not have to hope that Hank Rearden and Dafny Taggert will save us, but the nation as a whole will prosper. This will not force or even cause the wealthiest among us into poverty.(David Coche and Warren Buffet will not be on the street in rags begging passers by for spare change, which seems to be the current belief)
To this day ask yourself what is that thoses 400 people who make up the top 1% do that entitles them to 80% of all income earned in America since 1980. Because before 1980 the top 1% earned roughly 9% of all income in America. We have dropped the tax rate to such a low number that they literaly pay nothing, eliminated all kinds of regulations since barrack obama was elected (never mind what was gotten rid of before him) and yet the economy has only gotten worse. Even with this, we are still bombarded with the idiot notion that we will all be better off if the rich do what ever they want, set up monoplies, and pay no taxes. The current argument is that 35% is just to much and it needs to be 25%. I can only hope to see what kind of hell this could cause
SINCERELY EDWARD GRAVELY-THE LIBERAL LIBERTARIAN

[John Galt]

"it is not class warfare to expect the rich to pay more in taxes than I do."

Class warfare is about how you justify it.

"Our nation, from the year 1952 til 1960 taxed the richest 1% at 91%, from 1961 til 1972 at 75%, and from 1972 til 1979 at 69%. The nation prospered, the middle class thrived with the investments in infastructure that made it very easy for middle class and lower class incomes to find and keep work."

In other words, tax rates were lowered several times and the nation continued to prosper. Doesn't exactly prop up your fallacious conclusion that the correlating tax rates were ever the cause of the prosperity.

"under Regan the National debt tripled."

Reagan was promised spending cuts by a Democrat Congress in exchange for tax hikes. The cuts never came. All spending originates in the House of Representatives. And the fact is that those deficits and that debt were peanuts compared to what Obama's doing today.

"We also learned the hard way that trickle down economics does not and has never worked."

Conservatives do not call it trickle down economics. It's called supply side economics, and there's nothing magical about it. It's just another way of saying that you can't get a job from a poor person, and that you can't consume something before it's been produced. These are not meaningless cliches -- they are reality.

"(Also, would we prefer the rich not to indulge themselves? The more they indulge (and spend) the more that middle class businessman can sell.)"

Not the principle behind supply-side economics. The "rich" are already presumed to spend all they want. The purpose of the added income is to allow them to increase their investment in ventures that create jobs.

"previously stated that in theory that if rich have more money they spend more money."

Not under the definition of being rich. If the rich have more money they save more money. Robert Reich's own definition of "rich" is someone who spends the same regardless of how high his taxes are.

"This would seem logical and completely true however, Ayn Rand never forseen a day when the rich men in the U.S. who own the businesses would outsource everything to a communist country, thus eliminating the people this wealth would trickle down upon here in our country."

Whoa -- an admission that the money is invested rather than spent. Second, if some kid in Jakarta can do your job, then you need to learn to do things children in the third world can't do. You have no "right" to that job. Not to mention all the educational advantages and opportunities you enjoy over Jakartan kids...

"Further more, when the taxes go down for the richest 1% who originally the most of the tax burden was placed, the middle and lower classes are blessed with the burden of making up the difference."

Nice theory. In practice, the rich pay an increasing percentage of the income tax burden, and everyone else's share has grown smaller. And I reject out of hand any bullshit about payroll taxes since those funds go to entitlements which benefit the rich least of all.

"then raised taxes to 36% which did not stop the rich from getting richer"

Stop right there. Why is that even a consideration? What sort of person uses that as a milestone, exactly?

"but was beaten by Clinton who also raised taxes to 39% almost 40% and made welfare a new system, and made needed cuts where he could, and instituted new regualtions on manufacturing. Under this 12 yr tenure of tax raises and more regulations, the U.S. had its longest economic expansion in history."

Internet bubble. Republican Congresses. Welfare reform. Government shutdowns because the Republicans wanted less spending while Democrats wanted more. You give Clinton too much credit for Newt Gingrich's work.

"Currently the tax rate on the top 1% of income in America is 35%."

And you think the tiny little 4% between now and Bill Clinton's 39% is really making all the difference, huh? Ignoring percentages, are you suggesting the federal government is taking in fewer real dollars than when Clinton was President? Spending fewer real dollars and providing less real dollars in "services"?

"the richest 1% get wildly richer every year."

Does that make the rich villains -- or role models???

"How about instead of all the stuff we do now, lets make it unprofitable to outsource american labour, which will lead to the rich getting richer."

It would also make all goods more expensive, meaning that everyone else will have to accept a lower standard of living in order to make it happen. Furthermore, I believe economists have shown that it would be cheaper to just give money to the displaced than to subsidize the losses of bringing the jobs back here.

"Lets raise the tax rate on the top 1% from 35 to 55 so that we can actually fund our government as well as our nation."

Hey, I'll return to Clinton/Gingrich tax rates if you'll return to Clinton/Gingrich spending. I'm thinking you're gonna have a bigger problem with that deal than I would.

"And finally eliminate any difference between a income and a capital gain."

1. Why tax income? That's like taxing work. When someone makes a lot of money that doesn't limit how much anyone else can make. Tax consumption, because when someone consumes something they do limit the ability of others to consume.

2. Capital gains should be taxed at lower rates for several reasons. The time value of money, risk, inflation. I can earn money while gaining no wealth due to inflation, and yet I still have to pay taxes on the "earnings." Capital gains should be taxed at the lowest rates of all, and rational arguments can be made that any and all reinvested earnings or gains should be exempted from tax until spent on consumption.

"To this day ask yourself what is that thoses 400 people who make up the top 1% do that entitles them to 80% of all income earned in America since 1980."

I don't care how much value, in terms of worthless paper money, is used to measure their earnings. Magically, they do not consume such a disproportionate share of the wealth they create, and that's all that really matters. The amount of money one person makes does not limit anyone else's ability to make money.

Sounds like you have a real problem with freedom, my friend. Maybe you can get someone to construct you a cell where you'll always be safe from it.