The BOOKPRESS September 1999

Pundits & Plutocrats

Edward T. Chase

The Coming Class War and How To Avoid It.
Frederick Strobel and Wallace C. Peterson.
M.E. Sharpe, 1999.
209 pages, $24.95.

Myths of Rich and Poor: Why We’re Better Off Than We Think.
W. Michael Cox and Richard Alm.
Basic Books, 1999.
256 pages, $25.00.


These two new books, conflicting head-on in ideology, epitomize an intra-class (not class) warfare that is dominating the cutting-edge discourse in economics today. The four authors are of the same professional class, "symbolic analysts," to use the new nomenclature. Their books dramatically illuminate what neoconservative guru Irving Kristol calls "America’s Mysterious Malaise" (one of his widely discussed essays in the Times Literary Supplement.)

The title of The Coming Class War is loose rhetoric, of course—and one wonders why so solid an award-winning scholar as Wallace Peterson ever used it. For their part, Cox and Alm, notable for their writings for the Dallas Federal Reserve Bank’s publications, manage to magnify the degree of "myth" in economic discourse by assuring us that all’s well in today’s best of all possible worlds.

Kristol, while sympathetic to Cox’s and Alm’s right-wing conservative thesis, doesn’t quite buy that. His beef, though, is not with shortcomings in the American economy, nor is it with the extreme inequality in income and wealth between the top fraction of Americans and the bottom majorities, an inequality that properly outrages Strobel and Peterson. Rather, Kristol’s alarm is over the "tidal wave of social disintegration" evidenced by "the huge, frightening increase in broken families," out-of-wedlock teenage pregnancies, drug addiction, and rampant criminality. Sociological data and demographics, not economics, explain America’s mysterious malaise, writes Kristol. He is silent about any connection between this social disintegration and economic conditions. It’s the victims who are at fault. But while Kristol sees the underclass’s moral and cultural disintegration as the nub of our "malaise," he also perceives "an acute sense of insecurity among our middle classes," something Cox and Alm never admit. This includes even white-collar corporate middle managers losing jobs in America’s shift from an industrial economy to a service economy.

Strobel’s and Peterson’s chief worry is also about this troubled middle class, always the heart of the American polity. Their opening salvo is to deplore the rise of what Peter Drucker has defined as transnational corporations, global giants that carry out their manufacturing, marketing, sales, design and research anywhere across the world wherever raw materials and labor are cheapest. Bottom-line profit is all that matters.

With the world now linked in a global electronic network, billions of dollars can be transmitted in an instant, transferred hour by hour, to profit from "ferreting out minute changes in the value of financial instruments in any market anywhere." This trade in esoteric financial instruments called "derivatives," is keyed to tiny changes in prices, resulting in mind-boggling profits (and sometimes losses). A new term in transnational land has emerged to identify the key players in this system: on "the Street" they are called "quants," sharks at financial manipulation, moving money at the speed of light from market to market.

Not only are the masses not involved in this new world, the rewards go to a tiny few. The top 1% of Americans now hold an amount of financial wealth greater than the bottom 90% of the population—approximately $5.6 trillion versus $4.8 trillion dollars. Middle-class families as recently as the 1960s comprised some 73% of the population; this class now is down to 60%. Concomitantly the working class and underclass comprise an ever-increasing portion of the population. The proper name for this American system is plutocracy.

This is true despite low unemployment figures because wages also remain low: since 1973, average weekly earnings have steadily slipped from $315.44 to $255.73 by 1996, an 18.9% decline. Most families now get by thanks to working wives and substantially lengthened hours of work. Strobel and Peterson rightly argue that America now has a new class structure, one potentially fraught with class conflict. Here’s how they put it:

There is the wholesale shifting of American manufacturing capital to low-wage countries; this has shrunk manufacturing employment as a percent of the work force from 35% in 1969 to 22% in 1980 to 17.4% in 1990 and 15.0% in February 1998. Concomitant layoffs of white-collar workers followed as well, as did a decline in union membership from over 30% of the labor force in the early 1960s to approximately 12% today.

Strobel and Peterson also lament the gross reduction in federal corporate income tax rates, from 34.1% of federal revenues in 1950 down to 12.4% by 1995. They stress, too, the cruel inanity of our health care system (43.5 million uninsured) and the record number of children in poverty. They accuse our national government of stupidity in operating without a capital budget which could borrow for worthy long-term projects, pointing out that the single budget of current expenses precipitates phony claims of national debt "crises." Lastly, they declaim America’s outrageous neglect of its public infrastructure—transportation facilities, water supply, sewage systems, parks, and mass transit—which stands in stark contrast to that of developed European nations. What’s more, only about half of eligible Americans, often less, bother to vote in legislative elections.

Strobel’s and Peterson’s justified sense of outrage over the egregious gap between the rich and poor unfortunately leads them into some rather fatuous speculation about potential class warfare. They write that people under correctional supervision in prison, on parole or on probation came to an estimated population of 6.6 million people in 1998. What’s more, each person in the prison system has about five voting-age relatives or friends. So the authors conclude, "This results in a figure of 33,000,000 people who are very connected, even intimate with the prison population." The implication is that these people may be the core of a "coming class war."

Amusingly enough, here the authors trip themselves up, for they write, "The significance of this cannot be understated." They mean "overstated," of course, but have stumbled onto the truth: No revolution is in the wind. Indeed, an abiding trait among Americans is their innocent faith that good fortune will somehow befall them. Forget revolution in the USA, deserved though it might be.

Turning to the other camp, what the conservative Cox and Alm in their Myths of Rich and Poor deliver is a triumphalist polemic proclaiming the American free market’s glorious economic benefactions. They begin with a putdown of economic pessimists, including Wallace Peterson, Juliet Schor (Overworked Americans), Kevin Phillips (The Politics of Rich and Poor), and Jeffrey Madrick (The End of Affluence), among others. "Waking Up to Good Times" is their bugle-call title for a list of statistical tables on recent improvements in hourly wages (stagnant or sagging for a decade or so from 1973 into the 1990s); how much better new cars and highways are, and how much bigger on average the American home is. "Even the Poor Have More" runs a subtitle, along with "Still on Top of the World," a reassurance the USA is #l. Jolly looks on the bright side of really troublesome areas bear such rubrics as "The Upside of Downsizing" and "Growth Lies in Service." All together Cox’s and Alm’s bundle of statistics, commonplaces from upbeat data on how even the scruffiest Americans are blessed with TV sets, washers, dryers, cars, refrigerators, bottled water, etc., attempts to demonstrate that there’s no cause for complaint. Doesn’t the Dow Jones Average prove that?

Well, in his essay, Irving Kristol comes right out with the literary (if not quite original) charge that "the center is not holding." Kristol’s anxiety is two- or threefold—the aforementioned social disintegration of broken families, the secularization of American society, and, his final charge, "the contempt of this citizenry for their government and their politicians," which presumably he shares. "Deep down, very deep down," Kristol writes, "there is a free-floating anxiety that our secular civilization along with the ideologies that have created it and sustained it, are edging glacier-like to some sort of crisis." Not, one gathers, a revolution or class warfare, but some kind of social nightmare.

So the wonders, the blessings of improved technology that so persuade Cox and Alm that happy America is thriving as never before, don’t cut it with Kristol. Nor does Kristol give any weight to Strobel’s and Peterson’s thesis that the extreme gap in income and wealth between the rich and the poor is our real headache.

But despite our $8.5 trillion economy, Strobel and Peterson seem closest to reality when they deem America’s economic shortfallings a disgrace. More children are in poverty than ever before in modern times; 43.5 million Americans at any given time lack health insurance; family dissolution persists in the ghettos of our greatest cities; and our prison population is proportionately higher than any country’s except Russia. These problems are indisputably based on economics. Cox’s and Alm’s boasts about the infallibility of the free market, the magic of its self-correcting invisible hand, and the resultant cornucopia of new-gadget technology reveals the naive mindset that inhibits any real public effort to rectify the economic situation: blame the victims or blame government, never blame the pernicious practices favoring the capital rich at the expense of the rest of society.

Romantic revolutionary notions aside, Strobel and Peterson convincingly refute the conservative line that the roots of all social troubles are strictly cultural, not economic. They cite the respected Index of Social Health of Fordham’s Institute for Innovation in Social Policy, which measures key social problems like infant mortality, child abuse, teenage suicide, health insurance coverage, drug abuse, alcohol-related traffic deaths, homicides, and poverty among children and the aged. The Index traces a decline in social well-being from a peak of 77.5 in 1973 to a low of 38.1 by 1991. Write Strobel and Peterson: "It is no accident that the deterioration in social health parallels precisely the worsening distribution of income in our nation, as well as the increase in the number of persons living in poverty . . ." Of course.

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