"Class Warfare"? Absolutely!

Class warfare is nothing new. Plato spoke about it in his great dialogue, The Republic, more than 2000 years ago. “Any State, however small, is in fact divided into two -- one the State of the poor, the other that of the rich – and these are [forever] at war with one another.” He warned that extremes of wealth and poverty were the greatest of all causes of social conflict and revolution.

Adam Smith, the “founding father” of modern free market capitalism, also wrote about class warfare in The Wealth of Nations, in a passage that is seldom quoted by modern proponents of Smith’s “invisible hand” metaphor. “Masters are always and every where in a sort of tacit, but constant and uniform combination, not to raise the wages of labour above their [prevailing] rate.” Furthermore, Smith noted, “masters, too, sometimes enter into particular combinations to sink the wages of labour even below this rate.”

Many years later, Karl Marx embraced this theme and pronounced that it was the result of an “iron law” of economic evolution that would finally be repealed when the oppressed working class overthrew capitalism and replaced it with an egalitarian communist society.

During the industrial revolution in the nineteenth century, the words of Plato, Smith and Marx (among others) seemed to ring true. The rising factory system resulted in brutal, slave-like working conditions and squalid, impoverished living conditions for the laborers while capitalist owners amassed vast fortunes. And, as Smith predicted, organized efforts to reform these conditions were regularly thwarted by the organized opposition of the ruling class.

The take-home lesson from this dismal story came (mainly) in the twentieth century, when the major nations of the world took two very different paths – revolution and reform. The convulsive, bloody upheavals in Russia and China led to an authoritarian communism that was radically different from Marx’s vision, while most Western democratic societies undertook reforms that produced the modern “welfare state,” along with a moderate redistribution of wealth.

However, in this country political conservatives and the capitalist class seem to have forgotten this important historical lesson. While other welfare capitalist societies have maintained and even improved conditions for their workers, America has reversed course with a vengeance. Our safety net has been allowed to deteriorate while many millions of jobs have been outsourced and we have seen a huge increase in the gap between the wealthy few (the “one percent”) and the rest of us. For instance, CEO salaries have multiplied by about five times (after inflation) since 1980, while the average worker’s wage has stagnated. At the bottom of the economic pyramid, incomes have declined by about 27 percent (and a lot more than that after inflation). Today, the top 1 percent take home almost one quarter of our total national income. Earlier this year, Forbes magazine reported that 214 new billionaires were added to its list in 2010. Many of these were in other countries, but we still have the most billionaires, at 413. Overall, the net worth of the world’s billionaires jumped by 5.7 percent to an average of $3.7 billion each (the total is $4.5 trillion!).

The return of class warfare in this country has also been plainly evident in our politics. There have been systematic efforts to (among other things) hold down the federally-mandated minimum wage, reduce taxes for the top end of the income scale, eliminate inheritance taxes and shift the tax burden to the middle class And since the 2010 election there has been a full-scale assault on the safety net, coupled with demands to lower high-end taxes even further.

Now the pushback has begun, and class warfare has moved from Wall Street and Washington to -- well, Wall Street and Washington, though now it’s out in the streets. The psychology of negotiation and compromise has been replaced by the psychology of confrontation. Going forward, we will face once again the two alternative paths that were followed in the twentieth century – either reforms that will deal with the underlying economic hardship and distress, or an accelerating conflict that is unlikely to have a happy ending.

The hope is that we will choose the right path. The fear is that we will fulfill Plato’s prophesy that “ignorance is the ruin of states.”