“Class Warfare” is a term we often hear politicians evoke when attacking and when under attack by those who disagree with their economic viewpoints. Both liberals and conservatives charge the other with engaging in this tactic as a means of unfairly motivating the “poor” and the “wealthy” against one another.
This rhetoric completely ignores the middle class, creating yet another false dichotomy. A more accurate way to describe the conflict between classes is to redefine it as the competing needs of Labor and Capital interests.
The overwhelming majority of people across the globe are familiar with Labor interests. People who earn their income through wages, salaries, working for others share these interests. From the highest-paid CEO to the impoverished custodian, all are part of the Labor class.
Capital Interests are those represented by the investment community. This community is not entirely comprised of human beings. Corporations, which are entities bestowed all of rights and protections of human beings without actually being one, represent one extreme of Capital Interests. The small business owner who has started up with their own capital represents the other extreme.
Is there not also a gray area in defining this debate along these lines? Of course! I have labor interests that stem from my income as a Web Developer. I have capital interests that stem from my 401k income. Right now, with my 401k earning maybe 1% my salary, I side heavily with Labor. Later in life, when my 401k becomes my primary means of income, I will side with Capital.
So let’s look at some issues of contention these competing interests maintain in our political system.
A Fair Tax System
There are two competing theories for taxation in America, another dichotomy. Conservatives argue for a top-down stratification of tax rates, known as the “Trickle Down” theory. Liberals argue for a bottom-up approach, known as the “Bubble Up” theory.
The “Trickle Down” economic growth theory states that by giving tax relief to the wealthy, this will free up investment monies, allowing for business/corporate growth and increase employment. Increasing Employment improves incomes overall, strengthening public buying-power, which improves Capital gains and the circle repeats, benefiting everyone.
The “Bubble Up” economic growth theory states that by increasing education and using other government services to bring up the standard of living, this will strengthen the labor class. If labor has more money, through less taxation and higher-income resulting from improved job skills, it can purchase more goods and services, improving corporate profits and benefiting everyone.
Consumer buying power versus Producer cost-reduction power.
The problem with both of these theories is that they ignore the merits of their opposite. We cannot give preference to one class over another. To do so would unbalance the system. Placing the tax burden on Capital interests places too much social responsibility on Corporations and the Government. Placing the tax burden on the Labor interests creates a “servant” class, eliminating the middle class — one of our society’s most important developments.
If the top 1% of the income spectrum are paying 80-95% of the total Federal Taxes in America, and only 1% of the population controls 80-95% of the total wealth (These numbers are generalized because we cannot know the exact statistics due to the tax system’s complex nature.), then the question becomes one of who consumes more Governmental services?
Conservatives argue that Capital income pays more money in taxes than Labor. Liberals argue that Capital income does not pay the same percentage of income as Labor. Conservatives argue that Capital income is more important than Labor. Liberals argue that Labor’s product is more important than Capital’s.
Pharmaceutical Companies consume billions of dollars in Federal Research subsidies. A Billion dollars could put a million police officers on the force for a year. If the Pharmaceutical Company is paying more into the system, don’t they deserve to get more out of it? Or does benefiting society through a more stable social system make more sense?
Capital income owes the government for providing the system which produces its wealth. The Government prints the money, provides the stable social system, stable market system, enforces the rules of fair play, insures the banks, and so on.
Labor income owes the government for providing a stable social system and providing services Capitalism is incapable of providing, such as police, roads, fire departments, and so on.
So what’s fair?
Other Dimensions
“Free Market” VS “Fair Market”
A Free Market means that entrepreneurs have an open field to test their business models and have the potential to make limitless profit from their ventures. A Fair Market means everyone plays in a way that does not infringe on the rights of others to pursue the same goals. Maintaining both Free and Fair Markets require Governmental oversight.
Take the example of Monopolies. A Free Market provides for the possibility of a single company completely dominating the market. A Fair Market ensures that this single company does not use its dominance to prevent competing goods and services from entering the market. Free and Fair markets are not mutually exclusive, but we do sacrifice freedom for fairness and vice versa.
“Right to Work” VS “Union Power”
Labor also has issues of Governmental regulation to contend with. Unions are formed to create a united negotiating front in support of worker’s interests against the unified front of their Corporate employers. Unions are similar to the Corporate bodies they confront, providing a service, requiring membership dues, and a contractual obligation.
Enter the “Right to Work” state, where employees and employers are prevented from entering into many contractual obligations. The employee has the right to quit anytime for any reason and go work for anyone they want. “Right to Work” destroys Union Power by preventing Unions and Employees from entering into binding contracts and forming a united front, but “Right to Work” also prevents Employers from “trapping” employees in unfair work contracts or dictate who the employee may or may not work for after their employment ends.
Minimum Wage
To raise or not to raise the minimum wage? This is a contentious issue that seems to come around every few years. Raising the minimum wage too much places an economic burden on employers. Raising the minimum wage too little places an economic burden on employees. Without a minimum wage, Employers could lower wages artificially and create deflation.
A capitalist economy must maintain inflation, and a minimum wage is crucial to that end. If a company is able to create deflation through circumvention of fair labor standards, then the economy suffers. If employees are able to demand unrealistic wages, deflation will occur when the system cannot support their demands. An ever-slowly-rising minimum wage is crucial to both the bubble-up and trickle-down models.
Can you see how each of these issues is a balancing act?
Interdependency
Capital and Labor incomes rely on one another, each provides services that the other needs. Employers need employees to produce products. Employees need incomes that come from investment monies.
Attempting to establish a hierarchy of worth between these two forms of income becomes an exercise in futility when we understand the magnitude of this interdependency. Favor one form of income over the other and we unbalance the system, creating either a servant class out of the laborers or a socialist provider out of the capitalists. While it is certainly true that Capital interests get more out of the Government than Labor, the system is far too complex to quantify whether Capital interests gain more proportionally than labor.
With a system so complex, the reductionism required to accuse one another of “Class Warfare” seems absurd. Attempting to apply qualitative reasoning to either Labor or Capital is far too subjective a route to take. They both benefit from the Government, which provides them the entire system for the market to take place, and they should both pay into it for this service.
Remember IAAMOAC. The established economic state, the marketplace is how we manage our Civilization’s transactions of interdependent needs. A free system promotes innovation. A fair system promotes stability. When something raises the standard of living for your neighbor, it raises the quality of living for you.
So the next time someone screams “Class Warfare” — give them an earful.