We've been scammed, big time.
I know most of us like to think how smart we are, and how we are not vulnerable to scams, but let's face it and tell ourselves the truth - we are all victims. The only difference between us and Bernie Madoff's victims is that we don't even know we are being scammed.
The greatest scam is how those of us in the middle class have come to accept paper (fiat currency - without any inherent value of its own other than as a medium of exchange for goods/services as well as payment of taxes) money as something real and valuable.
This scam is at the root of most of the problems facing the middle class, and it is my opinion any real progress towards a fairer, more equal and just society needs us (in the middle class) to at least acknowledge the ongoing scam.
My objectives in this diary are:
1. To suggest the middle class has settled for much less than it should be otherwise entitled to.
2. To suggest that, on balance, we are potentially more powerful than we think.
3. To suggest that only the middle class can save the middle class - not the politicians (however populist they may be or seem to be).
Those of us in the middle class work hard, and fairness demands that we be well paid. Some (the endangered few) manage to get average to above-average monetary pay (and associated benefits) - most of us, unfortunately are not even well paid.
More importantly though, the ones we think are well paid are not getting such a great deal after all. Why? Because all these payments are made with fiat (paper) money - whether cash or bank deposit. First and foremost, the value of your wage/salary (or fee for the self-employed) is determined by forces outside your control. Expansion (or contraction) of money supply, fractional reserve banking (and the associated money multiplier), government deficits (or surpluses) and so on. While all these forces may (occasionally - very rarely though) work in favor of the working Jane/Joe, recent historical experience suggests it is working against us in the middle class. What the wealthy elite do is to convert fiat money into real money (measured in terms of ownership stakes in income generating assets) as fast as they can.
So, first take away is that the middle class is getting less - just because it gets paid in fiat money.
After we get this fake (fiat) money, almost all (if not all) the spending we do for consumption and investment is paid into the hands of interests (corporate and/or plutocrat and/or oligarch and/or elite) that actively - or in few cases, passively through twists/loopholes in the tax code and corporate/wealthy individual tax cuts - undermine middle class interests by reducing government revenue (tax cuts, corporate welfare), pushing for cuts to social spending, laying off millions of workers (and/or sending jobs outside the country which reduces personal income tax revenue), pilfering workers' savings (college, retirement), enslaving workers and their kids through debt (consumer credit, student loans) and so on. The combined effect of these actions is to increase the value of their real money (ownership stakes in income generating assets) while impoverishing those paid in fiat money through 'death by a thousand cuts' (cuts in wages/benefits, government services and so on) and the continuous loss of purchasing power (according to this website, $1 in 1985 had the same buying power as $2.05 in 2010 based on the government's fudged/understated CPI/Inflation numbers - on the other hand, 1 share of Procter & Gamble that cost $3.4688 on January 2, 1985 is worth $62+ today, not counting the annual dividends in between; 1 Share of Coca-Cola that cost $2.9167 on January 2, 1985 is worth $65+ today not counting the dividends in between).
If the middle class focused a little bit more on ownership (not of residential homes, but fractional stakes in income generating assets) in general, and much more importantly, control of such income generating properties, it would be in a position to increase the supply of jobs as well as ensure fairer distribution of the rewards of free market capitalism (not the crony capitalism of private profit, public losses/expenses). As Professor Domhoff states over at his website, Who Rules America (h/t to geomoo)
Q: So, who does rule America?
A: The owners and managers of large income-producing properties; i.e., corporations, banks, and agri-businesses. But they have plenty of help from the managers and experts they hire. You can read the essential details of the argument in this summary of Who Rules America?
So, second take away is that if working folks can somehow control more of these relevant income producing properties, and can transition their income profile into a mix of fiat (fake) money and real money (ownership stakes in income producing assets) as well as own more real money, they are more powerful than is readily apparent.
Finally, many of us in the middle class look to the government through its various arms - executive, legislative and judicial - to protect our interests. The wealthy elites already have that base covered - they go to great lengths to place stooges in these various arms of government.
Unfortunately, as we see in Wisconsin, these stooges can act in the name of everyone. They can contract out the operation of that state's power plants without any oversight, review or regulation to their corporate overlords - once done, it becomes a binding law. Even if the people of the state wake up and vote them out in the next election - the elite interest(s) that secure/obtain the rights to 'operate' the power plants cannot be voted out. They can cut services, raise rates and do whatever they please - if you try to make new laws, they can sue and tie things up in court for decades (in addition to the fact that their appointees are holding positions at all levels of the judicial system, especially in states where judges are elected, not appointed).
It is our right, and responsibility to demand that government institutions do the right thing - and like is happening in Wisconsin and elsewhere, we should not relent in making that case. Note however that - because government institutions are controlled by elite interests - those institutions will do the least they can get away with for working folks and the most they can get away with for the elite interests.
What is more interesting is that more often than not, when the government is doing tiny things for working folks, it is classified as spending and the elite noise machine cries foul, socialism and so on. When the government is doing great and mighty things for the elites, it is disguised in executive orders, tax code loopholes, sales tax rebates, and other tools that no one ever hears about. Furthermore, the government cannot prevent crime - they can (sometimes) investigate and/or prosecute the perpetrators (more often than not, especially on Wall Street, they choose not to).
So, to save the middle class would require working folks to look beyond their jobs and home ownership to acquisition (and control) of income producing properties (businesses, commercial buildings, oil/gas wells and so on). As much as we dislike the Wall Street business model, we all use their services - we save money at 0+% interest, which elite interests borrow at 6% to buy commercial buildings (for example) with a return of 12%. The 0+% interest income is taxed as earned income (no breaks), but the elite interests get depreciation of the building, Section 1031 capital gains deferral when they sell (as long as they buy a building of equal or greater value) and so on. Elite interests could equally have borrowed the same money (based on our savings deposits) and used it to acquire a manufacturing business, saddle it with debt (driving taxable income close to zero or negative and thus reducing corporate income tax revenue), get all the tax write-offs, subsidies, grants etc possible,lay off many working folks by off-shoring their jobs to China and so on.
This is going on every day - we want more jobs, but we leave control of businesses to elite interests that we know have a vested interest in destroying jobs. We want a fairer financial system, but leave control of banking and retirement savings to elite interests. We want better working conditions for people in the retail trade but spend a lot of money at chain stores that are virulently opposed to better working conditions.
The elites cannot maintain their wealth without us enabling them - via where we spend our earnings and where we put our savings. We may think that we don't have the resources - true, when we each stand alone but wrong if we pool resources. A good starting point is to at least acknowledge that we can do better than this - not any Senator or Congressman or Governor or President on our behalf - by doing things differently. We cannot and should not continue to do the same thing while hoping for a better outcome.
Only the middle class can save the middle class - that is the last takeaway.