Monday, August 9, 2010

Have We Become a Nation of Aristocrats and Servants?

Have We Become a Nation of Aristocrats and Servants?

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Robert Frank has a thought provoking op-ed piece in the WSJ this morning, positing that the rich no longer need the rest of us. It seems that except for fighting, cleaning and garbage hauling, the vast number of Americans are no longer necessary for their economic well being, which is a fairly alarming prospect, although not one that seems particularly surprising at the moment. After all, it’s become increasingly obvious that there’s no longer any reflexive resistance among the ruling class to the idea of a permanent underclass or even a belief in the necessity to keep a stable middle class thriving for economic (much less moral) purposes.

Late last year, the U.S. economy experienced a surprising decoupling. As stocks boomed, the wealthy bounced back. And while the Main Street economy was wracked by high unemployment and the real-estate crash, the wealthy–whose financial fates were more tied to capital markets than jobs and houses– picked themselves up, brushed themselves off and started buying luxury goods again.

Who knows what the next few months and years will bring. But one thing seems clear: the economic fate of Richistan seems increasingly separate from the fate of the U.S.


[Michael Lind]says the wealthy increasingly earn their fortunes with overseas labor, selling to overseas consumers and managing financial transactions that have little to do with the rest of the U.S. “A member of the elite can make money from factories in China that sell to consumers in India, while relying entirely or almost entirely on immigrant servants at one of several homes around the country.”

That’s a fairly creepy vision, which flies in the face of the old Henry Ford credo that he had to pay his factory workers enough to be able to buy his cars (even if he was a Nazi.) I guess when a country doesn’t make anything it may be inevitable that it becomes a nation of aristocrats and their servants.

Yves Smith says that although the attitude certainly is pervasive, this is probably more hype than reality. They’ve just found a new business model:

Yes, the rich increasingly live lives apart from those not in their economic cohort. But separation is not the same as independence. The Southern plantation owner had little interaction with his slaves (his overseer took care of that), yet he clearly depended on their labor. The financial crisis resulted in the greatest looting of the public purse in history. While the banksters were the obvious beneficiaries, most of the rest of the rich were carried along with them. The sudden recovery in the fortunes of the wealthy was no accident, but the result of a host of policies to prop up asset values.

This line of thinking is hardly new. James Galbraith, in The Predator State, discusses how the corporate elite have come to serve their own interests rather than those of their companies, and have become adept at using the state to further their personal aims. Thus the profit potential of remaining engaged in the US (albeit at as much of a remove as the top echelon can manage) is too great to be ignored.

So the new business of America is looting the coffers of the US treasury. Sounds about right.

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