Class Warfare

Yesterday I blogged about the current crop of suburban ghost towns, and how the middle class "goal posts" have been moved so far away from where my parents had them, that I really need to find a different word to what exactly is my current social class.

Well, the Wall Street Journal published Income-Inequality Gap Widens just this morning :

The wealthiest 1% of Americans earned 21.2% of all income in 2005, according to new data from the Internal Revenue Service. That is up sharply from 19% in 2004, and surpasses the previous high of 20.8% set in 2000, at the peak of the previous bull market in stocks.

The IRS data go back only to 1986, but academic research suggests the rich last had this high a share of total income in the 1920s.

This, by the way is not actual wealth. This is just income gap. If we considered actual capital holdings, we the non-wealthy are even more screwed and deeper in the proverbial debt hole than before.

The IRS data don't identify the source of increased income for the affluent, but the boom on Wall Street has likely played a part, just as the last stock boom fueled the late-1990s surge. Until this summer, soaring stock prices and buoyant credit markets had produced spectacular payouts for private-equity and hedge-fund managers, and investment bankers.

Economic Armageddon Is Coming

Joel S. Hirschhorn

Stop being a compliant consumer. Face the ugly truth. Don’t get fooled by the stock market. Accept the need for the mistreated middle class to become the revolutionary class. The British military establishment's most prestigious think tank sees what too few over-consuming Americans are willing to anticipate. Unjustified and mounting economic inequality is planting the seeds for global economic conflict.

Here is what the new report from the UK Defense Ministry's Development, Concepts and Doctrine Centre warned might happen by 2035. "The middle classes could become a revolutionary class. The growing gap between themselves and a small number of highly visible super-rich individuals might fuel disillusion with meritocracy, while the growing urban under-classes are likely to pose an increasing threat...Faced by these twin challenges, the world's middle-classes might unite, using access to knowledge, resources and skills to shape transnational processes in their own class interest."

Consider the wisdom of economist John Maynard Keynes: The rich are tolerable only so long as their gains appear to bear some relation to roughly what they have contributed to society. Think of it as proportional and justified economic success. This can be tolerated by poor and middle class people if they believe the economic system is fair and properly rewards those who work harder or have better capabilities. But truly obscene economic rewards angers people. When most prosperity and wealth is unfairly channeled to relatively few Upper Class people, it is only a matter of time until fuming, resentful people in the Lower Class decide enough is enough and revolt. Perhaps violently, if the political system remains controlled by the Upper Class.

In the first two hours of their workday most CEOs will have made more than the average worker on minimum wage. CEOs like Ray Nordelli of Home Depot, get fired by their stockholders but with secret compensation packages only known to their cronies at executive boards all across the United States, incompetence is rewarded in the hundreds of millions. In Nordelli's case, lower stock prices and spiralling costs was compensated to the tune of $200,000,000+.

Meanwhile, the Securities Exchange Commission, which has the authority to inquire and deny such payouts if it hurts stockholders, does nothing.

I honestly don't understand why so many bloggers hate Lou Dobbs. When it comes to economics, he is right on the money --with all pun intended.

Check out the clip after the jump: