Posts Tagged ‘class’

2f6036936539b3db3d2496c4871a4416

The argument I’ve been making during this series on utopia is that the utopian moment of the Marxian alternative to mainstream economics is critique.*

Let me explain. All modern economic theories have a utopian moment. In the case of mainstream economics, that moment is a full-blown utopianism—the idea that there is, or at least in principle can be, a perfectly functioning economic and social order. Such an order is both envisioned as a model within the theory (often by stipulating the minimum set of theoretical requirements) and advanced as the goal of economic policies (which move the economy to, or at least toward, the utopia). In this sense, utopia—of sovereign individuals, free markets, and private property—is the fundamental premise and promise of mainstream economic theory.

The Marxian approach is otherwise. Certainly Marxian economists (and social thinkers generally) imagine that the world can and should be radically different from what currently exists. They simply wouldn’t engage in their intellectual and political work if that weren’t the case. But, instead of drawing up a blueprint of what such an alternative might look like, Marxists are engaged in a “ruthless criticism of all that exists, ruthless both in the sense of not being afraid of the results it arrives at and in the sense of being just as little afraid of conflict with the powers that be.” It is a ruthless criticism of both mainstream economic theory and of the economic and social system celebrated by mainstream economists.

This is an argument I’ve made many times, in different ways, over the course of my various talks (e.g, here), papers (e.g., here and here), and posts on utopia in recent years. Here, I want to take the argument one step further. What distinguishes Marxian theory from both mainstream economics (and, for matter, from other criticisms of mainstream economics) is that is based on a materialist critique. That is its utopian moment.

As I see it, the method of materialist critique is both dialectical and historical.** It is dialectical to the extent that it involves the interpretation of economic categories—such as value, productivity, profit and much else—precisely as they are grounded in, deployed and disseminated within, the existing intellectual and social order. It takes those concepts as its own. But it doesn’t simply accept the existing interpretations of those categories but, instead, transforms them into their opposites. In other words, the critical acceptance of those categories is simultaneously their condemnation.

Let me offer a concrete example of what I have in mind. Both mainstream economic theory and capitalism operate on the basis of a notion of free and fair exchange. Each transaction is seen to be a voluntary exchange of goods and services between individuals who offer or receive a sum equal to the value of the commodity in question. A materialist critique starts from that category, not because every transaction holds to the rule of free and fair exchange in the real world (there are many exceptions to that rule, such as monopoly power, which even mainstream economists and defenders of capitalism will acknowledge), but because it is the stated premise of both mainstream economic theory and capitalism (it is their shared utopianism, in the sense I discuss above). Even presuming we’re referring to a system in which every exchange is free and fair, it is possible to show that a tiny minority at the top (the members of the boards of directors of corporations) is engaged in a social theft from workers (who perform but do not appropriate their surplus labor), with all the attendant conditions and consequences of a system based on class exploitation. Therefore, a materialist critique, which starts from the prevailing idea of free and fair exchange, arrives at the opposite conclusion—that capitalist exchange forms part of an economic and social system that is anything but free and fair.***

The method of materialist critique also has an important historical dimension. It focuses on the ways both economic ideas and economic systems change over time, often with radical disruptions between them. Thus, for example, the theories used by economists today (and not only, if we allow for everyday economic representations) are radically different from themselves (in the sense that the terrain of economics is defined by multiple, diverse and incommensurable, concepts and methods) and from theories that have existed in the past (beginning with classical political economy and including the theoretical revolutions within mainstream economics as well as their heterodox counterparts). Similarly, capitalism has changed over time—both within its own history (capitalism today is different from what it was in the middle of the nineteenth century) and as it represents a break from other, noncapitalist systems (such as feudalism, slavery, and so on). A materialist critique focuses on such disruptions and divergences over time, thereby creating the possibility of other radical changes, such as an end to capitalism and the emergence of new, noncapitalist ways of organizing economic and social life.

The most famous example in the Marxian tradition is the transition from feudalism to capitalism. Notwithstanding the wide-ranging debate about the causes and consequences of that transition (among such figures as Maurice Dobb, Paul Sweezy, Robert Brenner, and Stephen Resnick and Richard Wolff), the fact is capitalism had a definite beginning as it emerged from the crises of feudalism in Western Europe (and therefore didn’t always exist, as mainstream economists often presume and proclaim), which also makes it possible to imagine an end to capitalism (based, of course, on the accumulation and aggregation of political and social forces that are opposed to capitalism and imagine and seek to create the conditions for noncapitalist economic and social institutions). Much the same is true in economic thought: mainstream economics today (neoclassical microeconomics and Keynesian macroeconomics) represents a radical break from previous mainstream economic theories (such as the classical political economy of Adam Smith and David Ricardo), as well as the various alternatives to mainstream economics that have emerged alongside it from the very beginning (which are often overlooked in “official,” mainstream histories of economic thought). A materialist critique therefore highlights the absence of history—the history of ideas as well as the history of economic systems—within mainstream economics and capitalism itself.

In the way I am defining materialist critique, it does not represent a simple opposition to contemporary thought and society. On the contrary, it is grounded in them, using their categories as starting points with the aim of substantially and radically transforming them.

If materialist critique represents the utopian moment of Marxian theory, it stands opposed to the specialized knowledge of mainstream economics (and, by extension, of the rest of the modern social sciences) as well as to traditional interpretations of Marxian theory. It differs from contemporary mainstream economics in that it seeks to transform—both dialectically and historically—the existing set of categories instead of accepting them as the given parameters of economic and social life. It of course uses those knowledges as raw materials but only for the purpose of turning them into their opposites. And it is distinguished from the precepts and protocols of dialectical and historical materialism in that it is rooted in the categories that pertain to mainstream economics and capitalism, in order to do battle on that terrain, not a set of sui generis categories (often governed by a humanist anthropology or rational discourse) to establish a new and different science comparable to mainstream economics.

And to be clear, materialist critique is not the same thing as economism (with which materialism is often conflated). On the contrary. In fact, materialist critique represents a ruthless criticism of economism not because it gives too much importance to the economy, but because it gives it too narrow a scope. Economism takes the economy as a given, transmitting its effects to individuals and to the rest of the social structure—instead of focusing on the problem of the complex, changing relationship between the economy and individual and social lives.

In the end, the goal of a materialist critique is to denaturalize and thus disrupt the existing common sense—within both economic thought and capitalism—with the aim of radically transforming the existing theoretical and social reality. It doesn’t accomplish this alone, of course. Those who are engaged in a materialist critique as well as their specific objects form a dynamic, dialectical unity with the exploited classes as both an expression of the concrete historical situation and a force to stimulate change. Nor are there any guarantees, from either side of the relationship or in the often-tense unity itself.

Notwithstanding its aleatory nature, the process of materialist critique starts with the categories that dominate economic thought and the economy itself in order to transform them into their opposites, thus creating new intellectual and political possibilities. The new openings created by materialist critique represent the utopian horizon of Marxian theory.

 

*The series, thus far, consists of posts on the Bitcoin bubble, the right to be lazypopulism, the economics of controlutopian socialisminequalityinternational trade, healthcare (here and here), the disaster in Puerto Ricoepistemologyvalue theorymacroeconomicseconomic developmentmarketstechnology, work, and mathematics.

**Besides Marx’s own writings, an essay that serves as the catalyst for some of my ideas in this post is Max Horkheimer’s “Traditional and Critical Theory” [ht: db], reprinted in his Critical Theory: Selected Essays, trans. Matthew J. O’Connell and others (New York: Continuum, 2002).

***Moreover, such a system is neither free nor fair for both capitalists and workers. Each is subject to the compulsions and coercions embedded in such a system, albeit in a different way.

trump slump

Marketplace’s Kai Ryssdal is no class warrior. Far from it. But after Donald Trump’s chief economic adviser Larry Kudlow spent considerable time during a recent interview celebrating the latest statistics about economic growth, jobs, and wages and minimizing the effects of the trade tariffs, Ryssdal was encouraged to challenge him:

Ryssdal: Look, sir, really with all respect that’s easy for you to say sitting here on the second floor of the West Wing of the White House.

Kudlow: Now, don’t class warfare me or anything like that.

OK, let’s not class warfare him. Let’s just do some simple calculations. In June, hourly wages (for production and nonsupervisory workers in the private sector) rose at an annual rate of 2.7 percent. Prices (as measured by the Consumer Price Index) rose at an annual rate of 2.8 percent. That means real wages—workers’ purchasing power—actually declined, by 0.1 percent.

As is clear from the chart above, even as hourly wages (the grey line) have been growing by 2.2 to 2.7 percent since Trump was inaugurated, inflation (the red line) has also been rising, by 2.5 to 2.8 percent. The result is that the rate of growth of real wages (the blue line), which started in negative territory, is still in negative.

So, a year and a half after Trump took office, lots of conventional economic numbers look good: GDP growth, corporate profits, the stock market, the unemployment rate, and so on all point in a positive direction. Now, it’s a stretch to call it the Trump Bump, since it’s basically a continuation of the recovery that preceded his election. But we can let Trump and Kudlow revel in those numbers, which improve the fortunes of a small group of large corporations and wealthy individuals at the top.

However, it’s the rate of growth of real wages that affects the majority of Americans—and it indicates what can only be called a Trump Slump.

Put the two together and it sounds like class warfare to me. And it’s being directed not at but from the West Wing of the West House.

 

 

wage-profit

Liberals like to talk about all kinds of social ills and identity-laden tensions—but not class struggle. That’s their persistent and enduring blindspot.

Except, it seems, when it comes to Donald Trump.

Thomas B. Edsall is a good example. Over the years, he’s produced a series of solid, insightful surveys of liberal research and analysis on a wide variety of economic and political topics. But he hasn’t written much if anything about class—until his latest, titled “The Class Struggle According to Donald Trump.”

And, to give him credit, Edsall is right about one thing:

Trump campaigned as the ally of the white working class, but any notion that he would take its side as it faces off against employers is a gross misjudgment.

But his view of class struggle is sorely lacking. First, Edsall starts with and highlights the recent work of Alan Krueger and Eric Posner, who criticize “labor market collusion” on the part of large employers and maintain that the ideal labor market is one in which “workers can move freely to seek the most desirable opportunities for which they are qualified.”

Presumably, if the appropriate reforms were made—for example, scrutinizing mergers for adverse labor market effects, banning non-compete covenants that bind low-wage workers, and no-poaching arrangements among establishments that belong to a single franchise—the problem of class struggle would be solved.

Second, Edsall accepts the idea that, until the 1970s, class struggle in the United States had mostly disappeared or been held in abeyance, under the “postwar capital-labor accord.” But there never was such an accord—or, as it is sometimes referred to, a “truce.”

As economists Richard McIntyre and Michael Hillard (unfortunately behind a paywall) have argued,

Recent U.S. historical and industrial relations scholarship rejects the existence of such an accord. . .The existence or non-existence of an accord is not only an important matter of history; it has very definite practical effects. During the 1980s and 1990s especially, many in the labor movement and some radical economists sought “cooperation” between capital and labor as a cure for the ills of the American economy, often harkening back to the imagined “golden age.” But if such cooperation is a historical chimera, the time and energy put into “cooperation” might have been better spent in the self-organization of the working class.

Today, under Trump, Edsall and other liberals are attempting to revive that tradition, hoping that reforming the labor market can serve as the basis for more “cooperation” between capital and labor.

Ironically, both Trump and liberal thinkers like Edsall invoke a nostalgia for the exact same postwar period. In the case of Trump, it was a time when U.S. manufacturing successfully exported to the entire world; for Edsall and company, it’s when labor and capital agreed to cooperate and negotiate peacefully.

But that doesn’t mean there wasn’t intense class struggle during that period—or, for that matter, afterward. Only that the conditions and consequences have changed. And employers have been on the winning side for decades now, long before Trump was elected.

Consider the data Edsall himself cites, which are illustrated in the chart at the top of the post. Since 1970, the wage share of national income (the orange line) has fallen by more than 15 percent. Meanwhile, beginning in 1986, the profit share (the blue line) has risen by 164 percent. For decades now, under both Democratic and Republican administrations, a class struggle has been waged by corporate boards of directors and workers—and the working-class has been losing.

It’s true, they’re still losing under Trump. But they also lost during the recovery from the crash of 2007-08. Just as they did in the decades leading up to the greatest crash since the first Great Depression.

In fact, one can argue that capitalists’ remarkable success in extracting more or more profit from workers is precisely what created the obscene levels of inequality in the distribution of income and wealth that have left the majority of the U.S. population falling further and further behind—and, as a consequence, the election of Donald Trump.

The problem is not, as liberals would like to believe, that exceptional circumstances—market imperfections—have turned the tide against workers. It’s that class struggle is inherent to capitalism, and workers are only useful as creators of the enormous profits captured by their employers.

As I see it, class struggle between employers and workers can’t be solved by reforming the labor market. It can only be eliminated by getting rid of the labor market itself—that is, by moving beyond capitalism.

That’s a real solution to the problem of class struggle that neither Trump nor American liberals are interested in thinking about.

powmarx2

First there was the Great Gatsby curve. Then there was the Proust index. Now, thanks to Neil Irwin, we have the Marx ratio.

Each, in their different way, attempts to capture the ravages of contemporary capitalism. But the Marx ratio is a bit different. It was published in the New York Times. Its aim is to capture one of the underlying determinants of the obscene levels of inequality in the United States today—not class mobility or the number of years of national income growth lost to the global financial crash. And, of course, it takes its name from that ruthless nineteenth-century critic of mainstream economics and capitalism itself.

Marx

Now, to be clear, there are lots of ratios that can be found in Marx’s critique of political economy—for example, the rate of exploitation, the intensity of labor, the technical productivity of labor, the exchange-value per unit use-value, and the value rate of profit (as illustrated above in a fragment from one of my class handouts)—and the ratio Irwin presents is not one of them.

But that doesn’t make Irwin’s ratio wrong, or uninteresting. On the contrary.

Basically, what Irwin has done is take the data from corporate financial reports (net income and the number of employees) and from a minor provision of the Dodd-Frank Act, which requires that publicly traded corporations reveal the gap between what they pay their CEOs and their average worker (and thus they need to report median worker pay) and calculated a number:

The Marx Ratio, as we’re calling it, captures the relationship between a company’s profits — the return to capital, on a per-employee basis — and how much its median employee is compensated, a rough proxy for the return to labor.

Thus, for example, Wells Fargo, which reported $22.2 billion in net income in 2017, with 262,700 employees and median worker pay of $60,446, had a Marx ratio of 1.40. Similarly, we have the ratio for other corporations—from the relatively small real estate investment trust Duke Realty (37.7) to independent energy company Hess (-12.2).

Irwin is clear: notwithstanding the limitations in the data, “companies with high Marx Ratios offer particularly strong rewards to their shareholders relative to workers.”* But that doesn’t mean, contra Irwin, that “Numbers below 1 signal the reverse: a more favorable return to labor.” Any positive number indicates that, after paying all expenses (including workers’ wages, taxes, interest on debt, deductions for depreciation, and CEO salaries), the net income or profit per employee is positive.

In fact, with a little algebraic manipulation, Irwin’s Marx ratio turns out to look a lot like Marx’s rate of exploitation.**

They’re not the same, of course. First, because corporate net income leaves out many of the distributions of surplus-value corporate boards of directors make—such as interest payments, taxes, and managers’ salaries—and the number of employees refers to all workers, not just nonmanagerial workers. Second, because the Irwin ratio is calculated for all publicly traded companies and therefore makes no distinction between finance, real-estate, insurance and companies that actually produce goods and services. From a Marxian perspective, the former capture surplus-value that is produced and appropriated and distributed elsewhere in the economy (both nationally and globally).

So, the Marx ratio is not Marx’s ratio.

But Irwin’s Marx ratio does tell us a great deal about how wildly profitable American corporations are, especially in comparison to how little they pay their employees—to the tune of 3, 4, 30 times what the average worker makes. And that’s one of the principal causes of the obscene and growing levels of inequality we’ve seen in the United States for decades now.

I, for one, would love to see the Marx ratio reported in the financial news on a regular basis. Alongside the ratio of CEO to average worker pay. And, even better, Marx’s own indicator of capitalist class injustice, the rate of exploitation.

 

*The data are a bit of a problem, especially because median worker pay is based on self-reporting:

The denominator is the compensation to the median employee, as disclosed in the company’s proxy statement, which can create distortions in representing rank-and-file employees.

Companies also have some degree of flexibility in how they calculate median pay, so comparisons are not necessarily apples-to-apples. For example, they may choose to use statistical sampling instead of actual payroll records, and may exclude non-U.S. employees depending on privacy rules in overseas markets.

A better number for the idea we’re really trying to get at would be average compensation for nonexecutive employees, but companies aren’t required to report that publicly.

**Mathematically, Irwin’s Marx ratio is (NI/L)/(W/L), which turns out to be NI/W, where NI is net income, L is the number of employees, and W is the wage bill (calculated by multiplying median worker pay by the number of employees). Marx’s rate of exploitation is S/V, where S is the amount of surplus-value and V is the value of labor power.

the-rostow-model

From the very beginning, the area of mainstream economics devoted to Third World development has been imbued with a utopian impulse. The basic idea has been that traditional societies need to be transformed in order to pass through the various stages of growth and, if successful, they will eventually climb the ladder of progress and achieve modern economic and social development.

Perhaps the most famous theory of the stages of growth was elaborated by Walt Whitman Rostow in 1960, as an answer to the following questions:

Under what impulses did traditional, agricultural societies begin the process of their modernization? When and how did regular growth become a built-in feature of each society? What forces drove the process of sustained growth along and determined its contours? What common social and political features of the growth process may be discerned at each stage? What forces have determined relations between the more developed and less developed areas?

Rostow’s model postulated that economic growth occurs in a linear path through five basic stages, of varying length—from traditional society through take-off and finally into a mature stage of high mass consumption.

While Rostow’s model and much of mainstream development theory can trace its origins back to Adam Smith—through the emphasis on increasing productivity, the expansion of markets, and the definition of development as the growth in national income—the development models that were prevalent in the immediate postwar period presumed that the pre-conditions growth were not automatic, but would have to be engineered through government intervention and foreign aid.

Mainstream modernization theory was created in the 1950s—and thus after the first Great Depression and World War II, when world trade had been severely disrupted, and in the midst of decolonization and the rise of the Cold War, when socialism and communism were attractive alternatives to many of the national liberation movements in the Global South. It was a determined effort, on the part of academics and policymakers in the United States and Western Europe, to showcase capitalist development and make the economic and social changes necessary in the West’s former colonies to initiate the transition to modern economic growth.*

The presumption was that government intervention was required to disrupt the economic and social institutions of so-called traditional society, in order to chart a path through the necessary steps to shift the balance from agriculture to industry, create national markets, build the appropriate physical and social infrastructure, generate a domestic entrepreneurial class, and eventually raise the level of investment and employ modern technologies to increase productivity in both rural and urban areas.

That was the time of the Big Push, Unbalanced Growth, and Import-Substitution Industrialization. Only later, during the 1980s, was development economics transformed by the successful pushback from the neoclassical wing of mainstream economics and free-market policymakers. The new orthodoxy, often referred to as the Washington Consensus, focused on privatizing public enterprises, eliminating government regulations, and the freeing-up of trade and capital flows.

Throughout the postwar period, mirroring the debates in mainstream microeconomic and macroeconomic theory, mainstream development theory has oscillated back and forth—within and across countries—between more public, government-oriented and more private, free-market forms of mainstream development theory and policy. And, of course, the ever-shifting middle ground. In fact, the latest fads within mainstream development theory combine an interest in government programs with micro-level decision-making. One of them focuses on local experiments—using either the randomized-control-trials approach elaborated by Abhijit Banerjee and Esther Duflo or the Millenium Villages Project pioneered by Jeffrey Sachs, which they use to test and implement strategies so that impoverished people in the Third World can find their own way out of poverty. The other is the discovery of the importance of “good” institutions—for example, by Daron Acemoglu—especially the delineation and defense of private-property rights, so that Rostow’s modern entrepreneurs can, with public guarantees but minimal interference otherwise, be allowed to keep and utilize the proceeds of their private investments.

The debates among and between the various views within mainstream development economics have, of course, been intense. But underlying their sharp theoretical and policy-related differences has been a shared utopianism based on the idea that modern economic development is equivalent to and can be achieved as a result of the expansion of markets, the creation of a well-defined system of private property rights, and the growth of national income. In the end, it is the same utopianism that is both the premise and promise of a long line of contributions, from Smith’s Wealth of Nations through Rostow’s stages of growth to the experiments and institutions of today’s mainstream development economists.

The alternatives to mainstream development also have a utopian horizon, which is grounded in a ruthless criticism of the theory and practice of the “development industry.”

One part of that critique, pioneered by among others Arturo Escobar (e.g., in his Encountering Development), has taken on the whole edifice of western ideas that supported development, which he and other post-development thinkers and practitioners regard as a contradiction in terms.** For them, development has amounted to little more than the West’s convenient “discovery” of poverty in the third world for the purposes of reasserting its moral and cultural superiority in supposedly post-colonial times. Their view is that development has been, unavoidably, both an ideological export (something Rostow would willingly have admitted) and a simultaneous act of economic and cultural imperialism (a claim Rostow rejected). With its highly technocratic language and forthright deployment of particular norms and value judgements, it has also been a form of cultural imperialism that poor countries have had little means of declining politely. That has been true even as the development industry claimed to be improving on past practice—as it has moved from anti-poverty and pro-growth to pro-poor and basic human needs approaches. It continued to fall into the serious trap of imposing a linear, western modernizing agenda on others. For post-development thinkers the alternative to mainstream development emerges from creating space for “local agency” to assert itself. In practice, this has meant encouraging local communities and traditions rooted in local identities to address their own problems and criticizing any existing distortions—both economic and political, national as well as international—that limit peoples’ ability to imagine and create diverse paths of development.

The second moment of that critique challenges the notion—held by mainstream economists and often shared by post-development thinkers—that capitalism is the centered and centering essence of Third World development. Moreover, such a “capitalocentric” vision of the economy has served to weaken or limit a radical rethinking of and beyond development.*** One way out of this dilemma is to recognize class diversity and the specificity of economic practices that coexist in the Third World and to show how modernization interventions have, themselves, created a variety of noncapitalist (as well as capitalist) class structures, thereby adding to the diversity of the economic landscape rather than reducing it to homogeneity. This is a discursive strategy aimed at rereading the economy outside the hold of capitalocentrism. The second strategy opens up the economy to new possibilities by theorizing a range of different and potential connections among and between diverse class processes. This forms part of a political project that can perhaps articulate with both old and new social movements in order to create new subjectivities and forge new economic and social futures in the Third World.

The combination of post-development and class-based anti-capitalocentric thinking refuses the utopianism of Third World development, as it constitutes a different utopian horizon—a critique of the naturalizing and normalizing strategies that are central to mainstream development theory and practice in the world today. It therefore leads in a radically different direction: to make noncapitalist class processes and projects more visible, less “unrealistic,” as one step toward dethroning the “development industry” and invigorating an economic politics beyond development.

 

*At the same time, the Western Powers attempted to reconstruct the global institutions of capitalism, through the triumvirate of the World Bank, the International Monetary Fund, and the General Agreement on Tariffs and Trade (predecessor to the World Trade Organization) that was initially hammered out in 1944 in the Bretton-Woods Agreement.

**A short reading list for the post-development critique of mainstream development includes the following: Wolfgang Sachs, ed., The Development Dictionary: A Guide to Knowledge As Power (Zed, 1992); Arturo Escobar, Encountering Development: The Making and Unmaking of the Third World (Princeton, 1995); Gustavo Esteva et al., The Future of Development: A Radical Manifesto (Policy, 2013); and the recent special issue of Third World Quarterly (2017), “The Development Dictionary @25: Post-Development and Its Consequences.”

***Building on a feminist definition of phallocentrism, I along with J.K. Gibson-Graham (in “‘After’ Development: Reimagining Economy and Class,” an essay published in my Development and Globalization: A Marxian Class Analysis) identify capitalocentrism whenever noncapitalism is reduced to and seen merely as the same as, the opposite of, the complement to, or located inside capitalism itself.

600_209756

Special mention

1624486  BeeleN20180506_low

wealth-inequality

Chris Rock may be right. Still, Americans are well aware that economic inequality in their country is obscene, even though they often underestimate the growing gap between the poor and the rich.

But it’s Frank Rich, who conducted the interview with the American comedian, who made the more perceptive observation:

For all the current conversation about income inequality, class is still sort of the elephant in the room.

All the experts agree—from Thomas Piketty and the other members of the World Inequality Lab team to John C. Weicher of the conservative Hudson Institute—that inequality in the United States, especially the unequal distribution of wealth, has been worsening for decades now. Both before and after the crash of 2007-08. And there’s no sign that things are going to get better anytime soon, unless radical changes are made.

But, as it turns out, even the experts underestimate the degree of inequality in the United States. The usual numbers that are produced and disseminated indicate that, in 2014 (the last year for which data are available), the top 1 percent of Americans owned one third (35 percent) of total household wealth while the bottom 90 percent had less than half (45.3 percent) of the wealth.

According to my calculations, illustrated in the chart at the top of the post, the situation in the United States is much worse. In 2014, the top 1 percent (red line) owned almost two thirds of the financial or business wealth, while the bottom 90 percent (blue line) had only six percent. That represents an enormous change from the already-unequal situation in 1978, when the shares were much closer (28.6 percent for the top 1 percent and 23.2 percent for the bottom 90 percent).

Why the large difference between my numbers and theirs? It all depends on how wealth is defined. Both the World Inequality Lab and the Federal Reserve (in the Survey of Consumer Finances) include housing and retirement pensions in household wealth—and those two categories comprise most of the so-called wealth of most Americans. They just don’t own much in the way of financial or business wealth. They live in their houses and they retire based on contributions from their wages and salaries over the course of their work lives. They produce but don’t take home any of the surplus; therefore, they just don’t have the ability to amass any real wealth.

For the small group at the top, things are quite different. They do get a cut of the surplus, which they use, not only to purchase housing and put aside in their pensions, but to accumulate real wealth, for themselves and their families. If we take out housing and pensions and calculate just the shares of financial or business wealth—and, thus, equities, fixed-income claims, and business assets—the degree of inequality is much, much worse.

Yes, rich people in the United States are very rich—even more than either regular Americans or the experts believe.

But that’s not the real elephant in the room. The big issue that everyone is aware of, but nobody wants to talk about, is class. And that’s the reason there should be, if not riots, at least a sustained political movement to transform the existing economic and social structures in the United States.