The Catskill Chronicle

By Mort Malkin

The tax cutters scream “Class Warfare!” when some worker who gets $10 an hour says “Don’t extend the Bush tax cuts for millionaires.” The Occupy Wall Street movement says it’s the 99% vs. the 1%. In 2008, John McCain complained about “the Democrats who want to share the wealth.” In 2012, Mitt Romney paid about 14% in income taxes while most workers paid 30% to 35%. As well, Romney didn’t contribute to the Social Security Trust Fund via payroll withholding. The neo-cons say “Don’t tax the rich — they are the job creators.”

The Gadfly Revelry & Research gang didn’t have to expend much time or effort to find out that a) Romney hasn’t even created a job for himself lately, b) Bain Capital under CEO Romney eliminated and outsourced as many jobs as it created, and any that were replaced were at lower salaries, and c) Bain Capital made over 50% per year on its investments (financial manipulations) over the past 25 years.

The class warfare started in the late 70s and early 80s. More workers were available: Vietnam veterans, women who left their unpaid jobs as homemakers and sought paying jobs (however lowly) in the workplace, and more Latinos arriving from Central and South America with dreams of supporting their families. At the same time, mechanical engineers and tool & die makers were creating machines that could eliminate labor; and computers were being developed that could track inventories, do calculations, check records, and design everything from earrings to rocket launchers & cruise missiles.

It took a few years for the CEOs of the big corporations to realize that the workforce was larger and unemployment high enough that they didn’t have to give their workers salary increases or more benefits to retain them; they could just hire less demanding workers, especially non-union workers. In addition, with more automation and the new calculators & computers to do the numbers, the corporations could cut costs. Why, supermarkets didn’t even have to hire cashiers who had the math skills to make change anymore. Better yet, manufacturers could set up factories in Taiwan or South Korea or even Communist China — they wouldn’t have to deal with unions or OSHA or environmental regulations.

With lower costs for employees and consequently improved productivity, profits soared. The CEOs realized it was on account of their brilliance. Surely the corporate boards would reward them with a few million more in salaries, bonuses, and stock options. A new money class was coming into existence that could do battle politically with the working class.

Soon, a potential ally appeared — the investment houses. The daddy of them all was Merrill Lynch Pierce Fenner & Smith. In the 60s and 70s, their brokers advised clients to invest for the long term and trumpeted the magic of dollar-cost averaging. Investing in stocks and bonds would provide for a comfortable retirement … if another depression didn’t return again. As investors, we were warned that margin accounts or buying puts & calls were very risky. The investment houses would soon enough discover the wild world of derivatives.

In the olden days, savings banks were for savings and home mortgages, and commercial banks were for business accounts. The bank that wrote the mortgage on your home would typically hold the mortgage for a 25 year term until it was paid off. The investment houses were not even banks. The Glass Steagall Act  of 1933 prevented any monkey business. Bankers were dour, stuffy … and trustworthy. Even stock brokers were conservative.

Then, in 1999, Glass Steagall was repealed and go-go banks of every combination and permutation appeared. Soon, stock brokers dealt in trades, not investments. The futures market — puts & calls in gold, wheat, and pork bellies — were no longer high flyers. Securitized debt issues, credit default swaps, and collateralized debt obligations became a new class of investment “products” that expanded to derivatives such as eagles, condors, and butterflies prefixed by unlikely adjectives. Mortgage brokers and financial advisors, who were the antithesis of conservative old-time bankers applied to become bank holding companies. Banks could now provide any kind of conventional or innovative services. The financial services industry became a hall of mirrors, making money by buying and selling “financial instruments,” not real stocks & bonds of companies that made a profit and paid a dividend.

The CEOs of Goldman Sachs, CitiGroup, Bank of America, Morgan Stanley and the other giants, the managers of hedge funds, and directors of private equity funds became rich beyond measure. [How much is a billion dollars? $1,000,000,000 will buy a thousand million-dollar homes.] These are the 1%, many of them the 0.1%.

The disparity between the wealthy class and the rest of us — the 99% — is growing wider and wider. The wealthy are now sub-divided into the merely wealthy and the obscenely rich. A formerly handsome salary of a couple of hundred thousand no longer qualifies as rich. Less than half a million per annum, and you’re still a member of the brutish masses.

Of course, true class is a matter of how you deport yourself — your refinement, courtesies, social polish, and knowledge of art, music, and literature. Are you a class act, or are you merely nouveau riche? All you mucky-muck executives — your corporation or equity fund may be financially successful, but is it socially responsible? How do you treat your workers and the environment (the commons that the people own)?  Are your products proven harmless to consumers? Do you tell the truth when you testify before Congress?

Let us take a page from Great Britain, where class has a history many centuries old. We, too, can create a class of nobles — Lords, Barons, Dukes, Knights, Marquises — but we would base the titles exclusively on merit. Thus, we would have a class with class, something the Brits had with Elizabeth I, Victoria, and perhaps a few others. This American entitled class would, of course, have to apply for annual renewal.