As we enter into the fifth year of the Lesser Depression, it has become obvious that we are leaving the old class structure and establishing a new one. The evidence occasionally makes it into a media dominated by trials and fires and crashes. It makes a brief appearance in stories about the rise in inequality brought on by decades of policies that benefit the hyper rich and their enablers on Wall Street, their revolving door law firms, and their scheming tax accountants. It even makes it into the thinking of economists.

Americans think it is un-American to talk about class and its close relation, money, but this isn’t going to get better until we start talking about both in the open. One of the reasons we don’t talk about this stuff is that it’s too easy to slip into name-calling. The writer is insufficiently sensitive to the feelings of one group or another, or the categories that make up a class structure ignore other more important issues, or naming classes is blaming people or whatever. Everyone takes it personally.

So, here’s a story. When my sister was in first grade, she brought home a straight A report card. One of my brothers complimented her, saying she must be the smartest kid in her class. No, she said, there are two other kids smarter than I am.

Let me hammer home the point of that story. We know about class, we know pretty much where we stand in the class structure, we know about money, we know pretty much where we stand in the money structure, but we don’t normally talk about it. Only kids do that.

It’s harder for liberals to talk about class, because class implies ranking people along some kind of scale, and liberals hate to do that. It’s alright to have those ideas in your head, but, as we explained to our sister, you don’t talk about it. You just keep on, and the meritocracy carries you forward.

That doesn’t work anymore. The silly names we used instead of the real class identifiers never reflected the actual lived reality of class in the US. The best example is labor. In the Great Depression, factory workers and other hourly workers became more and more militant. They saw from their own experience, driven by desperation, that if they worked together, they had power. They had the votes to control the government, to prevent the government from intervening on the side of capitalists, and by withholding their labor they were able to extract a fair share of the profits from their work. That militancy arose from an understanding of the class interest of the working class, and it was grounded in ideology.

In the immediate post-war period, labor exercised that militancy through multiple strikes. That led to the passage of Taft-Hartley, that act of cowardice on the part of capital, which realized it could not dominate their workers without buying the help of the national government. After several years, a truce was reached. Labor purged its ideologues, those with communist or socialist leanings; and management agreed to give workers a share of the profits from the increase in productivity, through what Leo Panitch and Sam Gindin call the Treaty of Detroit in their book The Making of Global Capitalism:

By tying company-level wage increases to estimates of national productivity increases, and building in inflation protection through a cost-of-living index, they implicitly accepted that collective bargaining would not disturb the existing distribution of income. P. 83.

That deal lasted until the late 1970s, when Paul Volckler imposed drastic interest rate increases that drove down inflation at the cost of millions of jobs and lost income for workers. It ushered in the Reagan era, with even worse conditions for workers, and began the long decline of the labor share of national income.

Ugly Chart from FRED

You can see this in the chart. Every time there was a peak in the labor share, there was a recession, the labor share dropped. That happened because the Fed raised interest rates, cutting down on economic activity and leading to massive increases in unemployment. Still, the labor share bounced back each time, until the Reagan era. The recession that began in 2000 was also typical in that the labor share dropped, but unlike previous recessions, there was no recovery. All the money went to the richest among us. There is an anomaly in the Great Crash, where there was a brief peak in the labor share because the rich weren’t making money out of their financial games. And then the labor share drops some more.

And it will continue to drop until workers realize that they aren’t in that fairy tale middle class they thought they belonged to.

I have not provided a definition of this “working class”. Here’s one from the Urban Dictionary:

The working class. People who don’t make things but rather sell their labor in the workplace, when the means of production are owned by someone else. The most widely known example is the factory worker. The international proletariat make up about 50% of the world population at this point. See bourgeois.

A shirt is worth $10. The boss has a factory to make shirts. Workers get paid $1 a shirt that they make, and the cotton costs $1 a shirt. So the boss spends $2 on every shirt. 10-2 is 8. The boss gets $8 a shirt, the worker gets only $1. Something’s wrong here…

Does that definition include my doctor who works for some big hospital corporation? I think it does.