The financial aristocracy and the growth of working class struggle

4 March 2013

Last year, nine executives at four major private equity companies received a combined total of $1 billion in pay and dividends in what was likely the largest payout in the companies’ histories.

This extraordinary fact was reported in an article in the weekend edition of the Wall Street Journal. The article noted that dividend payouts alone amounted to more than $100 million each for Stephen Schwarzman, CEO of Blackstone Group LP; Henry Kravis and George Roberts, the co-founders of KKR; and Leon Black of Apollo Global Management LLC. All of these men were already billionaires, with Schwarzman worth $5.2 billion, followed by Kravis at $4 billion, Roberts at $3.7 billion, and Black at $3.5 billion.

The average payout for each of the nine executives was about 2,000 times the median household income in the United States.

This report is another example of the obscene concentration of wealth in America that has raised inequality to a level not seen in more than a century. Wages for workers in the United States are at their lowest level since the 1930s.

Meanwhile, massive cuts are being implemented at every level of government, justified by the claim that “there is no money” for health care, education or other basic social needs.

The same day that the Journal reported the income of the Wall Street private equity executives, the federal government began the implementation of $1.2 trillion in “sequester” budget cuts, and Michigan Governor Rick Snyder announced that he would appoint an emergency financial manager with dictatorial powers to impose cuts in Detroit.

The Obama administration has indicated that the brutal cuts under the “sequester” will not be reversed. The across-the-board cuts in social spending are the outcome of calculated maneuvers by the Democrats and Republicans to impose extremely unpopular measures that both parties support. Among the many consequences, those receiving long-term unemployment benefits will see their weekly income fall 11 percent to $260. The weekly take of each of the Wall Street executives cited by the Journal was more than 7,000 times this amount.

These figures point to the overwhelmingly dominant factor of American life: social inequality. Repeated surveys have shown that the great mass of the people significantly underestimate the scale of the wealth concentrated in the hands of the financial elite. It is little talked about in the media, and for most people the sums of wealth controlled by this layer are simply incomprehensible.

An immense and unbridgeable chasm exists between the conditions of life for masses of people—suffering from the greatest economic and social crisis since the 1930s—and a ruling class whose wealth is almost entirely divorced from productive activity in the real economy.

In terms of the political response, the contrast to the 1930s is instructive. In introducing the Revenue Act of 1935, which increased tax rates on high incomes and estates, President Franklin D. Roosevelt stated, “Great accumulations of wealth cannot be justified on the basis of personal and family security.”

Such a conception—advanced by Roosevelt as part of the effort to save capitalism from the threat of social revolution—belongs to another age. It is completely outside of the boundaries of contemporary bourgeois politics. Now the watchword is for ever greater attacks to make the working class pay for the crisis of the capitalist system.

The American ruling class bears all the hallmarks of an aristocracy, with all that implies for social and political stability. When the existence of the ruling class and the economic system upon which it is based become inimical to any progressive development—when instead they become the driving force for an immense historical retrogression—society is on the verge of revolution. This was true in France before 1789 and Russia before 1917, and it is true in the United States today.

For 30 years, the American ruling class has built up its wealth through a process of financialization, in which the productive forces of the economy were steadily undermined. This process led to the Wall Street collapse of 2008, which has become the occasion for an even more frenzied orgy of speculation.

Definite policies have been pursued, first under Bush and then vastly expanded under Obama, to ensure that this process continues. The financial elite is addicted to an unending stream of virtually free money pumped into the markets by the US Federal Reserve. After a quick fix of bailouts in the wake of the 2008 crash, the American central bank is mainlining a steady supply of dollars by means of asset purchases on the order of $85 billion a month.

This is what is behind the massive rise in stock prices upon which the wealth of the private equity executives is based, and it is the reason why the Dow Jones Industrial Average is within a few percentage points of setting a new record, even as economic growth stalls and begins to go in reverse.

The malignant character of social relations infects every political institution. The entire organism stinks of corruption. Both political parties, the Democrats and Republicans, function as direct instruments for the enrichment of the ruling class.

Nothing can be changed through this political system. Social struggle is required. The working class must fight back, countering the dictates of the ruling elite through collective action. Social conflict is, indeed, inevitable. It has already begun to emerge in explosive forms in countries around the world, and the first signs of the coming eruption can be seen in the United States itself.

For these struggles to succeed, however, opposition must be based on a clearly worked out political program—one that is directed against the entire structure of the existing social system. Capitalism is historically bankrupt. It must be replaced by a new and higher organization of society—socialism.

The Socialist Equality Party is leading the fight to build a working class movement to overturn the capitalist system and reorganize society on the basis of social need, not private profit. We propose the following measures:

* The taxation of all income over $1 million at a rate of 90 percent. An increase in taxation to this level would only return tax rates to where they stood in the 1950s. However, this measure is completely excluded by the existing political system, in which the two parties haggle over whether to raise the top rate a couple of percentage points while plotting to slash corporate taxes.

* The confiscation of all wealth accumulated through financial speculation. The members of the financial aristocracy should be treated as what they are: social criminals. They should face prosecution, along with those who have abetted their crimes.

* The nationalization of the banks and major corporations—with compensation for small shareholders—and their transformation into public utilities run in the interest of social need, not private profit. The wealth they produce must be utilized for the betterment of society.

Through such measures, the resources can be found to meet the basic needs of society and secure the social rights of the working class, including the right to a job at a decent income and the right to housing, health care, education and a comfortable retirement.

The socialist transformation in the United States must be part of an international movement. All around the world, the same basic questions are posed. We urge all those who agree with these demands to contact and join the Socialist Equality Party and fight to popularize this program among working people and youth.

Andre Damon and Joseph Kishore