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This article is meant to clarify a point made earlier (Why Didn’t Socialism Have Over-Production Crisis, Newsclick, June 30, 2018) about the erstwhile socialist economies not having over-production crises as capitalist economies do. It is in the nature of capitalism to have “over-production crises”, i.e., crises arising from “over-production” relative to demand. “Over-production” does not mean that more and more goods keep getting produced relative to demand, so that unsold stocks keep piling up. This may happen only for a brief period in the beginning; but as stocks pile up, production gets curtailed, causing recession and greater unemployment. “Over-production”, in short, is ex ante, in the sense that if production were to occur at full capacity use (or at some desired level of capacity utilisation), then the amount produced could not be sold because of a shortage of demand. But it manifests itself in reality in terms of recession and greater unemployment. It is a mistake to believe that such crises are only cyclical in nature, i.e., that they get automatically reversed after a certain period of time. On the contrary, the Great Depression of the 1930s, which was a classic over-production crisis, lasted nearly a decade and was finally overcome because of the war, or, to be precise, because of military expenditure in preparation for the Second World War. Read Also: Why Didn’t Socialism Have Over-Production Crises? Since 2008, there has again been an over-production crisis that has persisted with varying intensity right until now. There is, thus, no question of an over-production crisis under capitalism automatically disappearing. But what was striking about the erstwhile socialist economies of the Soviet Union and Eastern Europe is that they were free from over-production crises. The question is why? Over-production crises under capitalism arise because of two main reasons. One, investment decisions under capitalism depend upon the expected growth of demand, for which the current growth of demand is taken as a clue: if demand slows down then investment gets restrained. Two, whenever investment gets restrained, so does consumption and hence total income (this is called the “multiplier” effect of investment). Both these factors were eliminated under socialism. Investment was undertaken according to a plan and not the dictates of profitability; hence, there was no question of investment being curtailed when the growth of demand slowed down for any reason. This is not to say that there were no fluctuations in the level of investment. These fluctuations, however, arose not in response to profit expectations, but for entirely exogenous reasons, of which, two in particular were important. One was agricultural output fluctuations. In years when the agricultural output went down for weather-related, or some other, reasons, investment was cut, in order to prevent excessive upward pressures on food prices; correspondingly when agricultural output revived, so did investment. These investment fluctuations, however, had nothing to do with any calculations of profitability on investment; they were unavoidable even in a planned economy. The second reason was the operation of “echo effects”. Suppose, for instance, that a whole lot of new investment had been installed in a bunched manner at a certain date, say the beginning of the planning period. These pieces of equipment would become due for retirement again in a bunched manner around the same time some years later, which would, therefore, push up the investment plan, and hence the real gross investment around that time, so that both net investment and replacement needs are accommodated. The investment figure, therefore, would not show a steady growth but would exhibit fluctuations. But these fluctuations again had nothing to do with any calculations of profitability; they arose because of past investment history. But even when such investment fluctuations occurred, socialist economies ensured that they did not lead to fluctuations in consumption and income, i.e., those economies snapped the multiplier relationship that necessarily characterises capitalism. This is because all firms in the economy were asked to produce to their capacity, and, if demand was low because of investment being curtailed, then they were asked to lower their prices until whatever they produced got sold. At these “market-clearing” prices, some firms would make losses, while others would still make profits; but this would not matter since both the profit-making and the loss-making firms belonged to the State, which could, therefore, cross-subsidise the loss-making ones from the profits of the profit-making ones. And taking both groups of firms together, there would always be positive net profits as long as investment was positive (even if lower than would have been otherwise). This was a remarkable break from what happens under capitalism, and provides a clue to why output and employment fall in a crisis there. Under capitalism, a firm does not produce when prices do not cover costs; and when demand is low, prices do not fall, because they are “administered” through collusion among the oligopolistic firms. Instead, output, and hence employment, fall in order to equate supply with demand, and to eliminate stocks which might have got built up briefly. The matter can be looked at somewhat differently. A fall in price, with money wages and employment given, which is what happened under socialism, meant a rise in the share of wages in total output; income distribution in short shifted in favour of the workers. Since workers more or less consume their entire wages, such a shift in income distribution in favour of the workers raised the share of consumption in total output. Thus, socialist economies never experienced over-production crises because even when investment fell for some reason, output was kept unchanged and the share of consumption rose to compensate for the fall in investment (through a rise in the workers’ share in output). This, however, can never happen under capitalism because capitalists would never voluntarily agree to a lowering of their share in output and a corresponding increase in workers’ share, even in a situation of inadequate aggregate demand. This is why capitalism experiences over-production crises: income distribution here is a matter of intense class-struggle where there is no question of capitalists agreeing to lower their own share and correspondingly raise workers’ share for the sake of overcoming a situation of over-production. The “multiplier” that operates under capitalism, whereby a reduction in investment causes a reduction in consumption and hence total output, occurs because of income distribution not being adjustable. The “multiplier”, in other words, is predicated upon the relative shares among capitalists and workers being given. In fact, under capitalism, far from the workers’ share rising to offset the problem of insufficient demand, the tendency in periods of crisis is the exact opposite, namely, to cut wages and raise the share of profits, which, in a situation of reduced investment that brought about the crisis in the first place, actually compounds the crisis. A 10% fall in investment in such a situation does not just bring about a 10% fall in output, as the “multiplier” analysis would suggest, but a more than 10% fall in output, say a 15% fall, because an additional squeeze on consumption through a fall in workers’ share (via the wage cut) is further superimposed upon the reduction in investment. The fact that the relative share of the workers is not allowed to increase in order to offset the tendency towards over-production, which is a basic characteristic of capitalism, also shows its supreme irrationality as a system. It shows that the system would rather have larger unutilised capacity and unemployment, i.e., a sheer waste of productive resources for lack of demand, than produce as before by avoiding this waste through giving more to the workers. From its point of view, wasted resources are preferable to using these resources to improve workers’ consumption. True, not being a planned system, it does not make such calculations consciously; but that is what its immanent tendencies amount to. Socialism avoids any waste or slack, such as is caused by a crisis, by raising the consumption of workers appropriately to avert it. As the collapse of the Soviet Union recedes further into history, people increasingly forget that a system had existed there, which, notwithstanding its many limitations and defects, had nonetheless been free of unemployment, of over-production crises and of the irrationality of capitalism.

Americans must recognize economic classes

Class Identification

You see, if you shoot pool with some employee here, you can come and borrow money. What does that get us? A discontented, lazy rabble instead of a thrifty working class.

—Henry Potter, banker commenting on the people who reside in Bedford Falls and were helped by the Building & Loan company instead of crawling to Potter and his predatory bank lending policies.

This was excerpted from the holiday classic film “It’s a Wonderful Life.” It is one of the few times when the term “working class” was used in a widely seen cultural medium.

There appears to be a reluctance in the United States to wear the mantle of “working class.” Its connotation appears to be a relic from the economic revolutions of Europe in the late nineteenth century.

In the United States, the denotation is not worn proudly, but rather as having a slight tinge of being beneath the other more affluent and educated classes above it.

President Biden asserted in his speech to Congress on April 28:

And it recognizes something that I’ve always said: Wall Street didn’t build this country. The middle class built this country. And unions built the middle class.

The president misrepresented the demographic “middle class” as building this country. Sorry, Mr. President, but the working class of all races built this country. Also, his assertion that the “unions built the middle class” is only accurate if income and wealth is how “middle class” is defined.

Moreover, it was only attained after unions were established by working-class people in epic conflicts with the United States’ dominant class.

Regardless, it shows how reluctant politicians are to identify the vast majority of employees in the United States as “working class.”

However, they remain the economic class that built the nation’s now failing economy.

Conventional Views

Scholars and academics analyze, define, and redefine social classes. There are truckloads of literature that identify the historical development of social, political, and economic groups by income and wealth.

Mainstream sociologists tend to parse and expand social classes from a distinct, controlling economic class.

C. Wright. Mills was an acclaimed social conflict theorist. Mills argued in his classic 1956 book, “The Power Elite” that a small group of individuals within the political, military, and corporate realms actually held the majority of power within the United States.

Mills asserted that a small group of largely males dominated the social, political and economic structure of America. However, he rejected the identifier “ruling class.” His description of the demographic that dominated American life was the “power elite.

G. William Domhoff, prominent sociologist presented the case that there was a “power elite” in his 1967 book “Who Rules America.”

Oliver C. Cox, esteemed black sociologist, however, did not avoid the distinct economic class dominance in American society in his exhaustive study in 1948, “Caste, Class and Race.” Professor Cox emphasized that “economic class” was the basis in determining social classes.

Unquestionably, there exists a comparatively small economic class in the United States that controls the political, social, environmental, and foreign policies of the country.

Their policy views often do not comport with the views of working people on issues that affect the vast majority of Americans and why would they?

Maintaining their economic status drives every important policy issue in the country.

Actual Economic Classes

Dominant Class—aka the “One Percent, the “Ruling Class,” the “Power Elite,” the “Ruling Elite” and the “Upper Class.” They own most of the income and wealth in our economic model, but that’s the cursory view.

What matters is their power.

This class is comprised of owners and boards of directors. They exist at the municipal, state, federal and international levels.

They own or control the primary methods of producing goods and services in the country; they decide the organization and distribution of those goods and services. They control the workplace of those in the working class and “middle class.” They are the bulwark against a democratic economic model.

Working Middle Class

The “working middle class” is below the dominant class. In the media and literature this demographic is identified as the “middle class.”

This class identification resonates with most Americans.

“Middle class” is often used to promote the existing economic model in the United States implying that everyone existing in the expansive “middle class” is economically comfortable or should be. I’m happy for

However, it is clearly an artificial metric that merely serves to give a measure of false security to working people against the perceived judgements of others. It is promoted by the dominant class to keep working people divided.

The polls also reflect Americans’ preoccupation with it.

For example, in a 2015 poll by the Pew Research Center, people were asked to self-identify their economic class.

The poll noted that there were at least 12 different definitions of “middle class.” When all 12 definitions were considered, over 90 percent of the U.S. population would qualify as “middle class.”

T.G. Bottomore, a leading authority on classes wrote about the “middle class” in his 1966 work “Classes in Modern Society.” He asserted that the prevailing economic model served to create the “middle class.” Bottomore saw it as a social construct that emphasized status rather than economic position.

However, noted economist Michael Zweig, articulated the similarities between the “middle class” and the working class in his 2006 book “America’s Working Class Majority: America’s Best Kept Secret.”

He identified the “middle class” as professionals, small business owners and managers, and supervisors. They share many of the same conditions as working-class people do such as the instability of the market, government overreach, comprehensive healthcare and retirement security.

Also housing purchases, non-healthcare insurance, exorbitant education costs and prescription drug prices are similar conditions for both classes.

He also included college teachers, public defender lawyers, medical professionals, and public school teachers in the demographic.

Indeed, the working middle class shares many of the same associations with the dominant class as working-class people do. They may be compensated better, but the power to control their economic reality is similar to the working class. Their positions depend entirely on the decisions and caprices of the dominant class.

The tiny number of celebrities in entertainment and sports industries must be mentioned. They are often compensated with lucrative contracts. They can live lifestyles that most people only dream about if that’s a dream in the first place.

However, they are still employees, no matter how bloated their bank accounts or portfolios. Unless they become owners of entities that employ others, they are merely high paid workers dependent on the dominant class of billionaire owners and boards of directors.

To be sure, some of these individuals must be complimented for using their celebrity platforms to advocate for issues affecting working people. However, their numbers are insignificant to the demographic and they remain as outliers to the rest of the working middle class.

Working Class

Economists can also muddy up basic, clear definitions of class.

Guy Standing, prominent British economist came up with a novelty in his 2011 book The Precariat: The New Dangerous Class. Standing asserted that we now have an international social class of people who are in a constant state of precarity without predictability or stability in the workforce. He combined the words “proletariat” and “precarious” to arrive with the identifier “precariot.”

With considerable respect to Professor Standing’s impressive work, this identifier is gratuitous. The working people described here are still a demographic in the working class. There is no reason to single out these people with a fanciful portmanteau that brings little insight on the composition of the working class. This applies to the “gig” economy as well.

It is consistent with America’s narrative that about 62 percent of employees in the workforce are working class.

Zwieg identified the working class as white-collar bank tellers, call-center employees, cashiers, blue-collar machinists, construction workers, assemble line employees, secretaries, nurses, and home healthcare employees.

Also included are the significant numbers of service industry and healthcare employees.

These employees have little control over the content or conditions of their workplace unless they are fortunate enough to be unionized. However, without a robust resurgence of the labor movement, the number of union members today will remain pitifully small.

Power, Not Income or Wealth

The ultimate definition of economic class rests with the identification of power in the economy.

We must identify who has it, who doesn’t and how our society strives for democratic ideals if that is what we seek.

Political democracy is impossible without economic democracy.

Martin Gilens and Benjamin I. Page, respected economists, wrote a paper in April 2014. They reported that policymaking in the United States is dominated by powerful business organizations.

They concluded that “America’s claim to a democratic society is seriously threatened.”

This was not a cataclysmic revelation to those who track corporate “crime, fraud and abuse” as Ralph Nader aptly described it.

However, their conclusion was disturbing and prescient in light of recent events as elements of the country veer toward fascism manipulated by oligarchs of the dominant class.


No political movement, however motivated by righteously moral intentions can advance without a blueprint that accurately identifies the demographics involved.

From spiritual progressives relying on faith-based initiatives to secular progressive organizations the participants must be identified accurately by their economic power or lack of it.

We must present a simplified definition of economic classes; it will allow us to convey a better understanding of political machinations to ourselves and the American public.

It will also facilitate a plan to address the continuing issues of racism and sexism in our society.

Economic class is the basis of both.

Although the mainstream media painstakingly avoids that view, the F.D.M. crowd (Facts Don’t Matter) will eventually figure it out at some level.

Consider that the frustration and venom of Mr. Trump’s base would evaporate if they had opportunities for decent, sustainable jobs with healthcare, education, housing, nutrition and a clean environment.

Instead of the relentless and witless indoctrination from the dominant class through its coopted and corporate supported media they might redirect that discontent to the source.

The working middle class and working class are natural allies.

They exist largely in the same power associations controlled by the dominant class. Their numbers approximate 99 percent of working people if defined by economic power.

If we subscribe to the concept of democracy, it must be acknowledged that the continuing economic plague visited on a vast majority of the American people must change. They deserve better from an economic model.

George Bailey, said it best, again in “It’s a Wonderful Life” when addressing Henry Potter’s attempt to take over the Building and Loan company.

Do you know how long it takes for a working man to save five thousand dollars? Just remember Mr. Potter, that this rabble you’re talking about… They do most of the working and paying and living and dying in this community.

They still do.

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