Elites On The Edge

Growing income and wealth inequality were on my (and probably your) radar screen long before COVID-19 came along. The pandemic has made them both more obvious and more urgent. The actions by the Federal Reserve have widened the gap. We are now in a situation where society’s upper echelon can easily stay safe and prosperous while the lower segments live precariously and dangerously.

Elites on the Edge

It’s actually worse than that. The upper end is safe precisely because millions of “essential” workers are producing and delivering the goods we need, placing themselves at risk in the process. That’s always been the case to some degree. Now it is clearer, and the stakes are higher.

Two weeks ago I talked about Peter Turchin’s idea of “elite overproduction” leading to social and economic crisis. What I read sounded disturbingly like our present situation. Further reading wasn’t any more comforting. While he doesn’t have any solutions, Turchin helps illuminate how we reached this point. Today we’ll go a little deeper and think about the implications. As you’ll see, there are many.

Counter-Elites

The “memes” we see on social media, even the anonymous ones, are often revealing. Here’s one that made the rounds this year.


Source: TruthorFiction.com

As far as I can tell, no one has been able to verify this story or trace it to the source. It might not be true but it’s completely plausible. I know people who went through such experiences. You probably do, too. They followed the rules, did everything right, then cancer or some other bolt from the blue demolished everything. Happens all the time.

But here’s the thing: This doesn’t happen to everyone. The top layer, the fabled 1% or 10% or wherever you want to draw the line, don’t lose everything when somebody gets cancer. They are, to use Peggy Noonan’s term, a “protected” class. The link is to a letter I wrote in 2016, describing the frustration in both political parties with what they considered “the elites.” I talked about how the protected class doesn’t really understand the stomach-churning reality of the unprotected class for whom just one blown tire, a trip to the emergency room, or other personal disaster completely wipes out their meager savings. They look at those who appear able to afford whatever they need, “the protected class,” and wonder why is that not me? They want to be in that class, too.

But it’s not easy to join, as I’ve been lamenting for years. Peter Turchin’s work adds to my concern. He notes, looking at many civilizations through history, that prosperity creates more wealth and wealthy people. The problem is their numbers tend to grow faster than the number of “elite” positions or jobs. In the US, for instance, we have 100 senators and 435 House members. Those numbers are fixed while the number of people who think they are qualified to hold office grows. Hence our large chattering class that circles the Washington beltway without any real power. Wall Street has a similar pattern. So do large companies, universities, state and local governments—basically all the institutions that compose society’s backbone.

Meanwhile, a layer or two below are large numbers of people who want to join the top ranks. They think education is the key. Get a college degree and the doors to success will open. That’s not wrong, either. But here again, not all degrees are equal. Much depends on where you go to college and who you meet there. Grades aren’t the only factor.

Regardless, millions load up on debt trying to get those degrees. Many find themselves without the desired diplomas but still saddled with the debt. And it’s not just college degrees; people go into debt seeking law, MBA, medical, and other credentials they think will open the desired doors. Loose monetary policy subsidizes and encourages these ambitions while simultaneously inflating asset prices, which make them difficult, if not impossible to achieve.

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Disclaimer: The Mauldin Economics website, Yield Shark, Thoughts from the Frontline, Patrick Cox’s Tech Digest, Outside the Box, Over My Shoulder, World Money Analyst, Street Freak, Just One ...

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