America’s Four Socioeconomic Classes

By Charles Hugh Smith

A titanic political battle is brewing between the parasitic aristocracy, the dependent class and the two classes creating value with their labor.

In the conventional view, America’s socioeconomic classes are divided by income and wealth into various layers of Wealthy, Middle Class and Poor.

If we extend the analysis presented in Why Employment in the U.S. Isn’t Coming Back (January 29, 2013) and Why Employment Is Dead in the Water (January 28, 2013), we get an entirely different framework that breaks naturally into four classes:

1. Parasitic financial Aristocracy (creates no value, skims national surplus)
2. High value creation (employed, heavily taxed)
3. Low value creation (employed/informal economy, lightly taxed)
4. No value creation (unemployed, dependent)

There are of course various distinctions that must be made within each broad class, but the point is the financial health of the nation ultimately depends on creating surplus value–value in excess of the costs of production and overhead.

Wealth that is incapable of generating new wealth is consumed, i.e. eating our seed corn: once the investable capital is gone, it is no longer available to leverage new wealth creation, and the nation spirals into poverty and conflict.

The key metrics are value creation and cost: assessing the value created by each class and the costs of maintaining each class.

In the conventional view, the wealthy subsidize the poor via taxes and donations to charity (i.e. noblesse oblige). But the conventional framework ignores the key question of where the wealthy obtained their fortunes, and the consequences of that wealth acquisition on the larger economy.
If the wealthy parasitically skimmed their wealth, they are in effect depriving the economy of capital that could have been productively invested elsewhere. If they created value far in excess of the costs of their enterprise, then they were conduits of high-value creation.

Here is a snapshot of parasitic wealth skimming: the financial aristocracy skims roughly 5% of the nation’s entire output (GDP) from the 60% of the populace that are debt-serfs (the top 5% have wealth that is not debt-dependent, and the bottom 35% are too poor to have any credit).