Blog #19 – The Useless 47%

Blog#19 – The Useless 47% -Useless to the 1%

Mitt Romney has added a brutal reality to traditional class analysis: The Useless Class. It is simply defined: those from whose existence the 1% cannot extract a profit. Its definition reveals a telling economic analysis, although it was used at a political fund raiser.

Politically, it makes no sense at all. If 47% of the people are committed to vote for Obama, he only needs 4% from among the other 53% to win the election, and Romney is a sure loser.

But economically the 47% makes a lot of sense. It is astonishingly revealing, not of his political strategy but profoundly of his economic class interest and loyalties.

There are several ways of interpreting Romney’s 47% comment: as part of a political strategy, or as part of an honest economic analysis.

Or as a matter of personal jealousy: If Romney thinks not paying taxes is such a bad thing, why has he tried so hard all his career to do exactly that? Would he like to be part of the 47% himself, if he only could?

More seriously, politically, look at who the 47% are, and who the 1% are, and judge who is more deserving of public support:

47% 1%
The elderly Hedge fund managers
Children Managers
The disabled Corporate CEO’s
The working poor, earning too little for tax liability Real estate developers, owners, and speculators
Members of the armed services The inheritors of wealth
The unemployed
The sick

The 47% analysis makes no sense politically. In the first place, one can throw out the whole idea that you can predict a political vote of people by simply knowing what their income is and whether they pay income taxes: 40% of those with incomes under $30,000 voted Republican in 2010, 36% of those with incomes over $200,000 voted Democratic. And among those who do not pay income taxes are at least 4,000 households with incomes over $1 million ended up with zero federal income tax liability in 2011. Another 14,000 made between $500,000 and $1 million.

And in the second place, If Romney thinks 47% of the people would vote for Obama no matter what, as pointed out above, Obama is a sure winner: 47% vs. 1%.

But, looked at in economic terms, perhaps Romney has unintentionally opened to door to what might be a serious discussion of the divisions in U.S. society, and the implications of those divisions for the holding of power and the shaping of policy.

What are those relevant divisions? Let us look at it from Mitt Romney’s point of view, assuming, without moralizing, that he is rationally concerned with protecting and enhancing the position of the 1% to whom he unquestionably belongs personally, and wishes to lay out those groups on which he can count for support, those that might have the power or the position to challenge his interests, and those that, whatever their actual interests may be, have no power to make a difference him.

Mitt’s 47% category is one place to start. It includes two broad categories: those out of the labor market entirely, and those whose position in it is marginal and at a subsistence level of poverty but working. The former would include most of the elderly, the disabled, and children. They are, for essentially physical reasons, unable to support themselves in the market, and are necessarily dependent on society to survive. That means, in an economic system distributing key goods along market principles, they are dependent on government. They have no economic power that would disturb Romney. The only power they might have of concern to him would be political, through the electoral process, or possibly through disruption on the streets. Their number, in demographic terms is growing, but because they are limited in their physical opportunities. Unlikely to pose a threat. Even politically, their issues are often overwhelming enough to preclude an active participation in public life.

From Romney’s point of view, what are the crucial dividing lines between the 47% and the 1% to which he belongs?

I suggest four overlapping categories:

Their material position: poor, working, professisonal/managerial/1%;
The ease/difficulty of their organizing
Their position in Consumption
Their position in Production

What does make sense, then, rather than using the 47% for a political analysis, is to look at it as a negative definition of his real constituency, his class, useful in a fund-raising appeal among the 1% to reassure them that he knows where their best interests lie, and will serve them. The 47% are useless for profit-making in production in the economy. They do not work in a fashion that permits their direct exploitation, producing goods or services from whose disposition the 1% can benefit in classic economic terms, they cannot be exploited because their labor does not produce the surplus value that the 1% can capture for their own benefit. They are not in a position to disrupt the system, in part because they are only with difficulty organized. Their economic role is on the Consumption side of the economy.

One can phrase that in Keynesian terms that perhaps make the same point in different fashion, and reveal a contradiction that might in fact bother Romney some. If 47% of the population are poor, have so little income that they pay no income taxes, who will buy what is produced by the other 53%, from production on which the 1% depend for their profits? Writing of 47% of the population as profit-producing consumers is a problem, one that keeps Romney from saying what he really means, that he does not care at all about them. Even if they do not buy much, they do consume, and profit is still to be made from their consumption, even if it to be fueled by government benefits, such as social security, food stamps, or Medicaid and Medicare. So the 1% cannot afford to cut such programs off entirely—never mind the social disruption that might occur.

Yet, of course, those public benefits must be paid for, and necessarily by taxes. Yet if one has a progressive tax rate, the result is that the 1% are making their profits by recycling their own tax money; hardly desirable, from their point of view. Thus, rather than tackling those benefits directly, holding them down, and shifting the tax burden of paying for them from themselves to the “middle class,” is the preferred strategy. Hence a targeted austerity, with a continuing tolerance for some public benefits, in a sleight of hand which the middle class ta party adherents quite properly object to because it is at their expense.

This is perhaps a slightly different formulation of the Keynsian crisis of under consumption. With only the possibility for the 1% of extracting profit form 52% of the population, the possibilities of profit are reduced significantly, and drive the 1% to increasingly extreme means of accumulating wealth, producing a crisis when the 1% finds their source of nourishment is essentially gained by eating their own tail, relying on the tax revenues they themselves are contributing to.

Romney’s 47% comments are not a political analysis of his chances in the election; they rather lay out clearly the reason the 1% should support him as one understanding their own class interests.

But the 47% discloses an interesting difficulty for the 1%. If businesses make their profits by selling what they produce, Keynes and common logic would suggest they need buyers who have the money to with which to buy what is being sold. And if 47% have too little money, there is trouble. So supplementing their incomes with government support can help, and thus contribute to profit. But government support contributes to the deficit, runs counter to austerity, and increases taxes, if even only slightly. So those within the 1% who can profit even from the consumption of the 47% have an interest in conflict with those who cannot thus profit.

The health care debate is an example. Government support for health care for the poor is a loser for the 1%, who are not at all poor; the 1% oppose ObamaCare. But within the 1%, the insurance provisions of ObamaCare help the market for insurance, and thus enhance insurance companies’ profits, and those that will thus benefit supported it. A dilemma for Romney, and, if the poor are growing, as the 47% figure and other data suggest, a growing dilemma.

For Romney, what is consumed must be provided in the market, and must produce profit. Fine; the insurance companies covering health care have taken note. But a further problem arises. Consumption is increasingly of services, on top of the provision of goods. From tourism to security to design to retail to transportation to education to fire protection to social work, what people consume is more and more what other people provide directly for them, not just in the physical goods they buy. And a growing part (“collective consumption”), is provided collectively by government. But services must be privately provided to maintain business profits. And thus the increasing pressure or privatization of public services: education, hospital care, buses and railroads, private security, even private military. For the 1%, privatization is a matter of expanding the potential for profit, whatever its relation to efficiency.

Wait till someone with a tape recorder catches Paul Ryan at a fat cat fund-raiser boasting about the real advantages of vouchers…

2 thoughts on “Blog #19 – The Useless 47%

  1. One thing I think you may miss: The 47% who don’t pay income taxes aren’t all relying on gov’t handouts–and even most recipients of social security have long paid into the system previously. I think Romney used “47%” merely as a shorthand way of referring to a sector of the population who wouldn’t be open to his “reduce taxes” argument (since they don’t pay any anyway), but even he knows that that isn’t true–that (as you note) many of them vote staunchly Republican no matter what.
    And I’m not sure that Marxian analysis of extracting wealth from production (and consumption) is adequate for the global financial dealings of mega-capital. The junk bonds, leveraging etc. often extract wealth from un-productive or -consuptive activity by manipulating interest rates and playing with market fluctuations.

  2. A partial yes on both. II wasn’t concern to challenge Romney’s own logic, but to re-interpret it at a different level: the economic class definition.
    On the financial role in all this, absolutely right. That requires a reexamination of current (20th century) developments:

    The traditional sources of profit are:

    1. Surplus value extracted from workers in the course of production.
    2. Commercial/merchants/trading profits, extracted by a seller from a buyer
    3. Rent, extracted from capital for the use of monopoly ingredients in production, primarily land.

    #3 reduces #1 to the extent it is charged to productive firms, is a formof #2 to the extent is is charged by landlords residents

    #4 Financial profits, essentially a form of #2, and a reallocation of the value created in #1 and the profits created in #2.

    The 46% argument raises a different way of slicing the issue: who obtains the profits, and from whom.

    It rests on the increasingly recognized surplus of capital seeking an outlet for its investment for further accumulation. David Harvey has made the argument that it explains the boom in real estate and urban land prices. I want to make the argument that it also goes into an expansion of both #2 and # 3, depending on the goods or services involved:, through the process of Privatization. I want to make the argument that Romney is picking up on a substantially increased focus on extracting profit, in the sense of #2 and # 3, from the process of consumption, of the 47%. (extracting consumption profit from the 1% is simply redistributing within that class.)The issue is the extraction of profit from the 47%.It depends

    A. Privatization: If it is a necessity of life, #3, monopoly profit is derived from its privatization, not only of land, but also of water, food, housing – and necessary services: police protection, fire protection (again), education, health care, public construction.
    B. Financialization: The use of credit, the charging of interest, and the involuntary requirement that the 47% speculate, e.g. on their exchange value of their housing and the stock market through their retirement investments.
    C. Dispossession: Foreclosures, requirements, sales taxes.

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