"The history of all hitherto existing society is the history of class struggles… Freeman and slave, patrician and plebeian, lord and serf, guild-master and journeyman, in a word, oppressor and oppressed, stood in constant opposition to one another, carried on an uninterrupted, now hidden, now open fight, a fight that each time ended, either in a revolutionary reconstruction of society at large, or in the common ruin of the contending classes.... The modern bourgeois society that has sprouted from the ruins of feudal society has not done away with class antagonisms. It has but established new classes, new conditions of oppression, new forms of struggle in place of the old ones. Our epoch, the epoch of the bourgeoisie, possesses, however, this distinctive feature: it has simplified class antagonisms. Society as a whole is more and more splitting up into two great hostile camps, into two great classes directly facing each other: Bourgeoisie and Proletariat.”
– Communist Manifesto
Although the notion of class was advanced and considered long before Karl Marx used it to develop his Class Theory, most people today probably associate the concept with Marxism. This is unfortunate, because considering class, or the relationship different groups of people have to economic production, is a useful tool that can be used to navigate the current sociopolitical challenges we face. Specifically, it can help explain why every policy that elites advance seems to strike against the interests of productive, hard-working, competent Americans. It can also provide some clues as to what can be done about this perverted state of affairs.
To start, we must contrast our conception of class with the version advanced by Marx, and that requires a basic overview of class structure as advanced by Marx. In Das Kapital and The Communist Manifesto Marx describes two great classes emerging from modern industry: The capitalists (bourgeoisie) and the workers (proletariat). The relationship between the two is straightforward. The capitalists own the means of production thereby requiring the labor of the workers. The logical consequence of there being distinct classes with such a relationship has important implications, namely, that certain policies will preference one class above another. This is the fundamental truth behind the notion of class struggle.
Most Americans instinctively know that there is something deeply wrong with Marxist ideology, but are so overcome with disgust upon hearing the word they haven’t taken the time to investigate exactly what that is. Without such an investigation, we lose an indispensable tool in the battle to supplant the status quo with a new American populism. There are a couple distinct ways our usage of class can be distinguished from Marx’s Class Theory. To understand this distinction, we must briefly address the legacy of the “Classical Theory” of value Marx adapted from David Ricardo who, in turn, adapted from the great Adam Smith. Once that is addressed, we can broaden our conception of class to account for the fact that the economy has grown more complex than anyone might have imagined in Marx’s day.
Carl vs. Karl
Though 22 years his junior, the Austrian economist Carl Menger was one of Karl Marx’s contemporaries. Instead of following Marx and David Ricardo by adopting the position that value resides in goods and services due to some intrinsic property of those things, Menger recognized the empirical insufficiency of this approach and took another path. What Menger developed was a very precise notion that the nature of value is subjective. This notion turned the conventional understanding in classical economics on its head. In Menger’s view, things like land and labor only have value insofar as they culminate in goods or services that meet human needs. He also noted that this subjective value was in relation to other concurrently available goods and services. In other words, only when a human being is making a choice between available options does the abstract notion of value become a ‘real’ phenomenon that can be examined descriptively. Like some of the most useful observations in descriptive fields of study, this isn’t particularly intuitive. It certainly feels like a given car or a bar of gold has some intrinsic value just like it seems like a bowling ball would fall faster to the ground if released from the same height as an apple. Just as empirical observation assures us bowling balls and apples strike the ground as simultaneously as they are dropped from a given height, a rigorous consideration of the soundness of Menger’s conception of value proves there are no instances where value cannot be traced to meeting some human need at a given moment in space-time.
At first glance this might not seem significant, but the logical implications of this acknowledgment are far-reaching and profound. One of these implications directly challenges an indispensable core assumption of Class Theory. Marxian Class Theory is predicated on the notion that classes are inherently in conflict with one another. There is an element of truth in this. Any employer generally prefers to pay a lower wage while any employee would always welcome a higher wage. Just because there is conflict, though, doesn’t mean that both parties are unable to profit. Megner’s conception of value provides an empirical explanation for how this mutual benefit occurs in explicit detail.
The classical assumption that value is some intrinsic property of capital, land, or labor inescapably implies that there will be winners and losers in the game of macroeconomics. If value is based on the subjective determination of individuals, however, the mutually beneficial nature of cooperative exchange is revealed. If everyone valued everything the same, there would be a winner and a loser in every exchange. In reality though, our valuations of goods and services are unequal. It is this inequality in valuation that explains why capitalists and workers can profit from a relationship Marx would have us believe is inherently exploitative. Another exciting long term feature of this mutual profit is that it can result in an accumulation of capital in the world. If capital accumulates, labor becomes more productive. The truth is that a synergy between economic classes can arise under these conditions that increases the standard of living across the board. The relative wealth of the American middle class in the latter half of the twentieth century provides some evidence that this must be true, and also explains why working-class Americans have been skeptical of Marxism—it just doesn’t align with their lived experience.
Another way we can make class analysis more broadly useful in comparison to Marx is to employ a much wider array of classes. Something I’ve noticed in modern discourse is the usefulness of describing groups of people by class. But what do we mean by class today? These days, it is most useful to conceive of class as how people make their living. The managerial class, the professional class, the credentialed class, and the laptop class are just a few examples. Within these examples, and any proposed classes, there can be overlap. A single person could be a member of all of these classes (e.g. a Twitter executive with a Masters in Business Administration who works remotely).
Considering class is a useful heuristic when examining the implications and popularity of a given policy. There is a reason members of the classes used as examples above didn’t push back against draconian and ineffective COVID policy. They all got to keep their jobs, work from home, and get more time watching Netflix. It didn’t matter that “two weeks to flatten the curve” was a pointless strategy that morphed into months of lockdowns and failed businesses if you were an insular member of the laptop class. Class interest is real, and there are conflicts that can emerge. Given conditions of economic freedom these conflicts are manageable. When the government takes a larger role in the economy, however, such conflicts can escalate into existential crises such as that between us and the managerial class indicted in Michael McConkey’s Managerial Class On Trial.
Caste vs. Class
Now that we’ve demonstrated various economic classes aren’t necessarily in conflict with each other (as Marx would have us believe) we run into a significant hurdle if we want to use class as a tool to fully understand the economic conflict between populists and the ruling elite. Classes have the capacity to cooperate in a manner that is mutually beneficial. Confining group analysis to class misses something important though. There are groups that are inherently in conflict, and these are just as important and useful to consider. Mengerianeconomist Murray Rothbard notes in Power and Market that in contrast to classes, castes do necessarily conflict with one another, being that they are constructs of state intervention. The three mutually exclusive castes that we can incorporate into economic group analysis to better focus on conflict are three distinct castes that exist only as a consequence of government intervention into the market; the productive caste, the parasitic caste, and the dependent caste.
The Zero-Sum Economics of State Intervention
Unlike everything within the positive-sum realm of cooperative/voluntary economics, interventions ultimately backed by violence are zero-sum adventures in social engineering. In America today, it is very difficult to detect the line between state intervention and market phenomenon. It used to be that an examination of taxes was sufficient to understand more or less the full extent of this contagion. With the advent of the Federal Reserve and fractional reserve banking, there really is no segment of the global economy that can truly be called a “free” market anymore though. Really, it is a matter of what degree or extent to which one’s paycheck can ultimately be traced back to Uncle Sugar.
Those who produce goods and provide services that on balance, depend on the voluntary payments of customers can be said to be members of the productive caste. Those who, on balance, rely on monetary payments derived from government can be said to be members of the parasitic caste. I know this word has a negative connotation, but the parallels to the role of parasites in nature are too closely aligned not to use this term. First of all, parasites need a host in order to survive. This is definitively true in the case of the parasitic caste. Without a productive caste to generate wealth, the parasitic caste simply wouldn’t exist. Secondly, parasites do have the potential to provide some benefit in nature. This recognizes that even though members of the parasitic caste don’t have to satisfy human needs in order to earn their paychecks, they sometimes do so anyway. Finally, we have to consider the dependent caste. These individuals also survive at the mercy of government assistance, however they don’t trade their labor in exchange. As noted above, parasites have the potential to provide a benefit for what they extract. The dependent caste does not.
At first glance it might seem simple enough to determine the caste of any given individual, but it really isn’t. In order to illustrate, we’ll need to look at several examples.
Example 1: Government Employees and Contractors
This is the easiest example to categorize, as all government employees and contractors are necessarily members of the Parasitic Caste. Attempts to quantify their productivity in any objective sense are futile, because as Menger demonstrated, value only exists at the point an individual voluntarily chooses a given good or service. That choice is a purchase, and when the government is footing the bill, there is no genuine purchase. Everyone who draws their salary from Uncle Sam either directly as a government employee, or indirectly as a government contractor is a member of the Parasitic Caste, they all come from many different classes. To use a straightforward example in the U.S. Military, you could say that officers are generally members of the managerial class and enlisted, especially junior enlisted, are working class.
Example 2: Banking
Banks don’t have a reserve requirement in the U.S. and demand deposits are backed by insurance. These interventions into the market all but ensure that banks are able to profit by creating money out of thin air, then charging interest. There are of course a variety of other services banks perform, and too many rules and regulations imposed by the government to count, but the underlying fact of banking is that a certain degree of profitability is guaranteed by government. Even though taxes aren’t involved, by unilaterally increasing the money supply and profiting as a result, the bank benefits at the expense of everyone holding dollars, if only by the tiniest amount. I consider inflation of the money supply to be a sort of “stealth tax.” For this reason, until banks can no longer create money out of thin air there is an argument that can be made that they are all members of the parasitic caste.
Example 3: Healthcare
In policy debates over what should be done about exploding healthcare costs in America it isn’t uncommon to hear that the market is the problem, and that some kind of “single-payer” system is the solution. The thing is, there is no free market in healthcare in the America. In 2021, nearly 50% of healthcare spending was covered by taxpayers. Another 40% was covered by private insurers, all of whom enjoy special tax advantages thanks to, you guessed it, the U.S. government. This leaves only about 10% of healthcare expenditures being covered out-of-pocket/subject to traditional market forces. Vijay Boyapati explains how this came to be an excellent article that explains the real reasons for outrageous healthcare costs in the US:
Employer-provided health insurance has its origin in a tax policy passed in 1943, which made insurance provided by employers tax free. At the time the United States was engaged in World War II and had enacted wage and price controls,5 preventing employers from competing for scarce labor using the normal mechanism of offering a higher salary. Instead, businesses used the availability of newly tax-subsidized healthcare as a means of differentiating themselves.
The tax advantages were made even more attractive and fully codified in the 1954 Internal Revenue Code.
Now that 90% of healthcare costs in the US are paid not by individual consumers, but massive conglomerates that have a strong tendency to follow one-another’s leads, the interests of class and caste are able to exert their perverse effects on the delivery of healthcare. The health of individual consumers is no longer of any real import to this abominable “system.” Large corporations and government have a revolving door of personnel that negotiate with one another to enrich each other while ensuring that the care patients receive is nominally what is listed on the term sheets. Insurance doesn’t pay for outcomes, it pays for services and procedures, and for the most part, the rules of this game are circumscribed by taxpayer funded federal agency with the lions portion of the market share of the American healthcare industry: The Centers for Medicare and Medicaid Services, or CMS.
Put another way, the healthcare industry in America doesn’t optimize for patient satisfaction like it would if patients got to pick and choose what they spend their hard earned money on. No, in America the healthcare industry optimizes for CMS reimbursement. What this essentially entails is that most healthcare workers in the U.S. are not members of the productive caste, they are members of the parasitic caste like everyone else who’s bread is predominantly buttered by Uncle Sam.
Example 4: Big Tech
It is widely assumed that the Big Tech Oligopoly is a product of the free market. Fiercely competing firms where the best have been able to accrue a greater and greater percentage of overall market share. There are good reasons to be skeptical of this narrative. First of all, one of the major pioneers in the tech industry is the loathsome Bill Gates. How did Bill turn Microsoft into a behemoth worthy of triggering anti-trust legislation? It turns out, it had less to do with the quality of the products, and more to do with savvy leveraging of political power as evidenced by Bill Gates Senior’s law firm Preston Gates & Ellis role in lobbying various federal institutions. Even before that there is plenty of evidence that the entire internet started out as one big counterinsurgency operation funded by the U.S. Government as outlined by Yasha Levine in his book Surveillance Valley.
What of the success another tech giant that benefited greatly from the kneecapping of Microsoft after Bill pushed his luck a little too far into the anti-trust lane? Google has very serious engineers who are highly competent. They have many great products, but why was Google able to rise above the rest? Was it just because of merit, as we’d all like to believe? As it turns out, no, no it wasn’t. It was the agreement to sell out the American people to the intelligence community that gave Google the edge they needed to become so dominant. This isn’t common knowledge because it isn’t a straightforward case. As this article in Quartz magazine explains with respect to Google co-founders Larry Page and Sergey Brin, “Did the CIA directly fund the work of Brin and Page, and therefore create Google? No. But were Brin and Page researching precisely what the NSA, the CIA, and the intelligence community hoped for, assisted by their grants? Absolutely.”
Add onto this close relationship between favorable government legislation and tech the robust protections against liability offered by Section 230 and the fact that judges who all hail from the parasitic caste get to adjudicate conflicts between smaller firms, the American public, and Big Tech you start to get a sense for how deep the tentacles of government penetrate into this sector. Censorship at the direct request of federal agencies by companies like Facebook, Google, and Twitter over COVID and election issues have blurred the lines even further. Who that works at these companies is of the Parasitic Class and who is of the Productive Class? To what extent are features of Big Tech products designed to manufacture consent versus generating profit from willing consumers? It is not so easy to determine.
Example 5: Corporate Media
Very similar to big tech, but with far fewer willing consumers.
Example 6: Agriculture
In 2007 farmer Joel Salatin wrote the book “Everything I Want To Do Is Illegal.” There is no better comprehensive depiction of all the ways government insinuates itself into the agricultural industry to the benefit of large scale corporate interests resulting in gross inefficiencies. I can’t recommend the book enough. It makes a compelling case that this industry would be very different in the U.S. if not for government intervention. Instead of attempting to discuss all of the issues here, I'll only mention one. Over the past 20 years the federal government has spent hundreds of billions of dollars on agricultural subsidies. Of course, farmers producing food can be mostly thought of as members of the productive caste. But what of those producers that wouldn't be profitable if not for those subsidies?
Example 7: Energy
Speaking of subsidies, the vast majority of the renewable energy sector is completely reliant on government spending. Are individuals that work in this sector members of the parasitic caste?
Example 8: Education
What percentage of education dollars are courtesy of the government? Whatever that percentage is, that is the likely percentage of individuals working in that field that are members of the parasitic caste.
The Vanishing American Productive Caste
This has gone much further than should be possible. If you haven’t noticed, these few examples cover wide swaths of the American economy. How has it come to be that our productive caste and support such a robust parasitic caste? Well, it probably can’t.
“The market economy as such does not respect political frontiers. Its field is the world.”
-Ludwig von Mises
This is where we need to consider the dollar’s status as the world reserve currency. How many millions, if not billions of people worldwide work in austere conditions for very little pay in order to produce things that end up being consumed by American citizens? Why do they get paid so little? The short answer is that their respective governments buying U.S. debt is inflationary and keeps a lot of these folks from enjoying a larger share of the fruits of their labors. If the dollar ever loses this status, we will all be in for a rude awakening (those of us in the parasitic caste most especially!).
Power Dynamics of Class and Caste
Everyone has some more or less stable degree of earning power in the globalized economy, but that earning power can be dependent upon very different variables based on whatever your skills are. Additionally, when it comes to government and large corporations, sometimes your skills aren’t as important as your credentials. To bring this post back to the ongoing objective here, your ability to resist the system and bring about a new American populism will be dependent upon your ability to earn a living outside of the parasitic caste generally, and the managerial class in particular.
Skills that translate to large salaries in the managerial class are closely related to being competent at managing a lot of capital. The more capital you are managing/improving efficiency with, the more the earning potential. The problem is, the largest pools of capital are controlled by our ideological enemies via the Environment, Social, and Governance score scam. While this system is active, those who fall within the managerial class will be constantly tempted by the filthy lucre offered by ideologically corrupted large firms. Meanwhile, anyone in the parasitic caste is similarly vulnerable to the ideological whims of largely un-elected bureacrats. Are you competent enough to make it as a member of the productive caste? It is much easier said than done, and if you haven’t spent some time thinking about how you might be able to do it, you might want to start. Before you can do that, though, you need to be bold enough to honestly appraise what classes and caste you belong to. Use the timeless and inspiring phrases sapere aude and temet nosce for motivation!
Being a member of the parasitic caste and managerial class myself, I’ve got to admit that if we weren’t facing an unavoidable currency crisis at some point in the future, I might content myself with this station. Unfortunately, this gravy train must come to an end. With populist leadership we might be able to stop the train on somewhat more favorable terms than if this end is forced upon us by, say, foreign adversaries simultaneously dumping U.S. treasuries. Motivated reasoning will go exceptionally far in convincing many of the managerial, professional, and credentialed classes and most of the parasitic caste that the train can really go on forever. Fortunately, we don’t need to convince all of them that they’re wrong on this point. The majority of Americans recognize this at some level.
The challenge will be translating this populist majority into decisive electoral wins. A part of doing that is articulating the problem, and class and caste analysis can most assuredly be used to do just that. No only can it help identify those most sympathetic and hostile to our cause, it can highlight better ways to convey how a new populism is preferable to the disaster that is managerial class and parasitic caste rule.
Mengerian Economics became more widely known as Austrian Economics after initially being used pejoratively by the German Historical School a long time ago.
Many of us Government employees refer to the United States Government as “Uncle.” When talking about money, I like “Uncle Sugar” which I adopted after hearing it used by a retired Master Sergeant who I worked with many years ago.
For right now, I can also function as a member of the professional class as a straightforward clinician pretty seamlessly.
That was fantastic, Grant. Bravo.
The "parasitic caste" framework was new to me and I find it very useful. It shifts the perspective from traditional categories like blue collar/white collar, production/service etc. to something with more descriptive and political power. Like, yes, the defense contractor might have a big factory producing tangible goods, but what is an overpriced, fragile "high tech" fighter jet that isn't even appropriate for any realistic scenario and whose only purpose is to fatten up a club of tax-funded profiteers really worth? Nothing. On the other hand, your friendly accountant who truly helps small businesses could be seen as part of the productive class, even if he is the cliché of the white collar bureaucrat. Really interesting to think about it like that.
I've been saying for years to fellow engineers "we are becoming a nation (the US) that can't make its own underpants!" when discussing outsourcing -- with blank stares and non-interest for response. You've explained what I've tried to communicate far better, although even if I forward a link to this substack, it still probably won't explain anything to those who don't want to think. Still, excellent work sir!