The Economic System and Class

By Paul Kivel
Adapted from You Call This a Democracy? (2004)

A class is a segment of society that, through its shared economic position and cultural values, participates in common social, political, and economic interests and specific forms of access or lack of access to power.

A ruling class is the segment that dominates society through its control of power and wealth. It influences and often determines the distribution of and control over resources; who has access to political power; which groups benefit and which do not from social policy; which groups are central to the life, considerations, and attention of a society, and which groups are relegated to the margins. Besides “ruling class,” other words used to describe the richest and most powerful segment of society are “the elite”, “the upper class”, “the haves”, “the dominant class”, “the rich and powerful”, “the decision-makers”, “the owning class”, and “the 1%”.

A ruling class owns a dominating share of the privately-owned land, the
buildings, the stocks and bonds and other financial assets–whatever counts as wealth in a particular society. In other societies, wealth might consist of cattle, slaves, minerals, or land. Members of the ruling class are the primary beneficiaries of public policy decisions determining budget allocations, taxes, decisions of war and peace and international trade, environmental policy, health, education, and criminal justice issues. In every society with a ruling class, the ruling class uses the particular historical, political, and cultural traditions of that society to stay in power, to perpetuate its power through the generations, and to justify why this should be so. In general, a ruling class will use whatever means it can to gain and retain power and wealth. A ruling class chant might sound something like:

What do we want?
When do we want it?
Who do we want it from?

A ruling class is not a royal family, although a royal family can be part of a ruling class or a front for a ruling class. A ruling class is not the government, although government representatives can represent the interests of the ruling class, or be composed primarily of members of that class. A ruling class is not corporations in general, or transnational or international corporations in particular, although corporations can be run by members of a ruling class, or respond to the interests of its members. A ruling class is not a military dictatorship, although often military dictatorships operate to the benefit of a ruling class.

A ruling class is not a conspiracy. It is not a small group of men sitting in a room in secret, plotting to take over, or to commit criminal acts. The U.S. ruling class operates publicly, through accepted channels of power such as the government, businesses, and the courts. There are many members of the ruling class who operate out of a shared understanding of their economic interests but who do not know each other and do not always agree on issues.

Who Makes Up the U.S. Ruling Class?

The ruling class in the United States is about 1 percent of the population, or approximately 3.5 million men, women, and children. These families have incomes starting at about $500,000/year (2013) and/or net worth of at least $4,000,000. Most of the ruling class is white and it is predominantly Christian. There are some African Americans, Asian Americans, Latinos/as, and Arab Americans in the ruling class, but they are few and far between and rarely in positions of power. There are practically no Native Americans in the ruling class. There is a higher percentage of Jews in the ruling class than their representation in the general population, but despite the stereotypes, they still constitute a small part of that class. The ruling class is substantial. But even when you subtract from it children, women, and men who are wealthy but do not participate in making political and economic decisions, the group of predominately white Christian men who constitute the power elite–those who make the decisions that impact all of us–is still large in absolute terms although small in relation to U.S. society as a whole. Obviously they don’t all meet in a big room and decide on financial and social policy. There can also be widespread differences of opinion among these decision makers, although these differences generally fall within a narrow range of the political spectrum on economic issues. Some members of the ruling class are new members who have built up wealth during their lifetime. Others have inherited their wealth and are members of families who have been part of it for decades or even hundreds of years. Some who were previously members are no longer. The styles and values of members of the ruling class change over time, but their access to wealth, power, and influence remains in place. In other words, the class itself continues to dominate over time even as its membership fluctuates somewhat in size and composition.

The Managerial Class

The ruling class makes up only 1 percent of the population and they would be hard pressed to run all the important institutions in our society by themselves. They have set up a system to reward some people with money, education, and other privileges to work for them. (In some sense we all work for them, we just are not rewarded for it and we do not have managerial jobs.) This group consists of the next 19 percent of the population. The managerial class includes families with incomes above $150,000 and net financial worth of at least $150,000. The wealth part of this definition is the important part. People may have a combined family income of $150,000 and might even own their own house, but without financial wealth they don’t have the opportunities, resources, and influence that those with wealth do.

I refer to this class as the managerial class because the organizations and people (paid and volunteer) that the ruling class relies on to serve its needs are run (or managed) by members of this class. They are the non-ruling-class large business owners, corporate managers, foundation directors, corporate lawyers, doctors, architects, elite university professors, diplomats, politicians, and others who are generally paid a lot to carry out policies that benefit the ruling class. It is not their occupation, but their high income and wealth and access to other resources that define these people and their families as members of the managerial class. In other words, corporate lawyers, but not all lawyers, elite university administrators and professors, but not all university administrators and professors, are members of the managerial class. Some members of the managerial class become so successful that they are able to accumulate enough wealth to enter the ruling class. Many members of the managerial class are trained in professional programs at specialized graduate schools that provide them with ruling class values and an understanding of ruling class interests. These programs also screen out those who will not be reliable in serving the interests of the ruling class.

Other members of the managerial class could be successful small business owners, large independent farmers, consultants, directors of large non-profit organizations, or higher level administrators in local, state, or federal offices. There are many people who manage or supervise others who are not part of the managerial class because they don’t share the high levels of income, wealth, and influence that those in the top 19 percent do. They may be small business owners, school principals, lower- or mid-level administrators or government employees, or management staff of small- or mid-level non-profits.

The top 20 percent or owning classes, (the wealthiest 1 percent and the next 19 percent), consist of about 22 million households, or somewhere around 55 million people. Because of their numbers, and economic, educational, and social advantages, members of the owning classes, with rare exceptions, fill all the top positions in the most influential institutions of our society. This entire segment is predominately white and Christian, although there are certainly significant minorities of people of color, Jews, fairly recent immigrants, and other groups in the owning classes. Due to housing segregation, job discrimination, glass ceilings, and increasing educational disparities, there is rapidly diminishing economic and educational opportunity for poor, working, and middle class people to join the managerial class.

There are many people in the managerial class who are not managers. They may have a wide variety of jobs, occupations, and lifestyles. Whatever their personal lifestyle and values, the decisions that are made by the ruling class and the power elite usually benefit them economically, politically, and culturally in direct and specific ways. Their work is generally valued, well paid, and respected. They live in better, less toxic neighborhoods, with better services and infrastructure than most others. They have better educational options for their children than most, and their lives, interests, and points of view are reflected in movies, TV, magazines, and most mainstream culture. Members of the managerial class may choose to work against their class interests, or to disavow the benefits they have available to them. But just as with members of the ruling class, their choice to do this reflects their privilege.

The Bottom of the Wealth Pyramid

Below the owning classes (the ruling and managerial classes) there is a distribution of white people and people of color, men and women, Christians and Jews, Muslims and Buddhists, seniors, middle aged, and youth, people with disabilities, heterosexuals and lesbians, gays, bisexuals, and people who are transgender and genderqueer. But the people with least power are the people with least wealth. For example, the people at the bottom of the pyramid, those with zero or even negative wealth (they are in debt), are primarily children and seniors, women, men and women of color, people with disabilities, recent immigrants, Native Americans, and the poorest white people.

The Power Elite

In a democracy, the broad majority of people participate in making the major political and economic decisions which affect their lives. That is not true in the United States. We have a social structure in which a relatively small number of people are in unelected positions of vast power, and who act as representatives of the ruling class. Sociologists C. Wright Mills and G. William Domhoff refer to the members of the ruling and managerial classes who participate in running our society as the power elite. They are the “nonelected, self-selected, self-perpetuating” business, political, social, philanthropic, and cultural leaders who determine how our society operates, and who make decisions that affect us, our families, and our communities on a daily basis. In one study of 7,314 positions of power and authority in the dominant economic, political, and cultural organizations (5,303 of which were in the largest corporations), nearly all were from the owning classes. The people in these positions controlled “almost three-quarters of the nation’s industrial (nonfinancial) assets, almost two-thirds of all banking assets, and more than three-quarters of all insurance assets, and they directed the nation’s largest investment firms. They commanded over half of all assets of private foundations and universities, and controlled the television networks, the national press, and the major newspaper chains. They dominated the nation’s top law firms and the most prestigious civic and cultural associations, and they occupied key federal government posts in the executive, legislative, and judicial branches, and the top military commands.”

A study by researchers Zweigenshaft and Domhoff of the social backgrounds of people in the highest positions of decision making incorporations, the executive branch of the federal government and the military, concluded that this “core group continues to be wealthy white Christian males [who] have been filtered through a handful of elite schools of law, business, public policy, and international relations.”
There are some white women, some white Jewish people, and a few men and women of color among the power elite. They tend to be wealthy themselves and generally share the same values and education that the Christian white men in this group do. Fewer than 1 percent of the CEOs of Fortune 500 companies are women or people of color. Some corporations and government organizations, recognizing the need to look diverse, are selecting more white women and men and women of color to be in the top ranks, but without actually changing their overall culture or practices. One commentator summed up this appearance of diversity by saying “corporations [are] run by ruling class white boys, some of whom are female and colored (sic).”

Surrounding the power elite are 20,000-30,000 corporate and other institutional managers and directors who provide the interface with the managerial and ruling classes. They communicate and implement policy, direct operations, supervise mid-level managers, professionals, and consultants, develop strategy, and communicate and advocate for the decisions of the power elite to the media and to the managerial and ruling classes.

The Financial Elite

The managers and directors of the largest U.S. corporations, who control some of the most extensive financial entities in the world, sit at the center of the power elite. Many of these people command resources equivalent to small or even medium sized countries. Of the 100 largest financial entities in the world, 69 are corporations, not countries. General Motors, Wal-Mart, ExxonMobil, Ford Motor, and DaimlerChrysler each had 1999 sales that were greater than the GDP of 182 nations.

At the center of this circle of corporate elite are the managers and directors of the largest banks, insurance, and other financial companies which are mostly based in New York, Chicago, and California.
Governmental bodies, corporations, and countries need large amounts of financial capital (money for investment) to operate. The largest financial institutions have a pre-eminent place in the corporate and power elite network both nationally and internationally because of their accumulation of capital, their control over large blocks of stock through their trust departments, their extensive information, research, and evaluation capacities, their central place in the extensive corporate board interlocking network, their ability to work together to create loan consortia (group loans) and direct capital flow, their ability to facilitate takeovers and shareholder rebellions, and their ability to influence prices and interest rates, among other factors. Researchers Mintz and Schwartz conclude that, “a handful of centrally placed financial institutions have dominated capital-investment decision making for decades. They directly control a significant proportion of all stock that changes hands; they lead a majority of lending consortia; and they are involved in almost half of all large financial holdings in major nonfinancial firms.”

The financial elite are able to influence short- and long-term capital allocations in the U.S. which, in turn, have tremendous economic and public policy effects on our entire society. Since the 1970s, their ability to yield equally powerful influence internationally through the World Bank, IMF, and WTO give them truly unprecedented power to shape economies and social policy throughout the world. In the last 20 years the largest financial corporations have become even more influential members of the power elite because of the increasing volume of national and international speculation which has grown to overshadow any form of productive investment. Not only the traditional banks and insurance companies, but now also pension funds, money market and hedge funds, real estate speculators, and private investors are part of the financial forces which demand high, short-term (and short-sighted) returns from nonfinancial corporate directors and from government policy alike. These transnational financial corporations have become so concentrated that three banks (Citigroup, J.P. Morgan, and Bank of America) control about one third of all U.S. banking assets; two insurance companies (Prudential and Metropolitan) control one-quarter of all insurance assets; and a handful of large investment firms dominate investment funds. Finance is well-represented among the largest political contributors, within interlocking corporate circles, on the boards of think tanks, foundations, policy-formation groups, and in philanthropy. Even many of the directors and deputy directors of the CIA have come directly from Wall Street firms.

Outside of corporate circles, there are many sub-groupings within the broader power elite based on political, economic, and other differences. There are groups that are Christian Fundamentalist and groups that believe in the separation of church and state, groups that have a world domination agenda and groups that are more internationalist in approach, groups that favor high tariffs and comparative isolation, and those that advocate for limited trade barriers and an interventionist approach to international affairs. The power elite (even within corporate circles) is not a simple or harmonious network. There is often sharp conflict stemming from different analyses and agendas between groupings. These conflicts are often negotiated out, or maneuvered around, to reach specific policy decisions. Sometimes they are not worked out, and divisions within the power elite can be leveraged by grassroots movements to effect social change. On the other hand, there is great mutuality of economic interests and values, and substantial linking of most of the groups within the power elite. Often the power elite can reach broad agreement about general policy issues. The lengthy and sometimes hotly contested process of influencing other members of the power elite and reaching agreement involves the policy-formation groups, foundations, think tanks, and other structures.

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