Liberty Matters

Towards a Taxonomy of Class

George Smith raises a very important question in his recent post, “What’s the Use of Class Analysis for Classical Liberals?” Specifically he questions the value of lumping the public-school teacher (who receives a check from the taxpayers) or the average voter who votes in favor of some government benefit (such as Medicare) into the group known as “the ruling class.” Let me attempt to provide an answer to that question.
As I said in my opening essay, the modern libertarian notion of class has its roots in the “Rothbardian synthesis” which emerged during the 1950 and 1960s, especially his rediscovery of Calhoun and Oppenheimer. By basing his theory on the very crude distinction made by Calhoun between “net tax-payers” and “net tax-receivers” Rothbard did not advance CLCA as far as he might have wished. The relevant quote from Calhoun is the following:
Such being the case, it must necessarily follow, that some one portion of the community must pay in taxes more than it receives back in disbursements; while another receives in disbursements more than it pays in taxes. It is, then, manifest, taking the whole process together, that taxes must be, in effect, bounties to that portion of the community which receives more in disbursements than it pays in taxes; while, to the other which pays in taxes more than it receives in disbursements, they are taxes in reality—burthens, instead of bounties. This consequence is unavoidable. It results from the nature of the process, be the taxes ever so equally laid, and the disbursements ever so fairly made, in reference to the public service.[77]
This is a very blunt knife with which to carve the statist turkey. Historians and methodological individualists instead need a sharp scalpel to make sense of the complex nature of political and economic power structures which we wish to understand by using class analysis.
Thus I suggest the following taxonomy of classes as a starting point for further discussion. (See below for a graphical illustration of these categories.) It is still based upon the basic distinction between “net tax-payers” (NTP) and “net tax-receivers” (NTR), but it is more flexible and nuanced in order to clarify the complexities which exist in modern welfare/warfare states:
  1. Ruling Elite - those who control the “commanding heights” of the state (the presidency, Congress, military, intelligence services, Federal Reserve (or state bank), Supreme Court, etc.) and run the show. This group is a very small minority of those who benefit from access to state power. Some theorists also call this group the “Deep State” which was first developed to explain the power structure within the modern Turkish state.
  2. Political Class - elected politicians who sit in Congress (especially those who head important committees which control spending and formulate legislation); senior bureaucrats who run the main government bureaucracies; and wealthy and influential “private individuals” from finance, banking, think tanks, industry (especially defense and communications); and media moguls who advise the government on policy matters.
  3. Bureaucratic Class, or Functionaries of the State - those who carry out and implement the government policies which they are given. These people, like lowly office workers, public-school teachers, post-office workers, etc., are by no means members of the “ruling class,” but they are in a technical sense “net tax-receivers” and have a long-term interest in voting to maintain government (or rather tax-payer) funding for the institutions which employ them and pay their retirement benefits.
  4. Plutocratic Class, [78] or Crony Capitalist Class - very wealthy and influential business owners who actively seek to get or retain special privileges from the state in the form of subsidies, contracts, monopolies, favorable legislation, favorable monetary policy, etc. This class is quite complex to understand using the crude NTP/NTR distinction since they may still receive most of their income from the private sector (hence making them technically NTP). However, they benefit enormously from their access to the state by getting the entire economic system skewed in their favor.
  5. State-Dependent Firms and their Employees - nominally private firms which receive the bulk (perhaps all) of their income from the tax-payers via state contracts and are thus NTR.
  6. Dependent Class - people who receive benefits from the state such as health, retirement, or other welfare benefits. Some were NTP when they were working (probably in the private sector) but are now NTR in their retirement. Others have always been NTR. Some others are very poor and/or sick people who have been trapped in the cycle of poverty which has been created by the welfare state over the past 60 years. This latter group might also be categorized as “victims” rather than “beneficiaries” of the modern welfare state.
  7. Net Tax-Payers - another complex category which Rothbard’s crude Calhounian distinction does not always help to clarify. There may be some clear examples of “pure net tax-payers” still in existence, but in this thoroughly statized and regulated world most of us would fall into a “grey zone” where we pay taxes but also “consume taxes” in the form of using streets and getting police protection from robbers. Then there are the people who change their class status over time, people who are net tax-payers in their prime working years and then become net tax-receivers in their retirement.
To return to George Smith’s question, the historical explanatory power of class analysis comes from understanding the tensions and rivalries which exist between these classes (especially the overarching tension between the NTP and the NTR classes) as well as that between the subgroups within these classes. This analysis can be greatly enriched with the following insights which come from methodological individualism, whether of an Austrian or Public Choice perspective:
  1. People who have shared interests (in this case “class interests) often associate in order to further those interests. On the one hand, it might be to expand state benefits and privileges or protect those that are already in place, or to increase taxes and government expenditure. On the other hand, it might be to organize in order to reduce government regulation and taxation.
  2. People who have different interests will engage in rivalrous behavior in order to see that their interests will prevail over those of their rivals, especially if they perceive politics to be a zero-sum game. Since the gains from getting access to state power are so enormous these this rivalrous behavior will be bitter and very expensive, as recent elections have shown.
  3. Given the way modern democracies work, competing vested interest groups lobby the political class in Congress, and the result is compromise, special deals, log-rolling, and so on. The final result, to paraphrase Adam Ferguson, is “the result of human action but not of human design.” It produces all sorts of unintended political and economic consequences, many of which are perverse and uneconomic in the long run.
  4. Periodic crises like the Great Recession of 2008 or the outbreak of war in 2001/3 often reveal the competing forces at work in all class-based societies. Why are some banks or investment firms “rescued” by state bailouts and subsidies while others are not? What groups are pushing for an invasion of another country and why? I believe that class analysis, especially of the rivalries which exist between powerful groups within the uppermost levels of the ruling elite and the state, provide very important explanatory value for these crises and their aftermath.
I have tried to put some of these ideas into a graphical format, which I include below.
[77.] John C. Calhoun, Union and Liberty: The Political Philosophy of John C. Calhoun, ed. Ross M. Lence (Indianapolis, IN: Liberty Fund, 1992). </titles/683>. It is a curious fact, though not unexpected given Calhoun’s class interest, that he thought of taxes as a burden and a form of exploitation in some cases (i.e., northern tariffs), but not the compulsory labor he forced his slaves to endure while working in his fields. It apparently never occurred to him to think about the exploitation of the “net expenders of coerced labour” by the “net beneficiaries of coerced labour.”
[78.] I have borrowed this term from Roderick Long’s essay “Toward a Libertarian Theory of Class,” Social Philosophy and Policy 15, no. 2 (Summer 1998), pp. 303–349, in which he makes the distinction between two sub-classes within the ruling class, the “statocrats” (the full-time apparatus – the kings, politicians, and bureaucrats who man and operate the State) and the “plutocrats” (the groups who have maneuvered to gain privileges, subsidies, and benefices from the State).