Class Warfare and Class Struggle

By Robert M. Liu


When Democratic presidential candidate Al Gore launched his campaign for the White House in 2000 on an anti-business, "class warfare" platform, he raised quite a few eyebrows on Wall Street, because investors didn't like the way he criticized some of the most profitable sectors of the economy such as the pharmaceutical industry, the oil industry and the tobacco industry. According to Prudential Securities analyst Mark L. Melcher, nearly 50% of American households depend on their retirement portfolios for their future needs. Whether they hold 401(k) accounts or Individual Retirement Accounts, they are likely to own small pieces of various U.S. corporations including pharmaceutical, oil and tobacco companies, either through direct share ownership or through mutual fund investment.

While Al Gore's anti-business, "class warfare" did help him energize the Democratic Party's leftist voter base during the 2000 election, some members of the business community were wondering how he could work with corporate America to keep the economy in good shape if ever elected on an anti-business agenda. After all, corporate America with its long payrolls and its huge employee pension programs is the economy. No politician can help the economy and, by extension, the interests of the tens of millions of ordinary (common) people who are either on corporate America's payrolls or on its employee pension programs by pushing anti-business policies and regulations. That's where "class warfare" fails to make sense to anyone with the slightest knowledge of economic basics. Can we have a booming economy that is capable of generating increased tax revenue to fund various government spending programs while the political left wages "class warfare" against corporate America, calling for anti-business legislation and regulation to restrict its profitability? Definitely not, because nothing can be more effective than "class warfare" in shrinking and then killing the economy.

Honestly, I was not a little surprised when I heard the term "class warfare" on CNN last year, not because it was new to me, but because it was very familiar and very pungent to my ear. For nearly three decades, I had to live with "class warfare" on a daily basis in Shanghai, China, during Mao's Reign of Terror. In fact, I have written a novel (Shanghai Escapist) set in the Cultural Revolution period (1966-1976) of modern Chinese history when "class warfare" was the order of the day — on the basis of what I witnessed with my own eyes about "class warfare" during those years. Only, in China, they use the term "class struggle" instead of "class warfare". Whether it is "class warfare" or "class struggle", the essence of this political strategy is demagoguery designed to whip up envy of the rich among the poor and the ignorant, so that the left-wing plotters behind the scene can take advantage of a situation where blind emotion supersedes rational reasoning. Yet, to envy the rich won't make one rich. It is futile.

Needless to say, "class warfare" is a dishonest ploy because its negative economic consequences would hurt the poor in the long run. China's late Communist Party chairman Mao Zedong seized power through "class warfare" and maintained his leftist dictatorship through "class warfare" until his death. Coincidentally, the Democratic Party attempted to use leftist "class warfare" to win the 2000 presidential election. I think I had a good reason to be surprised. I was asking myself: Is this America or Communist China?

Recently, Al Gore re-appeared. Instead of "class warfare" rhetoric, he sported a newly grown beard, sparking off media comments that Al Gore has yet to decide who he is. If he wants to run in 2004, he needs to decide whether he should again use "class warfare" as a campaign strategy. That decision would set the tone with regard to who he is. To be sure, in the 2000 election, his "class warrior" image turned him into a despicable figure in conservative voters' eyes. How he is going to repair that image may determine his political future.

In any natural society, there are the rich and the poor, and the rich are always in the minority. Some people have more luck than others. As in the lottery game, the lucky ones are always in the minority. But as long as the game is not rigged, we respect the result. In addition, since people use money to make money, it is much easier for the rich to become richer than for the poor to become rich. Hence, the wealth gap between the rich and the poor tends to grow larger, rather than smaller. In my opinion, the real issue is not how to narrow the gap or how to stop the rich becoming richer, but how to help the poor and how to encourage the rich to help the poor. Actually, there is no way to eliminate the gap unless you believe some modern Robin Hood like "Socialism" is the solution to the problem in this age of high technology. For instance, the wealth gap between Mr. Bill Gates of Microsoft and any of us must be as wide as thousands of miles. How can society "narrow" this gap? By high taxation or mandatory confiscation? No way, because such "legalized robbery" would put an end to man's incentive to create wealth in the first place.

Furthermore, these days, money can be transferred at the push of a button. Not long ago, I saw a Saudi prince on a TV program. I don't remember his name, but I know he has billions of dollars invested in the United States. Would "class warfare" encourage him to invest more money in America? This is only one example. Many foreigners' money is invested in America. Would "class warfare" encourage them to stay invested in America? Probably not. "Class warfare" could wreak havoc on the economy, if it triggered a flight of capital by both domestic and overseas investors.

For proof of this argument of mine, one need only look at the history of the Chinese economy since the 1949 Communist Revolution. After nearly three decades of "class struggle" under Mao, the Chinese economy was on the verge of bankruptcy by September of 1976 when Mao died. It took about three years before Mr. Deng Xiaoping (1904-1997) became China's paramount leader and dumped "class struggle" on the ashes of history. He knew "class struggle" (i.e. "class warfare") would not help the economy. He replaced Mao's "class struggle" slogan with his own capitalistic slogan: LET A SMALL MINORITY BECOME RICH FIRST.

At the time, I was in Shanghai. When I saw those words in the ruling Communist Party's organ "The People's Daily", I wasn't sure if I should take Deng's slogan seriously, because the Communist Party was supposed to be a left-wing political organization which historically had adopted a hostile posture toward the rich. Yet, there was this slogan in black and white, which caused me to wonder if some supply-side economist was advising Mr. Deng Xiaoping. Nevertheless, I was pleased.

Well, the rest of the story is history. Deng's slogan "Let a small minority become rich first" was for real, as he immediately delivered his market-oriented economic reforms that allowed business people (i.e. "a small minority") to become rich and prosper, opening China's door to Western investments, especially corporate America's investments. Today, the gap between the rich minority and the poor majority in China is widening. It is not a very stable situation. But while China remains an authoritarian country with a "Socialist" brand name, it has become a land of opportunity for both Chinese business people and Western corporations.

Although political freedoms are non-existent in China, in recent years, business people who know how to play the game in the highly regulated China market have benefited from certain economic freedoms. With many of its over-staffed state-owned enterprises in the red, the Chinese economy does have serious problems, but it is apparently not on the verge of bankruptcy. On the contrary, some coastal Chinese cities like Shanghai appear to be quite affluent. It is not an exaggeration to say that the death of "class warfare" saved the Chinese economy and that American capitalism now helps Chinese socialism feed its working class.

The point is: through their own experience, even the Chinese Communists have learned that leftist "class warfare" is a fatal enemy to economic prosperity. That is why they dumped "class warfare" more than twenty years ago. They know that they must encourage the rich to invest their money so that the economy can grow and create jobs for the poor. I cannot but ask: Is it true that America's liberals (i.e. the left-wing of the Democratic Party) do not know that their leftist "class warfare" can work great mischief to investor psychology, business confidence, business environment and the economy at large? The answer is no. Rather, in their eagerness to seize power, they are ready to use any dirty trick even if it could destroy the economy.

It is important for the clear-headed to realize that "class warfare" hurts the poor the most, not the rich. The rich can leave or transfer their wealth offshore. The poor don't have such luxury. They have to stay in town, and they need jobs. In order to help the poor, society must encourage the rich to invest. That is because investment is a process by which wealth flows out from under the mattress of the rich into the economy, thereby creating jobs for the poor. In other words, the prospect of even more wealth for the rich would entice their money to trickle down to the bottom of the food chain. By investing, the rich could become richer if business environment is favorable due to business-friendly legislation. On the other hand, if business environment is unfavorable due to business-unfriendly legislation, investors could lose. Hence, society must use business-friendly legislation to encourage investment.

That is where politics becomes important. If voters elect pro-business politicians into office to ensure business-friendly legislation is adopted, investors, including 401(k) and IRA portfolios holders, will benefit and the rich become richer. If voters put anti-business left-wing politicians in office to launch "class warfare" against the business community, investors, including 401(k) and IRA portfolios holders, will suffer as the economy deteriorates with less investment. But remember: while the rich can afford to lose part of their wealth in a deteriorating economy without having their lifestyles affected, the poor cannot afford to lose their jobs. The money is already in the pockets of the rich. The question is how to let their money flow out to help the economy.

"Class warfare" definitely cannot help the poor. "Class warfare" destroyed the Chinese economy during the leftist Mao era. "Class warfare" could do the same kind of damage to the U.S. economy, if voters are not vigilant on the serious economic consequences of the leftist liberal movement in America. Every 401(k) or IRA portfolio holder must ask himself which side his bread is buttered when he goes to the polling station. He must find out which Democratic politician is a "class warrior" with the potential to hurt his portfolio. Every working American must ask himself if "class warfare" will help corporate America keep him on its payrolls and increase his wages. Every job seeker must ask himself if "class warfare" will help corporate America create job opportunities for him. Every American on welfare must ask himself if "class warfare" will help corporate America generate more tax revenue to finance welfare spending programs if it scares off both domestic and overseas investors.

No matter how you look at "class warfare", it doesn't look pretty. It is counter-productive in every economic sense. Imagine yourself working for a restaurant as a waiter (or waitress) who receives tips from customers as an important part of his overall income. Wouldn't you like to get tips of 20% or more from your customers? I guess you would. All you need to do is to be friendly to your regular wealthy customers who pay you 20% or more to show their appreciation of your services. The more wealthy customers you have, the better. Over time, you may save up quite a bit for yourself as you don't have to pay taxes on your tips income. But if leftist "class warfare" screws up their investments, many of your customers may cease to come, while the rest cannot afford to pay you tips of 20% or more because they are worse-off now. That means "class warfare" has killed "Trickle Down". As wealth can only trickle down from the rich to the poor, the death of "Trickle Down" is a nightmare — more for the poor than for the rich.

What America needs today is not the Democratic Party's leftist "class warfare", which calls for wealth re-distribution through excessive taxation of the rich, thereby scaring off investors who have the wherewithal to prevent the economy from falling into a tailspin. America needs class cooperation, class negotiation, bargaining, deal-making, give-and-take, class compromise etc. between the rich and the poor, plus incentives including tax incentives for people of all classes to create wealth and re-invest wealth. At a time like this when economic weakness erodes business confidence, the tens of millions of 401(k) and IRA portfolio holders in America should keep their eyes wide open and see who is still playing the obstructionist "class warfare" game on Capitol Hill.

The End (August 20th, 2001)