Hourglass Capitalism – Benoist

Hourglass Capitalism

By Alain de Benoist

Translated by Tomislav Sunic


Inequalities are increasing everywhere—between countries and within each country. The rich are getting richer and the poor are getting poorer, while the middle class is under threat of being downgraded. The question arises—how did we get there? The answer lies in the recent history of capitalism.

In the capitalist system of the 19th century, the class struggle was a zero-sum game: everything won by one class was automatically lost by the other—hence the ferocity of the System. In the following century, starting with the 1930s, the birth of the Fordist era introduced a major revolution that moved the entire system into second gear. The Fordist era was based on the fact that production was useless unless it becomes the object of consumption, which implied that workers needed to be more or less decently paid if they were to purchase the merchandise intended to be sold to them.

In the Fordist system, the fraction of the added value, which was given away by the capitalists and dispensed in the form of wages, flows now back to the capitalists as employees start purchasing goods and services. From then on, wages represent both the cost and benefit tool. At that moment, social consensus could emerge. In exchange for security and more or less a constantly increasing salary, workers were ready to give up their revolutionary claims. Moreover, the unions also become reformist. Besides, the Fordist system was in line with the welfare state, even if the latter curbed the financial sphere and attempted to fuse the economic dynamics into the framework of a nation- state, and insofar as the strengthening of social rights and the continued growth in wage incomes was allowed.

Thus, a relative balance was achieved between the interests of the market, productivity, competition, and a number of other protecting factors. Capitalism was no longer impoverishing its citizens: rather, it multiplied its own working poor (to increase the number of the working poor a society needs to be more affluent). Such was the nature of the system which dominated social relations until the 1970s.

The Iron Hand of the Market

It was at that time, which had already started during the interwar period, that the middle class began its gradual expansion—mainly at the expense of the working class, with its main feature being that as one entered the ranks of the middle class, there was no coming back. During the Fordist era, due to its ever increasing purchasing power, the middle class actually began to prosper. It contributed to the smooth functioning of the system characterized by mass production and mass consumption. Furthermore, the middle class played an important role in creating and keeping the demand, while absorbing quantities of ever important standardized goods and services, while also willing to pay a higher price for quality products. This, in turn, spurred innovation and investments. In addition, with the gradual improvement of parental funds, younger people were able to pursue higher education for a longer period of time, thus injecting onto the labor market a skilled workforce required by the business sector.

The alliance between the middle class and industrial capitalism was getting stronger insofar as the areas of production and consumption went hand-in-hand: whatever was produced in the North was also consumed in the North. In other words, the middle class was getting more compact just as the capital was gaining more in value. With revolutionary political parties now gone, and with the unions voicing only marginal demands, the political class found itself in tune with the voters.

However, as soon as the interests of the middle class began to diverge from those of capital, the middle class, once an ally of expanding capital, was bound to undergo its own downgrade. The cyclical nature of the middle class dynamics can be explained by the fact that after having been a factor in development and a contributor to capital growth, it now became a burden to productivity growth. At that moment governments were ready to prepare its decline. [1]

In the course of the 1970s, the Fordist era began to wither away. The explosion of the Bretton Woods monetary system, which in 1971 had put a seal on the fixed-rate system, the oil shock of 1973 and 1979, the stagflation, the debt crisis in the Southern hemisphere in 1982, the collapse of the Soviet system, the economic and financial globalization—all this led to the disconnection of the interest of the middle class from those of capital. Things changed profoundly when state interventions, which once played an important role in the establishment of national markets (i.e. when capitalism was still anchored at a national level), turned out to be incompatible with the internationalization of the markets, all of which was carried out within the context of globalization. A new brand of totally deterritorialized capitalism took the upper hand, with its major driving force being the emergence of large international firms and financial markets, spearheaded by the new American hegemony. This resulted in a considerable expansion of international trade whose rapid growth rate surpassed the growth of national wealth. What one witnessed was the end of social democratic consensus which used to be a trade mark of the immediate post-war period—a consensus that became increasingly irrelevant as about the same time the Soviet Union had disappeared.

It is from that time on that the market has attempted to resolve the economy of global society by means of a rapid liberalization of the international flows of goods and capital. From now on, as was very well explained by Bernard Conte, growth was no longer self-centered and the surpluses were no longer automatically redistributed. “Free trade allows the flooding of the markets with low-priced commodities that stand in the competition with domestic commodities, thereby showing their own lack of “competitiveness.” Consequently, in order to stay competitive, one has to lower the costs of production, both directly and indirectly. This approach entails the reduction of real wages, benefits, and, generally speaking, “clientelist” matters (corporate expenditures usually associated with corruption), as well as the reduction of expenses related to the welfare state. Under the guise of competition—profit must be boosted. In order to achieve this, it is essential to adjust national, economic and social structures to the rules of “laissez-faire,” “laissez-passer,” albeit extended, this time around, to the entire planet. As there are too many poor people amidst the population, with the rich being exempted, it is the middle class that must bear the brunt of the adjustments. Due to its unjustified existence—the fact that, in other places around the world ,the jobs of the middle-class people can be performed at lower costs—the middle class thus becomes the “enemy” of financial capitalism. Capitalism has rejected the compromise previously made and moved on to the “euthanizing of the parasitic middle class.” [2]

In order to accomplish this, state intervention—the state being now itself subject to the principles of “global governance”—proved to be indispensable. This took the form of systematic deregulation, destruction of social gains, erosion of public service, reforming of pension plans, and taxation, whose first victims was the middle class—all this against the backdrop of resurgence of a neo-liberal ideology once inspired by the Thatcherite and Reaganite reforms. About the same time, a gap between the middle class and the ruling class started to grow. The ruling class did not stop from implementing policies adverse to the interests of its traditional electorate, which only resulted in the electoral voting abstention on the one hand, and in the global crisis of legitimacy of the New Class, on the other.

Being the transmission belt of new ferocity, this third type of capitalism, often dubbed “turbo capitalism” or “neoliberal capitalism” in the functioning of economy, sanctifies the crucial role of financial markets. Essentially, this is what financial capitalism is all about. Since the early 1980s, financial transactions have brought in more assets than the capital once invested in the manufacturing of goods. The purchase and the sale of fictitious capital on the stock markets bring in more than the value added of the productive real capital. For example, prior to the 2008 crisis, out of 3200 billion dollars traded on a single day, less than 3 percent corresponded to actual goods and services. This may give an idea as to how disconnected the speculative economy has become from the real economy. The liberal justification for this phenomenon is that financial markets must be the sole mechanisms in the efficient process of capital allocation; hence it is important not to impede, let alone regulate their operations.

This theoretical postulate (called “informational efficiency”) has no foundations: the financial crisis of 2008 has demonstrated that markets are not efficient and that financial competition does not necessarily bring about a fair pricing system. Instead it triggers inadequate pricing.

Free Trade Traps

The major error of this theory consists in transposing onto financial market the theory of ordinary goods, which is based on the classic laws of supply and demand. However, as far as the financial markets are concerned, as soon as the price of a security increases, what one sees is not a decrease but rather an increase in demand, for the simple reason that price boosting means higher yields for those who possess that security, and also based on the fact that they can henceforth pocket the added value. This is at the heart of the “speculative bubbles”: a cumulative price increase that feeds itself of its own until a big incident occurs—an unpredictable, yet an inevitable incident provoking the inversion of expectations and the big crash.

Starting with the Treaty of Maastricht (1992), we have been witnessing the introduction of the euro, which came into existence in 1999, first as the interbank exchange system and then, in 2002, in the from of notes and coins. This monetary creation, which was in itself a good endeavor, could make sense only if the two conditions were met: that is, the existence of the customs union and the awareness of economic disparities between the European countries. This, however, was not the case. The single European currency imposed a single interest rate on the 16 economies of opposing needs. In the absence of the optimal exchange rate system, which was in any case impossible to set up, the single European currency turned into a global variable for U.S. deficit adjustments. As far as the abolition of the customs barriers was concerned, its end result was the pitting of French and European employees into the competition against more than 3 billion people (1.3 billion Chinese, 1 billion Indians, 580 million inhabitants of other countries), whose salaries are disproportionally lower than those of European employees. This has resulted in trade relations taking shape in the conditions of product dumping, as well as serial relocations, and as far as France is concerned, in industrial hemorrhage. As of now, we are losing between 800 and 1,000 industrial jobs per working day! (In 2006, there were more than 3.9 million jobs in the manufacturing sector, in comparison to 5.9 million in 1970). The euro, being significantly overvalued in comparison to the dollar, is in the process of suffocating a good part of European industry by diminishing its export margins.

The policies of general dismantlement of the regulations regarding the exchange of goods and capital have been the main vehicle of globalization. In the post-Fordist system, the organization of production has become a network of interconnected flows in an economy that has become more and more competitive. The process of trans-nationalization is being accomplished through the establishment of a systemic coherence. where capital, goods, technologies, like never before, have all been made mobile, as a result of the interplay between large enterprises and the markets. “Capital mobility, crucial for the transnational system, operates in the form of direct investments abroad, while contributing to the growth of private and public debt and eventually disrupting the system of a nation’s accumulation.” [3]

Maurice Allais had clearly seen the negative role played by the “multinationals that, along with stock markets and the banking sector, are prime beneficiaries of an economic mechanism that makes them rich, while impoverishing the majority of French citizens and the world population” (“Lettres aux Français “in Marianne). Allais, who was a Nobel Prize laureate in economics and who recently passed away, had estimated that globalization and international free trade had caused the destruction of the one third of French income. If one takes into account the multiplying effects of industrial employment on global employment—in addition to outsourcing and to the pressures exerted by free trade—it seems, then, that the number of the active population has decreased by 3.5 percent.

The downward pressure on wages, already fostered by resorting to immigration, has been the result of the two factors combined. The first was the establishment of global free trade, which mainly affected Europe and has resulted in a series of relocations. “French managers align their incomes at the highest notch on the world scale, while relocating industrial service sector jobs to the areas where the labor price is the lowest. Chinese or Filipino workers can be used as a reference, whereas French workers who are laid off are offered substitute jobs hundreds or thousands of miles away from home, at a local rate, i.e. a poverty rate .” [4] Economies have thus become entangled in a spiral of creeping deflating wages, i.e. the shrinkage of the purchasing power, which is temporarily hidden, thanks to the use of credit, and while creating a “fake middle class” only aggravating existing individual debts.

The other factor results from the shareholding constraints. In the current system, like never before, companies finance shareholders. The rise of shareholder value has now encouraged the idea that a company must primarily be in the service of the shareholders—starting with those powerful shareholders who represent investment funds—and whose intentions must be honored regarding the return on their investment, and as fast and as high as possible (the norm now is that a rate of return on equity is about 15 percent to 25 percent), even if that means cutting wages, layoffs and relocations, as well as a slowdown in a company’s investments. Such a simultaneous slow down in the investment and consumption results in chronic unemployment. Thus, corporations and businesses have been used only as a tool and reduced to the level of profit-making machines.” [5]

These two phenomena, starting with the 1980s, have resulted in the rise of structural mass unemployment (and no-longer-cyclical unemployment), to which productivity gains have significantly contributed. Meanwhile, the share of labor income in the overall GDP has continued to drop in favor of capital income. The essential feature of this overwhelming “Third-World”-process in the developed economies [6] has been the declining wage share in the value added, that is to say, the increase in the rate of exploitation within a context where capital can from now introduce labor competition on a global scale.[7] Henceforth, global society no longer resembles a pyramid, as was the case during the so-called postwar “golden years”—namely when the accumulated profits at the top of the pyramid ended up sliding downwards toward the bottom, according to the “the spillover theory” formulated by Alfred Sauvy. Rather its has become a sandglass with the rich getting richer at the top, the poor getting poorer at the bottom, whilst in the middle, the middle classes getting increasingly strangled. One can observe now that this widening of inequalities belies the thesis that is at the heart of the dogma of free trade and the ideology of “laissez-faire,” and which claims that within the context of free competition, people receive an income proportional to their contribution in the production process.

In fact, the more free trade expands the more income inequality increases.


[1] Cf. Bernard Conte, “Néolibéralisme et euthanasie des classes moyennes,” Octobre 2010.

[2] Ibid.

[3] Jérôme Maucourant et Bruno Tinel, “Avènement du néocapitalisme – d’une internationalisation à une transnationalisation des économies.”

[4] Michel Pinçon et Monique Pinçon-Charlot, Le président des riches. Enquête sur l’oligarchie dans la France de Nicolas Sarkozy, Zones, Paris 2010.

[5] Jean-Luc Gréau, entretien in Le Choc du mois, May 2010, p. 36.

[6] Cf. Bernard Conte, La tiers-mondialisation de la planète, Presses universitaires de Bordeaux, Bordeaux 2009.



De Benoist, Alain. “Hourglass Capitalism.” Alternative Right, 3 April 2013. <http://alternativeright.com/blog/2013/4/3/hourglass-capitalism >. Transferred to The Identitarian Congress: <http://www.identitariancongress.org/blog/2013/4/3/hourglass-capitalism >.

Note: This article was originally published as “Classes Populaires et Classe Moyennes Face au Capital”, Eléments, January –March, 2011.



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