To Understand America’s Neofeudal Economy, Start with Extortion

Of Two Minds – by Charles Hugh Smith

Here is the result of America’s neofeudalism: soaring wealth and income inequality.

Let’s spin the time machine back to the late Middle Ages, at the height of feudalism, and imagine we’re trying to get a boatload of goods to the nearest city to sell. As we drift down the river, we’re constantly being stopped and charged a fee for transiting one small fiefdom after another. When we finally reach the city, there’s an entry fee for bringing our goods to market.  

Note that none of these fees were payments for improvements to transport or for services rendered; they were simply extortion. This was the economic structure of feudalism: petty fiefdoms levied extortionate fees that funded the lifestyles of nobility.

This is why I have long called America’s economy neofeudal: we pay ever higher fees for services that are degrading, not improving. This is the essence of extortion: we don’t get any improvement in goods and services for the extra money we’re forced to pay.

Consider higher education: costs are soaring while the value of the “product”–a college diploma–declines. What extra value are students receiving for the doubling of tuition and fees? The short answer is “none.” College diplomas are in over-supply, and studies have found that a majority of students learn remarkably little of value in college.

As I explain in my book The Nearly Free University and the Emerging Economy, the solution is to accredit the student, not the institution. If the student learned very little, he/she doesn’t get credentialed.

Were students to have access to the best classroom lectures online (nearly free), and on-the-job apprenticeships in the workplace, (nearly free or perhaps even paid), learning would be significantly improved and costs reduced by 80% to 90%.

In this structure, there’s no need for costly campuses or administration; the entire structure of higher education could be largely automated with software, except for the workplace apprenticeships which focus on case studies and real-world projects that are creating value in the here and now.

Consider healthcare: has the quality of healthcare doubled along with costs?Are Americans significantly healthier as the costs of healthcare have tripled? The aggregate health of Americans has arguably declined, while the stresses placed on frontline care providers by the ever-heavier burdens of compliance and paperwork have increased.

What about the $200 hammers and $300 million F-35 aircraft of the defense industry? Once again, as costs have soared, the quality and effectiveness of the products being supplied has arguable declined.

How about state and local government services? Are they improving as taxes and junk fees rise? Once again, government services are often declining in quality as taxes and fees increase by leaps and bounds.

In sector after sector, the quality of the goods and services has declined while costs have soared. This is the acme of neofeudalism: insiders and the New Nobility are skimming fortunes as prices skyrocket and the quality of the goods and services provided plummet.

Look at the cost increases in higher education, healthcare and childcare and ask yourself if the quality of those services have risen in lockstep with price increases.

This is nothing but neofeudal extortion. The cartels raise prices and we’re forced to pay them, just as feudal commoners were forced to pay.

Here is the result of America’s neofeudalism: soaring wealth and income inequality. Insiders and the New Nobility are getting richer while debt-serfs are getting poorer.

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Of Two Minds