The death of the middle class. July 26, 2010Posted by ourfriendben in Uncategorized, wit and wisdom.
Tags: Boomers, capitalism, Industrial Revolution, middle class, vanishing middle class, Yuppies
Our friend Ben saw an article on Yahoo!’s finance updates the other day proclaiming the imminent demise of the middle class. Check it out for yourselves: “The Middle Class in America Is Radically Shrinking. Here Are the Stats to Prove It” by Michael Snyder at http://finance.yahoo.com/tech-ticker/, posted July 15, 2010. It’s not cheerful reading, but it certainly makes sense.
Historically, the middle class is a comparatively recent phenomenon, at least in the West. For much of European history, there were nobles and serfs, or nobles and slaves, a rigid two-level social order neatly split between the haves and the have nots. Yes, there were scribes, heralds, pages, monks, scholars, lawyers, and others who perhaps could have been considered a middle class, but there were never many, and they were never recognized as such.
It was not until the rise of the Industrial Revolution, when merchants attained status in their own right, amassing wealth and power as the nobility dwindled in significance and wealth and the serfs became smallholders, that the concept of the middle class came into its own. Suddenly, the all-powerful nobles no longer had a vital purpose—defending their lands and people—and the prosperous merchants and innovators finally came into their own. Their purpose was obvious and always current: producing goods, creating prosperity. Practicality and productivity were the orders of the day: Capitalism was born, and feudalism finally died.
In America, the middle class existed from the beginning, but reached its peak after World War II. Suddenly, everyone could own his own home, buy his own car, live his own life. Those of us who have come along since that time of great prosperity may look back, open-mouthed, at our parents’ or grandparents’ seemingly effortless prosperity. And perhaps we finally might begin to wonder if this was a one-generation phenomenon.
A single, post-war generation that was given the wherewithal to buy their own homes and cars. To have ample time off. To live well, better than their parents could have dreamed of, and live debt-free. To afford the then-reasonably priced medical care. To enjoy a leisurely retirement without wondering when, or even if, their money would run out.
That generation gave birth to the Boomers, who coasted along on their parents’ prosperity, going to college in record numbers, becoming professionals, creating the corporate class. Their “life is good” philosophy has proven to be an illusion based on their parents’ financial security, modest though it was in most cases. Now that they’re reaching retirement age, they find themselves woefully unprepared. (According the the article, 43% of Americans have less than $10,000 saved up for retirement.) Retirement is pretty much a thing of the past; once the Boomers leave their jobs, they’ll be looking at working at Wal-Mart or McDonald’s at minimum wage for the rest of their lives.
Which brings us to the phenomenon of the Yuppies, which ushered in the ’80s. They seemed on paper to be wildly prosperous. They bought huge McMansions, vacation homes, SUVs and sports cars, all the latest gadgets and designer fashions. They ate at all the trendy places, went to all the trendy travel destinations. Price was no object. Or you could say that price was the object: the pricier, the better.
There was just one little problem with the Yuppies’ seemingly endless wealth: It wasn’t real. Unlike their parents or grandparents, who paid for what they owned and therefore owned it debt-free, the Yuppies took out loans, not ever thinking through to the fact that it was actually the bank that owned their porperty, not them. Floating debt while living beyond even their opulent means was the norm. “Everybody” did it. And when the market crashed in the late ’80s, “everybody” was caught with their collective pants down.
You’d have thought this little economic lesson would have taken hold, but it didn’t. The children of the Yuppies also believed that wealth and an extravagant lifestyle were theirs by divine right. Immoral credit card companies that handed out cards like candy to college students produced graduates with staggering student-loan debts and tens of thousands of dollars in credit-card debts, at enormous interest rates, on top of them.
Thank God our latest recession/depression seems to finally be sinking in. Cheap is chic, vintage is fashionable, people are discovering the Goodwill, Salvation Army, and flea markets as viable alternatives to buying ever more new stuff. “Frugal” now equates to smart rather than to Scrooge.
But the new frugality is taking a toll on our old economic warhorse, capitalism. When capitalism replaced feudalism as the economic standard, the rise of the middle class was (in retrospect at any rate) guaranteed. But, as we’re now discovering, capitalism works best in an area where there’s a lot still to gain, a lot that still needs to be bought, such as India or China. In the West, we have more goods than we could ever use, want, or need, no matter how many ad dollars are spent trying to convince us otherwise. (This isn’t true of our poor, of course, but since they can’t afford the goods they need, they don’t grease the capitalist wheels.)
So we have a big problem: Capitalism isn’t working anymore, and we haven’t come up with a viable economic model to replace it. Sure, everybody’s looking at the internet and intellectual property, but nobody’s managed to figure out how to make it pay off, at least for the “average guy.”
Meanwhile, there are the rich, who own the stock markets. And there are the poor, who own pretty much nothing. And the middle class, that thriving segment of society that gave the Boomers its name, is disappearing even faster than the capitalism that gave it life.