Middle class as the buffer

I was struck by the use (dare I say manipulation?) of the middle class leading up to the American Revolution. Zinn describes a class of artisans that grew up between the social, political, and economic elites and the poor, who were often the indentured folk in the colonies. The struggle of the elites in colonial times was to retain their power and somehow get others in the colonies to take their side over the British. How to rally the masses from supporting one elite to supporting another? The American elite appealed to the nascent middle class with calls for liberty and property. (Give me liberty or give me death.)

How familiar this sounds even today. The political and financial elites rally the masses with fears of liberties being taken away…speech, arms, search and seizure, etc. Some fears are justified, some not so justified, some manipulated. The non-elites are promised the opportunity for property, for a slice of the pie that the elites hold, but only if they buy into the system and lend their support to the elites.

There is nothing about equality in these discussions—then or now. (In fact, equality is often depicted as somehow un-American.) But equality, or the more equal distribution of wealth, is what allows the middle class to exist and the American dream to be anything more than a cruel illusion. Without equality, wealth concentrates among the elites. The economy and society become more and more unstable.

What protects the elites from the masses? The bones thrown to the masses in the form of a middle class, the promise that you too can acquire some wealth. America, after all, is the land of opportunity, right?

What happens when the middle class is no longer there to be a buffer between the haves-all and the have-nots?

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Movie review: Inequality for All (2013)

Why does economic equality matter? Robert Reich, former Secretary of Labor and current professor, addresses three questions in a Berkeley class he teaches. What is happening in terms of the distribution of income and wealth, why, and is this a problem?

The answer to the last question is a resounding yes. Income inequality definitely does matter. It erodes our economy and jeopardizes democracy through social instability.

What makes an economy stable? A middle class.

What sustains an economy? Consumer spending. Seventy percent of the US economy is made up of consumer spending.

Who spends? The wealthy? Well, yes, but they can only spend (and consume) so much. The real engine of consumer spending—and the US economy—is the middle class.

And what has been happening to the middle class? It has been disappearing.

Reich maps the forces that lead to a middle class, consumption, and a strong economy: higher wages, increased consumption, increased employment, increased tax revenue, increased investment in education, better jobs. This virtuous cycle existed from 1947 through 1977. But then went off the rails.

What changed? Several things. Manufacturing moved abroad, which decreased the number of jobs and the wages of those jobs. The technical revolution meant that any good jobs required higher education. Financial deregulation revealed that the rules on which the market operated had changed.

Wages flatlined in the late ’70s. How have people coped with flattening wages? How have they tried to maintain the middle class standing of living? We tried three strategies. Women went to work. People worked more hours. People borrowed, often against their homes. But the number of women who can enter the workforce, the number of hours one can work, and the amount of debt one can accrue is finite.

The result? People are sliding out of the middle class into poverty.

Along with the flattening of wages since the late ’70s, costs—housing, health care, childcare, collage—have skyrocketed. Suddenly the chance to make it and move upward economically was no longer viable.

Forty percent of children born in poverty will not get out of poverty.

Forty percent.

(The optimist in me cheers the sixty percent that escape.) What lifts people out of poverty? Higher education. Investing in people and investing in the workforce is crucial for a healthy economy.

But we stopped investing. In fact, we divested. Decreased taxes meant less revenue to put towards places of higher education. Individual people could not afford the increases in higher education or went into massive debt to acquire it.

So what is there to do? As Reich points out, the “free” market is actually run by rules. The government sets these rules. Recently the government has been deciding on rules that deregulate the financial sector, that recognize corporations as people and thereby allow massive amounts of money in politics, and that divest in people—the economic engine.

Does this mean that government is bad as we have been led to believe? No. It just means government needs to change the rules by which the market functions. As one wealthy entrepreneur in the movie mentioned, government needs to do this through “middle class economics” (i.e., economics focused on enabling the middle class), not “trickle down economics”.

Is Inequality for All an informative movie? Yes. Will it get you thinking about issues that helped lead to the crisis of 2008? Yes. Will it help change things? Maybe. First you need to recognize and understand the problem before solving it. Robert Reich in Inequality for All seeks to inform and get you thinking, whatever your political persuasion.