RE: virus: Global demise of the middle class.

From: Blunderov (squooker@mweb.co.za)
Date: Thu Feb 12 2004 - 23:38:39 MST

  • Next message: Blunderov: "RE: virus: Global demise of the middle class."

     

     

    SANE Views
    Vol.4, No.2, 11 February 2004

     

    GLOBAL DEMISE OF THE MIDDLE CLASS

     

    Margaret Legum

     

     Everyone now accepts that poverty - whether actual destitution or
    state-aided underclass misery - is a growing global phenomenon. The
    figures, though astonishing, have become a cliché. Three million people
    live and die on less than $2 a day, and 1.2 million on less than $1.
    Even rich countries suffer homeless beggars and street kids and queues
    for soup kitchens.

     

    Less well known is the fact that globally the middle class is struggling
    and declining. Capital accumulation used to be a normal middle class
    pattern - pensions and insurance, setting up the kids on the home-owning
    ladder, a nest-egg against unforeseen misfortune. Today, dis-saving is
    closer to the norm - cashing in inherited savings, taking out loans in
    excess of income, selling the family silver. Parents are baling out
    and/or literally accommodating their adult offspring, who in the past
    might have contributed to family pensions.

     

    This thinning of middle class assets accompanies another new trend. Two
    incomes are needed to pay the bills. Not to upgrade the home, buy a new
    car or take a fancy holiday, but to pay the bond, the groceries, medical
    bills, school fees, transport - the essentials. Middle class incomes no
    longer allow even very small children the luxury of full-time care by
    one parent.

     

     This trend has happened over the thirty years when the world's capacity
    to produce wealth expanded by a factor of eight, thanks to the digital
    revolution. The world is immensely richer.

     

    We all observe these trends, but we tend to put them down to feminist
    insistence on income-earning, or simply to 'the youth of today'. In
    fact, the growing poverty from the middle class down is a function of
    the exponential systemic increase in inequality. Again the figures are
    well-known. The top three people own more than the bottom 600 million.
    The richest fifth in the world earns over 85% of world income. The
    pattern is worst in the US, where I% owned more than the bottom 95% in
    2000 - up from 90% a year earlier. Where the US leads the rest of the
    world follows, because that is the economic system it sets for the
    world.

     

    Thus the astonishing upward gush of resources - from poor to rich - is
    depleting the middle classes. In the US, middle class households have
    lost net worth since 1970. Average weekly wages and salaries were 12%
    lower in 1998 than in 1973, while labour productivity rose by 33%. In
    the decade 1990-2000 the pay of Chief Executives rose by 570%: it is now
    some 600 times that of the average worker. All of the increase in
    productivity - and more - now goes to the top.

     

    The systemic nature of this concentration of wealth means that it cannot
    be corrected without systemic change. It cannot be tackled by expanding
    growth. The more productivity rises the greater proportion the rich take
    away. It will never trickle down - not because the rich are mean
    bastards, but because they do not spend more than a small part of their
    wealth.

     

    In the past the rich spent or invested most of their money, and other
    people were employed in the process. Today a large proportion is
    effectively hoarded. Over 95% of the world's savings - much of it
    deriving from top incomes - is 'grown' by speculative trading through
    the financial sector. It is not invested in productive enterprise. It
    is used to buy and sell money and shares - and sometimes property - none
    of which puts one brick on another or employs any but the speculators.

     

    What has happened is that there are now effectively only two 'classes'.
    One owns capital; the other does not. Senator Edwards, a Democrat
    Presidential hopeful says: 'There are two Americas. One that does the
    work and one that reaps the rewards...Middle-class America whose needs
    Washington has long forgotten; and another America - narrow interest
    America - whose every wish is Washington's command.'

     

    Capital owning people - Edwards' 'narrow interest people' - are able to
    demand and get historically high proportions of the product of all
    countries - for the simple reason that they are allowed to move their
    capital from country to country. Rates of return between 30% and 40% are
    not unusual - indeed anything less than 20% and you change your broker
    or switch your operation. Only thirty years ago 10% was considered very
    good.

     

    It was also described as 'unearned income', and attracted more tax than
    income you went to the workplace and worked for. Today it may be
    entirely untaxed. That is because capital owners, having the power to
    move out - also profoundly influence government policy. Low taxes on
    capital are only one example. Low regulation, 'flexible' labour laws and
    privatisation are among the others. This middle class generation must
    save and ensure for health and education because owners of capital frown
    upon government expenditure on any but the most rudimentary education
    and health care.

     

    Capital rules Ok when it can move around.

     

    All that is very unfair to people who don't own capital. Even worse is
    the danger it poses to economic and social systems globally. Extreme
    daily fear of starvation is the fate of poor people everywhere. But
    everywhere also middle class people are getting into terrifying debt;
    having their homes re-possessed, falling behind on medical insurance and
    pension payments, and leading a life of constant insecurity, worry,
    stress and family conflict. Divorce, family violence, mental illness and
    middle-class drug-abuse and delinquency follow. So does a disrespect for
    the laws of society and a profound cynicism about politics and
    politicians.

     

    The middle class is traditionally thought of as the stable backbone of
    society. It holds traditional ethics about decency and good behaviour.
    It is generally well-educated and values education. It is about
    moderation and stability and abiding by the law. And it is often
    charitable. It can be mocked for all that; and it often does the
    mocking. It is lost at our peril.

     

    [Blunderov] This is a bit ominous. How much longer can this paper tiger
    last?

    Best Regards

     

     

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