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