The Middle Class. What is the middle class? And does it exist at all? The middle class is yet another myth in the capitalist economic model. The middle class is a result of the fight against capitalism, not a product of capitalism itself.
image by DonkeyHotey - source: flickr
This is the reason why I started this series "Myths Of Our Economy": I try to explain why capitalism simply doesn't work as a sustainable and just method of producing and distributing goods. That's all an economy is, you know? A method of producing and distributing goods. Economy is the answer to the question: "how do we distribute all the goods we collectively produce from the Earth's resources?" Now, there used to be a time when capitalism wasn't the only economic ideology in the world. Before 1989 when the Berlin Wall fell, and with it the Iron Curtain, capitalism had communism to contend with on a global scale.
Do you think it's a coincidence that the late nineteen eighties also is approximately the time when the deconstruction of the American middle class began, as well as middle classes all over the western world? It's no coincidence and no surprise: capitalism left by itself has no middle class! In capitalism there's only winners and losers. The invisible hand above the market is invisible for the most obvious of reasons: it simply doesn't exist. So, the middle class only rises when there's enough resistance against capitalist forces, and that's why we now see the middle class dwindling at an accelerated rate in Europe and the U.S., where our latest capitalist empire was born and where it will die first.
The middle class in the U.S. was most recently built up right after the previous capitalist meltdown, the Wall Street Crash of 1929, that started on Black Tuesday (October 29). This was accomplished by the super high tax-rates for the top incomes introduced by Franklin D. Roosevelt in his New Deal:
"The New Deal was a series of programs, public work projects, financial reforms and regulations enacted in the United States 1933-36, in response to the Great Depression."
Let me pause for a moment and give you a definition of the middle class that works for me: the middle class earns their income through labor and they distinguish themselves from the upper class by the absence of unearned income. The middle class also distinguishes itself from the lower class by that earned income through labor. Rich get richer because they gain income above and beyond their ability to earn that income through labor, i.e. by the value added through labor. They make most of their money by letting that money work for them, so to speak.
Tax rates for the richest were as high as more than 90% in those decades following the Wall Street Crash of 1929, something our modern minds would think utterly criminal. But is it? This is actually based on a very simple and very true principle: no human being can earn a whole lot of wealth by himself. That's just not possible without some agreed upon mechanism (capitalism) that distributes wealth in such an unbalanced manner that almost all of it lands in the hands of a few people and the meager remnants are left for the majority to fight over among themselves. Don't believe me? Well, just imagine yourself alone on an island that has all resources you could ever want to make whatever you want; you're free to do with all the wood, plants, animals, oil, metals, uranium, chemicals... everything is there and you can do what you want with it. How many tv's, cars, houses etc. will you have after a lifetime of hard work? Exactly: none. You'd be doing great if you managed a wooden cabin with a small vegetable garden and catch some wildlife for an extra piece of meat on your wooden table once a week...
I said this so many times: everything you have more than that wooden cabin, you have because of the work of other people, now and in the past. So, no matter your task in the economy, no matter how much you think you deserve, whenever someone has made enough money to own a house and a small piece of land even, and an extra house somewhere abroad, and a car for each of those houses, that person has made more than he could ever have done on his own. If you think about it like that, the richest among us should be glad they get to keep 10% of what they earn above a certain income, which is more than humanly possible. Proponents of capitalism and the free market are typically opposed to redistributing wealth, even claim that taxation is theft, but they forget that capitalism in itself is a system that constantly redistributes wealth from the bottom to the top; only when the redistribution goes in the other direction, they suddenly have a problem...
Capitalism is an ideological model that's based on one human trait only: greed. This economy takes as its base participants that are rational, calculating agents that do everything possible to maximize personal wealth. This is advertised as a good thing, because if only everybody took their personal responsibility and work to maximize their own profits, material wealth would be maximized and The Invisible Hand would assure that everybody gets their rightful share of the growing pie. Greed is good. Greed works. Repeated ad nauseam. This mantra is the reason why we seemingly accept corruption in this system, or at least we accept that there always be corruption, because in its base the system only works when we do everything in our power to enrich ourselves. Corruption has become the norm, so much so that it has become legal in many cases, like in elections and politics.
The rich cheat because they don't give back to the community of people that made them rich in the first place, the community that allowed them to have way more than that wooden cabin. The "giving back" has for years been described as the "trickle-down economy", the absurd believe that when the richest do better, that extra wealth would find its way down the social ladder all the way down to the poorest among us. Or that they would invest in more jobs or in a new middle class: the richest have never in human history behaved this way, why would they switch behavior now all of a sudden? Why would they abandon the idealism of greed that has served them so well? I'll repeat what I've said in several of these posts: Adam Smith never said the "invisible hand" is merely a mechanism that would provide an equilibrium in the capitalist economy, but as the empathy he thought the capitalists would feel toward the ones left behind by the economy that produces only winners and losers. I'm sad to say, the powerful have never shown to be very empathic at all, quite the opposite actually.
Capitalism has never ever known or cared for a middle class. This middle class is a result of force exerted against capitalism by a competing ideology or by the very few governments that still remember some of the alternative ideologies. Sweden still has a middle class, as did the U.S. in the times when there were still active communist and socialist parties and organisations. With the introduction of laissez-faire capitalism under Reagan and Thatcher in the early eighties, followed by the end of world-communism in the late eighties (don't start with communist China; there's nothing communist over there, it's just authoritarian capitalism), the middle class saw the beginning of its end. World-wide tax rates for corporations and the rich have been cut and are still being cut, thereby robbing governments of the power to exert any resistance against capitalist forces like their enormous campaign contributions during elections and lobby-groups that constantly lobby for laws that serve their goals.
The death of America’s middle class: Sky-high rent, second jobs, & 1% TV | Alissa Quart | Big Think
Economy isn't that complicated, or it doesn't have to be; it's simply the method by which we distribute the goods we collectively produce from the earth's resources. By that simple definition our current economy fails miserably if the goal is a just or even realistic distribution, and the sustainable production of that shared wealth. Remember the wooden cabin! All wealth is produced collectively and by no particular individual. These are simple truths in my mind, and our current economic model fails on every level because it simply rejects those truths and acts opposite to them by exceedingly rewarding a few individuals for the combined labor of the exploited masses.
There is no such thing as a self-made man, unless you live in that wooden cabin as a hermit. No one is independent. And there is no middle class in capitalism. And there's only middle class in communism. Both are ideologies that derive their answers from the perspective of only one human trait (egoism vs altruism) and are therefore both in essence unrealistic. The healthiest societies ever under capitalism were the ones heavily influenced by socialist principles that allowed for the existence of a middle class in an overarching economic model that by itself only produces a few very rich with many very poor. Now that these socialist influences are all but dead, we will only see a further acceleration in the growth of the gap between the rich and poor and a further dwindling of the middle class.
George Orwell said it in 1984: In times of universal deceit telling truth is a revolutionary act. All the above in my mind's eye is self-evident. Even if we leave economics and enter politics it's quite easy to see how the middle class is not only created by the politics opposed to the capitalists' goals, but also the politicians favorite target for elections; they are in a sense capitalism's greatest hero because they allowed this essentially sick and failing system to prolong it's existence after the meltdowns in 1929 and 2008. It's the middle class that exists because of the fight against capitalists, that somehow believe most fervently in capitalism's promises and vote in the politicians who cut taxes for the rich. I wonder how long we will let this go unchecked. I wonder how long until we realize that there's no solutions to be found within capitalism, but only in the fight against capitalism and thereby restoring some sense of balance in everything.
Remember that back in FDR's days he used the tax income gotten from the rich to create the jobs, yes government jobs, the owners of the means of production themselves wouldn't create. He saw the waste of this gigantic workforce of willing and able people not producing anything, so he took the money from the rich and created paying jobs for the poor. Brilliant, isn't it? But that's called communism now and I should get my red ass out of here :-) Decades of capitalist rhetoric has faded any sensible distinctions between political and economical ideologies in the general population's mind. So, I would be grateful if all of this at least leads you to question capitalism's so called merits and encourage you to start to think about possible alternatives for this failing economic model.
The fundamental law of capitalism is if workers don’t have any money, businesses don’t have any customers; that prosperity in a capitalist economy is a consequence of a circle of feedback loops between customers and businesses, which means that a thriving middle class isn’t a consequence of prosperity. A thriving middle class is the source of prosperity in capitalist economies, which is why a policy focused on the middle class is and has always been the thing that drives prosperity and growth — not pouring money into rich people, which simply makes rich people richer.
source: PBS News Hour
Thanks, dear reader, for sitting through this semi-rant. I hope that you liked this post, of course, and that you share your thoughts on the dying middle class in the comments section. Until next time!
Nick Hanauer on inequality
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