The ramblings of an Eternal Student of Life
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Sunday, August 21, 2011
Economics/Business ... Society ...

On this blog I tend to be a storm petrel, focusing on things that are going wrong with the Western world. I could talk more about the joy of being alive, and perhaps I should. The Buddha was quite a storm petrel himself; he kept hammering the point that life itself is suffering. And yet, the Buddha’s greatest lesson was to lift a flower before his students. Beauty is the ultimate lesson.

Well, that’s what I try to say when I post a picture here or talk about my Zen experiences. But tonight, it’s back to the suffering side of things. I’m thinking specifically of the American economy and what it has been doing lately to our society. I just read Don Peck’s incisive article “Can The Middle Class Be Saved” in the September Atlantic Monthly. Mr. Peck packs the article with plenty of probative statistics (onomatopoeia intended!), showing where we are and where we are going . For example:

— The richest 1 percent of households in the US earn as much as the bottom 60 percent (i.e., total dollars from all households in top 1 % = total dollars from all households in bottom 60% of households).

— The richest 1 percent of households possess as much aggregate wealth as the bottom 90 percent have.

— In 2009, the top 25 hedge fund managers earned more than they made in 2007, before the financial crash.

— The national unemployment rate is 9.1%; but for people with only high school diplomas – about 58% of the adult population – the rate is 12 percent. College grads, about 30% of adults, have a 4.5 percent unemployment rate. [Too bad that a college education is becoming too expensive for an increasing number of middle-class American families.]

— In the past 20 years, multinational corporations have become a big part of the American economy, but have only caused 11 percent of private-sector job gains. And most of that was in the first 10 years; from 1999 to 2008, they shrunk their domestic workforce by 1.9 million people, and at the same time increased foreign employment by 2.4 million.

— The typical middle class family lost 23 percent of its wealth since the recession began, and the typical upper class family lost 12 percent.

— Between 22 and 29 percent of all jobs in the US have the potential to be moved overseas in the next 20 years.

OK, that’s pretty stormy. The middle class is definitely in trouble; the rich are getting richer and the poor are getting poorer, that’s nothing new; what’s new is that the middle class is increasingly sliding down towards the poor.

Why is that a problem (other than that I myself am part of the middle class?). Well, Aristotle said that a nation’s middle class was necessary for political stability. In Politics Book IV, chapter 11 (1296) Aristotle writes:

“…it is manifest that the best political community is formed by citizens of the middle class, and that those states are likely to be well administered in which the middle class is large, and stronger if possible than both the other classes, or at any rate than either singly; for the addition of the middle class turns the scale, and prevents either of the extremes from being dominant.

Great then is the good fortune of a state in which the citizens have a moderate and sufficient property; for where some possess much, and the others nothing, there may arise an extreme democracy, or a pure oligarchy; or a tyranny may grow out of either extreme–either out of the most rampant democracy or out of an oligarchy; but it is not so likely to arise out of the middle constitutions and those akin to them.”

Eventually, the threatened, shrinking middle class is going to assert itself politically, and that assertion may not always be a good thing. Perhaps the Tea Party movement is an early sign of how ugly things might get. So far, the Tea Party reflects the middle class trying to rob the poor of their government supports. Fine, but once the poor ain’t got no more, then who becomes the next target? Do the Jacobins make a comeback?

As to the poor, uneducated young men (who Peck explains are becoming entirely useless to the modern economy, where ever they come from – but especially if they come from poor communities) from impoverished urban neighborhoods are increasingly turning to gangs and violence. The legitimate economy offers them little, so more and more are turning to the illegitimate economy. For a taste of what that is doing to our cities, here is a good article about my employer, the Essex County Prosecutor’s Office, specifically about the Homicide Unit and its new local-federal Task Force. (I personally have nothing to do with Homicide and know very few of the people mentioned in the article; I learned more about what they do in the article than I have in my many years pushing paper for the Office). The stuff they deal with is awful; and even more chilling is the prediction by one of the gang-war perps that “this is just beginning.”

I would opine that the rich are finally realizing their dream of achieving an economy where the non-rich are no longer needed. It’s the victory capital over labor, to dig up old Karl Marx. Right now the stock market is in a panic about another recession. But the previous recession hardly put a dent in corporate profitability, and I would guess that the next one (whether this year or in 10 years; I’m not yet convinced that we are in the “double dip”) will not do much to affect the global agents of capitalism. I will go out on a limb and predict that the stock market will recover before long, just as it recovered fairly quickly from the 2009 recession. International corporations (and almost all major US corporations are multi-national) will figure out a way to make money, e.g. by dealing more with the growing economies in the far east, Brazil and South Africa. In the process, they will continue to rid themselves of American middle-class workers.

So, if only we stop needing to sell our labor to make a living and join the capitalist – investor class, we would be OK. I did some rough calculations, however, and figured out that in order to make enough investment income to have a moderately decent middle-class life (not at all elaborate), you would need between $600,000 and $800,000 to invest – depending on the cost of living where you live. This amount would be over and above your equity in your home, if you choose to own and not rent. If you want to take a nice vacation every year and keep up with all the new electronic gadgets, well, then you better figure on a cool million.

If all middle class people had that kind of money to invest, they would be just-about-rich. But unfortunately, like me, they do not. Peck is not a stormy petrel, so he doesn’t end his article with dire predictions of an America riven by revolution and riots and bloody gang wars (thus far, the gang wars seem limited to a handful of neighborhoods around our older cities). The current trends are bad, but perhaps something will happen to turn them around before America becomes 2% rich and 98% poor.

Aristotle would likely agree with Peck’s prescriptions for helping the middle class, including “considerably higher” taxes on the rich. Otherwise, the USA might yet face “the extremes” and the “tyranny [that] may grow out of” such extremes. The Tea Party, foe of any taxes on anyone no matter how privileged, showed itself to be rather extreme and politically irresponsible in the recent Congressional debt ceiling crisis. Stormy petrel that I am, I suspect that the gang-banger in Newark may be more prophetic than he thinks in saying “this is just the beginning”.

◊   posted by Jim G @ 8:48 pm      

  1. Jim, This time I’m not going to think of you as a “storm petrel”; I have been wondering about these very things you mention for a while now. I find myself wondering just how much money is enough money for those who have “tons” of money (to put it in “poor people’s” terms, of which I certainly am one)–a billion? 2 billion? more? To hear some of these mega-millionaires and billionaires talk when it comes to even thinking about raising their taxes, one would think they would actually be forced to live in a small apartment of about 1000 square feet, raise a family on less than $3000 a month, and hear from the 1% group of the rich how tough life would be should their taxes be raised. Can’t you already hear Donald Trump?

    I also don’t understand the Tea Party: Seems the very things they are against will come to bite them sooner rather than later–but they will always have the “family values” and the “good ole times” touted by the very ones in power who themselves seem to have no clue of what family values might be. And as to the “good ole times”, I remember them: They weren’t that great. I have no desire to return to them. Seems to me only those who didn’t actually live in the “good ole times” want to return to them.

    And I have to admit that for once you have me agreeing with Aristotle. (I tend to not want to hear much of what he has to say because of his attitude toward women, but that’s another topic.)

    On the other hand I find myself thinking of Pierre Teilhard de Chardin who in the midst of the chaos of World War I (yes, WW I!) talked about the growing point of humanity. (I am amazed that the man thought the thoughts he did coming close to 100 years ago. How far ahead of his time he was!) His idea was somewhat akin to the chaos theory and fractals–chaos at first that tends to arrange itself into some new order. (Well, at least this is my own interpretation of PTdC’s idea and chaos theory.)

    I admit readily that it does seem that chaos is the word that appropriately fits today’s world–economic, political, social, etc. And regarding the crime business you mention, I heard recently that each year 8000 (give or take) people are killed and their killers are never found, to say nothing of their being caught and prosecuted. Socially, too life seems so cheap, useless, and worthless in so many ways.

    But then I come back to PTdC: Perhaps we are in the midst of the chaos of the growing point, which will sooner (one would hope) rather than later assemble itself into a new order of some kind for the world. What that “new order” might be, I would not be able to say. I do wonder sometimes if we may be returning to something more akin to the kind of economic system that existed before the industrial revolution. And, of course, if the economic system changes, then the social and political systems will change along with the economic. I’ve always tended to believe that the economic comes first, then follow the social and political, but that’s just my particular point of view.

    Who knows what the future will be like. Fifty or 100 years from now, I am sure that these times will be looked on as the chaotic period that preceded the “new” times. MCS

    Comment by Mary S. — August 22, 2011 @ 2:45 pm

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