2015 December 09 Wednesday
American Middle Class No Longer Majority
Upper and lower classes are growing. The center is shrinking. Naturally I think of William Butler Yeats and The Second Coming.
Turning and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world,
The blood-dimmed tide is loosed, and everywhere
The ceremony of innocence is drowned;
The best lack all conviction, while the worst
Are full of passionate intensity.
What, me worry?
Many analysts and policymakers regard the continued hollowing of the middle class as worrisome for economic and social stability.
Eras come to an end. The era of the great American middle class has certainly come and gone. I do not see how a recovery of its fortunes is possible. Technological trends are boosting the value of a higher IQ. Computer and communication advances are cutting the need for middle managers of moderate ability. There is less need for managers who just accumulate and funnel reports to the top. Computers are collecting the data in real time.
My advice to you: get yourself skills that make you worth more. Be willing to move to where your work will have the greatest synergy with more able people. Go to where the money is. You are either going up or going down. It is hard to stay still.
By Randall Parker at 2015 December 09 07:25 PM
And of course allowing the emigration of people to the US with average IQ levels substantially below the current US level exacerbates the effect of these changes. It increases the supply of low skill workers even as the demand for low skill workers declines.
It sounds like the Latin American model - a wealthy elite, a small, rather impotent middle class, and a large group of poor peasants at the bottom. The lower classes have traditionally been prey to nationalist demagogues of the Left or Right. Argentina, anyone?
I can see where the fortunes of the middle class might be massively improved in the long run by deleveraging and huge asset deflation. (Basically 1929 redux) Imagine buying a new car for less the one half a years salary in cash. Imagine buying a nice house in a safe neighborhood for about 4 years pay--once again in cash. This is the way the economy used to work before the distortions of leverage. I have an Uncle who was an auto mechanic from 1953 to 2005. When he died he was worth over 1.4 million dollars and none of his wealth came from capital gains. (He distrusted the stock market.) It is possible for tradesmen and others who work with their hands to make good money. A collapse in asset prices, or an unwinding of 50 years of debt fueled inflation if you prefer, plus an immigration moratorium would restore the middle class. Unfortunately the political instability associated with such a collapse in stocks and real estate would likely result in full communism and the end of the middle class for a long, long time. Absent communism then bankruptcy is beautiful and deflation is divine.
tgmoderator: During the Great Depression the poorer classes did NOT have the cash to buy the cars and houses that became cheaper. The working class was living from paycheck to paycheck, and when unemployment skyrocketed during the Great Depression, instead of buying cars and houses at low prices, they went to soup kitchens just to survive, most of them did not have the cash to buy those cheaper items. Deflation hurts the poor even more than the rich because at least the rich have most of the cash-equivalent assets to survive a depression, and even their excess real estate is fungible if they have several houses. The reason the American working class became much wealthier after the Great Depression was because the US won World War II and a new innovation cycle started (thanks to both military innovations in the US that later got modified and absorbed into the civilian sector, plus the German patents and technology that the US got for free after WW II), and also the US also gained a lot of relative leverage in the aftermath of WW II since most of Europe and Asia was destroyed and the US was intact. The US government also nationalized many sectors during the Great Depression and WW II.
But currently, the annual trade deficit of the US is substantially higher than the annual growth rate of the GDP, and this means both unsustainable job losses and lower salaries in those companies that were not driven to bankruptcy due to competition from Asia, in addition to cash that got lost to foreigners. Although it is true that nearly 70 % of the Chinese economy is in the hands of less than 1 % of their population, despite this accumulation of wealth in the Chinese upper class, the Chinese middle class is still growing and getting richer, because the Chinese trade surplus against the US equals exactly the American trade deficit against China, so that the Chinese middle class is still getting the bread crumbs from their trade surplus.
By the way, note that the popularity of Donald Trump is mostly from those conservatives who are NOT college-educated: from college-educated conservatives, Trump gets only 18 %, which gives him the 4th place among Republicans. It seems to me that this is not just due to the terrorism levels, but due to the job losses to Asia. The underemployed uneducated Americans did hear Trump's message that if he is elected he will start protectionism and try to bring back the jobs to the US, and this made him more popular among working-class conservatives.
Time to join the SJW coalition to avoid getting your ass kicked for having a decent job. Even if you're not a woman, minority, or gay, you can say that you come from a working class background (oppressed by classism), that your European immigrant ancestors were oppressed, or that you have depression and anxiety. If none of these work you can blame the 1%.
Inflation - A loaf of bread is 1 million dollars.
Deflation - A loaf of bread is 5 cents but you don't have 5 cents.
What will this country look like in 10 years?
I threw a file folder 2 feet back into its tray. Nothing at all violent, I mean it was a file folder. One of the females complained. I am pretty sure I am out of a job. After 18 years.
RP: "get yourself skills that make you worth more. "
You suggest that people learn the "skills" that make employees worth more. In the short run, advanced skills certainly keep the employees employed and even better paid, but such stills of the workers actually reinforce the net profits of the upper class: in most cases the employer hires and pays a high salary to the employee only if this brings more profit to the company at the end of the tax year. Thus, better job skills are good, but they still accelerate the accumulation of capital in the upper class, actually increasing the separation between upper and lower classes, precisely because of the main tenet of the modern economic system: the goal is to accumulate profits and hoard these in a store of value, such as financial assets including cash.
However, if the new innovations are good enough, then the upper class can then afford to redistribute some wealth to the lower class without getting seriously offended. In other words, the bread crumbs can be big enough to keep the poor happy, while the upper class is turning a profit. But it turns out that the best long term innovation is not made by corporations, it is made by government-sponsored high-risk research projects like the military, which later get commercialized. For instance, GPS, Internet, nuclear reactors, first computers, integrated
(Continued from above.) For instance, the development of GPS, Internet, nuclear reactors, first computers, integrated circuits, were initially financed by the government, at great short term financial loss during that continued for several years beyond development. Had the government not stepped in and financed these research projects, it would have taken half a century for private companies to do these developments by using off the shelf components that became cheap enough much later.
It doesn't take high cognitive function to sit on top of an economic rent stream. Nor does it take high cognitive function to identify and target an economic rent stream. Economic rent streams are as inherent to civilization as is the network effect. Indeed, the proper definition of economic rent should be in terms of network effect -- such as the profits enjoyed by Bill Gates because he identified, acquired and sat on top of the economic rent stream arising from the network effect of owning the OS standard established when IBM shipped their PC with MS-DOS.
Moreover the iron law of wages applies as much to the cognitive elite employment niches as it does to the burger flipper at McDonalds -- except that since birth control and the entry of women into the workforce, the iron law of wages is no longer about "subsistence" but about "replacement reproduction". For the high cognitive population, the cost of keeping a woman in the role of child bearer has EXPLODED and not one of The Great and the Good could give a damn about measuring the resulting inflation rate, let alone the hole it blasted in the gene pool.
The instinctive comfort with which The Great and The Good ply themselves in their participation of this genocide against the very essence of human capacity is 3 fold in its fallacy:
1) Survival of the fittest: Selecting out of the gene pool those "mediocre" talents that could not keep up with this explosion makes more room for the offspring of the likes of Bill Gates. The fallacy here is so obvious that anyone who doesn't see it isn't worth educating.
2) Genes don't matter. Again, The Great and The Good should know better but they don't care because they have the support of the social sciences which have, ever since Jews took over that area of academia in the early twentieth century via the likes of Boas, been trying to find ways of obscuring the significance of Jews occupying positions of public trust and authority in society. Moreover they buy social status the way Bill Gates sends all his money to Africa along with the rest of the Economic Rent Gang like Zuckerberg to do the same because -- well because Racism!
3) They're just playing by the rules of the game and can't do anything about it. The fallacy here is that the solution to economic rent seeking in both the public and private sectors is to replace taxes on economic activity (including income, capital gains, sales, value added, etc.) with a tax on economic rent and distribute the revenues as a citizen's dividend aka unconditional basic income. Economic rent can be operationally defined in terms of the liquid value of net assets which, in turn, is defined in turns of the annuity stream (at modern portfolio theory's risk free interest rate) represented by the corresponding asset. To call this a "fallacy" however, is a bit like saying "Never attribute to malice that which can be attributed to stupidity." when the, in the real world, the proper admonition is "Never attribute to stupidity that which can be attributed to self interest."
>>"My advice to you: get yourself skills that make you worth more."
Or become a politician and live off the budget for life. I hear evangelical pastors do very well in the Bible Belt or is it Babble Belt? Of course you gotta have this "Divinity" degree and be able to shout "hallelujah!" and "amen" in a very convincing way, not just the prosaic English football-fan "hoorah!" or "so be it".
Knowing some words in Latin would be useful if you are a Catholic who wants to impress some even dummer nitwits; words like "Per omnia seculae seculorum", or the Pater Nostri. By the way, here's a joke in Latin, basically a criticism from a Jesuit to a Mercedarian having to to with the reddish Mercedarian robe:
The Jesuit says to the Mercedarian
-Rubicundus erat Judas.
To which the Mercedarian sharply replies
-Est, et erat societatis Iesu.
I know it's not very funny, but then again it's a priests' joke.
Anyway, I hear starting a small privately-owned business has become kind of an impossible task in this country. Just try and set up a pretzel or dog cart in New York... ha!