11 ms·

The Crisis of the Middle Class and American Power

100 points by ph0rque 14y ago

silentmars 14y ago
Decent basic points, but superficial and often missing the real underlying trends. For better analysis on the same general ideas, I recommend: http://www.ribbonfarm.com/2011/12/08/acting-dead-trading-up-and-leaving-the-middle-class/ http://www.ribbonfarm.com/2011/12/08/acting-dead-trading-up-... http://www.ribbonfarm.com/2011/06/08/a-brief-history-of-the-corporation-1600-to-2100/ http://www.ribbonfarm.com/2011/06/08/a-brief-history-of-the-... (ribbonfarm is my favorite blog)
- magoghm 14y ago
  Thank you for those links. Interesting analysis.
- pvdm 14y ago
  The ideas are ok but the writing is too dense, too verbose. Not my cup of tea.
CleanedStar 14y ago
When Karl Marx wrote Capital in 1867, he said capitalism would never be able to get rid of credit bubbles, financial crises, high unemployment etc. He said that over time the problems would get worse and worse with greater and greater financial crises. Here we are about a century and a half later and you just have to look at the housing bubble, the bank crisis, TARP and the government bailout, unemployment in the US and Europe and the Arab countries which helped cause the Arab spring to see how prophetic he was in this respect. Marx and Engels wrote that the world has seen five economic systems. Each system collapsed due to internal contradictions. The first system was hunting-gathering, then Babylonian/Greek/etc. style slavery, then feudalism, and then capitalism. They saw the Paris Commune as the harbinger for the next economic system which would replace capitalism. The central contradiction in capitalism Marx spells out clearly in Capital, although its a little too much to explain in a comment. Basically workers create $240 of wealth every eight hour work day, but are only paid $200 a day. The $40 goes to profit, to get more capital, to make more commodities. But what is happening here - the worker is shorted $40 a day, and what happens with that money is commodities are made. Who are going to buy all these commodities when workers are not getting all the wealth they create? Well credit fixes that in the short term but creates a bigger long term problem. The communist manifesto says "the commercial crises that by their periodic return put the existence of the entire bourgeois society on trial, each time more threateningly". I certainly feel this way. So apparently does Stratfor. On this point, the left and right are in agreement.
- seiji 14y ago
  Please keep writing more around here. We need people like you and comments like this.
  - martinced 14y ago
    No we don't. These are poisonous words made by people dreaming of a world made of slaves. Dreaming of a world where the word "freedom" would be forbidden. The last thing we need now in a time of crisis is socialists or communists trying to push their agenda.
    - cantankerous 14y ago
      No offense, but aren't you "pushing" an agenda as well? People are entitled to push their agendas in an open forum such as this. I, for one, welcome open and honest discussion in good faith.
    - Fluda3 14y ago
      I find HN to be quite rich, in both content and discussions about said content. I don't post because I usually don't have anything significant to add to the conversation. I have to say though, your comment deeply disturbs me. Those weren't poisonous words. And I highly doubt that his comment, which seems quite informative, comes from his "dreams of a world made of slaves". I can tell you're American. Constantly when I travel to the US, I get spoon fed this bullshit when people find out I'm Canadian. I have literally - on more than one occasion - had people tell me how they couldn't live in a "socialist" country like Canada. They then proceed to educate me (without any indication I want to hear shit about their opinions or beliefs) on the benefits of capitalism, how Obama is enslaving America, how universal health care is freedom lessening crap, and so on. It blows my mind the level of intolerance and subtle hatred. He's just being part of the discussion, providing opposing information and some of his opinions. Chill the fuck out.
      - tolmasky 14y ago
        I assure you that your "burden" of having to "constantly" listen to Americans educate you about socialism is more than outweighed by people like you assuming we are all one homogeneous mass that behaves that way ("I can tell you're American" followed by a lecture about the "blow your mind" level of intolerance and hatred here, as if that is uniquely American) I wonder how you maintain the cognitive dissonance that so many people here seem to hate Obama and Obamacare, yet somehow re-elect him. Must be confusing.
jonnycoder 14y ago
This article is a great explanation of what I've been thinking all along. The rising tide has been in efficiency and technology but every American is realizing these gains through computers, phones, and access to information. The baby boomers were able to get an education, buy a house, a car, have a kid and go on vacation, and all of those things have been squeezed to the breaking point in the past two generations. On the other hand, you can consume all you want on the internet, and with enough experience, cheat the system and download unlimited music, tv shows, movies, ebooks and software. If you want all the luxuries of the baby boomers, you have to be frugal and prioritize. Education: go to community college and transfer to a cheaper state school. Car: buy a cheap 90s honda. House: save for a down payment, but rent is still the same or cheaper than buying and you have flexibility to move. Kids: that may take more time.
- pjzedalis 14y ago
  You make it sound like a community college education and 90's Honda are bad things to have. They might not be as nice as your neighbor but it's certainly nicer than 100 years ago, no?
awakeasleep 14y ago
This sure fits an interesting middle ground sort of journalism. I don't think I'm quite qualified to describe it, anyone up to help? For one, it tackles the same insecurity subject conspiracy theorists like Alex Jones approach. However, he keeps it in the realm of rationality. What is the "It"? The main subject seems to be a description of the position and orientation of classes in USA society, and how they're changing. Now, why is this so different than what other publications publish? I've heard before that Class in America is a touchy subject, and I don't see it mentioned much in The New Yorker, the New York Times, on TV, or in any of the sites I read online. It seems like something in the idea of Classes conflicts with the Left/Right narrative you hear in 'the media'. Classes should have interests within themselves, not necessarily 100% split among party lines. And the media mostly tells the stories from party perspectives. Does that make sense to anyone? This is confusing to me.
- scarmig 14y ago
  Class is both very real and very touchy in the United States. But people use the term in a really broken way, typically trying to map arbitrary income groups with classes. Which is convenient for everyone: Democratic-aligned classes can try to maintain their privileged position using class rhetoric to bludgeon Republican-aligned classes, and Republican-aligned classes can deny class altogether and take advantage of real but ignored class rifts within the Democratic coalition. Of course, the classes at the bottom of the respective coalitions get screwed in the process. Which isn't to say that there's any grand lower-class coalition waiting to be made: disempowered classes align themselves in the partisan coalitions out of genuine self-interest, not out of false consciousness. They're just getting a disproportionately small serving of the winnings.
  - seliopou 14y ago
    > disempowered classes align themselves in the partisan coalitions out of genuine self-interest, not out of false consciousness. They're just getting a disproportionately small serving of the winnings. To quote John Steinbeck, "Socialism never took root in America because the poor see themselves not as an exploited proletariat but as temporarily embarrassed millionaires."
gz5 14y ago
surprised the corporate agility theme doesn't explicitly include globalization displacing former US-based middle class jobs? globalization has positive economic consequences for the US as a whole, but not to key parts of the displaced middle class, at least not yet?
pdonis 14y ago
One thing I don't see addressed here (or in other articles linked to in this thread): corporate governance. Abusing the standard corporate governance model, where shareholders delegate to a Board of Directors, is one of the key ways that rich people game the system.
- chii 14y ago
  can you explain a bit more about this? i dont understand how delegating to a board is an exploit.
  - pdonis 14y ago
    Delegating in itself isn't, but it opens up a security hole as soon as corporate executives realize they can game the system by becoming board members--both in their own companies and in each other's companies. If you look at most corporate boards today, they are composed of executives of other companies, and their main function is to allow said executives to rubber-stamp each other's golden parachutes.
    - ahpeeyem 14y ago
      http://theyrule.net/ http://theyrule.net/ This is pretty old now (2000-ish?) but is a pretty great graphical and interactive demonstration of how interlinked the big corporations' boardrooms are. Check out the 'popular maps' for some good examples. Edit: It was connected to littlesis.org in 2011 ("a free database of who-knows-who at the heights of business and government")
svdad 14y ago
I hope his analysts are better than he is. This is shockingly insubstantial analysis coming from the CEO of Stratfor.
mchannon 14y ago
I'm confused about the perceived dichotomy of taxation and private investment. If the government threatens to take their cash, wealthy individuals and entities will find ways to use that cash to further their wealth instead of giving it to the government. So if the government's taxes are too high, the wealthy won't have the money to invest, but if the taxes are too low, the wealthy have a no-risk, stable return on their cash- sitting on it. I think this is exactly what we're seeing- low taxes and low inflation are encouraging inefficient use of capital- putting it neither into consumption nor investment. Just as a wave of unemployment lays the basis for a more efficient workforce, couldn't a new wave of inflation (since taxes are politically impossible) right the ship?
- AnthonyMouse 14y ago
  The idea has possible merit, but I want to complain about how you're getting to it. For one thing, the implication that inflation is politically easy is probably not true. There is a large contingent of the right (e.g. the Ron Paul crowd) who are always running around talking about auditing the Fed and how fiat money is ruining everything, etc. More strategically, the people who have the greatest incentive to fight inflation are money lenders who own outstanding fixed rate debt, i.e. banks, and as we've learned recently the banks are not exactly without political influence. Though granted increasing the rate of inflation probably is politically easier than raising taxes. The second thing I want to question is this: >So if the government's taxes are too high, the wealthy won't have the money to invest, but if the taxes are too low, the wealthy have a no-risk, stable return on their cash- sitting on it. How does sitting on cash generate any return at all? You have to invest it in something to cause the value to increase, unless the value of money itself is actually increasing (i.e. a period of deflation), which is almost invariably its own brand of near-immediate catastrophic meltdown. But you're on the right track, because the problem at present is that they invest their money in safe investments, like treasury bonds, as opposed to higher risk private investments. The relationship between the investor purchase of government debt and economic growth is very squishy: It's effectively investing in the government. Higher demand for government debt reduces the interest rate the government pays. The money not paid in additional interest by government is then put back into the hands of Congress which it can use to either reduce taxes or fund additional programs at the same level of outstanding debt principal. If the government uses the money wisely then it helps the economy; if they use it inefficiently (or just less efficiently than private enterprise would have) then it hurts. Naturally this leads to all of the arguments about who should get tax cuts and whether government spending, or what kind of government spending, is better for the economy than putting the money in the hands of private enterprise. But the other compounding factor is that the normal way we know of to cause inflation is for the Fed to print money and buy government securities with it. This will certainly drive private investors away from government securities, because you simultaneously have the Fed bidding down nominal the interest rate and the inflation reducing the real returns at a given nominal rate, but that doesn't mean you don't you still have the same amount (or more) of capital being "invested" in the government (i.e. the real interest government pays on capital goes down not up), it's just that the Fed is doing the investing with newly created money instead of private enterprise doing it. Furthermore, if you drive the private investors away from government securities, the question becomes what they invest in instead. This is the flip side of the "who should get tax cuts and what should taxes buy" question: If investors tend to take their money and invest in R&D then we're in business. If they tend to do commodity speculating with it then we're in trouble. It pretty much seems to come down to this: We need to find a way to get investors to invest in things that help the economy. "Quantitative easing" may cause them to do that either if the default private alternative to government securities is economically beneficial, or if we can arrange for it to be using e.g. tax incentives or government subsidies.
jeffdavis 14y ago
I would be interested to see more statistics and trends of people over time. Many of the statistics I see divide people into classes by income, but ignore the fact that the people within those classes change. For instance, let's say that people in the next generation decide to go to college for 10 more years, leaving at 32 rather than 22. Then, when they get out, they make 50% more income than the previous generation. Overall, they might be better off throughout their life; but the statistics will make it look like there is a huge lower class (who are in fact just young and haven't reaped the benefits of their education yet). The more our earning is concentrated to a small part of our lives, the more it will look like class divisions. And depending on how the accounting is done, the upper classes may consist largely of people with temporarily high incomes (from inheritance, selling a house, etc.). [None of the above is meant to imply that there is not a problem. Just that statistics can be deceptive, and can hide the real solutions from us.] EDIT: Specifically, I think it would be interesting to divide people into classes like: "X% of people will see an income over $80K sometime during their lives". That seems like a better indicator of opportunity to me.
- scarmig 14y ago
  You see that same issue when people complain that X% of the population doesn't pay income taxes: it's true, as far as it goes, but it ignores that people nowadays have extended periods of studenthood, sabbaticals, and partial retirement (among other things). The daughter of two professors working on a PhD in mathematics is not of a lower class than a high school educated waitress, despite making a similar amount. I dug up this paper, which seems like it might address it. Going to dig into it sometime after work: http://economics.sas.upenn.edu/~manovski/papers/accounting_for_profiles.pdf http://economics.sas.upenn.edu/~manovski/papers/accounting_f...
  - jeffdavis 14y ago
    Interesting, thank you (haven't read it yet, but the first page looks promising).
- bhntr3 14y ago
  It's an interesting argument that I've heard many times in different ways. I'm inclined to think there's some truth to it. But when you look at trends, income is stagnant, wages are stagnant AND measures of social mobility are low as well as studies that show a lack of evidence for second and third generation immigrants being significantly better off. That plus the (admittedly anecdotal) evidence that single earner lower middle class families who own their homes and cars are much rarer seems to indicate that the shrinking middle class is a reality (measured mostly by some vague "quality of life" metric.) So it's complicated. The most compelling argument I've heard is that necessities are getting more expensive relative to general inflation (gas, food, housing) On the other hand, what you get for your money is much more advanced now technologically. So it's not like we're strictly speaking worse off even if our relative purchasing power has decreased.
rdtsc 14y ago
> The expectation of rising real incomes was built into the American culture Ah that's the classic propaganda line: "I am not poor, I am just pre-wealthy." ...So I sure don't want to vote for anything that would jeopardize my wealthy position when I get there. The key in all of this is ability to manipulate the people into believing and voting in a particular way. US has no shortage of zombies who don't think on their won. Blame the education system, blame the system as a whole, I don' t know. As long as people don't base their votes on reality they will end up voting against their own good because they are being manipulated. Basic health care, tax cuts for the super rich, trickle down wealth, futile wars, all this things are being delegated (via votes) from un-informed people to the politicians via a manipulative process. I see this within my own extended family, I see it on the streets, in the stores, in school and at work.
- acabal 14y ago
  I've said for a long time the basic problem in the States isn't capitalism vs. socialism or rich vs. poor, but rather educated vs. uneducated. I think I'm not being out of line to claim that on the average an American's high-school-level education is pretty poor. People who are victims of poor education don't know history (which is rich in examples of past policy), can't think critically or reason about potential outcomes, and don't know to sometimes be healthily skeptical of things they're told. Those kinds of people will never be able to vote in their best interests because they have no idea what their interests even are, because they're easily manipulated, and because they're incapable of reasoning critically about even the most basic policy decisions. That's how you wind up with people holding up picket signs saying "Obama=socialism" on one side and "Keep your hands off my Medicare" on the other. The problem is basic education.
  - bhntr3 14y ago
    > I think I'm not being out of line to claim that on the average an American's high-school-level education is pretty poor. The thing is that it's not really that true. Here's a typical article on Huffington Post bemoaning the American education system: http://www.huffingtonpost.com/2012/07/23/us-students-still-lag-beh_n_1695516.html http://www.huffingtonpost.com/2012/07/23/us-students-still-l... But if you read it carefully, the truth is that we're not getting worse. We're just not getting better as fast as others. We used to be the best. Now we're in the middle. We're not worse than we were 60 years ago. We're better. Other countries have just gotten better much faster. Which is a trend that applies to a lot in America these days. Education IS improving. So, I think anything that tries to relate an absolute decline to "the failure of our schools" is wrong. Maybe that's not your point though. The thing is that what you describe at the beginning of your post is actually typically human. Experiments have shown we all have cognitive biases that make us bad at "being skeptical" and "reasoning about potential outcomes" or using past examples to predict future events (even when we're well educated.) Humans are just not good at doing that stuff. We can overcome our biases but that's not really taught in school. You can read about a lot of it at http://lesswrong.com/ http://lesswrong.com/ So I don't think it's that helpful to bundle up people who struggle with cognitive biases as "Those kinds of people" There's a chance that "our kind of people", aka people who read hacker news, are much better at being rational but it's probably because we've taught ourselves to think like computers! Because that's a big part of what being a hacker is.
ilaksh 14y ago
Great points in this article and I agree with just about everything. But I think that to really understand the problem you have to look at things from a wider and more fundamental perspective. First of all, the United States and what is happening to it does not exist in a vacuum. The US is part of a global system which has a lot of integration. We need to look at actual human needs and real resource distribution on a global basis to understand the problem and come up with a solution. We need to tie our financial and business calculations into human and environmental needs in a direct way rather than relying on indirect regulation by government. We also need to come up with a system that factors in massive technological unemployment, including large sectors of the professional workforce. I think there are probably several different approaches that will work, but you have to get away from the typical 'economic' arguments and go at things from a more fundamental level. I believe the key is to find ways to ensure the application and distribution of technologies that meet human needs. We may need some new types of institutions.
pinaceae 14y ago
Related to this, Showtime is currently airing a rather brilliant set of documentaries narrated by Oliver Stone called the 'Untold History of the United States'. It basically puts this article into broader context, from the entry to WW2 onward. Would be interesting to know how much different the reception of those documentaries is for a US-educated citizen. They definitely fit to the overall history being taught over here in Europe, but might conflict heavily with the official narrative in the US.
- mcantelon 14y ago
  I'm currently watching that series... interesting stuff. Another must, for any who haven't seen it, is the British documentary series "Century of the Self", about American conditioning specifically.
  - macavity23 14y ago
    'Century of the Self' is indeed amazing (as is everything else by Adam Curtis) and can be found for free here: http://topdocumentaryfilms.com/the-century-of-the-self/ http://topdocumentaryfilms.com/the-century-of-the-self/ It's not specifically about American conditioning though... it starts with Freud (Austria, then UK), wanders off to Edward Bernays (Austria, the US), talks about the US PR/Advertising industry for a while (totally fascinating to bear in mind while watching 'Mad Men' IMHO) and then ends up with Tony Blair (UK) via Bill Clinton. Thanks for the Showtime documentary pointer - will look that up.
ucee054 14y ago
If we move to a system where half of the country is either stagnant or losing ground while the other half is surging, the social fabric of the United States is at risk, and with it the massive global power the United States has accumulated. Translation: If half the US citizenry is utterly suffering, we won't be able to keep drone-bombing Yemeni infants, Oh the horrors! You'd think that preventing the suffering of half of the USA might be an aim in itself. Also, what's wrong with leaving the Yemeni children alone? Oh, I forgot, we want to provoke more terrorism. Maybe even hit the jackpot and start World War 3. What a stupid article.
csense 14y ago
Globalization is much of the reason. When unions were strong (c. 1950-1980), they were essentially a monopoly on certain types of workers that were vital to production in many industries. This monopoly allowed the workers to extract a larger proportion of the value of this industrial production through higher wages. With the US focus on free trade (c. 1975-present), the unions no longer had a monopoly on labor, since companies could now find labor in other countries. Labor could no longer enforce their favorable monopoly pricing. (They tried, and had some success in the US, but often the "victory" caused companies or factories that paid good wages to their workers to be uncompetitive with overseas companies or factories that did not, and forced to close.) The bottom line is that I'm very much afraid that globalization and a rising middle class are mutually exclusive, and will continue to be so for several decades.

100 points by ph0rque 14y ago

Decent basic points, but superficial and often missing the real underlying trends. For better analysis on the same general ideas, I recommend: http://www.ribbonfarm.com/2011/12/08/acting-dead-trading-up-and-leaving-the-middle-class/ http://www.ribbonfarm.com/2011/12/08/acting-dead-trading-up-... http://www.ribbonfarm.com/2011/06/08/a-brief-history-of-the-corporation-1600-to-2100/ http://www.ribbonfarm.com/2011/06/08/a-brief-history-of-the-... (ribbonfarm is my favorite blog)

magoghm 14y ago
Thank you for those links. Interesting analysis.
pvdm 14y ago
The ideas are ok but the writing is too dense, too verbose. Not my cup of tea.

CleanedStar 14y ago

When Karl Marx wrote Capital in 1867, he said capitalism would never be able to get rid of credit bubbles, financial crises, high unemployment etc. He said that over time the problems would get worse and worse with greater and greater financial crises. Here we are about a century and a half later and you just have to look at the housing bubble, the bank crisis, TARP and the government bailout, unemployment in the US and Europe and the Arab countries which helped cause the Arab spring to see how prophetic he was in this respect. Marx and Engels wrote that the world has seen five economic systems. Each system collapsed due to internal contradictions. The first system was hunting-gathering, then Babylonian/Greek/etc. style slavery, then feudalism, and then capitalism. They saw the Paris Commune as the harbinger for the next economic system which would replace capitalism. The central contradiction in capitalism Marx spells out clearly in Capital, although its a little too much to explain in a comment. Basically workers create $240 of wealth every eight hour work day, but are only paid $200 a day. The $40 goes to profit, to get more capital, to make more commodities. But what is happening here - the worker is shorted $40 a day, and what happens with that money is commodities are made. Who are going to buy all these commodities when workers are not getting all the wealth they create? Well credit fixes that in the short term but creates a bigger long term problem. The communist manifesto says "the commercial crises that by their periodic return put the existence of the entire bourgeois society on trial, each time more threateningly". I certainly feel this way. So apparently does Stratfor. On this point, the left and right are in agreement.

seiji 14y ago
Please keep writing more around here. We need people like you and comments like this.
- martinced 14y ago
  No we don't. These are poisonous words made by people dreaming of a world made of slaves. Dreaming of a world where the word "freedom" would be forbidden. The last thing we need now in a time of crisis is socialists or communists trying to push their agenda.
  - cantankerous 14y ago
    No offense, but aren't you "pushing" an agenda as well? People are entitled to push their agendas in an open forum such as this. I, for one, welcome open and honest discussion in good faith.
  - Fluda3 14y ago
    I find HN to be quite rich, in both content and discussions about said content. I don't post because I usually don't have anything significant to add to the conversation. I have to say though, your comment deeply disturbs me. Those weren't poisonous words. And I highly doubt that his comment, which seems quite informative, comes from his "dreams of a world made of slaves". I can tell you're American. Constantly when I travel to the US, I get spoon fed this bullshit when people find out I'm Canadian. I have literally - on more than one occasion - had people tell me how they couldn't live in a "socialist" country like Canada. They then proceed to educate me (without any indication I want to hear shit about their opinions or beliefs) on the benefits of capitalism, how Obama is enslaving America, how universal health care is freedom lessening crap, and so on. It blows my mind the level of intolerance and subtle hatred. He's just being part of the discussion, providing opposing information and some of his opinions. Chill the fuck out.
    - tolmasky 14y ago
      I assure you that your "burden" of having to "constantly" listen to Americans educate you about socialism is more than outweighed by people like you assuming we are all one homogeneous mass that behaves that way ("I can tell you're American" followed by a lecture about the "blow your mind" level of intolerance and hatred here, as if that is uniquely American) I wonder how you maintain the cognitive dissonance that so many people here seem to hate Obama and Obamacare, yet somehow re-elect him. Must be confusing.

jonnycoder 14y ago

This article is a great explanation of what I've been thinking all along. The rising tide has been in efficiency and technology but every American is realizing these gains through computers, phones, and access to information. The baby boomers were able to get an education, buy a house, a car, have a kid and go on vacation, and all of those things have been squeezed to the breaking point in the past two generations. On the other hand, you can consume all you want on the internet, and with enough experience, cheat the system and download unlimited music, tv shows, movies, ebooks and software. If you want all the luxuries of the baby boomers, you have to be frugal and prioritize. Education: go to community college and transfer to a cheaper state school. Car: buy a cheap 90s honda. House: save for a down payment, but rent is still the same or cheaper than buying and you have flexibility to move. Kids: that may take more time.

pjzedalis 14y ago
You make it sound like a community college education and 90's Honda are bad things to have. They might not be as nice as your neighbor but it's certainly nicer than 100 years ago, no?

awakeasleep 14y ago

This sure fits an interesting middle ground sort of journalism. I don't think I'm quite qualified to describe it, anyone up to help? For one, it tackles the same insecurity subject conspiracy theorists like Alex Jones approach. However, he keeps it in the realm of rationality. What is the "It"? The main subject seems to be a description of the position and orientation of classes in USA society, and how they're changing. Now, why is this so different than what other publications publish? I've heard before that Class in America is a touchy subject, and I don't see it mentioned much in The New Yorker, the New York Times, on TV, or in any of the sites I read online. It seems like something in the idea of Classes conflicts with the Left/Right narrative you hear in 'the media'. Classes should have interests within themselves, not necessarily 100% split among party lines. And the media mostly tells the stories from party perspectives. Does that make sense to anyone? This is confusing to me.

scarmig 14y ago
Class is both very real and very touchy in the United States. But people use the term in a really broken way, typically trying to map arbitrary income groups with classes. Which is convenient for everyone: Democratic-aligned classes can try to maintain their privileged position using class rhetoric to bludgeon Republican-aligned classes, and Republican-aligned classes can deny class altogether and take advantage of real but ignored class rifts within the Democratic coalition. Of course, the classes at the bottom of the respective coalitions get screwed in the process. Which isn't to say that there's any grand lower-class coalition waiting to be made: disempowered classes align themselves in the partisan coalitions out of genuine self-interest, not out of false consciousness. They're just getting a disproportionately small serving of the winnings.
- seliopou 14y ago
  > disempowered classes align themselves in the partisan coalitions out of genuine self-interest, not out of false consciousness. They're just getting a disproportionately small serving of the winnings. To quote John Steinbeck, "Socialism never took root in America because the poor see themselves not as an exploited proletariat but as temporarily embarrassed millionaires."

gz5 14y ago

surprised the corporate agility theme doesn't explicitly include globalization displacing former US-based middle class jobs? globalization has positive economic consequences for the US as a whole, but not to key parts of the displaced middle class, at least not yet?

pdonis 14y ago

One thing I don't see addressed here (or in other articles linked to in this thread): corporate governance. Abusing the standard corporate governance model, where shareholders delegate to a Board of Directors, is one of the key ways that rich people game the system.

chii 14y ago
can you explain a bit more about this? i dont understand how delegating to a board is an exploit.
- pdonis 14y ago
  Delegating in itself isn't, but it opens up a security hole as soon as corporate executives realize they can game the system by becoming board members--both in their own companies and in each other's companies. If you look at most corporate boards today, they are composed of executives of other companies, and their main function is to allow said executives to rubber-stamp each other's golden parachutes.
  - ahpeeyem 14y ago
    http://theyrule.net/ http://theyrule.net/ This is pretty old now (2000-ish?) but is a pretty great graphical and interactive demonstration of how interlinked the big corporations' boardrooms are. Check out the 'popular maps' for some good examples. Edit: It was connected to littlesis.org in 2011 ("a free database of who-knows-who at the heights of business and government")

svdad 14y ago

I hope his analysts are better than he is. This is shockingly insubstantial analysis coming from the CEO of Stratfor.

mchannon 14y ago

I'm confused about the perceived dichotomy of taxation and private investment. If the government threatens to take their cash, wealthy individuals and entities will find ways to use that cash to further their wealth instead of giving it to the government. So if the government's taxes are too high, the wealthy won't have the money to invest, but if the taxes are too low, the wealthy have a no-risk, stable return on their cash- sitting on it. I think this is exactly what we're seeing- low taxes and low inflation are encouraging inefficient use of capital- putting it neither into consumption nor investment. Just as a wave of unemployment lays the basis for a more efficient workforce, couldn't a new wave of inflation (since taxes are politically impossible) right the ship?

AnthonyMouse 14y ago
The idea has possible merit, but I want to complain about how you're getting to it. For one thing, the implication that inflation is politically easy is probably not true. There is a large contingent of the right (e.g. the Ron Paul crowd) who are always running around talking about auditing the Fed and how fiat money is ruining everything, etc. More strategically, the people who have the greatest incentive to fight inflation are money lenders who own outstanding fixed rate debt, i.e. banks, and as we've learned recently the banks are not exactly without political influence. Though granted increasing the rate of inflation probably is politically easier than raising taxes. The second thing I want to question is this: >So if the government's taxes are too high, the wealthy won't have the money to invest, but if the taxes are too low, the wealthy have a no-risk, stable return on their cash- sitting on it. How does sitting on cash generate any return at all? You have to invest it in something to cause the value to increase, unless the value of money itself is actually increasing (i.e. a period of deflation), which is almost invariably its own brand of near-immediate catastrophic meltdown. But you're on the right track, because the problem at present is that they invest their money in safe investments, like treasury bonds, as opposed to higher risk private investments. The relationship between the investor purchase of government debt and economic growth is very squishy: It's effectively investing in the government. Higher demand for government debt reduces the interest rate the government pays. The money not paid in additional interest by government is then put back into the hands of Congress which it can use to either reduce taxes or fund additional programs at the same level of outstanding debt principal. If the government uses the money wisely then it helps the economy; if they use it inefficiently (or just less efficiently than private enterprise would have) then it hurts. Naturally this leads to all of the arguments about who should get tax cuts and whether government spending, or what kind of government spending, is better for the economy than putting the money in the hands of private enterprise. But the other compounding factor is that the normal way we know of to cause inflation is for the Fed to print money and buy government securities with it. This will certainly drive private investors away from government securities, because you simultaneously have the Fed bidding down nominal the interest rate and the inflation reducing the real returns at a given nominal rate, but that doesn't mean you don't you still have the same amount (or more) of capital being "invested" in the government (i.e. the real interest government pays on capital goes down not up), it's just that the Fed is doing the investing with newly created money instead of private enterprise doing it. Furthermore, if you drive the private investors away from government securities, the question becomes what they invest in instead. This is the flip side of the "who should get tax cuts and what should taxes buy" question: If investors tend to take their money and invest in R&D then we're in business. If they tend to do commodity speculating with it then we're in trouble. It pretty much seems to come down to this: We need to find a way to get investors to invest in things that help the economy. "Quantitative easing" may cause them to do that either if the default private alternative to government securities is economically beneficial, or if we can arrange for it to be using e.g. tax incentives or government subsidies.

jeffdavis 14y ago

I would be interested to see more statistics and trends of people over time. Many of the statistics I see divide people into classes by income, but ignore the fact that the people within those classes change. For instance, let's say that people in the next generation decide to go to college for 10 more years, leaving at 32 rather than 22. Then, when they get out, they make 50% more income than the previous generation. Overall, they might be better off throughout their life; but the statistics will make it look like there is a huge lower class (who are in fact just young and haven't reaped the benefits of their education yet). The more our earning is concentrated to a small part of our lives, the more it will look like class divisions. And depending on how the accounting is done, the upper classes may consist largely of people with temporarily high incomes (from inheritance, selling a house, etc.). [None of the above is meant to imply that there is not a problem. Just that statistics can be deceptive, and can hide the real solutions from us.] EDIT: Specifically, I think it would be interesting to divide people into classes like: "X% of people will see an income over $80K sometime during their lives". That seems like a better indicator of opportunity to me.

scarmig 14y ago
You see that same issue when people complain that X% of the population doesn't pay income taxes: it's true, as far as it goes, but it ignores that people nowadays have extended periods of studenthood, sabbaticals, and partial retirement (among other things). The daughter of two professors working on a PhD in mathematics is not of a lower class than a high school educated waitress, despite making a similar amount. I dug up this paper, which seems like it might address it. Going to dig into it sometime after work: http://economics.sas.upenn.edu/~manovski/papers/accounting_for_profiles.pdf http://economics.sas.upenn.edu/~manovski/papers/accounting_f...
- jeffdavis 14y ago
  Interesting, thank you (haven't read it yet, but the first page looks promising).
bhntr3 14y ago
It's an interesting argument that I've heard many times in different ways. I'm inclined to think there's some truth to it. But when you look at trends, income is stagnant, wages are stagnant AND measures of social mobility are low as well as studies that show a lack of evidence for second and third generation immigrants being significantly better off. That plus the (admittedly anecdotal) evidence that single earner lower middle class families who own their homes and cars are much rarer seems to indicate that the shrinking middle class is a reality (measured mostly by some vague "quality of life" metric.) So it's complicated. The most compelling argument I've heard is that necessities are getting more expensive relative to general inflation (gas, food, housing) On the other hand, what you get for your money is much more advanced now technologically. So it's not like we're strictly speaking worse off even if our relative purchasing power has decreased.

rdtsc 14y ago

> The expectation of rising real incomes was built into the American culture Ah that's the classic propaganda line: "I am not poor, I am just pre-wealthy." ...So I sure don't want to vote for anything that would jeopardize my wealthy position when I get there. The key in all of this is ability to manipulate the people into believing and voting in a particular way. US has no shortage of zombies who don't think on their won. Blame the education system, blame the system as a whole, I don' t know. As long as people don't base their votes on reality they will end up voting against their own good because they are being manipulated. Basic health care, tax cuts for the super rich, trickle down wealth, futile wars, all this things are being delegated (via votes) from un-informed people to the politicians via a manipulative process. I see this within my own extended family, I see it on the streets, in the stores, in school and at work.

acabal 14y ago
I've said for a long time the basic problem in the States isn't capitalism vs. socialism or rich vs. poor, but rather educated vs. uneducated. I think I'm not being out of line to claim that on the average an American's high-school-level education is pretty poor. People who are victims of poor education don't know history (which is rich in examples of past policy), can't think critically or reason about potential outcomes, and don't know to sometimes be healthily skeptical of things they're told. Those kinds of people will never be able to vote in their best interests because they have no idea what their interests even are, because they're easily manipulated, and because they're incapable of reasoning critically about even the most basic policy decisions. That's how you wind up with people holding up picket signs saying "Obama=socialism" on one side and "Keep your hands off my Medicare" on the other. The problem is basic education.
- bhntr3 14y ago
  > I think I'm not being out of line to claim that on the average an American's high-school-level education is pretty poor. The thing is that it's not really that true. Here's a typical article on Huffington Post bemoaning the American education system: http://www.huffingtonpost.com/2012/07/23/us-students-still-lag-beh_n_1695516.html http://www.huffingtonpost.com/2012/07/23/us-students-still-l... But if you read it carefully, the truth is that we're not getting worse. We're just not getting better as fast as others. We used to be the best. Now we're in the middle. We're not worse than we were 60 years ago. We're better. Other countries have just gotten better much faster. Which is a trend that applies to a lot in America these days. Education IS improving. So, I think anything that tries to relate an absolute decline to "the failure of our schools" is wrong. Maybe that's not your point though. The thing is that what you describe at the beginning of your post is actually typically human. Experiments have shown we all have cognitive biases that make us bad at "being skeptical" and "reasoning about potential outcomes" or using past examples to predict future events (even when we're well educated.) Humans are just not good at doing that stuff. We can overcome our biases but that's not really taught in school. You can read about a lot of it at http://lesswrong.com/ http://lesswrong.com/ So I don't think it's that helpful to bundle up people who struggle with cognitive biases as "Those kinds of people" There's a chance that "our kind of people", aka people who read hacker news, are much better at being rational but it's probably because we've taught ourselves to think like computers! Because that's a big part of what being a hacker is.

ilaksh 14y ago

Great points in this article and I agree with just about everything. But I think that to really understand the problem you have to look at things from a wider and more fundamental perspective. First of all, the United States and what is happening to it does not exist in a vacuum. The US is part of a global system which has a lot of integration. We need to look at actual human needs and real resource distribution on a global basis to understand the problem and come up with a solution. We need to tie our financial and business calculations into human and environmental needs in a direct way rather than relying on indirect regulation by government. We also need to come up with a system that factors in massive technological unemployment, including large sectors of the professional workforce. I think there are probably several different approaches that will work, but you have to get away from the typical 'economic' arguments and go at things from a more fundamental level. I believe the key is to find ways to ensure the application and distribution of technologies that meet human needs. We may need some new types of institutions.

pinaceae 14y ago

Related to this, Showtime is currently airing a rather brilliant set of documentaries narrated by Oliver Stone called the 'Untold History of the United States'. It basically puts this article into broader context, from the entry to WW2 onward. Would be interesting to know how much different the reception of those documentaries is for a US-educated citizen. They definitely fit to the overall history being taught over here in Europe, but might conflict heavily with the official narrative in the US.

mcantelon 14y ago
I'm currently watching that series... interesting stuff. Another must, for any who haven't seen it, is the British documentary series "Century of the Self", about American conditioning specifically.
- macavity23 14y ago
  'Century of the Self' is indeed amazing (as is everything else by Adam Curtis) and can be found for free here: http://topdocumentaryfilms.com/the-century-of-the-self/ http://topdocumentaryfilms.com/the-century-of-the-self/ It's not specifically about American conditioning though... it starts with Freud (Austria, then UK), wanders off to Edward Bernays (Austria, the US), talks about the US PR/Advertising industry for a while (totally fascinating to bear in mind while watching 'Mad Men' IMHO) and then ends up with Tony Blair (UK) via Bill Clinton. Thanks for the Showtime documentary pointer - will look that up.

ucee054 14y ago

If we move to a system where half of the country is either stagnant or losing ground while the other half is surging, the social fabric of the United States is at risk, and with it the massive global power the United States has accumulated. Translation: If half the US citizenry is utterly suffering, we won't be able to keep drone-bombing Yemeni infants, Oh the horrors! You'd think that preventing the suffering of half of the USA might be an aim in itself. Also, what's wrong with leaving the Yemeni children alone? Oh, I forgot, we want to provoke more terrorism. Maybe even hit the jackpot and start World War 3. What a stupid article.

csense 14y ago

Globalization is much of the reason. When unions were strong (c. 1950-1980), they were essentially a monopoly on certain types of workers that were vital to production in many industries. This monopoly allowed the workers to extract a larger proportion of the value of this industrial production through higher wages. With the US focus on free trade (c. 1975-present), the unions no longer had a monopoly on labor, since companies could now find labor in other countries. Labor could no longer enforce their favorable monopoly pricing. (They tried, and had some success in the US, but often the "victory" caused companies or factories that paid good wages to their workers to be uncompetitive with overseas companies or factories that did not, and forced to close.) The bottom line is that I'm very much afraid that globalization and a rising middle class are mutually exclusive, and will continue to be so for several decades.