patrick.net

(Peter P, top this!)

I believe we're living near the end of history, so whether the middle class is a historical aberration or not is irrelevant.

astrid,

Please elaborate.

My theory is that the tax structure in the U.S., which has placed a heavier burden on the middle class, has driven those in the middle class to seek a higher class where they can enjoy tax shelters. For those who can chase the dollar endlessly, and were shrewd enough to create wealth out of thin air, they can indeed move up. For those who thought work hard, play by the rules, and everything will be fine...well, they are finding themselves suddenly not so middle class.

I think it's a generational shift as well. My parents and their parents never bought a single stock. My siblings and I and our cohort could not imagine life without a portfolio. So the average Joe has become much more savvy in the market and the things that make the economy tick.

Probably a lame theory but it's an interesting thought exercise. I have also wondered about what middle class even means anymore, in terms of monetary wealth. A middle class person in San Francisco is considered wealthy in many other parts of the US.

Great topic HARM.

Thanks, LSR!

I agree the rules of the game have definitely changed since our parent's (mostly Boomer & Silent) generations.

I believe we’re living near the end of history, so whether the middle class is a historical aberration or not is irrelevant.

The end of history? Huh?

I believe we’re living near the end of history, so whether the middle class is a historical aberration or not is irrelevant.

I see. Your sophistry is not bad either.

But whether we are living near the end of history is moot. History will have never existed if we go outside of the picture.

But, although the gap is growing, I think the overall standard of living for the mass middle class has improved tremendously. Everything is relative.

Very true. Just 10 years again, even the wealthiest CEOs did not have iPods. Now we have virtual worlds in which poor people can be rich and ugly people can engage in cartoon sex.

Those who with the same salaries, but who bought property over the years, and over the past 10 years especially have seen their Asset Column grow at a faster rate than those with the same income who rented.

Asset owners have always been, are presently, and will always be the overlords of the salaried servants. This fact is not up for discussion.

The thing in question is whether acquiring certain assets at certain price level is wise.

HARM,

Other than a way to spur Peter P into greater sophistry?

Well, I believe our technological capability is outpacing humanity's coping ability. We're soon due for either some kind of a radical realignment of human civilization or total destruction. The outcome of either case can be said to be the "end of history" in which our current concept of class and civilization will be obliviated.

But, although the gap is growing, I think the overall standard of living for the mass middle class has improved tremendously. Everything is relative.

I disagree. 35 years ago, your average middle-class college graduate my age would have a nearly paid-for house (if not 2), job security and employer-provided health insurance --even in CA. Now he has crushing student loan debt, no job security, little if any employer-provided health insurance, and can only afford a starter house with a neg-am NINJA special.

Cartoon sex and iPods are very nice, but they don't quite compensate for the astonishing drop in my overall standard of living vs. the Boomer generation.

It’s about changing perspective and spending energy improving oneself, rather than hoping those who have more than us start losing, so we can catch up.

This misstates the primary concerns over rising inequality. I recommend re-reading the thread topic. No one wants the successful to "lose" or an undeserved handout at the expense of productive people. It's all about providing a fair opportunity for everyone, so we end up with a better, happier, and more stable society that benefits all.

BB, I think you missed HARM's point. It's no longer about renting property versus owning property, it's about renting property versus renting money. RE, like the very definition of middle class, has shifted over the years. Middle class used to mean that you had a mortgage, period. The idea of a middle class family which rents property is a new phenomena. In regions like the Bay Area, this is more obvious and prevalent. Six-figure earners who cannot or do not buy mortgages are quite common now. That just was not the case 20 years ago. And that's where the questions begin....why is that? Is is that there are just proportionally more people who like to sit around and be bitter, and wish ill will upon the wealthy? Or might there be another reason?

Is is that there are just proportionally more people who like to sit around and be bitter, and wish ill will upon the wealthy? Or might there be another reason?

Exportation of all manufacturing to Chindia by greedy boomer fucks (GBF) whose sole motivation is making their stock rise by 2% so they can collect their extra fucking bonus? Ok how about the gutting of benefits so GBF stock can go up 2 pts? Or was it just the very savvy GBF that figured out less for others equals more for them? Or was it changing the scope of the game so that entry is all but impossible to Gen-Xrs?

Or maybe it's just that I like sitting around and being bitter.

good topic harm - my impassioned posts must be having an effect ;)

good point, surfer -- we are seeing increasingly unscrupulous behaviour from people with their hands on the reins with increasingly large sums of money being moved about in increasingly mysterious ways. consequently, there has been a 'hollowing out of the diamond' of the middle class to a pyramid structure. even property speculation has gone right down to the middle middle class as a practice as a result of easy credit.

- The devolution of our economy, from “free market” capitalism, based (at least somewhat) on the concepts of rule-of-law, meritocracy, competition and personal responsibility, to one based more on kleptocracy, plutocracy, corruption, and political connections.

- The growing phenomenon of “Privatize Profits, Socialize Risks”, where politically well connected big businesses and de-facto cartels attempt to insulate themselves from competition, and seek to transfer the consequences of their own bad financial decisions to taxpayers, via federal laws, subsidies and bailouts.

very well written topic, but on these two points I'm not sure that it hasn't ever been thus. there is a 'two tier' system of entitlement, where it's the meritocracy and gruelling HR selection processes for the average joe, and establishment favouritism, nepotism and cronyism for the elite.

the 50s and 60s saw a temporary burst of relative wellbeing and elevation of the working class to a middle class quality of life. I guess we are seeing that project unwind now, through the very application of avowed principles of 'free market capitalism' (when it suits the elite) -- I disagree that a 'free market' is guaranteed to provide good social outcomes by itself, you also had a lot of New Deal policies, GI resettlement an education programs, and a generally booming economy to thank for full employment and increasing income during those decades -- 'free market capitalism' I guess only served to facilitate the more rapid creation of the wealth as the engine-room of the economy, but not to drive social policy -- this is an essential point of difference...

an interesting development here -- the husband of a Federal shadow Minister, convicted at 19 for trafficking heroin and did 3 years in stir for it, was offered the unadvertised position of Director-General of Education at $387K. he has a hyphenated name and went to an exclusive boys school. only thing is, this is the 'Labor' party pulling the strings, also prone to nepotism... in the two tier meritocracy, it's not what you know, it's who you know...

@Muggy,

Thanks. Check out the "Black Swan" concept: http://en.wikipedia.org/wiki/Black_swan_theory

@DS,

Glad you're pleased by my choice of topic :). Perhaps we can both enhance our knowledge by considering the other's POV once in a while. Constructive dialog sure beats shouting matches any day.

I love your style Surfer-X. You remind me of Jon Stewart. I hope you take that as a compliment, because that's how I mean it.

We should take some solice in the fact that Chindians are human too. Outsourcing will come back to bite corporate America.

There are a few blogs about the RE bubble in India. Here's one for starters: http://ecophilo.blogspot.com/2005/03/real-estate-boom-in-india-bangalore.html

Sounds so familar, doesn't it?

Is Different Sean-style socia1ism the only way?

whatever that looks like. here it’s worth researching the ’social democracies’ of northern europe. I would argue that it’s not ‘Communism’ that’s failed in the 2nd world (whatever that was supposed to look like) but a loss of faith in the promises of totalitarian states.

is there any correlation with the Press Freedom Index that comes out each year(/some years)?

very well written topic, but on these two points I’m not sure that it hasn’t ever been thus. there is a ‘two tier’ system of entitlement, where it’s the meritocracy and gruelling HR selection processes for the average joe, and establishment favouritism, nepotism and cronyism for the elite.

I agree that American --or W. European-- style capitalism has never created a complete "meritocracy" in the truest sense of the word, and probably never will. That's a utopian pipe dream. However, as you pointed out, things have grown strikingly more un-equal and bifurcated in my short lifetime.

the 50s and 60s saw a temporary burst of relative wellbeing and elevation of the working class to a middle class quality of life. I guess we are seeing that project unwind now, through the very application of avowed principles of ‘free market capitalism’ (when it suits the elite) — I disagree that a ‘free market’ is guaranteed to provide good social outcomes by itself,

If you look back on previous posts on the subject, neither I nor most others here (esp Randy H) see the "free market" as some sort of automatic, magical entity, completely independent of human policy. Quite the contrary, "free" markets are designed, created and maintained only through human effort. The object of those efforts has a huge impact on the results.

I have always thought of Peter P as a Stephen Colbert doppleganger.

Quite the contrary, “free” markets are designed, created and maintained only through human effort. The object of those efforts has a huge impact on the results.

well yes, I would argue that the market is like a car, and no more intelligent. do you want to drive the car somewhere in a purposive way to benefit the driver, or do you just lash a brick to the accelerator and jump out and see where it goes?

HARM,

How do we provide a ‘fair opportunity’ for all as you write? It is what it is, and we can only help ourselves.

This is a very difficult question, and a complete answer would be impossible to post here. However, the short answer is: by not consciously rigging the political & economic system to automatically reward theft, fraud, corruption, nepotism and influence peddling. (Easier said than done, I know.)

We are all individuals, yes, but we are also citizens and market participants who can "vote" in more ways than one --and occasionally cooperate to help one another.

HARM wrote that the typical middle class college graduate is burden with crushing student loans.

It doesn't have to be that way, even with current prices. Finding the way to pay through college will also build character. The big majority of Californians students live in urban areas.

What is so wrong with staying with the follks for a couple more years and getting an AA degree first? If you went to an urban JC in California, you will know that the schedules are amenable to students working off the campus. Need to work more hours to help the folks with living expenses ?- then lighten up on the load. Getting the AA degree at age 21 instead of 20 is not the end of the world.

This will greatly reduce the expense of the 4-year degree. Young Californians who live in urban areas should be able to get it free and clear of student debt. Next comes the B.S. degree. Get a good major, go year or so on and year or so off, with related employment or paid internship during the time off. If you pick a major that is relevant to solving real problems in our society, instead of goofing off with a silly major, it can be done. Did it myself. The pay will defray some of the cost of the 2 to 3 years to get the B.S. degree. May need some small student loan for part of it, especially the first year of it, but hardly what I'd call a "crushing load" of student loans. Take an another extra two to three years to graduate because of taking the time in between to work, so maybe finishing at 25 after 8 years, is that the end of the world? Hardly, especially when you can differentiate yourself in the job market with an AA degree, and some good work experience.

So, now your 25, just got your BS, and you may have a relatively smaller amount of student debt, or even be debt free. You have a couple or so years of relevant work experience. What's a girl to do? Now is the time for grad school, since we have some real world experience, and little or no pre-existing debt.

I'm sure you've read about , or maybe done it yourself, pick a good major in grad school, the students are largely "supported" in exchange for the research work and/or TA'ing. Both are good experiences for a fledging professional.

There you are: 30 years old, some solid work experience, a graduate degree, and no "crushing" student debt.

The "middle class" students who graduate with crushing student debt have something in common with the people taking on too much debt to buy a house that they really cannot afford.

DS says: good point, surfer — we are seeing increasingly unscrupulous behaviour from people with their hands on the reins with increasingly large sums of money being moved about in increasingly mysterious ways. consequently, there has been a ‘hollowing out of the diamond’ of the middle class to a pyramid structure. even property speculation has gone right down to the middle middle class as a practice as a result of easy credit.

Are we really seeing "increasingly unscrupulous behavior" from people in power? Or is the information age and a surplus of journalists simply bringing status-quo abuses of power to the attention of the populace?

It seems to me that previous decades of robber barons, unabashed imperialism and the Gilded Age contained far more noxious offenses in corporate America. Most of these trespasses were simply cloaked from view because nobody actually asked the questions (or those individuals were easily silenced).

I think we're actually getting better from that standpoint. Improved observability and flow of information is making it more difficult for the uber-rich to perpetrate financial crimes. At least on the scale of multiple decades or centuries.

Now we have virtual worlds in which poor people can be rich and ugly people can engage in cartoon sex.

Escapism through addiction has always been an opiate, so to speak, of the masses. This was true before industrialization, and is just more efficient post internet.

But hey, you can own a cartoon island and have cartoons slaves too, so what's not to like.

(Peter P was referring to Second Life, my recent nemesis, for anyone wondering 'WTF?')

isn't what we have now just corpratocracy? and isn't that the epitome of wage disparity, top-down? that's always been the vanguard of this trend. In a corporate culture the non-execs are just cogs, easily outsourced or internized. I don't see anything changing along those lines soon. A real pisser.

I agree wealth distribution is an enormous global issue, one which is much worse in the developing world and third world than in industrialized countries. Nonetheless, by any measure the current distribution fails the test of plausibility (in the words of the IMF).

My criticisms of the Gini Coefficient as used in practice:

* Usually the measures of inequality are based on ratios of equal country-to-country units, weighted by population. This measure is almost entirely useless, irrelevant, and misleading. It is also the most commonly used mechanism because it provides the most stunning shock value.

* Other measures do not attempt to directly compare country-to-country but simply focus internally on a country (or regions therein). This is accurate, but not useful in saying things like "It's worse in the US than in the EU".

* Finally, there is an exchange weighted (currency) or PPP (purchasing power parity) method for determining the coefficient. This is not often seen because (a) it's hard and takes lots of work, (b) it doesn't tend to punish the US as much as other metrics. I think, unsurprisingly, that PPP is the *only* honest method to determine the actual economic wellbeing of comparative peoples in comparative strata.

For example, someone in the lower quartile of US socioeconomic distribution, weighted by PPP, is marginally better off than their equivalent in most of Europe (excluding the UK).

But few (aside from "The Economist") like it when the US doesn't look terrible, so they tend to use the other methods.

* Finally, comparison between the US & Europe have been heavily criticized using Gini, and even the Wiki article makes some reference to the debate. The problem is that, if you take the Eurozone on its own, compared to the US (and using a flawed metric as described above), then the US scores poorly. But, if you look at the actual standard-deviation of the income distributions, the Eurozone scores poorly. That's because the US is more homogeneous, while Europe has wild differences country-to-country. The point is, using Gini to make any kind of structural social comparison betwixt the EU and US is probably worse than useless.

The “middle class” students who graduate with crushing student debt have something in common with the people taking on too much debt to buy a house that they really cannot afford.

sybrib,

I wouldn't exactly equate borrowing for a college education to overborrowing for a house or HELOCing to pay for bling (disclosure: my loans are fully paid off). One is really about consumption and instant gratification, while the other is about attaining the minimum price of admission to the white collar job market (used to be a H.S. diploma). If you wish to enter some professions (doctor, nurse, teacher, scientist, etc.), you are required to have a degree. Realistically, unless you want to work at fast food or retail for the rest of your life for low pay, you pretty much need a degree. You don't really "need" a HELOC or McMansion.

It's true that its possible to reduce the cost of a college education partly by (a) going to community college for the first two years, then transferring, or (b) stretching a 4-year FT schedule out and working PT, or even (c) ROTC. However, it's naive to think it's possible to counteract the huge inflation-adjusted increases in college expenses and student debt load vs. 30-40 years entirely by exercising personal choice

Actually, aside from overborrowing, the average working and middle-class student debtor has something else common with the FB: s/he has been priced out of many colleges and universities thanks to the (sound familiar?) reckless borrowing by others. 30-40 years ago it was possible to finance a college education entirely by government scholarships and grants. The majority of Boomer graduates either did not graduate with any debt, or had very little relative to the incomes of the day. This is basically impossible today, even at a public University.

And guess who sets the "market price" of college education these days?: The responsible pay-as-you-go, hard-scrabble student, or the profligate, borrow-to-the-moon student debtor? Just like the housing market, highest bid wins.

Another interesting similarity between today's housing market and higher education: a federally guaranteed (but for-profit) company named "Sallie Mae". Does that name sound familiar? A little like "Fannie Mae" perhaps? Once again, the government comes to the rescue, by underwriting the banks and "helping" students to accumulate massive debt loads they get to carry around for many years after college.

Yeah, I don't think you can say anything meaningful about "Europe" when that means economies as diverse as Luxembourg and Serbia. Even just restricting to the EU means a really wide variety of economies and standards of living.

Let's just restrict to the Northern European countries of Germany, The Netherlands, Norway, Sweden, Belgium, England and Ireland.

Randy H,

I don't think adjusting for PPP does anything to effect the relative wealth differences internal to a society (the GINI coefficient). It obviously effects cross nation comparisons, but I think that is kind of beside the point.

I'm trying to swallow my usual rant about materialism and our perception of the "middle class". But... ah, screw it.

[rant]

First, let me preface my usual rant by saying YET AGAIN that I'm kinda tired about Californians whining about house prices and how the "average man" can't afford a house near Silicon Valley. Newsflash from the rest of America: only millionaire DINK engineers live in Silicon Valley. If you haven't figured that out yet, please do us a favor and don't breed. The rest of the county is not like your insanely overvalued chunk of pseudo-reality. We don't think you people are suffering from a bubble, we think you're nuts. It's mostly because you're Californians. Nobody in their right mind ANYWHERE else (except New York City itself) pays $1,500,000 for a 1500 sq.ft. single family home built in the 1940's. And let's not kid ourselves, for all its faults, NYC is crushingly more awesome than the smog-infested pit that is Silly Con Valley.

Has it occured to anyone here that our definition of "middle class" has drifted ever upwards in the last fifty years? Drifted... hell, hurtled. Middle class used to mean a modest house and one car, the kids in an average school, a garden out back, a mutt from the pound and cutting the lawn on weekends. Maybe you drink a beer with your friends, watch some baseball or play some pool at the local pub while the women watch TV and eat popcorn with the kids.

Now "middle class" means a "small" wine cellar, marble in the bathroom, granite in the kitchen, Brazilian cherry on all the floors, Persian rugs around, a Lexus and a minivan (God forbid older than 5 years!), gymnastics for all three daughters, private soccer lessons for the son, a purebred dog, country club membership for him, monthly pedicure and manicure for her, professional landscaping, a weekly housekeeper, organic vegetables bought from a specialty store, eating out twice a week, a 1000+ CD collection, a plasma TV in both the living room and the family room, three computers (God forbid older than 2 years!) a fully finished basement with a pool table, a sauna and a spa outside with tinted concrete pad and custom tile inlay.

what. the. hell.

You guys think the middle class is getting SHAFTED?!? Are you frigging kidding me? The so-called "middle class" today lives almost equivalent to the elite class only 100 years ago. Can you doomsday lovers identify another period since the Pleistocene when the gap has been closing that fast? And all people bitch about is the fact that the CEOs and uber-rich are still stunningly wealthy. Well guess what. Some guy 100 years from now is going to be getting a blow&(* from his perfect blonde android. And he's gonna be bitching to his buddies on his implanted nose-phone that the rich-poor gap is getting even bigger this century, because the rich guys are getting blow^(*s from hotter blonde androids with fancier tongue options.

You know what? The standard of living for the U.S. middle class has reached such an apex that people don't know what the fuck to do with all their wealth. Seriously. We're forced to look to rich societies of previous eras just to find ways to blow the wad faster. You know why people have cherrywood floors instead of just plain wood? It's because they have so damn much money that they have every conceivable pleasure they could want, and they have to spend the leftovers on something so the wealth isn't left to further generations. I present as evidence the "lowly" McMansion. 4000 sq.ft. on a 6000 sq.ft. lot. Because when you don't need land to be productive anymore, you might as well convert it into a 700 sq.ft. sunroom, piece by piece. Which by the way, was the size of your immigrant great-grandparents' entire damn cottage!

Today's American so-called "middle class" employs Mexicans to clean their toilets and cut their grass. What a fucking disgrace. You think this is what immigrants busted their ass for? So that their descendants could have servants for menial tasks? Kids, your immigrant forebears had more in common with Humberto the gardener than you. Humberto the gardener wants a used Chevy and a good school for his kids; you DINKs are complaining that your 5 year-old Trailblazer is "getting old" and lusting after some kind of rolling steel fortress with personalized DVD screens for the kids. But damn those Arabs for hoarding all the oil!

And you know what else? The "middle class" standard of living isn't much more enjoyable than the middle class around the turn of the century. They didn't have wine cellars, servants or metrosexual fashions. I will say this again because it bears repeating. The standard of living in Europe hasn't plunged relative to ours, except when measured in terms of useless shit. They seem to grasp the notion that the quality of life is framed by working hard 40 hours a week, and spending the rest of the time tending a garden, playing fetch with your dog, playing soccer with your kids (and grandkids), drinking a good beer (or three) and taking long walks with a modest woman who genuinely loves you. Everything else is pretty much bullshit that gets in the way of what's important.

America is screwed because it believes its own advertising. The middle class we see now is a product of generations that have never really known a tough time at home. Another Great Depression might do us good. This country (and most of the first world) needs a serious bitch slap to pull it back to reality. I know rich parents who spend no time with their kids, who in turn are basically being raised by coaches and tutors while their parents take an extra jaunt through the back nine. I know several fresh college grads in engineering who have more debt than assets, live in a fancy new townhouse/condo and drive an expensive European car. Hell, I know people who hire dogsitters. Dogsitters! Up until twenty years ago, only royalty had dogsitters! You are paying a servant to entertain your DOG. Jesus Christ. And you want to claim that the middle class standard of living has fallen? That the middle class is doing badly financially?

No, my fellow patrick.netters, the middle class is doing badly as human beings. If the middle class is unhappy, it's because it is realizing how truly empty wealth can be.

[/rant]

Brand,

Excellent rant. I may have to reconfigure some of my brain to properly process this information.

(Though...and presuming there is still a future history...we still need more millionaire DINK engineers - maybe breed them as sterile mules)

The skinny guy underneath might be a third world sweatshop worker, a lot of them are still skinny.

:lol:

Ok, by Brand's definition, I'm *definitely* not "middle class" (nor do I want to be).

Seriously, though, that description doesn't apply to anyone I know in my age range. In fact, anyone with a 4000 sft McMansion, their own wine cellar & dogsitter really cannot be considered "middle" class --you're upper class, buddy.

America's consumerist culture is the cultural equivalent of a peacock's unwieldy tail.

There's a bifurcation of America, we are a lot wealthier in terms of stuff, but we're also much more financially precarious. Even in this relatively successful blog, many (if not most) of us are only a lengthy unemployment or divorce or bout of serious illness from being completely broke.

Playing the devil's advocate - Brand, the American middle class is being economically rational, even if the collective result is disasterous. With globalization, stuff is cheap and fun (especially if you can buy on credit) while security (vigilantly saving, investing, exercise and good diet, regularly upgrading job skills) is expensive and no fun...and what if global warming or terrorists or Godzilla gets you first?

Learn to be like the grasshopper, my dear ant!

astrid says: America’s consumerist culture is the cultural equivalent of a peacock’s unwieldy tail.

I hate it when people can summarize my rants in a single sentence. :o

astrid says: Playing the devil’s advocate - Brand, the American middle class is being economically rational, even if the collective result is disasterous.

Oh Lord, if you keep pushing in that direction, I'm going to start agreeing with Sean. The role of government must be to restrain people's seemingly reasonable (in their own tiny context) but ultimately destructive tendencies.

Is there a version of capitalism where the "middle class" doesn't act like a bunch of uneducated drunken idiots with money they don't deserve?

Playing the Devil's Advocate, I think Americans should continue to close the gap between the rich and the poor by purchasing exotic goods that will improve their quality of life. If they need more money, just remember that Debt = Wealth. Hopefully the trend of you comrades closing the rich-poor gap will continue even as we diversify away from U.S. Treasuries and expand our hold on useful commodities like oil and natural resources, while continuing to educate our children.

Pay no attention to the man behind the (silken) curtain... he represents the interests of the proletariat. Move along, comrades, move along...

Brand Says: I hate it when people can summarize my rants in a single sentence. :o

I agree, it's a curse and it's probably gonna get me killed the next time somebody nearby goes postal (or collegiate, if you will).

As to the problems of collective action. The question is: have we fallen too far morally to make recover that eden of responsible sustainability? The mob drives the government and the electoral process in recent year seems focused on concentrating the idiocy.