Twilight of the Middle-Class

Every so often, and with increasing regularity, the progress or plight of the American middle-class is cited as either proof of economy recovery or stagnation. That group so indispensable to political rhetoric and for so long the key indicator of recovery and the ever-shining beacon of progress are indeed suffering, but not necessarily unduly. As the American economy allegedly stutters into life after six years of state scaffolding, financial methadone and endless government-sanctioned steroids, it is indisputably apparent that Western politicians, not just American, either dare not acknowledge or simply don’t comprehend that the world is on the verge of the biggest shift in power since the fall of Rome, possibly the greatest realignment in known history. Bearing the brunt of that change will be the Western middle-classes, of all nationalities.

The halt of the onward march of the American middle-class plight will easily spread to Europe partly because the jobs of the recovery are lower-paid jobs but more significantly the cause of so many of the West’s problems have their roots in middle-class employment. Employers once thought of as indispensable to high-value employment are implicated in so many misdeeds that they have become liabilities to our economic system. White collar chicanery rather than blue-collar militancy has brought the West to its knees. Illegal immigrants on minimum wage stealing American and European jobs are conspicuously absent from the banking and accountancy scandals.
Education, medicine and law have been among the most durable middle-class employers, but these sectors are not propelling the US economy- they are burdens. Doctored medical results and suspect medications implicate middle-class occupations once held in the highest esteem. Litigation and health costs are obvious impediments to US progress, but education is a problem too, particularly the cost of education and the expectations of degree holders. In Europe social health care and education have become the most stable and dependable middle-class employers, arguably the last remaining ‘jobs for life’ with the powerless taxpayer picking up the bill. The West is stuck in a rut yet our colleges and universities are turning out armies of graduates with skills that cannot ignite a recovery! The majority of people, predominantly middle-class, with degrees and doctorates are not inventing the substantial things an economy needs for its employment pool, and certainly not at the level needed to sustain Western wage expectations. The higher-education system produces people who are overwhelmingly dependent on existing innovation, ideas and businesses to provide them with the salaries and lifestyle they believe they deserve. Employers want degrees, yes, but do the tasks need them? It is time to challenge the middle-class template to success. Useless degrees and fancy job titles do not an economy make. Education is a middle-class sector directly and indirectly subsidized by the taxpayer, with diminishing returns for the taxpayer.
The creative sector is another important branch of the middle-class, relied upon to bring disproportionate economic value and cultural advantages. Alas the majority of the people involved in these industries are not creative. A relatively small number of people in the creative sector are responsible for producing financially potent intellectual property, the majority of creative jobs are as rudimentary as in any other part of the economy. Indeed every branch of the arts has its ever-expanding civil service of agents, lawyers, managers, administrators, curators et al earning a very good living often taxpayer funded or taxpayer subsidized through various tax incentives and breaks. Despite the millions of dollars circulating in the entertainment industry, tax credits are being offered to lure productions. Hollywood has spent years promoting itself as one of America’s last export success stories yet it needs subsidies! Inadvertently, this illuminates another unpalatable part of the contemporary economy. With a globalized employment pool, large and prominent companies are no longer lured to certain locations by the promise of a sophisticated or skilled workforce. Networked collaboration will nullify the advantage of concentrating production in ‘prime cities’ and ‘skill corridors’. Chinese and Indian companies can access the same technology without being encumbered by heritage or legacy obligations. The tax and incentive bait is a disguised admission that Western expertise is not enough.
The nature of contemporary innovation means the trickle-down effect is shorter in duration and lesser in impact as globalization allows a colossal pool of untapped foreign talent, inevitably on lower wages, to compete with the Western employment pool. Just as those at the bottom of the ladder have been first to bear the brunt of change now the middle-classes will face competition in technology, engineering and medical research and so on from the most gifted of the developing economies. We are getting the first indication of their skill in the unfortunate form of computer hacking. It is inevitable, too, that in military drone capability the US will be quickly matched. Technology is an equalizing force that will wither and diminish Western advantages. In a world of rapid change and automation the ‘knowledge economy’ is an illusion of frothy buzz words.
To respond Western economies must improve their agility- all unproductive obstacles must be removed. This will mean the swelling ranks of managers (mostly middle-class) will have to be culled. The distance from executive decision to production must be dramatically curtailed. Westerners will have to compete on price, not prestige or experience. Politicians like to bleat that the developing world should and will import our highest value goods, thus securing high-paying employment for us. The recent announcements that Cadillac and Land Rover will build factories in China lets us see that our competitors will not import our goods, merely the jobs and production process. The middle-classes are particularly vulnerable to the second wave of globalization and outsourcing as greater savings can be made, obviously, from higher salaries. What can we in the West do that they in the developing world cannot do for less? The implications for pensions, welfare and asset values are so profound they will make the last six years look like a long vacation in Disneyland. For American voters and politicians the prospects of globalization are becoming increasingly alarming. But is this simply because the cherished idea of American exceptionalism has led many to see capitalism as a Washington owned-and-managed department store?

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