Class Warfare Addendum

Some of you tell me I have gone too far with my recent binge of talking about the hollowing out of the middle class. But it’s not just me. This is now the hot topic as we sift through the debris of the Reagan illusion and the great trashing of our economy by the banks. It seems as if everyone is arriving at a similar, if not the same, point. The last thirty years have seen the unravelling of the great social contract that was the undergirding of the rise of the American middle class. The story is simple, easy to spell out, and has a nasty ending. We are witness to the betrayal of the achievement of the postwar years. That is no small matter and is thus worth talking about.

That it took thirty years of hard work to undermine the middle class is testimony to the strength of the structures put in place to support it. I have to admire the tenacity of those committed to such destruction and tip my hat to their success. As I have said here before, my big argument is not with those who sought to drive the middle back down to the bottom, I can understand their motives: they gained inordinately. No, the big mystery is why the middle was so supine and complicit in its own downfall.

Hence the interest and the vast amount of work now being written about the subject.

Timothy Noah argues that it was the loss of the unions and globalization as key amongst a plethora of factors. His argument holds together well. Many of the other explanations stand up less well simply because the experience of other countries is different. They provide a counter factual explanation.

Basically the Noah thesis boils down to a familiar story: coming out of World War II the western world was concerned about the potential disruption that could be caused by the arrival home of an unprecedented number of de-mobbed military personnel. The fear was that this arrival would spark a massive surge in unemployment along with civil unrest. These folks had to be put to work. Not just that, but they had to be sold on their ability to improve their lot in life. No one wanted to sell them notion that all that sacrifice merely bought them a ticket to slide back to a prewar lifestyle of marginal affluence and constant threat of unemployment and poverty.

Truman led the way by forcing the American auto industry into a five year labor deal that provided health insurance, and contractual annual wage increases. Big business, fresh from the labor disputes and violence of the 1930’s saw its self interest in building a quiescent workforce that had a stake in the nation’s affluence. Other industries, unaffected by the coercion from Truman, went along with the same model for the same reasons.

So a social contract was born. Its features were strong union voices in industry; reliable wage increases; sharing of productivity gains; corporate forbearance on profits; a clutter of government programs to assist workforce re-entry; the near deification of military service; a refusal to demilitarize to reduce the flood of workers to be accommodated; the protection of the New Deal; the constant lifting of the minimum wage; government interference in, and protection of, markets; a commitment to keep inflation low; and the encouragement of home ownership via government subsidy and limitation of the mortgage industry.

The essential thread running throughout the entire edifice was the acceptance of the government as a key player in insuring its survival. As a result of the sequence of a great depression being followed by a world war, it was generally assumed that middle class affluence rested on a variety of government initiatives. Those initiatives were either direct, as in the subsidy of mortgages and the provision of education to veterans; or indirect, as in the shaping of industrial labor practices through coercion or legislation. Either way the social contract recognized government as a major partner in the construction of wealth.

Naturally there were opponents of this structure. But they were few and for three decades both political parties espoused versions of the same contract..

But as the memory of the depression faded and as affluence engendered complacency the agenda shifted. The opposition grew, such that when the 1970’s saw the apparent failure of the postwar model, it was ready to pile in with its alternative vision. The confluence of high inflation and stubbornly high unemployment during the 1970’s opened the door for the right wing counter-attack that culminated in the ascendancy of Reagan to the White House and the anti-government rhetoric we have listened to since.

The fragility of the middle class – and it is always fragile – bred sufficient fear that politicians could persuade the voters to turn on the very programs that provided safety. Enough people thought that they had found solid ground and no longer needed that safety to provide the votes for the elimination of the postwar contract. The fear to be exploited was not of a destitution caused by depression or war, but of the intrusion of government and its seemingly endless need for tax support. Especially when those taxes seemed always to end up helping some form of “other”, whether it be the undeserving and idle poor, indolent single mothers, or the variety of minority groups who had learned to “feed from the government trough”. Fear was thus transmuted into a divisive turning inwards of the middle class – particularly its poorer white element – against what were perceived as a host of freeloaders. It is no coincidence that the Reagan democrats were those who most benefitted from the programs they now opposed: they were taught that the only end of government was to support the undeserving. So government had to be eradicated from the economy. It was brilliant and simple use of the timeless divide and conquer strategy authorities throughout the ages have employed to keep themselves in power.

Unfettered, businesses began to seek maximum profits at the expense of American workers. Jobs were eliminated more freely. Profits bulged even as wages stagnated. Unions were driven out and their privileges taken away. Regulations were reduced to a minimum. Markets were freed to follow self rather than community interests. Jobs were shifted abroad to take advantage of cheaper labor costs to the benefit of the rentiers – those who earn their living off of capital – rather than the domestic labor pool. Union free white collar jobs were created in droves, but they lacked the old security of their blue collar predecessors. The story is now too familiar. It culminated in the imbalance and inequality of today. It ended with the surrender of the middle class value of ensuring a better future for the next generation. For the first time we began to question where the dream went.

As if we didn’t know.

Our problem is that we want to hide from the responsibility. We did it to ourselves. We were lured by the illusion that we, too, could share in the great wealth being accumulated by the elite. It was always a falsehood for the vast majority. What progress the middle class made was never to become part of the elite. Fabled stories such as those of Buffett, Soros, and Gates are fabled exactly because they are aberrations. The rest of us live firmly in the mushy middle. Vulnerable to the ups and downs of the economy we scrimp and save where we can. We hope for a break. We feel the downdraft far to easily. We seek to retire with dignity and with our health. That is our land of opportunity. The safe, sensible, and cautious middle. We are mostly proud to have made it through life to end up on those shores.

And not on the rocks where so many of us are now.

The great achievement of the postwar social contract is that two generations have made it to the safety of those shores. Yet it those same two generations that have kicked away the necessary props. We sank the boats so fewer of the next generation will make it.

From my point of view it is to our enduring shame that we betrayed the contract that protected us. We have a choice: to reconstruct it so future generations can have the same benefit we did. Or we can abandon them to become a mirror of the world our forefathers fought to escape.

This recent crisis has thrown that choice into stark relief. It has brought to the surface the extent of the illusion and the consequences of the fateful choice we made back in 1980.

It is a cliche to say that we have to recognize ourselves as sick before we will seek a cure. I fear that far too many Americans still refuse to acknowledge the disease. Hence the great divisions that opened up in our society and our apparent inability to reach compromise on what to do next. These are dangerous days of political extremism and discord. The elite is aware of the threat to its ability to prosper at our expense. We need to take the future back, not for ourselves, but for our children. Given the extent of the problems we all need to enter the contest and express our opposition to the inequality that now dominates our economy. It is un-American, at least in the postwar incarnation of what that means. We need to stop driveling on about patriotism and the silly faux myths that prevent us from seeing clearly the reality in which we live. And we need to start the hard work of building something that actually resembles the aspirations and dreams that we all too frequently substitute those myths for.

At least that is my motivation.

What’s yours?