What’s Eroding the Middle Class?

I have devoted many blog posts to the erosion of the middle class, for the specific reason that when the middle class–the layers of the economy between the Power Elites and landless laborers/state dependents–erodes away, the nation/empire is destabilized and descends into crisis.

A society without a functioning middle layer of economic and social activity is not stable, though repression can mask this for a time.

As historian Peter Turchin explained in his book War and Peace and War: The Rise and Fall of Empires, societies that lose the cohesion needed for concerted, collective action collapse, either by failing to meet an external threat or from internal conflicts.

Economies constructed of a supremely wealthy elite, a thin layer of independent artisans and small farmers, and a great mass of laborers with no assets has no shared sense of identity or purpose; those at the bottom have little in common with those at the top, and the thin middle that is scraping by has little affinity with either the elite above or the poverty-stricken below.

This erosion of a self-employed, independent middle class was an important pre-condition for the collapse of Rome and the French Revolution.

As I have outlined in some detail, the middle class in the U.S. is eroding: the lifestyle that was widely accessible to a broad swath of households in the 1960s is now only available to the top 10% below the wealthy (the top 5%). This includes not just possessions like a home or vehicle but productive assets that can be handed down to the next generation.

As it stands now, many households that consider themselves “middle class” have few if any productive assets, and even fewer will have any assets to pass on to the next generation as their retirement and other expenses may well consume much of whatever assets they currently own.

There are five primary drivers of this erosion in my view:

1. The shifting of pension and healthcare costs/risks from the state and employers to employees

2. The decline of scarcity value to labor in general and specifically in college degrees that were once the guaranteed ticket to middle class security

3. The inexorable rise in big-ticket costs: higher education, healthcare and housing. Even as wages stagnate, these costs continue rising. claiming an ever-larger share of household incomes, leaving less to save/invest.

4. The transition from an economy with stable returns to a financialized boom-and-bust economy that wipes out middle class wealth in the busts but does not rebuild it in the booms.

5. The regulatory and administrative barriers to self-employment in a globalized economy.

There is zero evidence that any of these drivers is going to reverse, for the reason that they are reflections of deep forces that cannot be reversed: demographics, the exhaustion of financialization, the 3rd Industrial Revolution (i.e. the digital/automation revolution) and the loss of scarcity value in the foundations of the middle class: labor and financial capital.

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  • sick of lies and liars

    Since the 1890s — that is, for the last 120 years and counting — America has been a society in which more than half of us — and sometimes approaching two thirds of us, as now — have absolutely nothing besides paltry personal possessions, 10% of us own 90% of everything, 2% of us own 60% of everything and one tenth of one percent of us own 25% of everything, concentrated in a controlling interest in core finance, industry, commerce, etc.

    This is a fact, easily established and widely concealed and ignored.

    The idea that an economy or a society is “succeeding” on these terms is an OBSCENITY, a DISGRACE to humanity, to decency and to God.

    Charles Hugh Smith speaks consistently for the small investor class, the 8% below the top 2%, which he pretends is the “Middle Class.” His views and his spiel are part of the problem and part of the coverup. SHAME ON YOU, SMITH.

  • March 12th, 2015 Fascism: Humanity’s Scourge

    It gave us Hitler and Mussolini. Today it’s headquartered in Washington – with global client states run by puppets serving US interests. Subservient Western countries recklessly support America’s imperial agenda. Fascist regimes combine perpetual wars with corporate empowerment, massive corruption and police state harshness.


    • sock puppet alert

      This is totally off topic. What’s your purpose in diverting discussion?

  • January 18, 2016 The 21st Century: An Era Of Fraud

    In the last years of the 20th century fraud entered US foreign policy in a new way. On false pretenses Washington dismantled Yugoslavia and Serbia in order to advance an undeclared agenda. In the 21st century this fraud multiplied many times. Afghanistan, Iraq, Somalia, and Libya were destroyed, and Iran and Syria would also have been destroyed if the President of Russia had not prevented it. Washington is also behind the current destruction of Yemen, and Washington has enabled and financed the Israeli destruction of Palestine. Additionally, Washington operated militarily within Pakistan without declaring war, murdering many women, children, and village elders under the guise of “combating terrorism.” Washington’s war crimes rival those of any country in history.


    • sock puppet alert

      This is totally off topic. What’s your purpose here, I wonder?

  • sick of lies and liars

    The entirety of financial wealth is paper fraud — 100% bogus. Smith is just one more person who wants something for nothing, but he wants the fraudulent game played so that he gets a piece too. He’s right that the source our difficulties is deep: usury finance and corporate paper property in the hands of a predatory oligarchy that has usurped our government as well as all significant centers of our economy. But Smith doesn’t want to talk about this. He wants to talk about re-entitling his so-called phony “middle class.” By any definition that will survive inspection in the light of facts and reason, America has and has had no genuine MIDDLE class since before 1890. America has a ruling class (0.1%), a wealthy class (2%), a class of hireling bullies (“administators” and other thugs — 10%) an impoverished class of 60-70% — and then, in the “middle”, under 20%, one person in five, in a slender middle that actually possesses “middling” wealth — that is, something within range of a genuine equitable share. The reason this is so is because 98% of all of us — our “equitable share” is in the hands of a predatory sociopathic oligarchy. Smith wants more for his 10-20%, and fuck the rest of us. And he pretends that some kind of solution, some kind of “realistic” picture of the facts. SHAME ON YOU SMITH, you liar.

  • Don’t forget to include systemic fraud, which skims dollars from the middle class, and transfers it to wall street.