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Archive for March, 2010

 INTRODUCTION

The purpose of this and the next Blog is to describe an economic portrait of the Middle-Class in America, and the growing middle-class worldwide. Most of the emphasis will be on the middle-class right here in America. Part I defines the middle-class, and Part II will describe the middle-class in relation to economics and economic principles.

If there is a theme running through both Part I and Part II it is that the middle-class, particularly in America, is very privileged and economically very well off. A secondary, but no less important theme, is that the middle class with its Robin Hood Politics, is totally unjustified in discriminating against others from other social classes. After all, rich people, poor people, and middle class people all want the same things in life. They all have their personal dreams and desires.

Related to this topic is an interesting observation, that is, whether we talk about “crime in the streets” (A predominately poor and working class phenomena), or “crime in the suites” (a predominately upper-class phenomena) the middle-class have their own form of crime (subtle perhaps, but crime nonetheless). That crime is differential and progressive taxation, i.e., Robin Hood Politics. Property crimes have as their purpose the taking of things that don’t belong to someone. Life is about the choices we all make. Sometimes people who make poor choices early in life still nevertheless want others to pay for their mistakes. Today, there is a new twist to this phenomena.  Rather than politicians following good, solid economic principles in a free market economy, they largely abandon or ignore them in deference to the whims of middle-class voters and political party ideology.

Therefore, it is important to explore what economics is all about and how it ties into the observation that social distribution of wealth is patently unfair to everyone who believes it is the individual who is responsible for his own life, and all the decisions one makes. The notion of re-distributing the wealth through differential taxation of people in higher income groups is a short-term ineffective fix that won’t alter the fact that lower income and middle-class people cannot acquire the things they want unless by stealing from others through the tyranny of the majority. How can they best get the things they want? Well, economic prosperity should be the goal of our society. We shouldn’t try to eat the rich since they, particularly among entrepreneurs, make it possible to increase more prosperity, including increased prosperity of the middle-class. The best way for society to work toward abundance and greater prosperity for everyone—is to realize that it is wealth creation and prosperity in a free market economy that really matters and, by the way, the only thing that matters if people want to get the scarce resources they don’t currently possess. For the middle-class who engages in “Robin Hood Politics,” all that does ultimately, is to shoot themselves in the foot. Robin Hood Politics is a clumsy and incompetent way to achieve the goal of middle-class economic prosperity.

THE RELATIONSHIP OF CHARITY TO ECONOMIC PROSPERITY

Where do you think all the vast amount of money for charity and helping the less fortunate comes from in this society? Who do you think gives more money to charities in the first place—Democrats or Republicans?

America is unparalleled in economic prosperity and the 20th century proved that. It is economic prosperity that makes charitable contributions possible at all. We even try to help others worldwide with support such as in places like Haiti, or Chile. It is our economic prosperity that makes all of that possible. Check out the facts. Republicans give more money to charity in the United States than do Democrats. But, regardless of who gives more, the underlying ability to give at all is based on economic prosperity. We all live in a very rich nation as nations go.  But, before we get ahead of ourselves lets look at the facts. Who is the middle-class? How are they defined? What is the economic reality we all live under and why are economic principles so important to understand? Society needs to comprehend and understand economics.

Burying one’s head in the sand isn’t going to help anyone. It is crystal clear that Robin Hood Politics and government tinkering with the economy is at best counterproductive, and at worse, an affront to the values of individualism, self-reliance, hard work, determination, rational and intelligent thinking, and, above all, taking responsibility for one’s own life.

 CONNECTIONS

      Back in August, 2009 I wrote an article on the dynamics of class warfare from a political independent’s point of view. I considered it then, as I do now, class warfare to be the last bastion of discrimination in America. Our tax laws reflect that, and our politics reflect the underlying discriminatory beliefs about people with differing amounts of income and wealth. I’ve also previously written in this Blog about upper class greed in an article titled, “Greed is Their Creed,” where I discussed the Barney Madoffs of the world, and other white-collar offenders at the top of the social ladder.

Because the middle class in America dominate as a majority, one of the often unexpressed, yet socially blatant attitudes of this group is also, unfortunately—greed, and a willingness to engage in “Robin Hood Politics” by discriminating against people from other social classes or social conditions.

For example, middle class people will get angry about the demographics of changing neighborhoods, or halfway houses for drug offenders that are placed in their neighborhoods. Yet they barely raise an eyebrow when some politician struts populism to the extent and willingness to disproportionately tax the rich (everybody who makes over $250,000) or even just higher income upper middle class individuals. Most politicians (almost universally democrats but a minority of republicans) who create our laws, buy into this discriminatory ethos from the middle class. Why? The reason is that the middle class is their base for currying favor among society’s largest group of voters. All that matters to politicians is their getting elected or re-elected.

The thrust of my article last August looked at data and the dynamics of social class from primarily a sociological and psychological type of logical analysis. This article will be to support my earlier article. But, emphasis will be instead on key economic principles, economic insights, and economic data on income distribution.

Economics is sometimes called the ‘dismal social science’ because its laws and principles give special treatment or quarry to no one. It doesn’t take sides; it simply tries to explain economic principles with economic data. Thus, it is an objective way to view the world.

 LET’S DEFINE THE MIDDLE -CLASS

The American middle class is an ambiguously defined social class in the United States.  While the concept remains largely ambiguous in popular opinion and common language use,  contemporary sociologists have put forward several, more or less congruent, theories on the American middle class. Depending on class model used, the middle class may constitute anywhere from 25% to 66% of households.

One of first major studies of White Collar: The American Middle Classes, was made by sociologist C. Wright Mills in 1951. Later sociologists such as Dennis Gilbert of Hamilton College commonly divided the middle class into two sub-groups. Constituting roughly 15% to 20% of households is the upper or professional middle class consisting of highly educated, salaried professionals and managers.

Constituting roughly one third (33%) of households is the lower middle class consisting mostly of semi-professionals, skilled craftsmen and lower level management.  Middle class persons commonly have a comfortable standard of living, significant economic security, considerable work autonomy and rely on their expertise to sustain themselves.

Everyone wants to believe they are middle class…But this eagerness…has led the definition to be stretched like a bungee cord and used to defend/attack/describe everything. The Drum Major Institute places the range for middle class at individuals making between $25,000 and $100,000 a year. Ah yes, there’s a group of people bound to run into each other while house-hunting.—Dante Chinni

Members of the middle class belong to diverse groups which overlap with each other. Overall, middle class persons, especially upper middle class individuals, are characterized by conceptualizing, creating and consulting. Thus, college education is one of the main indicators of middle class status.

Largely attributed to the nature of middle class occupations, middle class values tend to emphasize independence, adherence to intrinsic standards, valuing innovation and respecting non-conformity.  Politically more active than other demographics, college educated middle class professionals are split.  Income varies considerably from near the national median to well in excess of $100,000.

Household income figures, however, do not always reflect class status and standard of living, as they are largely influenced by the number of income earners and fail to recognize household size. It is therefore possible for a large, dual-earner, lower middle class household to out-earn a small, one-earner, upper middle class household.  The middle classes are very influential, as they encompass the majority of voters, writers, teachers, journalists, and editors. Most societal trends in the US originate within the middle classes.

WORLDWIDE CHANGES IN THE MIDDLE CLASS

In February 2009, the Economist magazine announced that over half the world’s population now belongs to the middle class, as a result of rapid growth in emerging countries. It characterized the middle class as having a reasonable amount of discretionary income, so that they do not live from hand to mouth as the poor do, and defined it as beginning at the point where people have roughly a third of their income left for discretionary spending after paying for basic food and shelter. This allows people to buy consumer goods, improve their health care, and provide for their children’s education. Most of the emerging middle class consists of people who are middle-class by the standards of the developing world but not the rich one, since their money incomes do not match developed country levels, but the percentage of it which is discretionary does. By this definition, the number of middle class people in Asia exceeded that in the West sometime around 2007 or 2008.

The Economist article pointed out that in many emerging countries the middle class has not grown incrementally, but explosively. The rapid growth results from the fact that the majority of the people fall into the middle of a right-skewed bell-shaped curve, and when the peak of the population curve crosses the threshold into the middle class, the number of people in the middle class grows enormously.

In addition, when the curve crosses the threshold, economic forces cause the bulge to become taller as incomes at that level grow faster than incomes in other ranges. The point at which the poor start entering the middle class by the millions is the time when poor countries get the maximum benefit from cheap labour through international trade, before they price themselves out of world markets for cheap goods. It is also a period of rapid urbanization, when subsistence farmers abandon marginal farms to work in factories, resulting in a several-fold increase in their economic productivity before their wages catch up to international levels. That stage was reached in China some time between 1990 and 2005, when the middle class grew from 15% to 62% of the population, and is just being reached in India now.

The Economist predicted that surge across the poverty line should continue for a couple of decades and the global middle class will grow enormously between now and 2030.

A DYNAMIC CAUSAL THEORY OF MIDDLE CLASS AMERICA

In 1950 an important sociology book came out called—The Lonely Crowd. In it was a significant sociological analysis written by David Riesman, Nathan Glazer, and Reuel Denney. It is considered — along with White Collar: The American Middle Classes, written by Riesman’s friend and colleague C. Wright Mills — to be a landmark study of American character.

Riesman, et al. identified and analyzed three main cultural types: tradition-directed, inner-directed, and outer-directed. They traceD the evolution of society from a tradition-directed culture — one that moved in a direction defined by preceding generations. Tradition-directed social types obeyed rules established a long time in the past, and rarely succeeded in modern society, with its dynamic changes.

This earliest social type was succeeded by people who were inner-directed. They discovered the potential within themselves to live and act not according to established norms, but based on what they discovered using their own inner gyroscope. Inner-directed people live as adults what they learned in childhood, and tend to be confident, sometimes rigid.

After the Industrial Revolution in America had succeeded in developing a middle-class state, institutions that had flourished within the tradition-directed and the inner-directed social framework became secondary to daily life. Instead of living according to traditions, or conforming to the values of organized religion, the family, or societal codes, the new middle class gradually adopted a malleability in the way people lived with each other. The increasing ability to consume goods and afford material abundance was accompanied by a shift away from tradition or inner-directedness. How to define one’s self became a function of the way others lived.

Gradually an outer-direction took hold, that is, the social forces of how others were living -what they consumed, what they did with their time, what their views were toward politics, work, play, and so on. Riesman and his researchers found that other-directed people were flexible and willing to accommodate others to gain approval. Because large organizations preferred this type of personality, it became indispensable to the institutions that thrived with the growth of industry in America.

As Riesman wrote, “The other-directed person wants to be loved rather than esteemed”, not necessarily to control others but to relate to them. Those who are other-directed need assurance that they are emotionally in tune with others.

By the 1940s, the other-directed character was beginning to dominate society. Today the triumph of this type of social personality is complete. If one applies the outer-direction criteria to everyday actors as portrayed in modern culture, for example, Death of a Salesman or How to Succeed in Business Without Really Trying, or the classic How to Win Friends and Influence People, the other-directed person is easy to identify.

This defined the middle class that no longer had the material need to cling to past life standards to form a cohesive society. But since the other-directed could only identify themselves through references to others in their communities (and what they earned, owned, consumed, believed in) they inherently were restricted in their ability to know themselves.

Riesman’s book argues that although other-directed individuals are crucial for the smooth functioning of the modern organization, the value of autonomy is compromised. The Lonely Crowd also argues that society dominated by the other-directed faces profound deficiencies in leadership, individual self-knowledge, and human potential.

Riesman and his co-authors (Nathan Glazer and Reuel Denney) did not come up with the title; the publisher did.

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