Twilight of the “Credit Middle Class”

In all economic contracting cycles throughout finance capitalism’s history, labor (blue-collar skilled to unskilled, agricultural day laborers to small farmers, and white collar, clerical to professionals and mid-management) ultimately pays the price for dislocation. The middle class, as the media and governments define it today to include a very broad range from upper working class to highly paid professionals, experiences downward pressure toward “proletarization” status instead of upward mobility as it envisions its destiny. Very clear in the 1930s, this phenomenon is taking place today amid the current crisis not only because people are losing jobs, homes, retirement savings, etc., but because the future looks bleak for them and their children.

Besides part-time and contract work, blue-collar and white-collar workers are asked to accept pay cuts, reduced benefits, reduced work schedules, flexible working conditions, all of which will be accompanied by the expectation of retiring at a later age. Where are the blue collar, white collar, and the recently “proletariatized” middle class headed and will they emerge stronger than they did during the Great Depression, helped immensely by the war, or will the middle class society lapse into chronic decline? 

 

There is a fundamental question of whether the “middle class” was on sound footing, or artificially created by a deficit-spending system now in crisis. On paper, the combination of low labor values in the Third World that allowed for higher incomes in the advanced countries and the postwar credit economy accounted for the quantitative and qualitative growth of the middle class in core countries. A large percentage of the population in the West, Japan, Taiwan, South Korea experienced upward mobility in the past 40 years, but a large percentage of the middle class mobility was because of the credit economy. The “wealth effect” was a mirage because the middle class lived on credit and hoped values in everything from their incomes to homes and securities would continue to rise.

The current crisis has exposed the bourgeois facade of endless progress and revealed that a large percentage of the middle class was really working for the banks–all along, the proletariatization of the middle class was taking place serving both an economic and political purpose. The US Congressional Budget Office estimates that in the next three years there will be a $2.9 trillion gap between productive capacity and actual output; in short, more than 300% the amount that congress approved as part of Obama’s stimulus package. Such a gap will mean that the state must decide if the top 10% of income earners bare the brunt of the cost, or if the middle class and workers will have to endure lower living standards. 

 

Because capital accumulation on a world scale can take place by the more thorough exploitation of labor, the state will support financial elites’ efforts to squeeze out the maximum from middle class and workers short of precipitating social upheaval and political instability. Arbiter of social relations through control of the fiscal system, the state will largely determine how weak the working class and middle class will be for society to function without paying the price of radicalization and violence.

Hovering around 20% in the US and rising as it is throughout the world, chronic poverty will remain a permanent legacy of the current recession. “Third World-type” conditions already exist within the advanced capitalist countries–families in the American Deep South and northern inner cities subsist on a couple hundred dollars per month and rely on food stamps to feed themselves. Conditions for the bottom 20% of the population are not that much better in the EU where the prospects for recovery are not as bright as in US, and even less so for Japan. 

 

If finance capitalism is to survive with the inevitable wealth concentration within the top 10%, there must necessarily be downward income pressure on the middle class and workers. Generating greater surplus than the market can absorb will keep the capitalist economy in a limited-growth mode for at least a decade, unless the state absorbs the surplus and spends it for social development instead of defense.

Because the effective demand is limited by the earning power of workers and middle class in the post-credit crisis of the early 21st century, and the sharply reduced personal wealth (drop in real estate values, private pensions, and stock portfolios) the illusory middle class “wealth effect” will remain low and accumulated surplus capital high, thus keeping the world economy under limited growth prospects for a long time. 

 

Of course, China with a strong state structure and dynamic economy is the exception and of course, we must science and technology innovation take into account, as well as the degree to which the state will intervene to limit capital accumulation by the financial elites. But given existing conditions in the advanced capitalist countries, what impact will they have on the social order? Because there are multiple institutional means that condition people toward conformity, most people exercise self-restraint toward the status quo as they are convinced that there may be rewards in such behavior and punishment for social dissidence. 

 

There is also the cultural difference in every society–for example, in western countries historically the individual assumes responsibility for success or failure and thus internalizes what is in essence an outward or objective phenomenon like job loss. The internalization process entails that the individual feels guilty and may act against himself or loved ones, instead of criticizing or striking out at the system. Naturally, the mass media, schools, religion, business, and the state inculcate such thinking into the minds of the individual who blames himself as a failure, not realizing that the financial and political elites that control institutions have failed.

Accountant John Smith in Denver lost his life’s savings in the stock market, he cannot find work, his wife divorced him, and it is all his fault because he has failed to receive the requisite training to conform to the “new market conditions.” People permit their lives to be conditioned and ruled, and sometimes often ruined by man-made systems that the entitlement-minded financial and political elites have forged to retain their privileged status. 

 

The individual has been conditioned to equate man-made systems with natural disasters like earthquakes or floods. Part of this thinking is a testament to the resounding success of a ubiquitous “birth-to-death” PR campaigns that have convinced people to accept capitalism as “natural,” a premise that both Adam Smith and Thomas Malthus shared. Once people accept that premise, and they aspire to upward mobility possible only within the system, they never even consider working class consciousness for to do so is to demean their own self-image the credit economy makes possible and to lack ambition for individual (bourgeois) success.

How many ads are there online, in newspapers, etc., about “assistant manager” in everything from office clerical positions to fast food jobs, when in reality those are low-paying jobs veiled by a bourgeois “status title” people appreciate more than income? After all, the “real worth” of the individual was “creditworthiness” bundled as part of net worth, thereby giving the illusion to a large percentage of people that they were part of capitalism’s success. 

 

Class-consciousness is the enemy of the financial and political elites that constantly inculcate the idea that “all of us must work together and sacrifice” for the greater good, when in fact the “greater good” is largely the domain of the elites. As proletarization of the middle class become more apparent, the current global crisis will evolve into a middle class crisis of alienation, stratification, and erratic class/status identity.
 

Additionally, there will be the increasingly prohibitive costs of higher education, especially graduate school that will be out of reach for a larger percentage of people in the next decade and possibly the next half century. At the same time, there will be fewer positions available for the college-educated population that will have to be highly mobile not only within its own country but internationally and must accept jobs unrelated to their college degree–a phenomenon that has been growing in the past decade. 

 

Alhough society will become increasingly polarized and likely to remain so because of capital accumulation in a credit-tight environment, the cyber-eco-bourgeoisie will co-opt and thus de-radicalize a segment of the recently created “proletariatized” middle class and working class aspiring to upward mobility and lifestyle. More realistic and self-aware than the “credit bourgeoisie” of the past half century, the cyber-eco-bourgeoisie of the 21st century will also be useful to the political and financial elites in promoting corporatism whether that is in the US, Japan, or EU.