Growing Socioeconomic Inequality and the Shrinking American Middle Class

Dramatic Rising Inequality

Dramatic Rising Inequality

Socioeconomic inequality is on many people’s minds today, and is increasingly reported in the media.  A recently released documentary, Inequality for a All, is based on the work of noted economist Robert Reich and makes an impassioned plea for the well-being of the American middle class, a group that has seen their incomes stagnate since the 1980s. Income inequality is now at historically high levels.

Why has the middle class status of millions of Americans been eroding for several decades? When American manufacturing jobs, a source of high wages for those with a modest education, started to disappear in the 1980s, politicians told workers to retrain for high tech jobs. This didn’t seem to work.  Our presidents have promised us that if we worked hard and played by the rules we would be assured of a comfortable standard of living. Those on the left say we need more programs and regulations while those on the right say we need to work harder and smarter. Although some truth can be found in both arguments, there are more forces at work here than meets the eye.

I attribute the growing socioeconomic inequality in the U.S. to a triple whammy.

Global Income Distribution

Global Income Distribution

It is not simply a matter of greed, power, and corruption – it is deeper than that. Over 90% of Americans are reeling from neoliberal (free market capitalism) policies, economic globalization, and the rise of the financial sector. While this is a big topic beyond the scope of a simple blog, you can find more information in my book The Global Economy: Connecting the Roots of a Holistic System. For now, I would like to comment on the world’s middle class, and how the American middle class fits into this broader dynamic.

The world’s middle class is essentially a tale between two middle class groups: one is the old middle class of the core nations and other is a newly emerging middle class of the middle and periphery nations. The old middle class is seeing the erosion of the established standards of a middle class way of life, and the new middle class is developing its own standards for its way of life. The prospects for both are tied to economic globalization.

Chinese Middle Class Family

Chinese Middle Class Family

During the period of 1948-1973, the United States experienced tremendous economic growth and the American middle class grew significantly. The wealthy made strides as well, but the middle class gained the most. It was a time when the working class, in ”blue collar” jobs, also gained income and were able to attain a middle class standard of living. Although partially a result of America’s unique status after the war, it was also a result of a set of governmental policies enacted to support the growth and prosperity of an expanding middle class.

Since the 1980s, the middle class way of life has changed for the core nations. The wealthy have maneuvered into power positions and have designed the rules of economic globalization to benefit themselves , not the middle class. They encourage competition between countries for business, providing incentives that drive down taxes on corporations, weaken health and environmental protections, and undermine what wereconsidered fundamental labor rights, including the right to collective bargaining. In addition, policies that favor the middle class such as higher incomes tax rates on the wealthy, ample funding for education, low-interest loans for education, research and development that encourages job creation, a significant inheritance tax rate, tax deductions for home ownership, a safety net for economic hardships, and pensions for retirement,  have all been eroding.

World Distribution of Household Wealth

World Distribution of Household Wealth

The policies of economic globalization favor the wealthy, but this does not mean that the middle class has disappeared.  A growing phenomenon today is the emergence of a global middle class. One billion individuals are situated in the middle segment of the wealth pyramid. Almost 60 percent or 587 million individuals in this middle segment are located in Asia Pacific, the fastest-growing economies of the world. The middle class in this region is expected to replace the indebted U.S. middle class as the global growth locomotive.

How did the middle class expand in Asia Pacific countries and shrink in many core and periphery countries, such as the United States? In most cases, countries simply stopped making things and started buying them from the Asian Pacific countries. Since 2000, the U.S. has lost 3 million manufacturing jobs; Brazil has lost 2 million since 1998, and South Africa has lost nearly 1 million in a similar time period.  In the past, Argentina assembled televisions; now it purchases most of them from abroad. Mozambique packaged its cashew crop 15 years ago; today the country ships its raw nuts overseas for others to bottle and can. Zambians made their own clothes in the 1980s; now they sort through bundles of clothes shipped from the U.S. and Europe. San Francisco used to manufacture the ships that delivered American-made goods to the world; now the ships docked in the Bay Area’s ports are mostly from East Asia, unloading foreign-made products for U.S. consumers.

This erosion of the American middle class is not an inevitable change brought about by forces of nature but a calculated process by financiers, multinational corporations, and the global elite to further enhance the bottom line of those at the top.  It behooves all of us to counter this trend of rising inequality and establish more equitable policies for the well-being of the middle class around the world.

There are a number of things that we can do, beginning with educating ourselves. One simple thing we can do is watch the documentary Inequality for All to get a more in-depth picture of how this phenomenon has become such a powerful force. Another suggestion, as outlined in my book, is to rebuild a local economy in which food is grown locally and businesses are firmly planted in the local economy.  When multinational corporations are able to siphon off profits locally, local economies suffer and the middle class is unable to grow and prosper.  The middle class depends on countering the global trends that are eroding their standard of living and way of life.

Further Resources:

See my book The Global Economy: Connecting the Roots of a Holistic System for a in-depth look at neoliberalism, economic globalization, and the rise of the financial sector.

Interesting information about inequality: 9 Out Of 10 Americans Are Completely Wrong

Critical Thinking Suggestions for Educators

1.  What policies do you think should be enacted to protect the American middle class way of life?

2.  Would these policies harm the middle class in the non-Western world?

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