The Decline of the Western Middle Class


The most virtuous and exceptional feature of modern western civilization is that it created something new to history:  an economically and politically dominant middle class.  The stability (political), vibrance (economic growth and diversity), and innovation (technological) it produced is historically exceptional.  

Unfortunately, that singular accomplishment is soon to become a fond memory.  Why?  The social contract that enabled this success, particularly the post WW2 social contract that shared the increases in wealth generated by improvements in productivity with the more productive workers that enabled it, ended with the financialization of economic activity and globalization (and governments that facilitated and catalyzed the process).  In sum, the increase in wealth the western middle class produced over the last three decades has been transfered to global financial elites (who misspent it) and mercantilist nations (China, Japan, Korea, Taiwan, etc.).  We can see the result of this.  It’s tangible:  The median income (the best measure of the health of the middle class) of the western middle class today is less than it was in 1974, despite massive top line GDP and productivity growth (both global and national) during the same period. 

The ongoing strangulation of the western middle class is at the heart of the west’s current problems.  Everything else is fluff, misdirection, and hot air.  Its death creates, in the short to medium term:

  • Economic stagnation/depression.  An ever increasing loss of vibrance.  Shrinkage, across the board.  Wealth destruction.  
  • Inevitable government bankruptcy.  An ongoing and inexorable shrinkage of the tax base that funds government activities.  Governments become slaves to global bond markets.
  • Political instability.  Increasingly fractious political discourse.  Increasing violence.  A rise in criminality and corruption.