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from Stratfor: The Crisis of the Middle Class

edited January 2013 in Off-Topic
Another thoughtful piece from Goerge Friedman:
The Crisis of the Middle Class..


  • edited January 2013
    Hello again JR-

    That piece essentially reflects an ongoing conversation that I have been having with my wife since the early 70's. The description of the typical single-earner lower-middle class family of the 50s and 60s is virtually identical to the family that I grew up with.

    I agree with his entire analysis, and would suggest adding one other factor to the structural changes which began in the 70's: The United States finally ran out of "West".

    The United States has been unique in it's short and rapid evolution. I can think of no other historical example where a large group of technologically advanced people (the Europeans) was presented with an entire new continent to utilize, develop and plunder to their heart's content (never mind the Indians). The potential resources were apparently endless- when things started to get a little crowded, the answer for hundreds of years was simply "go West, young man!"

    This was still in evidence in my youth in San Francisco. The European immigrants and their descendants (including my family) had by that time built their new houses from the shore of the Atlantic Ocean in the East almost, but not quite, to the shores of the Pacific in the West. As a child playing in the remaining sand dunes bordering the Pacific Ocean I of course had no idea that, at least with respect to San Francisco, I was playing on the last undeveloped Western frontier of the United States. But I did realize that those sand dunes were disappearing pretty fast, as new housing developments (including ours) continued to eat away at the remaining open space. And in my lifetime we've used up the last of the "West".

    If a young man now feels crowded or wants to strike out for some unclaimed territory, he can no longer "go West"... sorry, but it's all taken... somebody or some entity now owns every last inch of the North American continent and there's no longer any free land "out West". So now the US has to play by the same rules that have been in effect in Europe for many centuries. We can redevelop or reuse existing resources, but the days of simply grabbing more from "out West" are gone forever.

    There is a segment of our political spectrum which constantly decries the "Europeanization" of the US. It's no coincidence that in many cases this is the same mentality which advocates the need to carry whatever type of firearms we may choose, presumably to maintain our ability to take whatever we need or want from "the frontier". They are living in a fantasy United States which no longer exists. It's time that we grew up and adjusted to the fact that the US is no longer "special" or "exceptional"... that's all been used up now and we will have to play by the same rules as the rest of the world.
  • Reply to @Old_Joe: i came here over 21 years ago, and, for me, the uniqueness of the US is still there, even though it is disappearing as the sand dunes of your childhood. in the former Soviet Union, 'go West, young man (gal)' worked wonders for me and landed me here, literally with twenty bucks and a one-way ticket. it is i guess increasingly disappointing to find that the 'land of opportunities' has the same challenges that all mature countries have and plenty of political shenanigans to boot...
  • Reply to @fundalarm: Yeah, we do occasionally catch and punish a bad guy but it seems like for every one of those two new ones spring up in their place.

    OJ - if you still got a hankering I believe that you can "Go North" (Alaska) and stake out a claim but you've really got to love the cold and the insects.
  • OJ, you're spot on, methinks. You did not specifically mention the Dust Bowl, and I'm not old enough to recall the Dust Bowl days, but surely some of us in here are old enough. Zorba---that Greek guy---when confronted with a complete catastophe at the end of the story--- could find no better thing to do but to dance. And his boss asked him to teach HIM to dance. When I think of life as lived by so many now who go hand-to-mouth, from paycheck-to-paycheck---struggling just to manage to maintain their human dignity despite the fact that the deck is stacked against them--- I think of the wonderful "luck" of those who "made the race" to become a "Sooner." (I got there SOONER than you did, to Oklahoma.) "Sis" Cunningham wrote this song, which may just be familiar to a bunch of us in here. It's all about working hard, trying to achieve and succeed, and getting screwed, literally from outa the blue--- for your efforts. All kinds of people do in fact screw all kinds of other people every day, all the time, but then there's Mother Nature, too...

    Well, despite the catastrophe, "Sis" invites us to at least enjoy the song. This one is a rather new version in a Dixieland style with a rather large band including strings, horns, keyboards, drums, woodwinds...

  • It's "The Boss," of course.
  • edited January 2013
    And... "How Can A Poor Man Stand Such Times As These?"
  • Reply to @MaxBialystock: Love the band in this one.
  • edited January 2013

    I believe I have a bit of a problem with this presentation.

    "In the 1950s and 1960s, the median income allowed you to live with a single earner -- normally the husband, with the wife typically working as homemaker -- and roughly three children. It permitted the purchase of modest tract housing, one late model car and an older one. It allowed a driving vacation somewhere and, with care, some savings as well. I know this because my family was lower-middle class, and this is how we lived, and I know many others in my generation who had the same background. It was not an easy life and many luxuries were denied us, but it wasn't a bad life at all.

    Someone earning the median income today might just pull this off, but it wouldn't be easy."

    The point being, no one now wants to live that life. They don't want the tract house with three bedrooms and one bath. They don't want one late model car (paid for) before they get the even older second car. They can't live with just one TV, one phone, and no computer.

    Am I missing something?

  • Reply to @Mona: hence the borrowing surge, Mona, to get all of it and more with the simply median salary. we all know how that went... i think you're touching a valid point, but it is a different point from the one author is making.
  • edited January 2013
    A book we always give as an extra wedding present:

    The Millionaire Next Door

    Some of the data and numbers used will be out of date; but not the main thrust, "spending and debt habits" may eat one alive". Age old problems for many today.

  • Ralph Cramden ("Honeymooners") lived in an age in which telephones were not yet considered to be a necessity. He'd run upstairs to use Art Carney's phone. ("Trixie" was the wife, and... what was his character's name? Oh, yes: NORTON.)

    Technology has made great leaps, a big benefit to us all, generally speaking. But there is an element of the common wisdom--- by which we shake our heads up and down and agree on the things which are "essential" today--- that jumps past what's more important, in favor of what we've come to rely on as conveniences. "Necessary conveniences." Like cell phones. As Comedian Lewis Black points out in his hilarious but thought-provoking performances: he draws attention to the marvelous, ubiquitous cell phones we all use, and yanks his own out of his pocket, making sure to run his hand around all four sides of the thing. It's CORDLESS!!! And why don't we already have universal health care for everyone in this country, he asks? Because we collectively decided that it was more important to be able to text each other instantly...As Catch-22 notes above, life is all about choices.

    This is the color, flavor and texture difference between the current day and the days when soldiers came home to take advantage of the G.I. Bill and make a (BIG) family together with their wives. We used to do big, important things. Now it's about making everything portable and convenient. ...Yes....Until you need any institution, a bank or the government or even your gym club, to make things as convenient for YOU as they have set things up to be convenient for THEMSELVES.

    Here's what I'm talking about. Some might be offended. In that case, run and cover the children's ears! (This is an off-topic thread, anyhow.) Alert: It's a bit over 8 minutes long...

  • Reply to @Mona: I could be wrong but I think that you might be jaw-dropping surprised at the number of folks who would toss all of today's tv's, cell phones, computers etc., etc., to return to the 50-60's lifestyle they grew up in with no regrets or hesitation. Admittedly I have a desktop, laptop, tablet and smartphone but for the life of me I don't know why half the time and in many ways I could easily do without them if only the rest of society (i.e. friends, businesses, clients, my children) would agree to go along with me. My only victory in today's digital world is that I still refuse to pay for TV programming. Also, FWIW, I still prefer to read actually physical copies of newspapers, magazines and books and not something that digital content providers and publishers or software changes and glitches can disable or remove at will.
  • Reply to @Old_Joe: You must have been around for Playland at the Beach. It's my privilege to have known (and still know) the founder of the San Francisco Historical Society for many years; he talks frequently and so fondly of his memories of the place when he grew up. I hope your recollections are just as warm.
  • Reply to @Old_Joe:

    Old Joe, There is still a lot of underdeveloped frontier in the US waiting for exploration and exploitation. I witnessed this when I have driven from Texas to Yellowstone and back and this past summer by brief travel to Alaska. Opportunities still exist and as a naturalized citizen I can see and appreciate it.

    This past decade (especially the second half) has been a difficult one in which USA is not spared from troubles and this has created an wave of pessimism for US-born citizens and self-doubt started to happen assisted by screams of doomsayers. But, the rest of the world really did not get spared from these troubles. It is not that unique. This shall pass too.

    While "special" and "exceptional" might not be that visible, the opportunities still exist to do something special and exceptional but you have to work for it and most importantly being in yourself.
  • Reply to @Mona: I think you are right. We no longer live that life anymore. We say we want the same 'good old days' but not really willing to live like that anymore. At that time, it was considered enough and people were happy as they could plan for their future. Today, we are stretching a richer life with maybe barely more income (inflation adjusted) and the economic makes us unhappy.

    The generations of the past had vision for future. They were able to build the interstate highway system, send people to moon. Government was part of the solution, we empowered it. It was the government by the people and for the people. Today political infighting and the mentality that instilled as the government as the enemy made it nearly impossible to do big projects.

    It is still possible to achieve big projects but you need to fight more, work harder against naysayers.
  • Howdy folks,

    Nice article, Dan. Thanks. Mona, you've got a good point. We live in the days of instant gratification and full blown conspicuous consumption. How many TV programs show you all the stuff you couldn't possibly afford . . . unless you charge it. Alas, I fear this is here to stay for many.

    That said, the middle class is still being extermentated at a fast pace. I grew up in Lansing, MI - capitol, olds, MSU. There were three paths to the middle class - mfg jobs, state jobs, and a quality public education. Folks divorced when I was 12 so if middle, we were Low middle class. I took the latter path as I had the finest teachers all through the public school system. Later, by having military service, I rec'd the GI Bill to pay for a BA in Econ from MSU. I lived at home and commuted. I worked from when I was old enough to help deliver papers. Hell, my little brother without the GI Bill went thru med school with almost zero debt.

    Today, there are still mfg jobs - we've got two state of the art GM assembly plants here in Lansing. However, way fewer jobs, and way less pay and benefits. State jobs? I worked for MDOT for 30 odd years, hiring in in 1980. They started cutting our benefits in 1983 and have continued ever since. They also contracted out most of the lower skill jobs and, most of the IT and a lot of the technical work. They switched to a DC pension some 15 years ago. They never paid much - I was at 60% of my wife in a same level pvt industry job. But you had secutiry and benefits. Today? Nopers.

    Education? Because they came up with Charter schools to both attain public monies for private and parochial schools AND enable parents to segregate their children from the 'unwasted hoard' . . . most urban public schooling is substandard at best. College? Wow, lots of folks willing to loan you money - as much as you want. However, these debts, like mortgages, are immune from bankruptcy. When will we start to see people locked up for debts? We won't institutionalize the freakin crazies, but soon they'll be locking up debtors.

    But as the author says, some things were way out of line. You can't pay a hs educated, at best, line workers ~$100K in total wages and benefits and have a viable business model. You cannot give public workers obscene pensions. There are municipalities all over the country (and some states), that allow you to backload all your unused vacation and sick and overtime into your final year and only use that one year to calculate your pension. With a higher multiplier, you can see a 50 year old police or fireman who had at most earned $60K, with a pension of $100K - for how many years? You've got some of the silliest damn work rules. They just made this a RTW state, where the AFL/CIO was born, and I can see why. We had unions in state service and being mgt, I had to deal with them. At discipline and work rule complaints were the only time they were involved. Duh. MI has a Civil Service commission that negotiates for us on everthing per the constitution and unions don't do anything. CS even had grievance procedures. For the pleasure it was ~60-75$

    And I'm still pro-union and would not have voted to make us a RTW state. If you're going to making joining the union optional AND by not joining, you do not have to pay dues - well then you should not share in anything the union gained for their members.

    I think education could play a huge part in the solution. We've got to get ed loans subject to bankruptcy. What would be just would be to have the corporations pay for all the education. Who would benefit? Who should pay for it? Use fee folks. Who is reaping the benefit of our national defense system? Who benefits from the highways? The airways? To the degree corporations benefit - they should pay. For starters, they should pay off the entire national education debt presently official. All of it. Make them pay based upon market capitol to the top 5000 companies. Special levy tax. Then make college tuition free for anyone having and keeping a 3.0 GPA. Just like the Kalamazoo Promise. Several private doners ponied up $500M to cover college tuition for anyone graduating from a city school with a 2.0 if they maintained. I believe George did something similar with their tobacco settlement monies. I can be done.

    and so it goes,


  • edited January 2013
    Reply to @Investor: "The generations of the past had vision for future."

    They also had (and this is someone speaking who didn't grow up in that era, just my opinion) and entirely different ethic and mentality than you see today. There was some desire to improve things for the future, for the collective. I mean, look at high speed rail - something that I think would offer a lot of benefits to the collective, and something that's awfully commonplace in other countries at this point. Yet, this governor doesn't want it and that governor wants blah blah blah.

    "in 2012, Amtrak proposed a $151 billion plan to build its first dedicated high speed rail line by 2040.[3] "

    2040? Hahahaha! By 2040, we'll finally be gettin' that high speed rail we've heard so much about while other countries will probably look like the freaking "Jetsons".

    "A federal allocation of $8 billion for high-speed rail projects as a part of the 2009 stimulus package has prompted U.S. federal and state planners to coordinate the expansion of high-speed service to ten other major rail corridors,.[6] However, governors of some of the states where the corridors were to be built have cancelled the projects."

    As I noted above.

    "America's first dedicated high-speed rail infrastructure is likely to be in California between Anaheim and San Francisco via Los Angeles and San Jose but will take at least until 2028 to complete"

    2028? Better, but geez.

    Improvements in infrastructure (smart grid, etc) would also lead to a number of benefits, but we have a government that - at least for the next four years - will not likely agree on anything while other counties continue to pass us by.

    "This past decade (especially the second half) has been a difficult one in which USA is not spared from troubles and this has created an wave of pessimism for US-born citizens and self-doubt started to happen assisted by screams of doomsayers."

    Um, only US-born citizens are pessimistic? Really?

    Or, are people being realistic? Just because people have criticisms about the direction of the country do not mean that they're "doomsayers" (which reminds me of someone having a negative thing to say about a company online, and having a bunch of people go, "OMG YOU MUST BE SHORT!") It may just mean you have a negative thought or two about the company.

    I'd like to hope that this country turns itself around, but rather than hoping it will (and nothing politically would suggest such), I think it's best to prepare for the possibility it doesn't. That doesn't mean anything extreme or "doom", it just means the possibility for a continued (hopefully gradual, if that's the case) quality of everyday life in this country.

    I think there are some positives in this country - what's going on with energy - but my complete lack of confidence in this government keeps my confidence low (although I have high confidence that somehow, these positives will be spoiled.)

    Lastly, the EIU's "Where to be Born" index had the US in first place in 1988. It is now 16th. Better than worse than 50th place, but indicative of a slow, continued slide that I don't see getting better any time soon.
  • Reply to @rono: thanks for sharing your thoughts, Ron. Always appreciated. One question though... in "Nice article, Dan." -- who is Dan??:)
  • Yes, we've been hijacked by a world-view which makes gov't the enemy, just because. We just don't like government. But why? Well, gov't is always interfering. How? Well, gov't makes us follow regulations and forbids some excessive crap by which the ones without a lotta money would get screwed. Why should we care about the ones without a lotta money? Screw them. Come to think of it, why can't we operate by an "every man for himself" model? Screw the common good. What's the "Common Good?" Did you just make that up? I see no reference to that term in the Constitution. What are you talking about? SOCIALISM? Are you a Communist? Yer one of those income re-distributors, aren't ya? Sure! Go ahead and soak the rich. That's your answer for EVERYTHING!!!

    No, you idiot. But anyhow, should I soak the poor? And how far do you think that will get us?

    I don't care. I'm wealthy now. Screw you. I can arrange for my own roads. Come to think of it, I don't need your roads and airports and train stations. I can hire my own helicopters to take me places, and I have a sweetheart deal with the UAE. I fly over to Dubai every month for the golf and horse races and indoor snow skiing. "Taxes are for little people." (Leona Helmsley.)
  • Goodness Max, relax a little or you'll be a candidate for heart failure. And since decent medical care is in the process of being allocated to only the top 5% or so you'll really be screwed. Damn! You sound just like me ranting at the dinner table!

  • edited January 2013
    Reply to @Old_Joe: Yeah - Ditto that good advice. Or else Ted will have a piece of Max's $$ through his investment in PRHSX - not what we want!
  • Reply to @Old_Joe: Actually, a good rant is good for the soul.
  • Thanks, OJ. AND Hank. AND Anna. Yer correct, Anna. It's a good thing they don't put me in charge. Heads would roll. And people would not be sleeping on sidewalk grates. Unless they choose to. You can lead a horse to water...
  • Actually, a nod is as good as a wink to a blind horse. ---Rod Stewart.
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