(#22) October 23 2014

ARE WE A NATION OF FROGS”

THE FRIGHTENING DECLINE OF THE U.S. MIDDLE CLASS—BY WHICH I MEAN THE BOTTOM 90 PERCENT

YOU? (ME, CERTAINLY)

ALL THE WEALTH ACCUMULATED SINCE 1940 IS GONE. WHO HAS IT NOW? THE ULTRA-RICH 0.1 PERCENT

If ever you wanted an example of the boiling frog pattern of human behavior, you would be hard pressed to find a better example than the attitude of most Americans since the early Seventies.

It was at that time that the ultra rich—and their followers—decided to reclaim their absolute dominance of the U.S. economy. They felt it had been severely challenged by the New Deal, the rise of the trade unions, the War on Poverty, and the massive demonstrations against both the Vietnam War and the system in general that characterized the Sixties—and 1968 specifically. A massive factor—though rarely discussed openly—was—and remains—profound hostility towards the Civil Rights Act of 1964. The poisonous effects of racism are ever a factor in American life.

American capitalism’s extraordinary hostility towards its own workers—unique among developed nations—is heavily intertwined with racism.

This counter-attack by the ultra-rich—seemingly unnoticed by most Americans has been entirely successful—as the above chart shows.

Time to remind you of the frog story.

If you drop a frog in a pot of boiling water, it will of course frantically try to clamber out. But if you place it gently in a pot of tepid water and turn the heat on low, it will float there quite placidly. As the water gradually heats up, the frog will sink into a tranquil stupor, exactly like one of us in a hot bath, and before long, with a smile on its face, it will unresistingly allow itself to be boiled to death.

Version of the story from Daniel Quinn's The Story of B

What is the source of this information? A a new study by economists Emmanuel Saez of the University of California, Berkeley, and Gabriel Zucman of the London School of Economics.

Let me quote from a Huffington Post story of October 20 2014.

Debt has been the big force driving net wealth lower for the middle class, according to Saez and Zucman. Brief bubbles in stock and home prices in the 1990s and 2000s only temporarily offset the steady, depressing rise in mortgage, student-loan, credit-card and other debts for the bottom 90 percent.

"Many middle class families own homes and have pensions, but too many of these families also have much higher mortgages to repay and much higher consumer credit and student loans to service than before," Saez and Zucman wrote.

Another important factor has been that incomes have stagnated for most Americans over the past few decades, once adjusted for inflation. Along with rising debt levels, stagnant wages have made it impossible for most families to save very much money.

And who has been the beneficiary of this middle-class misery? The top 0.1 percent of Americans, whose incomes have just kept rising, and whose share of wealth has soared to levels not seen since Jay Gatsby was still staring at the blinking green light at the end of Daisy Buchanan's dock:

In fact, the middle class is not alone in suffering from shrinking wealth. The rest of the top 10 percent of Americans below the 0.1 percent -- the "merely rich," Saez and Zucman call them -- have also suffered from falling household wealth over the past four decades.

This rising inequality of wealth can only lead to more inequality of income and wealth in the future, Saez and Zucman warned, echoing French economist Thomas Piketty. The very rich will just keep getting richer by living on the returns from their wealth, while the rest of us will keep falling behind.

Are we doing anything about this? No.

Is it a major issue in the Mid-Terms? No.

Are the media making an issue of it? No.

Does it mean that the U.S. is in rapid economic decline? Yes (as far as most of us are concerned).

Is this decline inevitable? No—it’s actually quite unnecessary—but it is inevitable if we don’t change the current American Business Model (which is rigged in numerous ways—and is certainly not free market capitalism).

666 words.

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