The middle-class meltdown
By John Lloyd
The opinions expressed are his own.
â€śAll that is solid melts into air,â€ť wrote Karl Marx in the Communist Manifesto. He meant that the sheer, revolutionary power of capitalism had wrenched larger and larger parts of the world out of its feudal or tribal doze, and sent it running round the track of modernization, smashing down habits, customs, faiths as it went. The agents of this wrenching change: the middle classes, or as he would have it, the bourgeoisie, the new class which grew in the womb of feudalism, and then destroyed it. And they would, he prophesied, be destroyed in their turn.
Do you not fear, in anxious moments at dawn, that he was right, just a bit (163 years: the Manifesto came out in 1848) before his time? Do you feel the solid world melting? Do you tremble that we in the rich states are living, not just on borrowed money, but also on borrowed time â€“ and that it is running out? That our way of life is being gnawed at from below?
John Gray, the British philosopher, once a Thatcherite, thinks Marx is right, and that the melting has gone beyond effective political control. Marx was wrong, to be sure, about communism producing a decent society, judging by whatâ€™s been on offer so far. But Gray thinks he was right about how the apparently triumphant bourgeoisie, builders of a productive, industrial, city-based society, would themselves melt. â€śThe weapons,â€ť Marx wrote, â€świth which the bourgeoisie felled feudalism to the ground are now turned against the bourgeoisie itself.â€ť The constant churn and change which capitalist development required would, in the end, attack those who had created the process: the middle classes. Now they â€“ we â€“ are for churning.
Our fate has become linked to that of the classes we thought we had left, or left behind. The industrial working class in the rich societies, whom Marx thought would lead the revolution, is now small, and in most states the trade unions are weakened, as are the socialist parties. Those in what Marx called the â€ślumpenproletariatâ€ť are growing in numbers, and can be dangerous â€“ see the London riots in August. But they are alsoÂ disorganized. In an article in Londonâ€™s Guardian earlier this week, the UK Justice Secretary Kenneth Clarke called the rioters a â€śferal underclassâ€ť and said they were â€ścut off from the mainstream in everything but its materialism.â€ť
But is there also a feral overclass which sets the materialist tone and style? In the United States, a growing number of economists see society separating more and more into the rich and the poor, with a middle squeezed down and out. As Don Peck writes on Reuters.com and in his sober piece in The Atlantic: â€śthe most important economic trend in the U.S. over the past couple of generations has been the ever more distinct sorting of Americans into winners and losersâ€¦the recession has pressed hard on the broad center of American Society.â€ť Peck quotes Emmanuel Saez, a Berkley economist, as saying that â€śthe rich seem on the road to recovery,â€ť while the jobs for those in the middle â€śare being wiped out. And what will be left is a hard and a pure market.â€ť
Earlier this week in the UK, the High Pay Commission published a study â€“ â€śWhat are we paying for?â€ť – which showed that the trend towards payment for performance has done well for senior executive pay, less well for performance. It makes tough reading for those who argue that the high paid are worth it: while salary and bonus payments have increased hugely in the past decade, the increases bear â€śno relation to either market capitalization, earnings per share or pre tax profit.â€ť Bonuses seem to have taken on a life of their own, blithely oblivious to the market and to the profits on which they were supposed to be based. â€śEven at the deepest point of the latest recession, when pre-tax profit was at its lowest point, the lowest bonus level was still 134 per cent higher than in 2000,â€ť says the report. Throughout the rich world, most (not all) the rich resist tax increases; while their wealth and their lifestyles inevitably insulate them from the majority of membersÂ of their society. The phrase â€“ â€śweâ€™re all in it togetherâ€ť – cannot be used of these bad times: instead, weâ€™re all in it separately.
The old rich world is not alone â€“ indeed, is not the most extreme. In the new enriching states â€“ as China, India and Russia – the very wealthy cut themselves off ruthlessly from the masses, often live largely or partly abroad and tend to the ruthless side of employment practices. Employers there have the advantage of pools of relatively cheap, usually unorganized, labour, and labour laws which are either non-existent or avoidable. In his new book – The Beautiful and the Damned: Life in the New India â€“ the writer Sihhartha Deb describes workers in a steel mill â€“ â€śthe men visible through the smoke and noise were infernal creatures, rags wrapped around their faces to protect themselves from the heat.â€ť Most of these â€śinfernal creaturesâ€ť were contract workers, with no effective employment rights: but with very effective stomachs needing filling, and often effective families needing support.
Some among the super rich, the billionaires, the oligarchs â€“ as Warren Buffett, Bill Gates and George Soros â€“Â put much of their fortune to charitable use. Some of the new oligarchs, from the enriching state, are beginning to do so too. But most keep most of their fortune. And the merely rich, though they too may give on a more or less generous scale, are concerned â€“ it seems to be the human default position – first of all to retain and increase what they make. Much of this wealth will trickle down: the rich have always needed to employ both the poor and the middle class. But trickling no longer cuts it: a flood of jobs, investment and growth is needed, to get back to low unemployment levels. Will President Obamaâ€™s speech on jobs tonight stop the melt? The President is reported as preparing to pump $300bn into jobs creation: even in these times of inflated numbers, thatâ€™s substantial. But it has to be fought through Republican opposition. And it has to work.
I am less convinced than John Gray that Marx was right about the great capitalist/middle class melt down. Marx tended to the apocalyptic â€“ one reason why he appealed to revolutionaries everywhere. The enriching world offers, to the enriched, opportunities as well as competition; the educational and other programs now being worked out to raise the level of the western game are more than merely desperate: they are centered on increasing human capacity â€“ and such programs oftenÂ work. More people in the populations of more countries have more to lose â€“ because they are becoming middle class in their turn. The sentiment that a gamblerâ€™s throw of a revolution will at least make things no worse becomes less widespread.
Yet â€“ to borrow another much-used phrase from the Communist Manifesto â€“ there is a spectre haunting, not just Europe, but also the developed world. That is, that the good times no longer roll. Â The areas in which a fine salary can be collected, in increasing amounts, through a not-too strenuous working life, are contracting. The discreet smugness of the bourgeoisie is much reduced.
Though not their potential for anger. If the rich go on getting richer, the poor more feral and the middle more squeezed, than a reckoning, more likely a series of reckonings, will come.