A provocative theory
From the end of World War II in 1945 through the end of the Johnson Administration in 1968, the United States was in a golden era. Or to be more specific, it was a golden era for the nation's middle class. Jobs, even blue-collar jobs if they were union, paid well enough for families to buy homes, send their kids to college, and put away money for retirement.
That didn't happen by accident, or solely from individual effort, or because America had some special blessing from God. It was social democracy, a polite term for socialism.
Thanks to the great paradigm shift engineered by President Franklin D. Roosevelt in the 1930s, but which didn't come to full fruition until the 1950s, government in that period believed it had a mission to help people get into and stay in the middle class. The majority of the American public believed it, too, and expected as much from government. Unions were legally protected and encouraged, which pushed up wages and benefits for everyone. Employer-sponsored health insurance that didn't cost the employee anything was the norm. College aid was plentiful. Social Security and Medicare ended the economic terrors of old age.
And all of that was critical to creating a vibrant American middle class, argues Monmouth University economist Steven Pressman in an essay published in March in the Journal of Economic Issues. Little noticed until now, his essay was brought to light in an article by Toronto Globe and Mail reporter Doug Saunders. Saunders has been exploring the stresses on middle classes around the world, and how difficult it is for countries like India to build and sustain a middle class despite have the same income levels the U.S. and Canada did when their middle classes began to grow. He defines a middle class family as one with household income between 75-125 percent of the median income.
Pressman, not to be confused with the New Jersey anti-cult activist of the same name, crunched the numbers on middle classes in the U.S., Canada, Britain, Sweden, Norway, and Germany, looking at the period between 1980-2000. It was a period of explosive growth in most of those countries, but downward mobility exceeded upward mobility by two to one. The U.S. middle class shrank by 2.4 percent. In a nation of 250 million, that means about 4.8 million people, or well over a million families, fell out of the middle class.
But that didn't happen everywhere. As Saunders notes in his article about Pressman, the middle classes in Switzerland and Germany stayed about the same size. Those of Norway and Canada actually grew, in Canada's case by 4 percent. He ran the numbers this way and that, and the results were the same. Whether a nation's middle class stayed the same size or grew was entirely dependent on what their governments did to help the middle class. In other words, how much they spent.
In the U.S., of course, the years 1980-2000 coincided with the rise of the rightwing Republicans, who had been against Roosevelt and his paradigm shift all along but who, in the wake of the Great Depression, had no credibility. They took power in the wake of the oil shock and inflation of the 1970s, aided immensely by the skilled and popular President Ronald Reagan. Reagan's personal affability masked a political agenda aimed at stopping many of the policies of government, especially those regarding unions, that helped the middle class. House Speaker Newt Gingrich and his howling hordes picked up the torch during the Clinton Administration and stopped a national health insurance program in its tracks. It's been downhill from there.
Pressman told Saunders that after completing his study, he doesn't think a middle class can be self-sustaining without active government assistance. And that those countries which tend to do best in the turbulent global economy are those "with the most robust tax-and-spend programs," Saunders writes. "But they have to be aimed at the right places...And countries such as Canada, which can and do spend that money, have done the best at surviving the social turmoil of our age."
And of course, things have gotten much worse for the American middle class during the eight lost years of George W. Bush. Is anything not made in China? And better for the Canadian middle class, which pays no less for oil products than we do despite having vast reserves in country. The Canadian dollar has appreciated by 50 percent in the past five years and is now nearly at par with the U.S. dollar. Think about it. We're going down, absent a strong Democratic president and Congress taking office in 2009.
The current administration professes to want to help the entrepreneurs, the "risk takers," or less politely, the people who think they can make a killing and want to give it a try. It's time we stopped giving that idea a pass. Only a tiny minority of Americans will ever be entrepreneurs, and even fewer of those will be successful entrepreneurs. Most of us will always be wage slaves. The entrepreneurs can look after themselves, and here's to their success. They deserve a halo, but not government policies and tax incentives that hurt the rest of us. It's time to help the wage slaves of the middle class and restore the American dream.