The Middle Class is being Disrupted by the One Percent

Global economic inequality is in the spotlight and capitalism is on shaky ground.

So familiar, yet so under-reported. Have you heard this story?

Middle-class families are seeing their incomes stagnating as they are squeezed by the ultra-rich taking a bigger slice, while housing and student debt are crippling the prospects of the youth.

Even the ultra-rich themselves are saying capitalism isn’t working for most people, even as the U.S. is said to be having the strongest economy in recent memory with record unemployment.

Under Employment is an Invisible Economic National Emergency

Well, what about under-employment and the rise of part-time work? What about the wave of automation that’s coming vaguely on the horizon that will disrupt the working world in the next three decades?

A recent international report from the OECD economics think tank points to the conclusion that the middle class is being “hollowed out”, with declining chances of rising prosperity and growing fears of job insecurity.

That we haven’t had a recession in over 10 years speaks volumes to what might happen when the next one does get hold of us, it will be crunch time. Young people today are stressed out about career and economic uncertainty. Europe in early 2019 is basically already in recession levels.

Our Most Prosperous Firms aren’t being Regulated Properly

So what gives? Silicon Valley is basically unregulated, their platforms go to extremes of manipulating all of our attention spectrums on the western internet, basically a “super-power” of magnifying their advertising revenues, leading to enormous profits.

The OECD says there will be political consequences for Western countries for the decline of the Middle Class.

Each generation, in their 20s, are experiencing less Middle Class-like realities. Meanwhile, of course, the ultra-rich are enjoying greater success at a time when income gaps and wealth inequality are increasing at a startling pace.

When the internet and democracy have been hacked by the ultra-rich, what does that leave for the rest of us? Capitalism, sure, but how does it pick the winners? When social mobility (The American Dream) and ethnic divides in income and access to promotions and income equality are so lacking in America, how can we say it’s the global leader for the future economy?

We have to admit, whether we like it or not, the current version of capitalism and democracy are likely failing. Failing the human challenge of global warming and, even more importantly, failing the economy for the majority of people.

The Seniors’ Economic Meltdown

But listen, we know what’s coming — as bad as the youth have it today, tomorrow’s seniors will have it worse.

  • The three “legs” of the retirement “stool” (private savings, pensions, and Social Security) are all in dire shape.
  • That balance hangs on many other factors, including whether or not you have access to a 401(k) and which assets your employer selects and then how they fare.
  • For many in North America, pensions may not exist years from now as they do for some of us today.
  • A large segment of the population has little to no savings for retirement.

The intersection of aging populations, technological automation and the decline of the middle class due to accelerating wealth inequality paints a dire future ahead for the Western economy. The Middle class will perhaps be irrevocably damaged in the process.

From an international perspective, the OECD shows a changing economic model in which high earners have accelerated upwards, while those in the middle have seen “dismal income growth” or a falling back.

This is not just the crazy conspiracy theories of your uncle any longer, this is news for everyone to expect what is certainly coming. There will be an economic press and it will challenge the way we see healthcare, education and the “American Dream”, maybe forever.

The ultra-wealthy will have more power than the general population to make our version of capitalism nearly untenable. Trust in Governments, Banks and Tech Companies will plummet, leading to significant social unrest likely in the 2027 to 2037 period or later.

The trust loss will also accelerate in proportion to the fall of the Middle Class. Across OECD countries, which include most of the big economies in Western Europe and North America, the 10% of highest earners have increased their income by a third more than middle earners.

In the United States over the past three decades, the top 1% of earners have increased their slice of total annual income from 11% to 20%. If America is the heart of capitalism, capitalism is eating itself the most in America — namely an unregulated California. We can tax them, but without significant de-monopolization of their unfair practices, we’ll be at their mercy for decades to come.

The OECD report warns of social consequences if the middle classes lose trust in the system, beyond their own economic self-interest. With a rising Chinese economic and technological machine likely to surpass the U.S. in the years ahead, the American Middle Class might be pushed from within and from without. There’s every indications healthcare costs will continue to balloon.

American Capitalism is especially likely to fail in providing its people, its middle class affordable access to sectors such as education, health and housing and “good quality public services”. Rewarding major BigTech and neglecting the youth is a recipe for disaster for the future economy.

It’s creating a culture of backlash. Worsening income inequality could threaten “trust in others and in democratic institutions”. One day the “peasants” will get fed up, though it’s unclear in which decade this is most likely to happen, but a revolution of some kind in the 21st century is looking likely. By then, wealth inequality will be seen as a cancer that destroyed American Capitalism on the backs of the middle class — especially our younger workers.

In Europe we have seen already that the “stagnation of middle-class living standards” has been accompanied by the emergence of “new forms of nationalism, isolationism, populism and protectionism”. In Asia, the birth rate has plummeted, causing imbalances in population pyramids that have dire economic consequences in the long term.

The 1% is only going to get more powerful, as the Middle Class continues to dwindle, unless some major action is taken. This economic chasm between the ultra-rich and everyone else could become a global threat to social order. The idea that capitalism is the best and fairest system is in rapid decline among Millennials and GenZ, and democracy’s voting participation rates should see interesting figures for 2020 and 2024.

OECD

Another traditional middle-class advantage has been job security, but this has also been eroded. Underemployment is a greater problem than unemployment. Cities are becoming too expensive for young people, who have greater uncertainty over career stability than ever before. Additionally they often have student loans that cripple their ability to own a home or start a family.

OECD via BBC

This means the experience of young people is profoundly different and worse with each generation. Young people need to move to where the jobs are, but some cannot even afford to do it.

The widening gap of incomes has pushed more people to the extremes of rich and poor, so that millennials in their 20s are less likely to be in middle-income households than baby boomers in their 50s and 60s. We are talking about more haves, and a lot more have nots. The middle is thinning and it’s a nasty economy for the average Joe or Single Mom Cindy.

A strong and prosperous middle class is important for the economy and society as a whole, but in America wealth inequality is becoming a national emergency. A situation that’s still taboo to talk about.