Debt and the Demise of the Middle Class

Unfortunately for those at the top who’ve benefited immensely from speculative bubbles, speculative bubbles don’t create a vibrant middle class–they push what’s left of the middle class off a cliff.

What exactly is the Middle Class and what unique role does it serve in the economy? Given that the Middle Class is constantly invoked by politicos and economists, you’d think the status quo had a solid understanding of the Middle ClassAlas, it isn’t that simple.

The conventional view defines the middle class by income, education or type of labor being performed. These are all superficial attributes and ignore what actually differentiates the working class from the middle class. Yes, the middle class tends to earn more, have higher educational credentials and perform white-collar labor rather than blue-collar labor.

But getting a higher education credential and increased pay doesn’t automatically provide a middle class role in the economy, nor does performing white-collar work. None of these automatically moves the individual up the social mobility ladder from near-zero ownership of capital (working class) to meaningful ownership of productive capital (middle class).

As I explained in The Top 10% Is Doing Just Fine, The Middle Class Is Dying on the Vinethe middle class is fundamentally a means of transforming labor into capital via savings and investment. The traditional ladder of social mobility from the working class to the middle class is one of capitalizing work: time and savings are invested in higher education, in effect capitalizing future labor by increasing productivity.

In other words, what separates the working class from the middle class is the middle class is able to transform their labor into capital while the labor of the working class only funds consumption. The working class is defined not by credentials, type of labor or credentials but by limited access to the means to transform their labor into capital.

In the classical Marxist view, there is a bright line between labor and capital: the proletariats labor in the factories owned by the capitalist industrialists who depend on monopoly capital controlled by the commercial/investment banks.

The class of small business–tradecrafts, commerce, professionals, etc.–is merely a wedge between the dominant classes of labor and capital.

In this view, the exploitation of labor is the dominant force of capitalism. While labor is indeed exploited in many cases, the dynamic that this schema misses is the essential role of middle class credit/debt and consumption in generating profits for the big owners of capital. Low-wage workers benefit their employers but not the banks or those who profit from selling goods and services to higher-wage workers–the middle class.

Debt is immensely profitable, and so low-income workers are a limited pool of profitability. The financial services are expert at ripping off the working class with payday loans, check-cashing services, sky-high used auto loans, rapacious late fees and overdraft charges, but again, there is only so much blood that can be extracted from low-wage workers….[   ]

What do you think?

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Devin Kim
3 months ago

The obvious solution is to raise taxes, open the borders and institute cultural marxism.
Bribe-in-Chief Pedo Joe got 16 million more votes than obama.

Basically a mandate.

rack
3 months ago

It’s getting back to the way it always was before WW2.

Jamee Lewnth
3 months ago

Forget about the “middle class”, the top 1% (mega billionaire oligarchs plus their top tier operatives) plan to use AI and robots to replace over 90% of the population. That’s the grand finale of the Great Reset and it’s not that far in the future. Keeping your head down & your mouth shut and hoping the beast will eat you last won’t work any more.

intelli
3 months ago

The consequences of printed, fiat, centrally-issued and manipulated money have been known in the West since at least the 13th century.

paradox
3 months ago

The middle class works in professional jobs and derives at least 10% of annual income from passive means.
Upper class don’t work at all, except as a hobby and all meaningful income come from passive means.
Working class have no passive income, but still can live on their usually uneducated incomes.
Underclass has no living income and depend on handouts and above all have no future or hope of ever rising from that status.

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