While OpEdge is on a two-week hiatus, we are running some of the more evergreen columns from past years. This blog entry originally appeared on July 27, 2010.
Over the weekend, Yahoo’s home page linked to an article titled “The Middle Class in America is Radically Shrinking. Here Are the Stats to Prove It.” on Yahoo! Finance.
The article originally appeared in “The Business Insider,” and was written by Michael Snyder, editor of a website called theeconomiccollapseblog.com, which builds a case for a coming economic meltdown while selling survivalist paraphernalia. The menu bar selections on Snyder’s website include Gold Coins, Silver Coins, Emergency Food and Water Filters, all leading to portals with links to articles and a display of products for sale, gold at Gold Coins, silver at Silver Coins, et. al.
The article lists 22 statistics that demonstrate that the middle class is shrinking. While none of the stats cited references, I am fairly confident that all 22 are correct, as I have seen many of these facts before, for example at the Who Rules America website.
Some of Snyder’s stats:
- 82 percent of S. stocks are in the hands of 1 percent of the people.
- The top 1% of S. households owns nearly twice as much of America’s corporate wealth as they did just 15 years ago.
- Only the top 5 percent of S. households have earned additional income to match the rise in housing costs since 1975.
All well and good, until we come to Snyder’s conclusion, which is to blame the growing inequities in wealth in the United States on globalization and free trade. For example, Snyder writes that “It turns out that they didn’t tell us that the ’global economy’ would mean that middle class American workers would eventually have to directly compete for jobs with people on the other side of the world where there is no minimum wage and very few regulations. The big global corporations have greatly benefited by exploiting third world labor pools over the last several decades, but middle class American workers have increasingly found things to be very tough.”
There’s one big problem, though: other Western-style industrialized nations have not seen the same growing inequality. The economies in Germany, France and the other EU democracies are saddled with the same high labor costs and safety regulations, yet there has not been the same pulling apart of incomes, not the same gutting of the middle classes, not the same transfer of wealth upwards that we have seen over the past 30 years in the United States. Even Japan, which has suffered through two decades of stagflation, still has less wealth concentrated at the top than the United States does.
Why is that?
Unlike these other democracies, the United States has been on an active program to redistribute wealth upwards over the past 30 years. I’ve written about this trend before, but here are some examples of actions that our nation has taken that move money upwards:
- A series of tax cuts, the most substantial of which being those of Bush II, have significantly decreased what the wealthy pay while giving only token cuts to the middle class and poor.
- The outsourcing of government functions to private sector companies, whose executives tend to make more money than public-sector executives and whose lower level employees tend to make less money than public workers.
- The gutting of our safety net for the poor.
- The uptick in anti-union activity, such as the hammering of the air traffic controllers union, the reshaping of the National Labor Relations Board, the charter school movement (which seeks to substitute low-paid nonunion teachers for higher-paid unionized ones), and the current war on the salaries of public sector employees. Remember that unionization creates middle class jobs, especially for blue and pink collar workers.
None of these things have happened in Japan or Western Europe. Looking at the pay of CEOs you can see clearly why there is a greater inequality of wealth in the United States than in any other industrialized nation. These particular numbers come from a PBS special of a few years:
|Nation||CEO Pay Compared To Average Worker|
|Japan||11 times as great|
|Germany||12 “ “|
|France||15 “ “|
|Italy||20 “ “|
|Canada||20 “ “|
|Britain||22 “ “|
|United States||475!! “ “|
By the way, in 1960, the average CEO in the United States made a mere 45 times what the average worker did.
All of these other nations are among the wealthiest in the world. All have willingly globalized their economies. All pay higher wages and have higher safety standards than third-world competitors. But it is only in the United States that there has been a significant redistribution of wealth upwards from the middle class and the poor.
Snyder got his facts right about the U.S. becoming a nation of rich and poor, but his explanation that globalization is the sole cause does not hold water.
FYI, the first time I wrote about the U.S. becoming a nation of rich and poor was in five-part TV news miniseries called “To Have and Have Not,” which I did while a television news reporter in 1982 for “Business Today,” a now-defunct national business news show.