The idea that economic inequality exists in America is not new. In Paul Krugman’s article “For Richer”, he discusses the growing chasm between America’s poorest citizens and its growing elite. But more importantly, he discusses the political policies that increasingly support this widening gap. It is with these policies that middle America needs to be most concerned.
Initially reminiscing about growing up in the ‘50’s and ‘60’s, Krugman notes how the ‘American dream’ was really within reach of all Americans if they worked hard. It was in his words, a “fairly equal society”. Times had changed from the ‘20’s and ‘30’s of what he calls “the Gilded Age”, when generations of families controlled most of the country’s wealth, living lavishly in mansions, with servants and status fit for a king.
But what should concern us all is the fact that these times of ‘American Royalty’, so to speak, are upon us again, and it is getting increasingly difficult for most working Americans to achieve the American dream. The idea that hard work will pay off is no longer necessarily true. And that, sadly, is in large part due to the policies that our government makes to lift up and support our wealthiest citizens, at the expense of the poor and quickly disappearing middle class.
What has changed, though, is who is holding this wealth today. As Klugman demonstrates, roughly 60 percent of the economic gains in our country went to just to the top .05% of taxpayers. When comparing gains overall throughout the taxpayer base, the so-called middle class had economic gains of just 10% from 1979 and 1997 while America’s wealthiest rose 157% (after taxes)! These disparities are alarming. When factoring in the cost of inflation, a 10% gain over almost 20 years actually translates into a loss! And that gain includes the addition of second wage-earners in middle class families. Overall, many families are finding that their debt ratios are on the rise while their standard of living is dropping.
Today’s wealth is no longer controlled by wealthy families through inherited assets, but rather by young CEO’s who are earning sometimes 300 times what the average worker earns! Krugman asks how these salaries can be justified. His theory is that over time, unlike the ‘50’s and ‘60’s when he was growing up, society has accepted the notion that these ‘all powerful leaders’ somehow deserve these enormous salaries. The understanding is that without these types of perks and benefits, corporations will be unable to retain skilled leaders and if they aren’t willing to pay, someone else will.
This type of thinking is obviously flawed, leading to outrage amongst the rest of the working public. This shift in acceptable norms in corporate America will at some point face correction. But it will probably take a huge uprising on the part of middle America before we see any real changes.
Another question, however that Krugman raises is the idea that there was ever a sustainable “middle-class” in the first place. Historically most of the wealth has been controlled by a minority, with huge gaps in income between them and the rest of the public. It wasn’t until after the Depression that economic equality really existed here in the U.S. Krugman questions whether or not this shift back to two general economic classes; the very wealthy, and the relatively poor (or struggling) population isn’t a more normal course of events.
The fact is, the more wealth one holds, the more relative power one holds. And the more power held, the more decisions and policies they can create. And it seems only natural, that in an effort to preserve their way of living, that those policies that are created tend to lean in favor of the policy-makers and the holders of power. It is this shift in wealth that creates the power, which in turn snowballs, creating more and more wealth and more and more power for a select few, leaving the rest of our population holding the bag. Unfortunately, the limited nature of all resources means that in order for some to hold most of the wealth and power, everyone else must lose theirs. It is this sad reality that makes it so critical that these issues not be ignored in our society before we become not one united nation, but a nation divided.
Do you feel that the "Middle Class" is sustainable? Are you finding it harder to make ends meet? If you could speak with your legislators about this issue, what would you want them to know? Do you feel our legislators have lost touch with"average" Americans?
Source:
“For Richer-How the permissive capitalism of the boom destroyed American equality”- by Paul Krugman, New York Times Magazine, October 20, 2002
Showing posts with label middle class. Show all posts
Showing posts with label middle class. Show all posts
Friday, October 5, 2007
Globalization's Effect On America's Middle Class
The world we live in today is one of global proportions. Gone are the days where retail stores were filled with products that were “made in America”. Today we are more likely to find products made in China, Taiwan, Bangladesh, or Mexico. But what does this mean to Americans? How does this shift in our nation’s economy affect the average American? How does this shift affect our Middle Class?
The answers to these questions are not simple. Advances in technology have quickly brought our nation into a fast-moving, worldwide market. While many would agree that these technological advances are good for humanity as a whole, there are those that would argue that this rapid advancement to globalizing societies comes with some very steep costs.
In “The World is Flat” by Thomas L. Friedman, a New York Times Columnist, Friedman goes through the timeline of technological development, mainly in the communications arena, and the effects this rapid advancement has had on America, in particular. What Friedman comes to realize, is that the technology that has rapidly catapulted our nation into the global market (which is a good thing) has also had a negative impact on our society.
What does he mean by this? The same advances that allow us to communicate and access the rest of the world, also makes our markets open to them, in Friedman’s words, “leveling the playing field” for less-developed nations, like India, for example. The fact that these lines of communication are now open allows these other nations to get in the game, so to speak, providing direct competition to American workers. This easy access to cheap labor has had a direct impact on American jobs, due to corporate outsourcing, which, prior to globalization was never a concern. In effect, globalization has made America vulnerable to the competition.
So how does this affect us?
There are various opinions which place all the blame on outsourcing for our “Disappearing Middle Class”. In “Global Outsourcing and the Disappearing Middle Class” by William Raynor of the State University of New York, Raynor specifically discusses the impact outsourcing has had on our economy, and the middle class here in the U.S.
While Raynor acknowledges that not all of the job losses here in America can be attributed to outsourcing, he does feel that it has had a significant, negative impact on our economy. Like Friedman, Raynor also recognizes that advances in technology also play a part in the loss of jobs, as advanced technology often translates into higher productivity with fewer workers. Ready access to cheap, educated workers in addition to these technological advances, essentially puts many American jobs on the line.
So is it true that the hardest hit is the middle class in this loss of jobs? Raynor sites some of the ways domestic employment levels have been affected. He sites the drop in the number of workers hired by American employers as well as the quality of those jobs. Quoting Dr. Paul Craig Roberts, Raynor adds “Only a few of the 116,000 private sector jobs created in October provide good incomes…the remainder…consist of temps, retail trade, telephone marketing…” (Roberts, 11/12/03) It is important to note that a decline such as this in the quality of these jobs has a huge impact on employees’ ability to survive financially. This in turn, impacts our entire economy.
Interestingly enough, there are many who believe the “middle class” that we have accepted as the norm for generations, really is an anomaly. In Paul Krugman’s Article, “For Richer; How the permissive capitalism of the boom destroyed American equality” he demonstrates how historically, there were really just two economic classes; the very rich and the poor or struggling. While it’s true that there has been a shift in wealth over the last three or four decades, the gap between rich and poor is growing and the formerly middle class appears to be losing ground.
But Krugman questions this middle class ‘reality’. He points out that in America, prior to the Depression, there was no economic equality. Prior to the Depression there was the rich and the poor or struggling. So the question of whether or not a middle class is actually sustainable in our economy is valid. But Krugman looks further at this issue and seeks to find out why this is so. His answer; as the rich get richer, they attain more power. Those with power make public policy (or influence those that do). Therefore, those policies that are created will be created with the most powerful (wealthiest) in mind. In effect, the cycle builds upon itself, creating its own cocoon of self-protection.
Of course, policies that are designed to protect one segment of society must come with a cost to those it is not designed to protect. In this case, policies that are designed to favor the wealthiest American taxpayers, in effect, hurt the rest of the taxpayers by passing along higher tax rates, broader tax policies, making less funding available for service providers, etc. As there is a limit to the ‘pie’, if one large piece goes to one segment of society, the rest must get smaller pieces.
But Krugman isn’t the only one weighing in on this idea. In “Globalism: Enemy of the Middle Class-February 2007 Phyllis Schafly Report”, the author also cites the fact that “the majority of countries in the world (e.g., Mexico) have two classes: the ruler who are very, very rich and the rest of the people who are very, very poor.” But the author points out that America is different, because we built our society with the belief that anyone can live the ‘American Dream’ and prosper if one works hard. (Disclaimer; this report may not be unbiased, but I still felt it had information worth mentioning)
But this report also goes on to point out that globalization is hurting the U.S. by providing cheap products and labor from other nations who “don’t play by the rules”. The overall sentiment is that “the effects of globalization are not equal.” While globalization is a boon to Asia and India, wages for many American workers are down substantially or have remained the same over the last five years. This direct competition with substantially cheaper labor and goods has had a direct negative impact on working Americans’ ability to provide for their families.
According to this report, the United States has lost more than three million jobs since the Bush Administration took office. The fact is America cannot compete with cheap labor from Asia and India. The fact that these workers do not have access to the same benefits as American workers makes the cost even less for companies looking to outsource. And this is an alarming trend.
Janny Scott of the New York Times and Blaine Harden of the Washington Post both make reference to the loss of middle class neighborhoods in America. Why is this significant? The loss of these neighborhoods is a clear indication of this economic class as a whole. According to Harden “middle-class neighborhoods…are shrinking at more than twice the rate of the middle class itself”…”in their place, poor and rich neighborhoods are both on the rise.” Blaine blames the decline on widening income inequality in our nation.
This brings us back to Krugman’s analysis that this economic inequality is perpetuated by policy-makers who seek to protect their wealth and power. And as mentioned earlier, much of our nation’s wealth is held now by young CEO’s who earn their wealth by taking advantage of cheap goods and labor; namely Globalization. So, while we cannot necessarily draw a direct line of cause and effect between Globalization and the Decline of America’s Middle Class, there are clear connections that need examining.
According to Evette Treewater, University of Florida International Review, just fifty years ago, India had a self-contained economic system, isolating itself from the rest of the world. Deregulation in the ‘70’s and ‘80’s opened up a whole new global market. It was just a matter of time before corporations around the world, American companies included, began to take advantage of this cheap labor market.
Treewater gives an example of computer programmer wages. In the U.S. the average wage for a computer programmer is up to $80,000 per year. In India, a programmer can expect to average just $11,000 per year. With wage differentials like this, it’s easy to see why corporations find it hard to resist outsourcing. But the instant savings for corporations are not generally passed on to the consumer. Instead, corporate profits explode, and top-heavy administrations receive excessive salaries and benefits. Ultimately, it is the average worker that suffers.
One needs only to look around to see the downturn in the U.S. economy. Rising interest rates, layoffs, cutbacks, reductions in or elimination of pensions, lost jobs, rising consumer debt, reduced housing starts, the rising cost of education…the average “middle-class” American is finding it increasingly difficult to make ends meet. These economic factors impact families negatively, despite working hard, many families are finding their standard of living has dropped. And it’s unlikely to improve any time soon.
So, is Globalization really to blame for the Disappearance of America’s Middle Class? Or is it an unsustainable state of being, as Klugman suggests? In the scope of mankind, historically, I would conclude that the true nature of any economy is that there are the haves and the have-nots. Those who are able to keep a balance by remaining safely in the “middle-class” are in a temporary, if precarious position.
And globalization’s impact on our economy and our standard of living cannot be ignored. There is a saying, “There but for the Grace of God go I”. What this means is that our situation is always precarious, and external forces can have a direct impact on our personal situations. And in this day and age, we live in a Global world, and what happens in India and Asia does indeed, have an impact our lives as individuals.
Those living currently in the “middle class” are usually just one illness, layoff, or divorce away from poverty. Yet presented with these same crises, the rich do not suffer the same devastation as the middle class. But globalization has made layoffs and outsourcing more common for average Americans, and our policy-makers need to take a long, hard look at the real long-term ‘costs’ to America associated with these short-term savings.
What are your thoughts on outsourcing and the policies that are affecting American workers today?
Reference Sources:
“Global Outsourcing and the Disappearing Middle Class” by William Raynor
The State University of New York
“The World is Flat” by Thomas L. Friedman (NY Times Columnist)
“For Richer-How the permissive capitalism of the boom destroyed American
Equality” by Paul Krugman, New York Times Magazine, October 20, 2002
“Globalism: Enemy of the Middle Class” The Phyllic Schafly Report, February
2007, vol. 40, no. 8
“U.S. Losing Its Middle-Class Neighborhoods” by Blaine Harden,
Washingtonpost.com, 6/22/06
“Cities Shed Middle Class, and Are Richer and Poorer for It” by Janny Scott,
The New York Times, nytimes.com
“The Invisible Man: Evaluating the Outsourcing of American Jobs to India” by
Evette Treewater, University of Florida International Review
The answers to these questions are not simple. Advances in technology have quickly brought our nation into a fast-moving, worldwide market. While many would agree that these technological advances are good for humanity as a whole, there are those that would argue that this rapid advancement to globalizing societies comes with some very steep costs.
In “The World is Flat” by Thomas L. Friedman, a New York Times Columnist, Friedman goes through the timeline of technological development, mainly in the communications arena, and the effects this rapid advancement has had on America, in particular. What Friedman comes to realize, is that the technology that has rapidly catapulted our nation into the global market (which is a good thing) has also had a negative impact on our society.
What does he mean by this? The same advances that allow us to communicate and access the rest of the world, also makes our markets open to them, in Friedman’s words, “leveling the playing field” for less-developed nations, like India, for example. The fact that these lines of communication are now open allows these other nations to get in the game, so to speak, providing direct competition to American workers. This easy access to cheap labor has had a direct impact on American jobs, due to corporate outsourcing, which, prior to globalization was never a concern. In effect, globalization has made America vulnerable to the competition.
So how does this affect us?
There are various opinions which place all the blame on outsourcing for our “Disappearing Middle Class”. In “Global Outsourcing and the Disappearing Middle Class” by William Raynor of the State University of New York, Raynor specifically discusses the impact outsourcing has had on our economy, and the middle class here in the U.S.
While Raynor acknowledges that not all of the job losses here in America can be attributed to outsourcing, he does feel that it has had a significant, negative impact on our economy. Like Friedman, Raynor also recognizes that advances in technology also play a part in the loss of jobs, as advanced technology often translates into higher productivity with fewer workers. Ready access to cheap, educated workers in addition to these technological advances, essentially puts many American jobs on the line.
So is it true that the hardest hit is the middle class in this loss of jobs? Raynor sites some of the ways domestic employment levels have been affected. He sites the drop in the number of workers hired by American employers as well as the quality of those jobs. Quoting Dr. Paul Craig Roberts, Raynor adds “Only a few of the 116,000 private sector jobs created in October provide good incomes…the remainder…consist of temps, retail trade, telephone marketing…” (Roberts, 11/12/03) It is important to note that a decline such as this in the quality of these jobs has a huge impact on employees’ ability to survive financially. This in turn, impacts our entire economy.
Interestingly enough, there are many who believe the “middle class” that we have accepted as the norm for generations, really is an anomaly. In Paul Krugman’s Article, “For Richer; How the permissive capitalism of the boom destroyed American equality” he demonstrates how historically, there were really just two economic classes; the very rich and the poor or struggling. While it’s true that there has been a shift in wealth over the last three or four decades, the gap between rich and poor is growing and the formerly middle class appears to be losing ground.
But Krugman questions this middle class ‘reality’. He points out that in America, prior to the Depression, there was no economic equality. Prior to the Depression there was the rich and the poor or struggling. So the question of whether or not a middle class is actually sustainable in our economy is valid. But Krugman looks further at this issue and seeks to find out why this is so. His answer; as the rich get richer, they attain more power. Those with power make public policy (or influence those that do). Therefore, those policies that are created will be created with the most powerful (wealthiest) in mind. In effect, the cycle builds upon itself, creating its own cocoon of self-protection.
Of course, policies that are designed to protect one segment of society must come with a cost to those it is not designed to protect. In this case, policies that are designed to favor the wealthiest American taxpayers, in effect, hurt the rest of the taxpayers by passing along higher tax rates, broader tax policies, making less funding available for service providers, etc. As there is a limit to the ‘pie’, if one large piece goes to one segment of society, the rest must get smaller pieces.
But Krugman isn’t the only one weighing in on this idea. In “Globalism: Enemy of the Middle Class-February 2007 Phyllis Schafly Report”, the author also cites the fact that “the majority of countries in the world (e.g., Mexico) have two classes: the ruler who are very, very rich and the rest of the people who are very, very poor.” But the author points out that America is different, because we built our society with the belief that anyone can live the ‘American Dream’ and prosper if one works hard. (Disclaimer; this report may not be unbiased, but I still felt it had information worth mentioning)
But this report also goes on to point out that globalization is hurting the U.S. by providing cheap products and labor from other nations who “don’t play by the rules”. The overall sentiment is that “the effects of globalization are not equal.” While globalization is a boon to Asia and India, wages for many American workers are down substantially or have remained the same over the last five years. This direct competition with substantially cheaper labor and goods has had a direct negative impact on working Americans’ ability to provide for their families.
According to this report, the United States has lost more than three million jobs since the Bush Administration took office. The fact is America cannot compete with cheap labor from Asia and India. The fact that these workers do not have access to the same benefits as American workers makes the cost even less for companies looking to outsource. And this is an alarming trend.
Janny Scott of the New York Times and Blaine Harden of the Washington Post both make reference to the loss of middle class neighborhoods in America. Why is this significant? The loss of these neighborhoods is a clear indication of this economic class as a whole. According to Harden “middle-class neighborhoods…are shrinking at more than twice the rate of the middle class itself”…”in their place, poor and rich neighborhoods are both on the rise.” Blaine blames the decline on widening income inequality in our nation.
This brings us back to Krugman’s analysis that this economic inequality is perpetuated by policy-makers who seek to protect their wealth and power. And as mentioned earlier, much of our nation’s wealth is held now by young CEO’s who earn their wealth by taking advantage of cheap goods and labor; namely Globalization. So, while we cannot necessarily draw a direct line of cause and effect between Globalization and the Decline of America’s Middle Class, there are clear connections that need examining.
According to Evette Treewater, University of Florida International Review, just fifty years ago, India had a self-contained economic system, isolating itself from the rest of the world. Deregulation in the ‘70’s and ‘80’s opened up a whole new global market. It was just a matter of time before corporations around the world, American companies included, began to take advantage of this cheap labor market.
Treewater gives an example of computer programmer wages. In the U.S. the average wage for a computer programmer is up to $80,000 per year. In India, a programmer can expect to average just $11,000 per year. With wage differentials like this, it’s easy to see why corporations find it hard to resist outsourcing. But the instant savings for corporations are not generally passed on to the consumer. Instead, corporate profits explode, and top-heavy administrations receive excessive salaries and benefits. Ultimately, it is the average worker that suffers.
One needs only to look around to see the downturn in the U.S. economy. Rising interest rates, layoffs, cutbacks, reductions in or elimination of pensions, lost jobs, rising consumer debt, reduced housing starts, the rising cost of education…the average “middle-class” American is finding it increasingly difficult to make ends meet. These economic factors impact families negatively, despite working hard, many families are finding their standard of living has dropped. And it’s unlikely to improve any time soon.
So, is Globalization really to blame for the Disappearance of America’s Middle Class? Or is it an unsustainable state of being, as Klugman suggests? In the scope of mankind, historically, I would conclude that the true nature of any economy is that there are the haves and the have-nots. Those who are able to keep a balance by remaining safely in the “middle-class” are in a temporary, if precarious position.
And globalization’s impact on our economy and our standard of living cannot be ignored. There is a saying, “There but for the Grace of God go I”. What this means is that our situation is always precarious, and external forces can have a direct impact on our personal situations. And in this day and age, we live in a Global world, and what happens in India and Asia does indeed, have an impact our lives as individuals.
Those living currently in the “middle class” are usually just one illness, layoff, or divorce away from poverty. Yet presented with these same crises, the rich do not suffer the same devastation as the middle class. But globalization has made layoffs and outsourcing more common for average Americans, and our policy-makers need to take a long, hard look at the real long-term ‘costs’ to America associated with these short-term savings.
What are your thoughts on outsourcing and the policies that are affecting American workers today?
Reference Sources:
“Global Outsourcing and the Disappearing Middle Class” by William Raynor
The State University of New York
“The World is Flat” by Thomas L. Friedman (NY Times Columnist)
“For Richer-How the permissive capitalism of the boom destroyed American
Equality” by Paul Krugman, New York Times Magazine, October 20, 2002
“Globalism: Enemy of the Middle Class” The Phyllic Schafly Report, February
2007, vol. 40, no. 8
“U.S. Losing Its Middle-Class Neighborhoods” by Blaine Harden,
Washingtonpost.com, 6/22/06
“Cities Shed Middle Class, and Are Richer and Poorer for It” by Janny Scott,
The New York Times, nytimes.com
“The Invisible Man: Evaluating the Outsourcing of American Jobs to India” by
Evette Treewater, University of Florida International Review
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