The Collapse of the Middle Class

In my last post, I spoke of the dying American upper class.  It is being replaced by a global upper class. As readers discovered, it is not the word “upper” that is no longer useful; it is the word “American”.  The same could be said of national upper classes around the world.  At the end, I asked “Is there evidence of the birth of a global middle class?”

Slowly, painfully, agonizingly, something that looks like a global middle class is beginning to develop. But there is a substantial difference between the global upper class and this “global middle class”.

The problem is understanding that the term “class” is no longer very useful. And “middle income group” provides us with nothing but a numerical range. It tells us nothing about the people included in that range.

Upper class people, by current definition, have the money to meet their peers anywhere, become friends, do business together, and so forth.  Middle class people, again by current definition, do not have that kind of money and typically live without much face-to-face interaction with their peers globally.  That’s a big difference indeed.

I think my fundamental problem with a term like “class” is that it doesn’t really tell us much. In decades past, as I worked in nations all over the world, a word like class was a useful generalization.  You could usually go into a developing nation for example or even a so-called “developed nation” and you could understand why that generalization was being used.  It made sense.  People in the upper and middle classes did share a great deal in common from favorite sports to the food they ate, each according to his or her class.  That kind of generalization is more and more irrelevant for those in the “middle”.

Two Factors

There are many factors that contribute to the collapse of the “middle class” globally. The two that I consider to be the most important, in my experience, have been 1) disposable income and 2) access.  Let’s take a look at the first one.

Disposable Income

Let’s say a poor family in a traditionally poor nation has a monthly income equivalent to $200.  Their daughter gets her high school degree and lands a job at a hotel and brings home another $200, so the family’s monthly income is $400.

You may sit there and thing, “So what? No big deal.  What can you do with that little extra income?”

But when you and your family have spent their lives living on the equivalent of $200, what do you say?  “Wow!  What are we going to do with all this extra money!”  Do they go out and waste it on booze and parties?  A few do, just like everywhere else, but these are people who know how to get by on very little money.  They have a lifetime of experience being thrifty.  Most will save up for the washing machine, the television, or more and more commonly these days, the computer their kids need for school.

Okay, fair enough.  But let’s move it up a little, realistically given what has been happening in many nations over the last couple decades.  Suppose the family monthly income has gone from $2,000 to $4,000?   Now we’re closer to talking “real money” for people in many traditionally wealthy nations (the ones up to their ears in debt and not sure what to do about it).

A recent infographic produced by MoveHub, a global shipping service, helps demonstrate this.  The difference is that they count all income after taxes as “disposable” while I also deduct housing, food, and other basic expenses.  That is not entirely inappropriate though.  Many North Americans and Europeans will be surprised to know that most homes in formerly “poor” nations were built without mortgages, so housing costs are minimal.  Many people in those same nations continue to purchase their food at low-cost markets and directly from farmers as they have for generations.

That is changing, but they are still far from reaching the levels common in the “wealthy” nations.  As I say, they had to be thrifty before and most see no reason to change old habits now.  But I can assure you of one thing.  Twenty years ago, that map would have looked very different.  It would have been far more “red” than it is today.

It makes no difference.  The simple fact is that incomes have risen dramatically in nations as diverse as China and Ghana.  With it, “disposable income” has risen sharply too.

Enough on disposable income, what do I mean by access?

Access

Let me dispose of the first obvious access route that is now open to billions of people – the Internet.  I do not have to tell you how important this has been the people all over the world already. You probably remember when you first went on the Internet.

Recently, I received a report from the Boston Consulting Group on one aspect of the Internet that has had particular impact on the poorest region of the world, sub-Saharan Africa.   If you take two minutes to read the first few paragraphs, you will get my point faster than I can explain it here.  Take a look at Africa Blazes a Trail in Mobile Money,  Based on software, much of it originally developed in Africa, the Net is more than just a way to make or spend money, it is a way to manage money.

But there is another form of access that can be equally important. More than just the Information Revolution, there is the Transportation Revolution and it has nothing to do with speed.

To have any substantial adult memories of the Cold War, the collapse of the Soviet Union, and the opening of China to the outside world, you pretty much have to be 50 or older today.  Suddenly (or so it seemed) a third of the planet opened to the rest of us.  Visiting Moscow or Beijing, or a thousand other places in that part of the world,  was no longer a nightmare of bureaucracy and “guided” tours that took you where they wanted you to go, not you.  And that was if you could get in at all.  If you were middle-income, forget it.

If you are 20, 30, or 40 years old today, you probably know that, but you don’t care.  You still need to buy a ticket, probably get a visa, and drag your bags around with you, but the world is open to you as never before in human history.  Access to places is every bit as important as access to information.

Why does this mean the middle class is collapsing?

In my experience when both disposable income and access increase substantially in a nation, the first phase is that, after people have purchased the items they have long wanted, they look for interesting things to do.  They tend to move together.  Unused to having disposable income and access, they don’t want to waste it, so it’s important to know whether something is worth the money before paying it.  The social media, Facebook, Twitter and all the others, play a major role too, especially with young adults.  So if they hear that something is “worth it”, they do it too.  It makes sense.

But once they have done that for awhile, they change their approach without really thinking about it.  They look for what interests them, not someone else, and take a chance.   This new “middle class” begins to slowly crumble.  People go on generalizing about them, but they begin to specialize.  They begin to choose their own direction, sometimes in surprising ways.

Here in Panama, Cesar Melendez is a good example of what can happen.  From the rural area far from Panama City, Carlos got his university degree and a job as a computer programmer (a Panamanian with disposable income).  But he wanted to be back home, so he took a job there and met an expatriate who lived there (a Canadian with access to places) and introduced him to a sport Carlos had never heard of before – rock climbing.  That was the beginning of this young man’s shift from a “safe” job to becoming Panama’s first professional rock climber and entrepreneur, very nicely shown in this video (access to information).

Carlos’ story has been and is being repeated millions of times all over the world.  It is an “old story” to many of us from North America, most of Europe, and the wealthier nations of Asia, but a new and expanding story everywhere today.

Is Carlos middle class?  Are you?  There is a reasonably probability that Carlos, you, and I could all agree that we are middle class.

But what does that really mean?  Nothing.

The upper class just changed its adjective from American, Canadian, French, Japanese, Brazilian, Indonesian, and so on  to “global”.  They now have so much in common with each other, even language, and they have the opportunities to meet and get to know each other well that form the basis for future cooperation that they really are a “class”.

There is nothing wrong with that.  If we had those opportunities, we would almost certainly do the same.  But we do not.  This is not the result of some kind of conspiracy.  We simply do not have the resources that allow us to do what the global upper class does.

So while the various national upper classes are melding into one global upper class, the various national middle classes are breaking up into many different groups with goals very different from each other.   The term, “middle class”, has become a box into which we are all packed.

For the media, the politicians, and the global upper class, this is convenient.  They can talk about us without knowing us.  We are “the commoners” – good people, but not that bright.  We can be discussed ad nauseum, as if we were off to one side, waiting for someone to help us live our lives, too simple-minded to be directly involved in their “debate” as to our futures.

But in reality, the box is empty!  We don’t live in that box.  We are just told we live in that box.  Our mistake is to believe it, accept it, and let it shape our lives.

If you want to use “middle class” as a synonym for “middle income” on some scale you create, fine, but we are not a global class of people, interconnected and working together as is true of the global upper class, but simply people with disposable income, but typically different goals and aspirations.  Perhaps it would be better just to call us The Middle, between the rich and poor, and be done with it.

We of The Middle make this world work.  We supply the money for the upper class and the hope for the poor that there is something more than poverty in their futures.  We build homes, we teach students, we manage businesses, we do a wide variety of things and have a wide variety of skills, but we should not allow ourselves to be trapped in a box or class that treats us as if we were all alike.  We are not defined only by our incomes.

There are many people I have met and known who have incomes far higher than mine, but we are all part of The Middle.  When I talk about the global upper class, I am not talking about income levels alone.  Yes, those people have money, lots of it commonly, and that has allowed them to become so involved with each other that they have lost contact with the rest of us, as I explained in my last post.  Someone with a lot of money does not have to do this, but it is easy to get sucked into it.  We could find ourselves doing exactly the same thing if our income level rose high enough to allow us this gilded isolation.

Attacking people on the basis of their income level is no more useful than attacking them on the basis of their race, gender, nationality, sexual preference, body type or any other single factor.  It is thoughtless and eventually dangerous to their own well-being.  We need to do more thinking and less attacking.  But those who are isolating themselves need to hear clearly that the rest of us are losing patience.  It really is for their own good, as well as ours.

People sometimes ask me for an example of the isolation of the global upper class and the negative results that can come from that.  It is so easy to respond.  For 70 years, the “elites” of Europe have built a house of cards called the European Union and, more recently, a second even more fragile house, the eurozone.  We can watch and see what happens when The Middle decides, enough is enough.  Unfortunately, when emotions run as high as they do in much of Europe now, the result of an angry Middle can be just as damaging as the arrogance on their part of the global upper class.  Watch…and learn.

The ultimate question remains the same.  So what?

In the last post and this one, I have attempted to provide a perspective on the growing global upper class that goes beyond income alone.  In this post, I have introduced the idea that the “middle class” is not a class, but a box or a label that trivializes us to everyone’s detriment.

The answer to “So what?” will become too obvious in the next ten to fifteen years.  There are trends so strong that they will not be stopped, but if they are not understood, accepted, and dealt with intelligently now, we will not have to watch our brothers and sisters in Europe.  We will have more than enough to watch in our own nations, all of them.  The whole “class” system will collapse.  It will be an interesting time.

And that will be our focus in the next post.  Until then, thank you for joining me on this journey.

——-

This is a personal blog, more of a personal notebook, unadvertised and without promotion. I try to post on a weekly basis. Should you stumble across it and wish to be notified of new posts, just enter your email address at the upper-right of this page. I have no other use for email addresses. Rest assured, yours will be kept private. You are welcome to make comments, if they are on topic and polite. I have no time or space for insults, foul language, or anything I judge to be offensive to readers.

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