Here is the third question posed to me by the editor of the business magazine Investor.ge, put out by the American Chamber of Commerce in Georgia.
(3) Why is it (the middle class) important? Can we say it is more important economically than socially or does it play an important role in both spheres? What is its role in the United States? Is it merely a mass that balances the interests of the rich and the poor or does it do more?
The status of the middle class serves as an economic, political and cultural indicator for a country. I do not think you can socially engineer to strengthen the middle class in order to have other desirable outcomes fall into place. Rather, as my dichotomous key suggests, the economic, political and cultural functions of a society will be reflected in the quality and quantity of the middle class. The middle class is an effect, more than a cause.
A strong middle class is an indicator of merit based economics. A weak middle class indicates greed at the helm and warrants measures to check that greed. From the United States experience a weak middle class should lead one to examine what is happening with the financial sector in relation to other business sectors. They should track together in a balanced system. Over a thirty year stretch starting in the mid-seventies the GDP of the United States grew by a factor of 13. The financial sector, net dividends and privatized health insurance costs all grew by around a factor of 25. This reflects a growth in producing capital without being backed by producing goods. We are now seeing the effects of that greed based strategy on economic instability and the middle class. If the middle class is struggling there are changes that likely should be made to the financial sector.
A strong middle class is an indicator of wisdom based politics. The middle class benefits from decentralization. As James Surowiecki wonderfully documents in his book, The Wisdom of Crowds, wisdom also benefits from decentralization. This may sound counterintuitive, since we have a tendency to look towards experts for answers. Yet my own discipline, science, is a confirmation of what Surowiecki convincingly establishes. The Scientific Revolution brought a change to the university system where erudite scholars promoting fixed beliefs, usually religious dogma, were replaced by scientists skeptically cross-examining flexible theories. Yes, we have our Newtons and Einsteins and such, but science is very much driven by the masses all making their small contributions to the collective wisdom of science, rather than by authorities establishing unquestioned schools of thought. Science, like wisdom, like the middle class, thrives on decentralization. If the middle class is struggling the decision-making mechanisms of a country (whether by political parties or corporations or a synergy of both) are too centralized.
A strong middle class is an indicator of a high quality of life. Here is a seemingly trivial anecdote which I believe has far-reaching implications. In the sixties even people in the upper class would report that they were in the middle class. In contrast, one survey in 2005 reported that 20% of respondents thought they were in the top 1% of wealth. This turnaround reflects two things: 1) people do not understand how obscenely rich the wealthiest people have become in the United States; and 2) one assumes that in a culture turned “dog-eat-dog” one aspires to be a “top dog” in order to enjoy a high quality of life. Quality of life is a highly subjective and variable concept, but if the middle class is struggling one or more of these problems likely occur: 1) people are devoted more to interest groups than their communities; 2) people are spending too much of their labor on economic productivity rather than community and family involvement, or personal growth; and 3) people’s needs are not being met or require a high proportion of their income. All these conditions have increased in magnitude in the United States since the seventies.
So while I would not say that the middle class is an ultimate cause of societal conditions we are the canary in the coal mine. If greed is driving the economy the middle class will suffer. If paternalism is driving the decisions the middle class will suffer. If special interests are driving the quality of life the middle class will suffer.
Tags: Cultural Harmony, Economic Merit, Middle Class Culture, Middle Class Economics, Middle Class Politics, Political Wisdom
