I should like to talk to you today about a very serious matter -- a fundamental change in the socio-economic structure of American society that has been under way for almost three decades and is now accelerating as a consequence of the current economic crisis. These remarks are triggered by a very interesting article on the website www.tz.com, by the Pulitzer Prize winning investigative reporter David Cay Johnson. Two caveats: First, this is not a subject on which I am any sort of expert, although at various times in my life I have spent a good deal of time poring over Bureau of Labor Statistics reports on earnings and income; and Second, this has nothing in particular to do with the election next week, or with the question now absorbing all news junkies, of whom I am one, namely whether the Republicans will seize control of the House and/or the Senate. The changes I shall be describing are structural, not ephemeral. They are also, in my judgment, disastrous to American democracy and social justice. Reversing the direction of these changes would take decades and would require a mobilization of political will that seems to me extremely unlikely in contemporary America.
A little background is required to place the changes in context. Before the Second World War, the class structure of American society was quite clear -- the easiest way literally to see it is to watch old movies. There was a large working class, one major portion of which was marginalized and disadvantaged because of race, a smaller middle class, and a small upper class of the rich. The differences among the classes was encapsulated in the terms "blue collar," "white collar," and "top hat."
Working class, or blue collar, Americans earned wages, paid weekly or, in some cases, even daily. They lived pretty much from pay packet to pay packet, paid in cash, earning just enough in good times to cover food, clothing, shelter, and a few extras. These families had little or no disposable income left after the necessaries were paid for. Their employment was extremely insecure, subject to periodic interruptions due to seasonal or other layoffs. They did not, by and large, enjoy paid vacations or guaranteed health care, and their employment made no allowance for old age pensions. As a consequence, the last years of life were liable to be marked by poverty and uncertainty. Families typically shouldered the burden of caring for the elderly.
Middle class, or white collar, Americans earned salaries, paid monthly by check. They enjoyed considerably greater security of employment, and salaries sufficient to allow for some coherent economic family planning and the enjoyment of non-essential goods and services. They owned their own homes [save for those living in the big cities, who might rent apartments on long-term leases], were able to take vacations, could afford medical care, and more and more were able to keep their children in school through the completion of high school and even to send them to college. Their jobs frequently included guaranteed pensions as fringe benefits, making it possible for middle class Americans to enjoy a secure and reasonably comfortable old age. Middle class Americans could afford cars, electric refrigerators, gas stoves, even dishwashers and washing machines, all of which relieved the women of much backbreaking labor.
The rich, or Top Hat America, along with those whom we might call the upper middle class, lived lives of luxury, owning second homes, hiring servants, traveling to Europe, and purchasing expensive luxury goods like fine paintings, fine home furnishings, and even yachts.
Starting in the thirties, continuing during the Second World War, and accelerating in the fifties and sixties, a series of changes took place in this set of social arrangements that had the effect, to put it colloquially, of making America a "middle class nation." The principal agent of change was a strong and combative labor movement. Against great opposition, frequently violent, labor unions fought for and won a series of contractual concessions from large employers that had the effect of bringing middle class security and affluence to working class families. Unions forced employees to raise wages, to curb layoffs, to make available paid vacations and old age pension plans. Blue collar families started to own their own homes, buy cars, take vacations, and even send their children to college. This last benefit was made possible by the explosion of public higher educational institutions that completely transformed Academia in the fifties, sixties, and seventies. Social Security laid the foundation for a more secure old age, but with slowly increasing life spans went a dramatic rise in medical care in the last years of life, a development that kept large numbers of older Americans in poverty. Medicare lifted this burden from the elderly, allowing people with modest earnings records to live the sorts of decent and comfortable final years that in previous generations had been reserved for the rich.
Much of the muscle for this radical change came from the Federal government, which was for most of this time controlled by a Democratic Party whose strongest and most reliable ally was the Labor Movement.
Not all Americans experienced this transformation into middle class status -- what the French might call the embourgoisement of America. African-Americans, most notably, were left out of the transformation for a long time, principally because of deliberate social and governmental policies of discrimination. [For a long time during the thirties, forties, and fifties, the Federal Housing Authority, in its official publications, proscribed the writing of mortgages for persons of color in predominantly White communities, with the result that Black families, even as they succeeded in closing the income gap between themselves and White families, still -- to this day -- exhibit a striking wealth gap. They were shut out of the home ownership through which most White families were able to accumulate capital assets.] There was also, of course, a very big gap between the pay packets and benefits of workers in strongly unionized industries, like automobiles and steel, and the large numbers of workers in non-unionized sectors.
Over time, the social landscape of America was totally transformed, and the familiar world of suburban malls, vacation destinations, middle class entertainments, and consumerism came into being. Among the many features sustaining this lifestyle was the dramatic expansion of credit, which in turn made possible a smoother, easier management of household finances. The practice of "lay away" accounts at local stores, through which families could pay a little each month into a fund until they had accumulated enough to buy an expensive item like a bedroom furniture set, virtually disappeared, to be replaced by credit cards. [Small personal note: as late as 1968, when I was a tenured Professor of Philosophy at Columbia University, I did not have a credit card, so that when I had to rent a car while my VW was in the shop, I had to put down a $50 cash security deposit. My usually quite taciturn psychoanalyst was so astonished by this that he advised me to go out and get a credit card, which I did.]
As David Johnson's article shows, the inflection point, or moment when things began to change, was 1981. which is to say the beginning of the Reagan presidency. Some of you may recall that Reagan's first major domestic act as president was to break the air traffic controller's union. The tide began to turn, although it took decades before it was clearly visible. The underlying economic fact, that went hand in hand with the anti-union efforts of the Republicans and some Democrats, was the globalization of production. In brief, capital went looking overseas for cheap labor, which it found in Latin America and in Asia. The availability of that cheap labor enabled companies to break the unions, with the result that pay and benefits stagnated or plummeted, jobs disappeared, and workers were forced from well-paid unionized sectors into service jobs that were typically les well paid and not unionized.
Families typically struggle very hard to maintain their style of level character of life. As the well-paid, well-benefited unionized jobs disappeared, more and more families sent second or even third wage earners into the labor market. The opening up of professional careers to women is undoubtedly one of the great triumphs of the past quarter century, and it has received a very great deal of attention in the public discourse, but most of the White women who flooded into the job market were not pursuing careers as doctors, lawyers, or corporate managers. They were taking low paid jobs in sales or offices so that their households could sustain the middle class life they had only one generation earlier managed to achieve.
The strains on newly middle class families can be seen in the steady rise in consumer card debt, in the refinancing of family homes for the purpose of extracting equity, and in the large burdens of debt taken on by college students whose parents cannot afford actually to pay for the tertiary education their children need to secure middle class jobs in the next generation.
The collapse of the housing bubble and the current economic crisis have together dramatically undermined the middle class status of millions of Americans. This can be seen in three developments that, together, are fundamentally altered the social structure of America. The first is the disastrously high unemployment rate, which, as Johnson notes, is really about double what is most commonly reported in the media. The second is the foreclosure crisis, which is robbing millions of Americans of the family home that has for three quarters of as century been the mark of middle class status. And the third is the evaporation of pension plans and savings accounts, which will in time consign millions of Americans to a diminished old age.
Along with these changes, as Johnson notes, goes an explosion in the wealth and income of those at the very top of the American pyramid. He cites one statistic that is simply startling: In 2009, the highest paid seventy four people in America made as much as the lowest paid nineteen million workers.
These changes are not simply a consequence of a temporary economic recession. They are, I believe, permanent. Millions of Americans who have lost their jobs will never again find secure employment. Tens of millions of Americans will never enjoy the secure old age that they believed they had made provision for. Middle Class America is being hollowed out and depopulated.
This fact, which dwarfs everything else that is happening in America, is concealed from view because of a fact peculiar to America, a consequence of its racial history. For the past three hundred years, White Americans have measured their social, political, and economic status essentially by contrasting themselves with Black Americans. "I am free, White, and twenty-one," the old saying goes, meaning I can do as I please. Before the Civil War, this meant, "I am a free man, not a slave." But in the latter part of the Twentieth Century, as Black Americans were forced by restrictive covenants and other legal and extra-legal constraints to remain in the inner city as White Americans moved to the suburbs, "lower class" came to mean "Black." It was desperately important to White Americans not to see themselves or be seen as Black. As a consequence, the term "middle class" was drained of all economic meaning, and came to signify simply "respectable, proper, decent -- NOT BLACK." As a consequence, in the midst of an economic crisis that has already destroyed the economic security of tens of millions of Americans, those who are themselves being worst hit insist on self-identifying themselves as "middle class." Hence the fact that everyone in the political world talks about the problems of "the middle class," despite the fact that the real problem is the loss of middle class status.
We are becoming a Banana Republic, with a tiny, obscenely rich upper class, a smaller and smaller professional middle class, a large working class, and a larger and larger mass of those left out of the economic all together. Because of the globalization of production, even in the service industries, there are now tens of millions of Americans who are, in effect, surplus population. They are not needed by capital, not even as a "surplus population of the unemployed" holding down by their existence wages for those employed.
This is a politically explosive situation. Judging from twentieth century history, it is a situation more likely to produce fascism than socialism. I honestly do not know what can be done now to reverse the trend, given the enormous hostility and opposition in the political class to labor unions and mass organization of the working class. At a minimum, those who are now driven into the insecurity of the working class must give up their pretensions to middle class status and embrace the reality of their situation. Perhaps a vibrant and expanding labor movement might be able to attack the wealth of those at the top and start the reconstitution of the large middle class that was, for several generations, the foundation of a decent life for scores of millions of Americans.