Why the American Middle Class Is Disappearing (and What It Will Mean for the Economy)

My Comments: Today is Wednesday and my topic is, as usual, ‘global economics’.

The decline of the middle class has not happened overnight. It brings to mind the phrase ‘watching grass grow’ or ‘watching a car turn to rust’. You know it happens, but from day to day, you never notice any change.

And what’s confounding to me is that the people most impacted by this decline are the very same people who send Republicans to Congress and the White House. Years ago, Republicans were very aware that their future was dependent on an emerging middle class. Today they are beholden to those at the very top and are blind to the potential consequences.

States around the world that have the most dramatic economic discrepancy among their populace are not democracies, but autocracies where the ruling class is wealthy and everyone else is poor.

As a child I lived in India. At that time abject poverty was the norm where the streets at night were filled with people sleeping on the sidewalk. Children overwhelmed you whenever you left the hotel or apartment begging for food or currency with which to buy food. It began to change after the British left and people like Nehru became leaders. Today it’s a thriving democracy with a growing middle class.

Apart from the political ramifications of a disappearing middle class in the United States, there is a significant economic outcome on the horizon. Corporate America needs a middle class with the capacity to consume goods and services in order for there to be an incentive to manufacture goods and services and thereby earn a profit. If we allow the middle class to disappear, who is going to buy new homes and cars and all the goodies that advertising encourages us to purchase?

by Chris Hughes, Co-Founder of Facebook, Co-Chair at Economic Security Project, author of Fair Shot: Rethinking Inequality and How We Earn, on Quora:

Democracies do not last long without strong middle classes. I believe unless we make significant changes today, the income inequality in our country will continue to grow and call into question the very nature of our social contract. It is such a fundamental idea behind America that if you work hard, you can get ahead — and you certainly don’t live in poverty. But that is increasingly less true today. Many scholars smarter than me have looked at how democracies slide into authoritarian rule, and growing class resentment and the emergence of nativist or populist leaders is a recurring theme. (This is the concern that I share with many about Donald Trump’s dangerous lack of respect for the rule of law.)

Economically speaking, the biggest driver of growth in our economy is consumer spending. If we want to grow our economy, we have to put more money in the hands of working people. If you put a $100 in the pockets of the poor or middle class, they’ll naturally spend the vast majority of it on products and services they need, spurring economic growth. That same $100 put in the hands of the wealthy will mostly go into the bank for savings. The Roosevelt Institute has looked at the effects of this practically speaking: a guaranteed income of $500 a month to all Americans could add as much as 7 points to GDP growth over the next eight years.

History has proven that the “trickle-down” economic worldview may be good for America’s corporations, but it is not good for Americans. Just because economists tell us the economy is healthy again does not mean the American dream is strong.

I spend a lot of time discussing this exact topic in my book, particularly in the last couple chapters.

Source article: https://www.inc.com/quora/why-american-middle-class-is-disappearing-and-what-it-will-mean-for-economy.html