American corporations have pretty much written off the middle class. Their actions declare that the middle class is moribund. And they should know since they have been in the front lines shooting down and decimating the middle class. Indeed, American business has dismantled much of its manufacturing and has eliminated untold numbers of other middle class jobs, sending them overseas where cheap labor fattens corporate profits at the expense of American workers. That's why the employment and housing markets are struggling on life support, food stamp use is at an all-time high and the ranks of the working poor are swelling -- while corporate profits soar and the S&P 500 stocks show the best first quarter since 1998.
In view of the assault on American jobs and workers is it any wonder that a Stanford University study reveals a dramatic drop in American families living in middle class neighborhoods -- from 65 percent in 1970 to 44 percent in 2009. Robert Borosage, President of the Institute for America's Future, adds this alarming note: "The broad middle class -- the triumph and strength of America's democracy -- is sinking. Unless we change course dramatically, we will become even more a nation of haves and have-nots."
Brookings economist Ron Haskins dismisses the notion of a suffering middle class. In his Washington Post commentary on March, 29th, "The Myth of The Disappearing Middle Class," he argues that "when the insurance value of health care and the value of certain government transfer payments are included in income... the disappearing middle class appears pretty healthy." Doesn't this sound like Mitt Romney's comment -- "I'm not concerned with the very poor because we have safety nets there" -- applied to the middle class? So I guess we don't have to worry about anyone. Let's break out the champagne!
But Jared Bernstein, Senior Fellow, Center on Budget and Policy Priorities, disputes Haskins rosy picture and insists that the middle class has been "squeezed" by the economic downturn. "Squeezed" doesn't adequately capture the dire state of the middle class though, confirmed by the actions of U.S. industries that are revising their business plans.
What is corporate America's response? Rather than mounting crash programs for generating solid middle class jobs they have figured out how to profit from the sinking ship.
Corporate America is shifting its focus in product development and marketing to serve the "hourglass economy." The hourglass has two chambers connected by a slim channel. Translated into economic terms, or better yet, the emerging picture of America, the two chambers represent rich and poor, with virtually nothing in the middle.
Worse, while the traditional hourglass has two equal chambers, the economic hourglass does not. One chamber contains a small percent of the population and most of the wealth and the other is filled with the bulk of Americans, who have little access to resources and diminished hope for prosperity. The hourglass economy has become so entrenched that Bloomberg News credits it with dividing Americans and defining U.S. politics.
Leading the rush into the hourglass economy are some icons of American industry, like Proctor and Gamble. Here's what Melanie Healey, group president of P&G's North America business, said to the Wall Street Journal about what her company did when it started losing market share to competitors who were catering to the low end market: "It has required us to think differently about our product portfolio and how to please the high-end and lower-end markets ...That's frankly where a lot of the growth is happening."
P&G is not alone in catering to the top and bottom of the hourglass and ignoring the middle, according to WSJ columnist Ellen Byron. H.J. Heinz Co is expanding its offerings of lower-priced products to celebrate the hourglass model. And shooting for the high-end, Saks, Inc. is growing its line of pricier products to serve the deep pocketed consumer segment that accounts for most of its growth.
Many other retailers are generating impressive year-to-year gains by marketing to the top and bottom consumers including Coach, Lululemon Athletica, Whole Foods, Family Dollar and Costco.
The hourglass economy is even impacting the "green" industry. Eco-friendly products are typically costly and, therefore, appeal to wealthier consumers. Green marketers are struggling to find strategies for making their products appeal to a cash strapped low-end market.
Citigroup was quick to notice the hourglass trend that was taking root in 2009. To help investors cash in on the demise of the middle class Citigroup recently issued an hourglass investment advisory that highlights 20 stocks of companies targeting low-end consumers and 15 companies targeting the high-end ones. Showing that the hourglass economy is real and gaining momentum, Citigroup's hourglass index posted a whopping 56.5 percent return between Dec. 10, 2009 and Sept. 1, 2011, according to financial reporter Patrick Martin.
Since business models are projected well into the future, corporate America's hourglass strategy forecasts a long grim road ahead for the middle class.
Yet politicians continue to express their heartfelt concern for the middle class, pledging to shore up this segment of the population. Are they just placating us while secretly supporting the hourglass strategy of their corporate sponsors? Is it possible that you and I know that corporate America has abandoned the middle class but that politicians are ignorant of this stark reality?
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Can the Middle Class Be Saved? - Magazine - The Atlantic
Well said, and well understood. Now what are we going to do about it???
The Casino Economy on the other hand, implies that the Casinos (Corporations) are the House and always win, the professional gamblers (1%) stay rich, and the rest of us (99%) are lured in with the idea that we can get rich and sometimes do ok, or break even if lucky, but mostly go home broke.
And having worked for a Large Multi-National, they are only looking for High Growth Markets.
We here in the US already have Major Appliances, large TV's and buy crap we don't really need. But now that things have gotten tight, we replace those Necessities only when they break and cut back on the crap. But in Third World Countries where they are just now starting to enjoy the modern life, things like Dish Washers are the latest must have item, so is Air Conditioning, and those other niceties are now an option.
These are the markets they will use to replace the stagnate or even shrinking US consumer market.
- The US working class is complicit in this new economic development. They all sat comfortably as the military industrial complex they tolerated opened borders all over the world. Carry a big stick, they said. Well, now that borders are more open, get ready to compete.
- The 3 decades everyone is nostalgic for is a unique period, which will never be repeated. Europe was devastated after ww2. The former colonies were rebuilding their de-industrialized nations. The US was 50% of global GDP in 1950 because of this, and in that period they promised their scarce working classes benefits which are no longer sustainable.
- The US spends too much on health care, especially end of life care. 10% of americans eat up 75% of the health care budget. The US spends too much on a small segment of the population, and there is no return on this investment. Death has to get cheaper.
- The US economy is being gutted from the inside out. "Managed Services" is a nefarious term most need to follow. The best form of resistance is real resistance. People need to boycott goods and services from firms they don't believe in. Economic protests are the only answer.
- There are no "american jobs", and "american jobs" are not shipped overseas. These Jobs are available on a global market. If certain nations and locations can attract capital, it is due to competition. Americans need to stop thinking about 'their' jobs going overseas, because they were never 'their' jobs. A firm does not owe anyone a job. That said, no one owes a firm their business. Economic freedom goes both ways.
- The globe is better off with this shift in production. As products become cheaper, more have access to it. In a way, expensive western labor was holding us all back. When product costs include expensive ($50-$60k) jobs for unskilled and semi-skilled people (high school grads), it becomes too costly for most to purchase. Globalization and Automation help all of us use less money to consume what we want.
- Neither set of politicians will help the 'working class' in the US, because there is no real solution. An entire way of living will collapse. That said, we won't lose much. The 'working class' we speak of hasn't contributed much to global culture. The food sucks, the people are fat, they don't read, and they mostly sit, watch tv, play video games, and offer little in terms of culture.
Losing a large fraction of the US middle class (and european), while large pools of capital shift overseas, and build booming cities/communities all over the world, is a good thing. We all get cheaper goods, and the power of Empire will hopefully abate.
We shall soon see just how "smart" they actually are. China's not cheap anymore.