The Problem of the Middle Class
The middle class is shrinking because the ruling class no longer needs it.
For decades, the trick to running a managed democracy under capitalism is the maintenance of a healthy middle class.
The ruling class, always and everywhere, aim to keep as much of the productive output of society for themselves and their families as possible. Various schemes and wheezes to achieve this – divine right, serfdom, slavery, colonialism – work very well up to the point the conditions of the lower classes become too much for them to bear, at which point the situation usually resolves itself in a scenario involving beheadings, ropes tied to lamp-posts, burning palaces and so on.
The revolutionary innovation of capitalism in the modern era was the vast expansion of the middle class. Some of the productive output of society was not hoarded by the wealthy, but allowed to filter down and give many more people access to some of the trappings of wealth, such as owning your own house, being able to take a holiday, having nice clothes – things of this nature. By giving this new, expanded group access to just enough wealth, you could get them to identify their interests with the wealthy, rather than with those labouring in the mines and factories and working in the shops and ports and warehouses where they get their nice clothes and other treats.
This is a delicate balancing act. Society has a circle of protection around the people who it believes matter. Inside the circle and your life has value, your death is a tragedy, if you fall on hard times you deserve, and expect to get, sympathy and assistance. Outside this circle, you can go fuck yourself.
The circle needed to be expanded just enough, distributing just enough treats and luxuries to the new middle class, to prevent the working class from reaching a critical revolutionary mass and storming the palace with pitchforks. But there are limits on this. The modern wealthy live their lives at a level of luxury which would have made Solomon and Croesus weep, but this does not curb their drive for ever more accumulation and enclosure. These are the kinds of people who look at rivers and forests and mountains, and even cities and countries full of people and think “Why can't this all be mine?” If they have to give too much out in wages or taxes to keep the middle class in place as a buffer against revolution, they get mad and start demanding that something be done about it.
This is, of course, foolish nonsense. By creating a broad class of consumers, the expansion of the middle class turbo-charged retail capitalism and produced absurd levels of wealth for owners and industrialists. But the wealthy are irrational, and view any impediment to their capacity to enclose, own and profit from everything that exists as an affront to natural justice.
And so, despite the broad growth of the middle class objectively benefiting the wealthy far more than a return to feudal peasant aristocracy would have, they never stopped looking for a way to get round the problem. How to expand the circle of people who would defend their interests, but do it while continuing to hoard most of the productive output of society for themselves.
Around the 1980s, people came up with another innovation. The One Weird Trick was simple: housing as an asset class. In Britain, with Thatcher’s Right-to-Buy the government engaged in a single, one-off wealth transfer from the state to the middle and working classes and created a significant new buffer population of property owners. Then they began to carve up public services, finding any place they could extract a rent and shoehorning themselves into it. Transport, energy, waste management, schools, sewage – whatever is necessary for the smooth running of an industrial society presents an opportunity to burrow in like a tick and sit there extracting rents.
This latter part, the extractive parasitism of privatising public services and infrastructure, could not have advanced so far without the former mass transfer of housing into private hands and the turbo-charging of the housing market.
Public services function as a form of wage substitution – if you have good services, you don't need wages to cover things like healthcare, travel, waste collection, education for your children, etc. Start taking those things away and people feel worse off; like any parasite, you don't want to make yourself too difficult to live with.
However, if you can find another way to substitute wages, such as cheap credit leveraged against an asset whose value is appreciating faster than the general rate of inflation, then you can start taking more and more out of public infrastructure. The middle class will have to start paying more for private services to replace the public ones that are deteriorating under your management, but they won't notice as much because that wealth feels like it’s coming for free. If you’re savvy, you could even convince them that paying £85,000 on credit for a Landrover Discovery and driving everywhere yourself is better than having a cheap and efficient rail network. People will even advocate to be allowed to buy these things from you, with money they borrowed from you, at the expense of the public infrastructure that would mean they didn't have to.
By the time the scam begins to collapse, or at least collapse enough for a significant proportion of the middle class to notice that they've been sold a bum steer, it’s too late. You’ve made off with hundreds of billions in loot and left the public sector a smoking ruin.
This is the situation we're dealing with in the UK. The generation that got the house price dividend in the 80s is either retired or very close to it. The schemes and wheezes that were used to keep their house prices rising as they aged – from cheap credit, to zero interest rates, to expansive housing benefit for renters – have begun to collapse under their own weight. High house prices for everyone else don't function as a form of wage substitution but as a cost, a tax on living, a constant source of stress and anxiety. And now the process of parasitism is so far advanced that many public services can’t provide decent wage substitution either, having been effectively hollowed out by decades of private sector mismanagement.
Interest rates aren’t high by historic standards, but they’re too high to support an economy that has been rapidly reconfigured around a zero-percent “free money” environment, and so the middle class can’t borrow to consume like they could in the Blair years. For a large swathe of the population, it is a perfect storm of consequences for actions they might not even have had any hand in making.
The ruling class seem to have come to the conclusion that they no longer need as many middle class people to buffer them from the prospect of being strung up from a lamp-post while peasants loot their wine cellars. The long march through the institutions in the media is all but total, dramatically cutting down the avenues for the middle class to be exposed to radical ideas like “We could have been investing in public services all this time” or “You’ve been properly stitched up here, lads”. And organised labour, despite its resurgences over the last year, still lags behind the kind of mass penetration that would make it a significant threat to the country’s power base.
Perhaps most importantly, the abortive attempt to create countervailing pressure via the Labour party has resulted in a reactionary backlash of furious intensity, with the result that both major parties are now absolutely committed to keeping things this way. With alternatives shut down, and every possibility of an alternative being strangled at birth by an implacably hostile media and political class, they seem to have calculated that there simply isn’t as much need to bribe as many people with treats and functional public infrastructure.
Here’s the big problem: they could very well be right.
The ruling political class have always sold their looting to the middle class with a nod and a wink, a gesture to the deserving poor. “Yes, we’re going to fuck over the undeserving, but don’t worry, that’s not you.” This is always a lie. Sure, it might not be you right now, but the gap between you, positioned as the nice deserving good person, and the “useless eaters” has always been much narrower and much more contingent than people think. A job loss, an economic downturn, a disabling injury, any change in fortunes could always put you outside the circle, where you would find yourself complaining: “I’ve paid into the system, why is it treating me like the freeloaders and dole scroungers?”
If the newly insecure middle class demands not that the system be changed to work for everyone, but just that they should get their own personal protections back, it’s not going to make any difference. They will find out soon enough what it’s like to be the people that don’t get listened to.
The systems that protected you from poverty, or even from the kind of precarious status where there might be a lot of money coming in but there’s slightly more money going out every month, only work if they work for everyone. If they are refused to the “scroungers” and “shirkers,” to the “fakers” and “feckless” and “lazy,” then they won’t work for you, because when you need them you will suddenly discover that you were a feckless lazy scrounger all along.
The ruling class expects, with good reason, for the former middle classes to have been so institutionalised that they keep working as freelance unpaid defenders of ruling class interests even after their wages have been stopped. How the future plays out will very much depend on whether enough of them figure this out in time to defy expectations.
Note: You all may have noticed that there has been a 2 month break. Unfortunately, I do have a day job and the last few months have been incredibly busy for me, leaving virtually no time for the kind of writing behind these newsletters. Expect continual sporadic updates through to October, at which point hopefully things will get back to some semblance of regularity.