January 30, 2011

CHANGE: The Squeezing Of The Middle Class.

Another sign of the coming middle class anarchy? If the middle class gives up on the rule of law, beware.

UPDATE: A reader who requests anonymity emails:

This is something I have thought about a lot, and is an important story. There are so many important stories, it’s easy
to miss a long term one, like this. Everyone agrees the possibility of a middle class, and its belief in the fairness of the system has been one of the main drivers, in differentiating America, maybe the most important.

We now have a system that increasingly, means you have to either work for or sell to the government, or have its blessing through interpretation of the rules and regulations to operate. We see the favored and connected moving forward regardless of actions. Here in TN, they are building a Volkswagen plant and Nissan USA moved to Nashville with private funds, but the favored were bailed out because of Big Labor. We see the out of favor not be allowed to drill for oil or receive permits for coal, as easy examples. We see the bond and shareholders of large financial firms protected by changes in accounting rules, and given liquidity using failing loans as collateral at 100 cents on the dollar, while community banks are closed or merged out weekly.

We read monthly of large firm “settlements” of civil fraud, and other deeds, that would make any smaller business close their doors, because of shame, lawsuits or being barred from any new business, But those firms pay some money, and are valued guests at the White House and mainly at fundraisers.

We read that large multinationals through overseas subsidiaries, pay single digit US taxes, keeping the money overseas. While the smaller companies I am associated with, pay the full rate. We have no Irish solution to taxation. We read that a repatriation holiday probably will be allowed. We know that Hedge funds pay at the Capital Gains rate, while we pay at regular rates.

We have 10-20 million “guest” workers, that have to work off the books, which means all their employers, have to pay “off the books, so everyone is learning to break the law together. Unless the government needs a headline and an arrest, all are fine, so, why not do the same with Non Guest Workers ?

Anyone of us can go on and on with examples, probably better ones. The point is, the people and companies that do everything “by the book”, are like the Redcoats in the revolutionary war, using an old system, matching down the middle of the economic battlefield. The people that are connected, or simply ignore the rules are hiding behind the trees and rocks, shooting at the system.

Now the middle class knows, we do not have the money, lawyers and connections, to get away with as much as the larger firms, so most people will not attempt as much. But the belief system is being eroded, and quickly, like the banks of a full river, iT takes some time, but the water is brown with the eroded soil.

But more and more, I feel stupid for playing by the rules, and I know I am not alone. Because the rules are no longer what I thought they were all my life.

The new system is get what you can, and throw away the old fashioned economic moralities.

Everybody loses in such a system, but at least they don’t feel so much like suckers. As I’ve noted before, while Obama has been accused of not appreciating the role of financial capital, he’s even more ignorant — or unconcerned — about the importance of moral capital. But you cannot run a prosperous, civilized country without it.

However, if the middle class asserts itself it can change things for the better instead. That’s why so many fear the Tea Party movement.

UPDATE: A high-school friend emails:

Had to chime in on this one.

In the 80′s a thought struck me. The extraction of resources and creation of wealth in our country had produced the middle class as a by-product, not as a desired goal. The new “natural resource” available for plunder was now the wealth accumulated by the middle class.

I assumed that robber barons and snake-oil salesmen would arise to attempt this feat, but it never occurred to me that a collusion of our own government, unions and financiers would organize to kill the golden goose. I also never thought the voters would line up in sufficient numbers to be lambs for the slaughter.

I sure love my country. I would never do to her what this collection of S.O.B.s has done.

I’m hanging on to hope that we can ride out this storm. I think we can.

Me too. Some additional effort from our so-called leaders would be nice, though.

ANOTHER UPDATE: Some somewhat-related thoughts from Jerry Pournelle.