Saturday, January 2, 2016

Decline of the American Middle Class: Can You Feel It?

A simple Internet search of why the American middle class is shrinking will reveal a plethora of causes, such as the off-shoring of manufacturing, the decline in union membership, as a reflection of increased automation, and government policies that favor corporate America (or my favorite, capitalism! -- and, no, capitalism is not to blame, but that's an essay for another time). But all of these are only incidental. What most commentators tend to overlook is China, which is reestablishing itself as a premier world economic power.

China has historically been one of the great cultural, political, and economic powers. Like everywhere else, the degree of its international influence has waxed and waned through the centuries; but who else can claim such an extensive and unbroken line of cultural continuity? In many ways the history of the world is the history of China, but our occidental-centric paradigm rarely considers this.

China has recently been clawing back to its prior position of being a great world power. And don't confuse the current faux-communistic government of China with the real China -- this is all a legacy of passé propaganda. Remember, China alone encompasses roughly 20% of the world's population. India is second at a little over 17%, so these two nations alone are over a third of the world's population! The U.S. is a distant third with less than 5%.

Subsequently, with all things being equal (which they're not) China should be the most powerful nation on earth. And that's the rub: China is finally reestablishing itself. We must not confuse military might with true power, because real power is economic. China is on the rise, everyone else is on the descent. Again, I'm not talking about military power, but economic. Military power is a false measure. Look at the British Empire. Look at the Soviet Union. Look, most compellingly, at the US. Economic power is where it's at!

So what does this have to do with the decline of the American middle class? Well, the same as with the German middle class, or the British middle class. Indeed, pick any western highly-developed economy -- they're all facing the same challenges. Indeed so too, in a fashion, is China.

The problem? A shift in manufacturing from the West and Japan to the East, especially China. This shift occurred because it makes economic sense, and all the flag-waving in the world won't change this fact. All the arguments against "off-shoring" are meaningless, because when push comes to shove people vote -- both politically and financially -- with their pocketbook. Since Chinese-made or other foreign-made products are cheaper, people will buy them. Period. To reframe this equation into patriotic terms is naive. Because if patriotism, e.g. "buying American," really mattered Americans would purchase these American-made Levi jeans rather than these foreign-made identical ones. They don't, because they can't afford to. Or they don't care.

China is dominating world production of everything, from automobiles to children's toys. This has moved manufacturing jobs from the West to the East. Subsequently wages are falling in the West and rising in the East. There is a grand, world-wide rebalancing of wages. This has to occur, as China finds its natural place among the great nations. So, as living standards rise in China and elsewhere (such as Mexico), they fall in Europe, the US, Canada, and other developed economies. That's just the way it is and no amount of Congressional interventions, changes in union membership rolls, or mandated increases in the minimum wage will change this. And such actions will always be short-term and generated simply to gain votes from the body politic. Sorry.

My fear is that our populist political leadership will whip itself into a frenzy trying to reverse the economic realities of today to return to some sentimental prior decade of historical fantasy. A frenzy that could lead to war -- a stupid, futile war that will only decimate all participants. 

Am I wrong?

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Emphatic language can be couched in kind words. Let's all be adults here and use our words constructively.