Wednesday, January 9, 2013

Stratfor: Decline of the Middle Class

Here is a good article from George Friedman and the crisis of the middle class and how it is a threat to long term American global power.  It is good in the sense that does identify that danger that the declining middle class, or rather the shifting of what it means to be middle class, posses to America's ability to project power abroad.  It is also good as it does a great job illustrating how many of the highly intelligent, and even not so highly intelligent, in positions of real power, the American bureaucracy, view what is happening in America. I respect George Friedman immensely, he is very insightful in world affairs and his prognostications are based on good sound fundamentals, that being said, he is a person who advises the elites, and has a somewhat similar outlook in regards to governments ability to deal with problems.

The Great Depression was a shock to the system, and it wasn't solved by the New Deal, nor even by World War II alone. The next drive for upward mobility came from post-war programs for veterans, of whom there were more than 10 million. These programs were instrumental in creating post-industrial America, by creating a class of suburban professionals. There were three programs that were critical:
  1. The GI Bill, which allowed veterans to go to college after the war, becoming professionals frequently several notches above their parents.
  2. The part of the GI Bill that provided federally guaranteed mortgages to veterans, allowing low and no down payment mortgages and low interest rates to graduates of publicly funded universities.
  3. The federally funded Interstate Highway System, which made access to land close to but outside of cities easier, enabling both the dispersal of populations on inexpensive land (which made single-family houses possible) and, later, the dispersal of business to the suburbs.
There were undoubtedly many other things that contributed to this, but these three not only reshaped America but also created a new dimension to the upward mobility that was built into American life from the beginning. Moreover, these programs were all directed toward veterans, to whom it was acknowledged a debt was due, or were created for military reasons (the Interstate Highway System was funded to enable the rapid movement of troops from coast to coast, which during World War II was found to be impossible). As a result, there was consensus around the moral propriety of the programs.

George Friedman has always stated that politics is less about great men leading nations to desired ends and more about great men realizing the constraints they are put under by geopolitics and acting as best they can within those constraints.  He does acknowledge that there are other events that contributed to America prosperity after WWII, but he is off the opinion that it was three government programs enabled American growth.

I differ with Friedman and would say that the GI Bill probably didn't do a whole lot. It wasn't a bad program, and you could certainly make an argument, which I agree with, that individuals sacrificing years of their life to defend their nation are owed some compensation of some sort. What really mattered is that millions of GIs received far better managerial, organizational and logistical experience from their time in the service.  The military, while like any organization is full of inanities, is a results oriented organization, at least on the squad, platoon and company levels, were decisions have real consequences.  The GI might have helped facilitate growth to some degree, but I think the desire to build beyond the travesties of war and build a better future for their children had more to do with it.  Simply change Hanlons razor 'never attribute to malice which is adequately explained by stupidity' to 'never attribute to insight which can adequately be explained by human nature.

Moreover, I would consider his second point as  short sighted by our government. Yes it made college more affordable for returning GI's, however, this could be ground zero for the beginnings of both the college and housing bubbles. Just because it took about a half centuries for the negative externalities of the college and housing bubbles to appear doesn't mean this wasn't the gestation point.

George Friedman is spot on about this point however:

American society on the whole was never egalitarian. It always accepted that there would be substantial differences in wages and wealth. Indeed, progress was in some ways driven by a desire to emulate the wealthy. There was also the expectation that while others received far more, the entire wealth structure would rise in tandem. It was also understood that, because of skill or luck, others would lose.
What we are facing now is a structural shift, in which the middle class' center, not because of laziness or stupidity, is shifting downward in terms of standard of living. It is a structural shift that is rooted in social change (the breakdown of the conventional family) and economic change (the decline of traditional corporations and the creation of corporate agility that places individual workers at a massive disadvantage).
The inherent crisis rests in an increasingly efficient economy and a population that can't consume what is produced because it can't afford the products. This has happened numerous times in history, but the United States, excepting the Great Depression, was the counterexample.

There isn't really much more to add save other than that he doesn't even consider the negative effects of the Federal Reserve, rampant deficits and eroding constitutional liberties.  Now, it would be disingenuous not to say that George Friedman has openly said he fears for the republic, and that continued empire means the continued erosion of the American republic. Republics and Imperial ambitions cannot coexist for long, and he does mention that, moreover, George Friedman may not intentionally down playing those actions. He is a geopolitical analyst first and foremost, and a student of history, and America is undergoing many of the same maladies that brought down republican Rome and replaced it with imperial Rome. It may simply be a case that he is writing about America the nation versus America the state; America the republic.  The disconcerting truth is that the nation of America doesn't need the republic to still be a nation. Many of nations have seen numerous types of states in their time, monarchy, dictatorship, republic, so on and so forth. We may like to think that the republic form of statehood is part and parcel of our nation, but it isn't, and we are rapidly coming to this realization.

Lastly, there is this quote:
People who are smarter and luckier than I am will have to craft the solution. I am simply pointing out the potential consequences of the problem and the inadequacy of all the ideas I have seen so far. 
It has always bothered me that individuals who are intelligent, and George Friedman is undeniably very intelligent, buy into this technocratic notion of governance. This is one of the reasons why we are in the very situation we have today. Yes there are some fundamental changes, which he pointed out, that the nation faces, but almost every solution technocrats have come up with in the last 90 years has only served to magnify the current problems we face. Until technocrats realize that every cure they come up with is worse than the poison they are trying to treat, then we won't overcome the structure problems besetting our nation.

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Seattle resident whose real name is Kevin Daniels. This blog covers the following topics, libertarian philosophy, realpolitik, western culture, history and the pursuit of truth from the perspective of a libertarian traditionalist.