The coming collapse of the Irish middle class

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In the her excellent lecture on “The coming collapse of the American Middle Class”, Harvard professor Elizabeth Warren investigates the stagnation in real median wages in the United States since 1970, and highlights the massive amount of extra-risk assumed by families in moving from one to two income households (The Two Income Trap).

It’s probably worth noting at this point that Warren employs a more expansive notion of middle class than many (although not all) in Ireland. Large swathes of the population designated working class in the various class analyses produced by Conor McCabe, and probably the bulk of the social classes defined by the CSO (certainly Professional workers, Managerial and technical, Non-manual, Skilled manual, and probably many in the Semi-skilled category too), would also fit her definition and hence suffer the same problems highlighted.

Like Matt Ridley, Warren notes that the affordability of many essentials has improved markedly. Households buy more sophisticated foods and eat out more often but spending on food as a proportion of income has fallen significantly since 1970. Or to put it another way, it takes significantly less hours of work to purchase a better meal than in 1970. Ditto for clothing, household appliances and electronic goods and even for the (first) household car.

However since 1970, American women have increasingly entered the workforce and Americans have migrated to suburban housing. With two workers per household, far from the office, not only is a second car essential, but households must spend on other new expenses such as childcare, and third-level education. In 1970 Warren points out that to become middle class Americans needed 12 years of education (that is to graduate from second level), where as today most American feel a third level qualification is an essential prerequisite for entry into the middle class. In the United States these costs have been allowed to spiral out of control, with the United Kingdom appearing to follow suit, there but for the grace of God go us?

In addition any potential savings (from improved food, clothing & appliance affordability) are, after deductions for new & increased costs elsewhere, completely eaten up by more expensive housing. Housing in this context is something of a double edged sword. While rising house prices eat up any gains in real wages, they also increase households’ asset wealth. Home owners can in later life trade downwards and use any capital gain on their properties as a pension. They could also remortgage to help fund a new business if they so wished. With real house prices falling since 2005 younger workers will find housing more affordable (increasing the purchasing power of the their wages), while existing home owners find themselves locked in to large mortgages with a large deteriotation in their expected asset wealth.

With the death of the Celtic Tiger, David McWilliams argues this is the fate facing the Irish middle class. Large debts, decreasing asset values, shrinking real wages (whether via increased taxes or levies, pay cuts or below inflation pay rises).

Whatever the overall reason, the trend of a middle class that is either running to stand still or actually falling backwards is of crucial significance here, because the Irish middle class is about to take a giant leap backwards.

This group is now getting hammered by the collapse of property prices – which, ironically, has to continue if we are to get competitive and become a proper trading nation once again.

This is the central dilemma for all of us: we need to ‘lock in’ cheap property as a competitive advantage for the country, but that means trapping the property-owning middle class in a brace, where their debts remain static but the value of their assets falls.

This means, in its simplest form, that middle class Ireland is broke for the foreseeable future.

And he paints a bleak picture of that future. Bear in mind while reading of emigration that 57% of our school leavers now go onto third level.

In the 1980s, the middle class responded by emigrating. Atypical emigrant in the late 1980s was three times more likely to have a university degree than one who stayed at home.

This trend will probably repeat itself, and the fiscal situation will deteriorate as unemployment rises and tax revenue falls. Ireland is on course for a failed fiscal adjustment – all the indicators are pointing to it.

The state will then try to get its hands on cash from wherever it can.

This is why a tax on savings is likely to be introduced, as are all sorts of other charges and stealth taxes.

All the while, the position of the middle class – which seemed to be so strong a few years back, when the property scam blinded people – will become more and more edgy.

This is exactly what Warren documented in her book.

So what are the alternatives? Whether we like it or not, with the balance sheet shattered, some form of debt restructuring for Ireland’s private sector is a given.

Time will tell how this will work out.

Also, given an anticipated last-gasp, smash-and-grab exercise from the state, the middle classes will take some of their cash out of the country and the Irish banks.

This is what happened in Latin America for decades when capital flight was endemic.

The real damage done by these changes is not in the stagnation of real wages alone (in part driven by spending, however essential, on new goods and services), but by the increase in the levels of risk a family must bear. Dismantling, however piecemeal, the welfare state steadily increases the risk of bankruptcy. And Irish bankruptcy laws are incredibly severe.

With two incomes required to pay mortgage, should a parent lose their job (or perhaps even a child get sick) debt default approaches with every jobless week. The probability of one of two working parents losing a job, through whatever cause, is much greater than that of single worker becoming unemployed, and depending on the reason for the job loss, there is no backup worker at home that can re-enter the workplace. E.g. Should a husband lose a job through illness, his wife will be unable to take on extra work to compensate.

The increased risk borne by families in every sphere – from pensions (the shift from defined benefit to defined contribution), to job loss and health should mean that appropriate policy responses are taken to reduce risk elsewhere. The recent phenonem of giving mortgages on the basis of a multiple of joint income is absolute madness. But with bank solvency dependent on house prices remaining high, can we really hope for an end to this any time soon?

Warren argues that the 3-tier American class system (Rich, middle-class, poor) is being replaced with something approaching a two-tier system, a comfortable upper class (that includes any members of the old-middle class that are lucky enough to avoid personal disasters throughout their working life) and the poor – which will include any members of the former middle class struck by job loss, illness and other problems.

In a recent interview in the Washington Post Warren gave a concise overview of the problem -

Well, I believe that the middle class is under terrific assault. And I don’t want to play this as a capitalism issue.

When we compare middle-class families today with their parents a generation ago, we have basically flat earnings-a fully employed male today earns on average about $800 less, adjusted for inflation- than a fully employed male earned a generation ago. The only way that houses could increase or families could increase their household income was to put a second earner into the workforce, and, of course that’s now flattened out because there aren’t any more people to put into the workforce. So you’ve got, effectively, flat income in this time period, with rising core expenses; housing; health insurance; child care; transportation, now that it takes two cars to get everywhere, two jobs to support; and taxes, because you’ve got two people in the workforce and we have a somewhat progressive taxation system. So that families are spending a lot more on what you describe as the basic nut.

The third leg to the triangle, and that is families, to deal with this, stopped saving and started going into debt.

And the debt side of where families both spend more money and are made much more vulnerable on mortgages, on credit cards, on check overdraft fees, all this side of it, the credit side of it really means that we have a middle class that a generation ago we would have described as solid, secure, dependable. If you could just get into the middle class, you could pretty much count on a fairly comfortable life and all the way through to a comfortable retirement.

That’s been hollowed out. Sure, there are people who are going to make it through just fine, but the vulnerability of families in the middle class has just, it has gone up enormously.

The mispricing of risk played a large part in the creation of the Great Recession, is it time for a rethink about the amount of risk we are piling onto families today? We’ve bailed out the banks, but haven’t even begun to discuss issues like this.

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  • Alan Maskey

    Mack

    You have much too many points/essays here to induce meaningful and directed comment . Nevertheless…
    Economists are always predicting doom and gloom and these book toting people are no different.
    Ireland, especially during the Charlie McCreevey years, has been reengineered via tax sticks, to have less children and to hyper inflate the costs or raising kids. The influx of unskilled and often undocumented migrants is in part to ameliorate that deficiency and to put a downward push on wages and to dampen expectations of further price increases.
    Ireland, like Britain (and the US) has few competitive advantages today. Britain has pornography, the defence industry (second fiddle to Great Satan) and the City. Outside of that, it is barren. The great cities are employment wastelands, known more for football hooliganism, dull Full Monty type movies and voting BNP than for their former industrial and craft prowess.

    House prices are dependent upon location, location, location. Anywhere near a stock market, a central bank, churches and schools, will, melt downs excluded, retain value. They are also highly dependent upon interest rates and expectations.

    Dampening expectations is not a bad thing. Also, women could go back to the kitchen, people could smoke and drink less, do less drugs, use bikes, dig the garden, scrap the gym membership and go for a long walk instead, make love and babies, and support Glasgow Celtic. As it was in the beginning.

    Forget that bit about Celtic. Play football instead of watching it. And maybe use an economist’s head as the ball and their mounds of worthless publications as the goal posts.

  • Anon

    I’m sceptical you can “lock” people into current mortgages when property values are significantly under the value of those mortgages for the long term. Even given that people don’t want to lose their home, the economic arguments beging to stack towards defaulting and renting with home of eventually getting back into the game. And I can’t see politicians making thhat brace binding as there’d be outright revolt, especially given how much money that has went into the banks.

    What you want is recover followed by stagnation, essentially, but that’s a tough trick to pull off. Bailout home owners by renegotiating the terms then?

    The risk issue has been bubbling about for a while. You could further add a risk shift form companies to individuals in the tax system.

  • http://garibaldy.wordpress.com Garibaldy

    Thanks for this Mack. Some serious food for thought here. Of course, the Marxist in me is saying this tale of woe rings a bell from the Communist Manifesto, where Marx and Engels outlined exactly the phenomenon under discussion. As that suggests, we are not dealing with a new concept here, as will a glance at all those reports about growing inequality in the US, UK and the south over the last several decades. Immiseration in Marx and Engels was always a relative concept, and while they and many others underestimated the capacity of capitalism to provide a higher general standard of living while increasing inequality, it may be that with the retrenchment of credit we are witnessing that dynamic aspect reach its limit for many, and they will start the slide downards, but in their own eyes and the eyes of others. Then again, as long as the iPad drops in price enough to be affordable, people mightn’t care.

    The question of what constitutes middle class is as you say a very complicated one, with people’s perception differing from the reality very often, especially in the States.

    Anyway, I want to sound a note of scepticism about McWilliams’ point about emigration in the 1980s. I’d like to see statistics that prove the “typical emigrant” was three times more likely to have a degree than the person who stayed at home. It may well have been the case that an emigrant was three times more likely to have a degree than the population at home, but I would be more sceptical that the typical emigrant had one – I’d like to see the proportion of emigrants who did and didn’t. In other words, I’d like to see how this sentence fits with measurable facts, especially given the poor way it is worded. Points like this make me suspicious of his analytical framework and application of methodology as a whole. Which is not to say that I am sceptical about Warren’s ideas.

  • Greenflag

    Germany saw it’s middle class in particular it’s lower middle class collapse in the early 1930′s .Russia did’nt have a sizable middle class when the Communists took over in 1917 .

    The bankers , Wall St and the neo con ideologues and the rest of their fellow travellers will only have their own shortsightedness and greed to blame when ‘society’ and our long hard for democratic values are usurped by the new ‘totalitarians ‘. Already the so called Tea Party numbskulls are carving out swathes of the lower white middle and non working classes in the USA . Political polarisation is at it’s highest level for generations and a racist tinge has crept into the campaign against the new found scapegoat i.e ‘them’ the illegal immigrants.

    Ireland is still dumbstruck by the reversal and in a state of ‘suspended’ belief . No matter what we do we’ll not escape the downsizing of both American and UK middle classes . The real question is will our political system and what we now accept as normal ‘democracy’ survive ?

    Once states lose their cohesion and any sense of government being possessed of the capability and or will or power to ‘fix’ the economy and the rule of warlords and regional/tribal warlords will begin. When the majority of people have nothing to lose why would they support the few who have something to lose ? New forms of slavery will be found to replace local indigenous recalcitrants of the new economic order .

    Whatever did they expect when they pushed forward Enronomics as the answer and never ending wars in western asia as the priming pump for economic growth ;(?

  • http://www.labourbelfast.blogspot.com DC

    What’s needed is a massive reset button on mortgages and creditcard debt.

    It seems so unfair that in relation to the housing side of things financial services can pump money into housing, take the returns via profitable speculation while the average joe is left with the negative equity post financial crash.

    Not forgetting the tapping up of the taxpayer who has bailed out the banks and in doing so the CEOs get to keep their bonuses (which were in the end based on incorrect credit supply projections – therefore the link to performance and bonuses – such as the CEOs were – has been well and truly broken. Facts of the financial crash seems to make any such link absurd).

    I imagine the middle classes would care less if some of these bonuses and CEOs had had their own properties and assets frozen like the law can do for criminals and terrorists under special enforcement legislation. It’s all one way traffic, the stack is at the top if you ask me – inland revenue should be able to spot these people and arrest them or so it should be in the future.

    There is no counter-attack with pursuit on the financial services markets – take Britain and the Cameron and Clegg government, so bankrupt for ideas are they both that all they can do in answer to the debt is cut public services to scrap back some cash.

    The constitutional protection of capitalism is so skewed in favour to the money men and such likes that they are staring the answer to this problem right in the face – their own parliament. The law’s an ass.

  • Alan Maskey

    Well British but not Irish banks are starting to make profits again. Thank heaven for little mercies. If voters were not in such a rush to spend money they do not have via credit cards and the like, we would not have this problem.

    No words for the British or Irish pensioners who save and let the young fatties blow it on hamburgers and coke (do pushers take Visa?).

    The Holy Bible says: The debtor is slave to the lender. And so it should be. Live within your means. Stop paying Irish judges, politicians, nurses etc so much. Make them work.

  • Glencoppagagh

    “so bankrupt for ideas are they both that all they can do in answer to the debt is cut public services to scrap back some cash”

    If public services hadn’t been expanded so much on the strength of tax revenues derived from a financial bubble, such an adjustment would not have been necessary.

  • John East Belfast

    I think the outcome is a wave of personal bankruptcies – however that will give the State headache number 2 which will be more on the scale of a full stroke than a migraine

    I have mentioned on here before the ROI is sitting on a residential mortgage time bomb. Although the State could just about bail out the Commercial Property Loan market it cannot do the same for Residential Mortgages – it will be the IMF and Germany when that happens

    The big problem is when Euro Interest Rates start to tick up an you have no control over them. People on Interest only Mortgages on reduced household income will be in dire straits and will simply give their house keys back to the Building Society/Bank.

    Your Interest rates are pegged to the wrong economies – you should still be in sterling

  • http://www.labourbelfast.blogspot.com DC

    Correct to a point there – but why aren’t any CEOs adjusting? Where is the compromise across both sectors?

    Constitutional protection of capitalism means the law dictates that you lose your property if you can’t make the repayments but the repayments are linked to miscalculations of others i.e those credit supply lines that have thus collapsed due to financial services incompetence.

    Sold a pup.

  • SDLP Man

    I think a critical point for NI is to put a very severe cap on the salaries of people here paid out of the public purse. I would suggest, at most, five or six times the average wage.

    To take a particularly egregious example, the two Vice Chancellors are paid approaching £200k per annum, far more than David Cameron, which is simply absurd, given that they’re not running businesses to meet a payroll, even if the universities employ thousands of people.

    This society is small enough, in the name of social solidarity, to hunt down and sort out the more obscene anomalies and it doesn’t have to be a witch-hunt. For example, all legal aid should be put out to tender and it shouldn’t be allowed that the defendant client (who’s not paying the bill, the taxpayer is) can pick and choose the lawyer to represent them, irrespective of the cost.

    I came across an example of a convicted criminal many years ago who, in cahoots with his solicitor, vetted various QCs for his upcoming case, rejecting several until he got the one he wanted and who justified his chutzpah by saying: “If you’ve a horse in the race, you want Lester Piggott riding it”.

    Few could have failed to notice that when some details of the amounts paid out to Bloody Sunday barristers was revealed, a well known local QC got several millions but his son, a wet-behind-the-ears recently qualified barrister, got something around £200,000. Barristers are supposed to be sole traders but it stretches credulity that the son, however bright he is, got the junior brief on his own merits and that his relationship to his QC dad had nothing to do with it.

    Similarly, while I think hospital consultants should be very well paid indeed (the multiple by which the average UK doctors are paid is around four times-one of the highest in the world), I think the obscenity of the system whereby their consultant peers determine an additional bonus should be ended forthwith. Again, I know of one case where a hospital consultant, on a salary of £110k per annum, got a top-up bonus of £70k and who fretted about what he would do with it-he already had holiday homes in France and the US!.

    I think transparency is key to all those. I see that in the Republic the media has identified (I think) around 200 civil servants earning in excess of €200k per annum.

    There’s a particularly self-serving crowd called the First Division Association which represents civil servants above, I think, Grade 5 (Assistant Secretary) level and who justified no alteration of their pay in NI in the grounds that these geniuses could get more in the private sector here. Complete, utter, total nonsense and some elected person needs to take them on.

    One last thought, the idea that a reduced Corporation Tax rate in NI is some sort of panacea is crazy. The tax burden as between individuals and business in the RoI has got completely out of balance and will have to be rebalanced.

    I know many young people, at the start of family formation, who have bought over-priced houses in places like Crumlin, Glenavy, Lurgan, Randalstown, even Derrynoose. A party which comes up with a fair and meaningful set of proposals to help these people, without invoking the so-called moral hazard, will garner a lot of votes. I hope it’s SDLP.

  • Jane Jeffers

    “Economists are always predicting doom and gloom and these book toting people are no different.”

    Hilarious logic. (all cigarette packets have health warnings on them, yet not all smokers die of smoking related illness WFT!? )

    Anyway my real point is this — the middle class is finished. The deeper structural reasons are clear though they have been hidden and will not become fully apparent for several years hence.

    In the early to mid 90′s around 150 mill low-paid manufacturing workers (mainly in china and India) became available to the global ecomy. This huge over-capacity was hidden by the various credit bubbles.

    This same over-supply exists across most if not all sectors.

    Unfortunately the curtain has been pulled back. No, in fact, we just found out there is a curtain.

    We are seeing the near collapse in the value of human labour.

  • JaneJeffers

    “Economists are always predicting doom and gloom and these book toting people are no different.”

    Peculiar logic. (all cigarette packets have health warnings on them, yet not all smokers die of smoking related illness WFT!? )

    Anyway my real point is this — the middle class is finished. The deeper structural reasons are clear though they have been hidden and will not become fully apparent for several years hence.

    In the early to mid 90′s around 150 mill low-paid manufacturing workers (mainly in china and India) became available to the global ecomy. This huge over-capacity was hidden by the various credit bubbles.

    This same over-supply exists across most if not all sectors.

    Unfortunately the curtain has been pulled back. No, in fact, we just found out there is a curtain.

    We are seeing the near collapse in the value of human labour.

  • Glencoppagagh

    SDLP man
    If you can persuade your party to adopt your ideas, it’ll have my vote for sure.
    However. I must demur on the matter of dealing with people with overpriced property. Let it be a painful but salutary lesson that you don’t need to own the house you live in and certainly not expect it to be an assured successful investment.
    Unfortunately, the idea of ‘putting your money in property’ beguiles the ignorant and lazy (in the sense of can’t be bothered considering the alternatives).

  • A N Other

    The notion of an Irish middle class is a fiction. Some gombeen men got lucky, when their local bank began to pay out loans to them like a slot machine on Bray seafront. These individuals, lack class, taste and repsect for their heritage; the majority of them are from poor backgrounds and their plundering of the country was in the main one big long ego drive.

  • http://www.labourbelfast.blogspot.com DC

    Is Bertie Ahern one of those gombeens?

  • SDLP Man

    Glencoppagh

    I agree with you about properties over a certain threshold-say, those people who paid £500k plus at the height of the boom. Generally, those people can look after themselves. However, I have concerns about people, particularly young families, who can’t get any house, however modest, and who don’t have the option of public sector housing available that isn’t ghettoised and isn’t polluted with paramilitary flags, symbols and graffitti. I do think Ritchie was and Attwood is on the right track by proactively supporting non-ghettoised public sector housing.

    Like you, I am delighted that the era of making wealth through property acquisition has drawn to a close and I don’t have a lot of sympathy with all those ‘professionals’ with their rentier property portfolios on the side who depended on their mortgages being paid by those hard-pressed folks who could only afford to rent. A lot of them are now in diffs, because they were only buying housing units as investment properties.

    I think, however, there should be a market mechanism to enable them to let their properties go, and at a loss, and make them available as affordable houses to young families.

    To take a concrete example, the Ulsterville area of South Belfast, and most parts of Windsor ward, is a fantastic location, close to city centre and amenities, beautifully proportioned urban scape but families were priced out by the investors and the area is rotting away and falling into dereliction. Another factor is that there are a number of anti-social elements, problem families, who are tainting otherwise good areas to live in, and they shouldn’t be allowed to do so. The knock-on effect is that young families who would want to live in the city have to move to the far-flung places I mentioned previously.

    I hate Irish tricolours and union jacks and all other coat-trailing paraphenalia impartially and that is why any CSI strtagey is worthless until this issue is addressed. No-one should be allowed to erect stuff on publicly-owned street furniture. If they want to fly a flag outside their own house that’s fine by me.

  • Greenflag

    ‘The notion of an Irish middle class is a fiction’

    Complete and utter shite . Your notion that an Irish middle class is a fiction is a fictitious notion or in plain english a lie ! The ‘plundering ‘ of the country was in the main orchestrated by those members of the ‘professional ‘ middle classes who call themselves bankers , mortgage brokers and developers and their attendant political time servers .

    Elizabeth Warren tells it like it is for the USA . Do we have anybody in Ireland or the UK of similiar ilk ?

    While her analysis of the last 30/40 years was next to perfect I wonder does she have any prescription for recovery ?

  • http://garibaldy.wordpress.com Garibaldy

    Greenflag,

    You’ll find an attempt to apply some of the insights not of Warren but of people making similar arguments about the decline in real wages and reliance on credit to the Irish experience at the link below. There is also a lengthy debate in the comments about some of the arguments in the paper.

    http://www.irishleftreview.org/2010/07/09/roots-current-crisis-analysis-workers-party/

  • http://garibaldy.wordpress.com Garibaldy

    Oh, and keep an eye out of Conor McCabe of Dublin Opinion’s book some time over the next year, which is taking an historical approach to NAMA.

  • Greenflag

    Thanks Garibaldi for the link . I have perused many analyses of the roots of the current crisis both from the left and the right and centre but the prescriptions for the cure appear strangely reticent . Obviously what happens in the USA will have major repercussions here and in the UK and worldwide . MIght we slowly be coming around to the realisation that while capitalism has provided the engine of economic growth and innovation over the past couple of centuries and while it’s tenets may apply to benefit some parts of the world at particular times in history -it just cannot work for all of the people of the world all of the time .

    There was nothing in Elizabeth Warren’s presentation that came as a surprise -what for me however is a constant surprise is the number of USA politicians who simply ignore the facts surrounding their growing economic implosion .

    Given the retail stagnation not surprising given the recession and mass unemployment and the property bust hope is now being expressed that most of the next increase in consumer spending is going to have to come from the top 10% i.e the rich . What will they be buying ? slaves ? In the absence of reason one can only hope for a black swan event to bring the USA to its senses :(

  • Mack

    Her analysis, one of the best on the real wages issue as it actually breaks down what people are spending money on – does demonstrate real gains but also severe increases in financial frailty.

    All of the (unspent) gains in real wages for median workers are eaten by the FIRE economy (Finance, Insurance & Real Estate). That is via

    mortgages for housing
    health insurance
    insurance costs imposed on child care providers

    Elizabeth Warren is hardly alone in arguing this point. The path to higher living standards should be reasonably clear. Enforce proper regulation of that sector. Prevent predatory lending. Enforce strict limits on mortgage multiples (the standing up in the cinema effect gives no-one a better view, even the banks lose out in the end). Reform tort laws so that childcare costs become manageable (look to New Zealand for inspiration here). Provide a public health option in health to counter act the mendacity of the private health insurers. And when child care is affordable, perhaps a decent public option for less well off workers & single parents would also be easily affordable too.

    Left alone the FIRE economy has been able to fill any gap left by rising productivity in workers spending. It would appear in part that the basket of goods used to calculate inflation has expanded to encompass the new essentials. Masking both the parasitic nature of the FIRE economy and the increase in consumption by families over the past 40 years. You would wonder, on balance, who does that benefit more?

  • Shamie Og O’Britsout

    Being a red hearted socialist I of course hate the middle classes and therefore, welcome this development

  • Mack

    Missed college education costs there too. We need to keep a close eye on those.

    Charging graduates a small amount for the privelege is probably fair enough – allowing private interests to cream off students future earnings is unacceptable rent seeking (typical FIRE economy behaviour). The American student loan providers fulfil this role, and do nothing to limit the worst inflationary excesses of the private colleges.

  • Glencoppagagh

    I’d forgotten about “all those ‘professionals’ with their rentier property portfolios”.
    They’re the pig ignorant investors most of whom had made a bit of money – possibly not entirely legitimately – and could only think of one investment possibility. Many, if not most, of these cretins were earning a pathetic rental yield (they probably wouldn’t even know what it meant) on their properties and would have earned more by putting their money in a good savings account. Anvbody who realised how low the yield was would have known that property was grossly overvalued. But their facile rationale was what went up last year is bound to go up again this year.
    Anybody who bought for the first time rather than rent anywhere in Ireland during the last five years was either ignorant or foolish – probably both. Anybody who wanted to live in Belfast but was prepared to move as far as Derrynoose (near Keady?) just to own a house deserves to suffer for their utter stupidity.
    I completely agree on the subject of flags and authorities should remove them instantly from all public property.

  • Alias

    The extent to which Irish mortgages and other personal or business loans are in delinquency is deliberately concealed by the banks using moratoriums with no qualification other than “We need to make our balance sheets look healthier while the public are still prepared to underwrite our debts.”

    The government are in collusion with this fraud because these debts default to lenders in the eurosystem and not to the Irish taxpayers, and the aim of protect the eurosystem at the direct expense of the national interest by taking all of the shit loans off the bank’s balance sheet and containing them within the Irish state rather than allowing the bad debts to default to the (French and German) lenders outside of the state.

    Hence all the shit is dumped into NAMA and otherwise retained within the state via nationalisation (with the nationalised Anglo being a non-lending bank despite the cover story that it was nationalised as part of some cunning plan to get the banks lending again).

    As an architect, I know a hell of a lot of unemployed folks in the construction industry with moratoriums who have no realistic prospect of regaining employment, and who would not meet any sensible criteria for granting such moratoriums.

    Eventually, each and every one of their loans will now be repaid via taxpayers with no reduction in debt requested from eurosystem lenders by the state and not as much as a ‘thank you’ from those eurosystem lenders for retrospectively underwriting their reckless loans.

    Brian Cowan, however, is guaranteed a plush job from the EU when his domestic political career expires at the next general election as his reward.

  • Glencoppagagh

    ‘The ‘plundering ‘ of the country was in the main orchestrated by those members of the ‘professional ‘ middle classes who call themselves bankers , mortgage brokers and developers and their attendant political time servers .’

    Yes, but they couldn’t have got away with it were it not for a credulous populace which couldn’t think of anything better to do with its money. Did I not read somwhere that one important reason why Irish banks are not lending to small businesses it that so many of the small businessmen have stuffed their money in property instead of reinvesting it in their businesses with consequent damage to their creditworthiness.

  • Mack

    Here’s a couple more related articles

    http://www.marketoracle.co.uk/Article21732.html

    and this one, I think is the FT article McWilliams mentioned -

    http://www.ft.com/cms/s/2/1a8a5cb2-9ab2-11df-87e6-00144feab49a.html

  • slappymcgroundout

    “In the early to mid 90′s around 150 mill low-paid manufacturing workers (mainly in china and India) became available to the global ecomy.”

    Jane, Mack refuses to acknowledge that patent reality. He also refuses to acknowledge that a corresponding number of consumers did not become available as well. He further refuses to acknowledge that such means that all our jobs that can be sent to China and India will be sent to China and India given that those souls are “low paid manufacturing workers”. He lastly fails to understand that such means the collapse of our economies and the collapse of the standard of living of the vast majority of humans in our countries.

    By the way, I would add on to your description. It isn’t just manufacturing, but also any and all personal service jobs that can be performed without the person having to be in your and my country. And so the phone service center in New Delhi handling my complaint regarding my AT&T cellphone service.

    Lastly, Mack fails to acknowledge another reality. The monetarists are wrong. Monetarist: an advocate of the theory that economic fluctuations are caused by increases or decreases in the supply of money. As Abe Lincoln clearly understood, it is human labor that gives a currency its intrinsic value. And so in addition to the coming death of the middle class is the coming death of the US dollar. After all, the labor giving value is not our labor any longer, but Chinese and Indian labor instead.

    Almost forgot, but a comment to a piece in Forbes concerning Anna Schwartz (a monetarist), who argues that Ben Bernanke is fighting the wrong war:

    “Focusing on the money supply for equilibrium does little good for labor when it is jobs that are missing because everyone who can is using the equivalent of slave labor overseas to produce the income that makes up the GDP. Taking labor out of the picture only works where governments are subsidizing citizens welfare and maintenance, not when it isn’t. Without including labor, any set of numbers can be presented as workable. But is that reality?”

    The Forbes piece is “Monetarism Defiant”, 4/26/09.

    And, no, it isn’t workable. And so the death throes of the middle class and the coming death of the US dollar as well. And ole Abe is rolling in his grave because some forgot the basic point that labor gives the currency its intrinsic value. And well and truly lastly, Mack, that’s the ultimate argument in favor of tariffs. Look around the world. Why are certain currencies worth more than other currencies? Because the labor in the country has a particular value in production? So you can’t send your jobs overseas without destroying both your labor force and your currency. Fluctuations in the money supply didn’t make America great. Made in America goods did so. And even the Times of India gets it:

    http://timesofindia.indiatimes.com/world/us/Unmade-in-the-USA-Death-of-manufacturing-in-America/articleshow/5622699.cms

    See the last comment by our man in Bangalore. “Huge social repercussions.” Indeed. And so the number of homeless Americans continues to rise.

  • http://www.labourbelfast.blogspot.com DC

    Likely be a rush for protectionism and pump up trade tariffs in a bid to stimulate home production of goods then in USA?

    But I agree with Greenflag on this one: simple answer is nobody knows what is going to happen next.

    Gavin Hewitt gives the European perspective and it is a similar big unknown of what’s to come next or where the answers like:

    Outsiders still see the heart of Europe’s crisis as that it cannot sustain its comfortable way of life.

    My eye was drawn to some analysis in the China Daily. “It was not widely known until now,” the article read, “that the average wage of workers at the government-owned railway company in Greece was $75,000 a year. Some train drivers were paid as much as $130,000. That’s about 10 times the average salary of the highly qualified …train drivers in Hong Kong.”

    Now I’ve no idea whether these figures are true, and it is necessary to point out that China’s workers have increasingly been complaining about their own working conditions, but the perception remains that Europe has been living beyond its means. Social programmes will be cut back. Countless painful questions will have to be asked. For instance, can it be sustained that staff in Belgium are paid travelling-to-work expenses?

    When Europe’s leaders return from their holidays they will immerse themselves in trying to prevent the eurozone crisis occurring again. Budgets and spending plans will be monitored. Those who break the euro’s spending rules will be disciplined. Will that be enough to ensure the survival of the single currency, or will there be a push for fiscal union? And if so, what strain will that put on already frosty relationships?

    Others see Europe’s growth spurt dying away towards the end of the year. Gilles Moec of Deutsche Bank says “there’s no big change in terms of the underlying macro picture; we’re in for slow growth.”

    Slow growth will pose a huge challenge. Most observers accept that Europe cannot sustain its way of life with growth under 2%.

    Two final thoughts. One of the stories of this crisis has been its unpredictability. All of us, officials, observers, politicians have reacted to events. We have been unable to see the twists and turns and the autumn looks no easier to predict.

    The debate so far has been about crisis management. Considering the fundamental questions that are being asked, there has been relatively little soul-searching about whether the EU is on the right road, how it prospers in a world where power is moving to the nimble and politically ambitious countries like Turkey, Brazil and India.

  • Comrade Stalin

    I don’t see why Mack should acknowledge the false logic that the global economy operates in some kind of vacuum where it is possible to export every single job until there is no employment left.

    The expansion Eastwards is only possible because of consumerism in the West. And it didn’t just start with the dot-com bust. It’s been in progress for many decades. Start with flax/linen, and shipbuilding, and then work your way forward from there. Guess what ? The sky didn’t fall in. People found other kinds of employment.

    Take out the state sector, which was often forced to employ people to fill jobs that weren’t needed, and you’ll find that unemployment was higher than the supposed glory years in the post-war period. Do you want to talk about an “artificial” boom economy ? Take a look at the UK manufacturing sector, mollycoddled by subsidies and trading restrictions.

  • Comrade Stalin

    Once states lose their cohesion and any sense of government being possessed of the capability and or will or power to ‘fix’ the economy and the rule of warlords and regional/tribal warlords will begin. When the majority of people have nothing to lose why would they support the few who have something to lose ? New forms of slavery will be found to replace local indigenous recalcitrants of the new economic order .

    Yeah. Nutters all over have been repeating something like the above for centuries. Society’s going to collapse, mob rule will take over and we’ll all go to hell in a handbasket. It’s nonsense.

  • Comrade Stalin

    The big problem is when Euro Interest Rates start to tick up an you have no control over them. People on Interest only Mortgages on reduced household income will be in dire straits and will simply give their house keys back to the Building Society/Bank.

    John, interest rates are going to rise due to conditions in the banking marketplace (ie capital ratio requirements and the need to pay down debts and return profit to shareholders) and there is nothing that any central bank will be able to do to stop it.

  • JJ Malloy

    If this global warming thing is as dire and imminent as some suggest that will sure throw a wrinkle in any attempt to salvage our current standards of living for the long run

  • http://orcid.net Ciarán

    Great, provocative piece Mack. But the McWilliams quote omits an important issue with the saving tax. Experience suggests that a savings tax is not a tax on savings per se but a tax on the savings of people who are (a) putting money in domestic bank accounts and (b) not in cahoots with bank managers. (viz…)

  • http://www.organizedrage.com/ mickhall

    “The majority of them are from poor backgrounds and their plundering of the country was in the main one big long ego drive.”

    I love this one, we have now reached the stage where the economically poor are not only being blamed for their poverty, they are now being blamed for the rich plundering the country.

    I’m tempted to say, you could not make it up, but these days almost any nonsensical rubbish is likely to become taken for reality.

    God save us from the ‘civilised’ middle classes, for if history teaches one thing, it is middle class civilisation is nothing more than a very, very thin veneer.

  • Greenflag

    True to a point but again a mostly after the horse has bolted why did’nt we see the door wasn’t closed comment .

    Ten years ago two men go into a bank looking for financing . One is a building developer or property speculator and the other is an entrepreneur with a great idea for a business but is looking for a working capital loan to keep the doors open long enough to achieve a positive cash flow .

    Guess who comes out with the money ? The banks understand ‘real ‘ assets and know that whereas you can (or used to be able to ) sell a property that has been given up trying to sell a bankrupt small business full of inventory nobody wants is not a state of affairs that bankers want to handle .

    Traditional attitudes to property in Ireland compounded the already built in bias of banks everywhere (not just Ireland ) to invest /make loans to ‘real property’. It should come as no surprise that small businessmen jumped on the property Titanic just as it was about to leave port .

    A more important reason why our ‘plunderers’ got away with it was the abject failure of not just our politicians in Ireland but leading politicians throughout the western world to understand but to impose controls on the FIRE economy .

    The FIRE economy has succeeded only in adding 8 million people (plus families ) to the American unemployment heap and Americans now see their ‘recovery’ sputtering to a Japanese style deflation while many Americans recoil at the thought of even more government spending (stimuli) without which there won’t be a ‘recovery’.

    Stuck between a rock and a hard place the ‘dithering’ among the world’s leading politicians and economists continues as before . It seems as if the particular property bubble burst juggernaut in the US is now being compounded by the effects of mass unemployment (16.5%) plus the cost of financing two wars .
    The fact that the Federal Reserve has now thrown 1.5 trillion dollars ( the cash equivalent of 5 Irish (ROI) economies in stimuli at the economy which under even half normal conditions would be enough to spark inflation but instead deflation is now looking more likely, is an indication of how ‘lost’ policy makers are :(

    If the Americans are lost and the British are bailing water then I guess we’ll have to depend on a corpulent Irish Archimides to have himself craned from his bath before we hear the exclamation ‘Eureka’ :( On the other hand we could still hope that Godot will arrive and both Estragon and Vladimir or Gilmore & Kenny will have their ‘deliverance’ ;(?

  • Greenflag

    As an aside USA economic experts who have been berating Japanese economic policy makers over the past 15 years or so for failing to tackle Japanese economic stagnation which resulted from the then Japanese ‘property bubble ‘ fiasco are now somewhat chastened in their prescriptive chastisements as they contemplate the present American de ja vu of the Japanese precedent .

  • slappymcgroundout

    So, Comrade Stalin, tell us what other work there is? And do you not know your own history? When the British Empire begin its glacial retreat into has been? When in the mid-1800s it decided to be non-protectionist? Every nation has rose on protectionism. Every single one. India and China are protectionist now and so your country and my country. Matter of fact, here is India complaining about Chinese protectionism (from of Times of India blog):

    “The trade imbalance, India points out, is strange, given that India is not a primary products exporter to other countries. So why is it that only resource and labour-intensive stuff like iron ore end up in China? “The trade basket with China is an exception, not a rule. .. The problem is that restricted market access and tariff/non-tariff barriers have limited the scope for growth,” said India. Laying out the gamut of concerns of Indian industry, India said Chinese policies, which give its domestic companies preference, local content stipulations, sharp increases in import duties on manufactured equipment have constrained Indian exports to China. While Chiense companies are capturing Indian market share with their exports of power plant equipment, Indian companies find that exporting fertilizer, coal gasification and refinery plant equipment to China confronts huge tariff and non-tariff barriers.”

    So if its good enough for China, why not for us? And note the Chinese reply to India that I quote, to wit, India you are protectionist too, so pot, stop calling the kettle, black.

    Lastly, back to my question for you, what jobs are there left? We invented the cellphone. Not a single cellphone is now manufactured in the US. Not a single one. How many cellphones are there worldwide? How long has the cellphone been existence? If that doesnt tell you all you need to know. And, again, it isn’t like the Chinese invested a better cellphone. No. Our cellphones, all of them made by workers in our nations and not because they are more efficient. Simply willing to take a slave’s wage. And you otherwise miss the point, which is that without jobs we can’t consume anything. And that’s why there was the great credit expansion to try to keep the ship afloat. As any fool knows, that simply could not last forever. It didn’t. And now the world, and not just us, is paying the consequence.

    Almost forgot, but it also just Andy Grove. The fellow at General Electric as well:

    http://manufacturethis.org/?p=11334

    The fellow from Nucor also:

    http://www.portfolio.com/companies-executives/2010/02/18/nucor-chief-executive-dan-dimicco-wants-more-manufacturing-in-us/

    Note that he speaks to his convo with our man from GE.

    Can I now ask the obvious question, who nows more about what it takes to succeed as an economy than the guy who co-founded Intel, the fellow from the GE, and the fellow from Nucor? Do economists who have never owned and operated a remotely similar concern know better? And have you ever been to Detroit lately? It’s falllen apart, literally. And so no surprise that for those who know business, as they’ve made business, and who also care about the nation and its people:

    Also he gave a speech in Detroit, Michigan, last year where he highlighted the need to grow manufacturing in this country back to the point where it was at least 20 percent of GDP, as opposed to the current 9.9 percent. He firmly agrees about the fact that we have allowed the destruction of the middle class to occur by not making sure that we maintained a strongly growing private manufacturing sector.

    And Mack’s late in the day, as we’ve already lost our middle class here in the US:

    DiMicco: We’ve lost our middle class. Not because it’s a rich-poor thing. But basically because we lost the jobs that allow people the opportunity to reach the status of lower, middle, and upper middle class. That ladder no longer is there, or most of the rungs are broken. And we need to rebuild that.

    Truly lastly, note his answer to the question re not having any layoffs at his company. Last question on page 2 of the piece. He’s an American hero and the pity is that most Americans don’t even know his name. That’s how pathetic the journalists and the media are. And not just here, but the world over.

  • John East Belfast

    Comrade

    “and there is nothing that any central bank will be able to do to stop it.”

    It is the Central Bank that sets the Base Rate (BOE Base, Eurobor, Fed etc) – we are not talking about Banking Margins to customers – all of which are already very high as they make huge profits and shore up their Balance Sheets

    A Central Bank’s main concern is Inflation – the inflation in Germany is likely to go up a lot quicker than in ROI.

    When the current Euro Base moves from 1% to 3% and if you were (lucky enough) to be on a good historical low margin of 1% and Interest Only Mortgage then such individuals will see a doubling in their Monthly Mortgage payments – that will be catestrophic.

    My view is that things are not currently as bad in UK or ROI as they should because of these historically low interest rates and people are still spending.

    When the Rate curve turns there are some serious shocks in store.

    Although people are talking UK Rates up by mid next year I still think they are over cooking it because there will still be major deflationary forces in the UK economy.
    However the same cant be said for Germany to the same extent and that was the point I was making regarding the ROI

  • Mack

    Of course Slappy, you are right. No country should export anything. Wave bye bye to those $1 trillion dollars worth of American exports, because you are preventing local companies from producing their own versions of those products. Unless you think you can impose import tariffs on Chinese products, in your export markets??

    And the Sun? B*£$&*d, coming over here, every morning, providing everyone with light. Costing our torch makers jobs. For free too. B*£$&*d!

  • Greenflag

    ‘I love this one, we have now reached the stage where the economically poor are not only being blamed for their poverty, they are now being blamed for the rich plundering the country.’

    Good observation Mick – The Victorian Age is back :( Next up cold baths -and compulsory thanksgiving prayers before being allowed to eat dry bread and a mug of tea at the local pike .
    George Orwell come again ;)

    ‘If history teaches one thing, it is middle class civilisation is nothing more than a very, very thin veneer.’

    That may be but it’s a very important veneer and not just for the middle class . Before there ever was a middle class there was even more brutality and tyranny and injustice -slavery etc etc and the life of western man was nasty -brutal and short .

    The middle class used to provide a bulwark in democratic societies between the opposing forces of the authoritarianism of the extreme right or left . When at times that ‘bulwark’ lost it’s cohesion then the resultant chaos was manifest among all classes -think Weimar Germany .

    In todays world as Elizabeth Warren eloquently makes clear in Mack”s link above the American ‘middle’ class is facing collapse more accurately a major downsizing as those ‘survivors ‘ from the middle class clamber into the top tier (20% ) while the non survivors are hurled into the 80% human ‘livestock ‘ portion of humanity – possibly to provide the ‘combustible ‘ element for future revolution /turmoil etc !

  • http://www.organizedrage.com/ mickhall

    Question

    Whilst we are on the subject of the living standards of the average working/middle class US family having stagnated, if not fallen over the last decade or so, can anyone tell me how the percentage of profit out of turnover the top one hundred US companies make has changed in this period.

    What I am asking, is big business talking a larger slice as profit these days, smaller, or much the same?

  • Mack

    Profit levels as a percentage of GDP are well below their post war peaks. They’ve moved up and down over the same 40 year period. From a low of 6% in 1982 to peaks of just over 10% in the mid-90′s and mid-2000′s.

    http://contraryinvestor.com/imagesCImain/wagescorpprofit050204.png

    There has been wage growth for some workers. Above the median workers have seen their salaries rise. Below the median workers have seen their salaries stagnate. The top 1% or so have seen their salaries go through the roof.

    http://www.stateofworkingamerica.org/tabfig/03/SWA06_Fig3D.jpg

    It’s worth bearing in mind that 2010 salaries do purchase more than 1970 or 1980′s salaries ( better appliances, food, clothing etc). It’s when you move into the middle class / double income / home ownership world of two cars, expensive housing, childcare, health insurance, college fees that the FIRE economy creams off all of the productivity gains for itself..

  • Mack

    Just to back that up. Here is a graph showing real median household incomes since 1970, and what that money is spent on.

    Housing, health insurance, child care and taxation eat up all of the gains.

    http://www.marketoracle.co.uk/images/2010/Aug/middle-class_image003.jpg

    Which should help explain this

    http://3.bp.blogspot.com/_v3_kw7R30BI/SPdjzUeM9DI/AAAAAAAAADk/cwSlKhfq9Lw/s1600-h/finshv.jpg

  • Mack

    And this

    ” Wall Street ran with these opportunities. From 1973 to 1985, the financial sector never earned more than 16 percent of domestic corporate profits. In 1986, that figure reached 19 percent. In the 1990s, it oscillated between 21 percent and 30 percent, higher than it had ever been in the postwar period. This decade, it reached 41 percent. Pay rose just as dramatically…”

    http://peakwatch.typepad.com/.a/6a00d83452403c69e201156fa1ffd1970b-pi

  • Greenflag

    This decade, it (Financial Sector) reached 41 percent.
    And when you add to that the Health Insurance sector reaching almost 20% and then throw in Government expenses administration then the USA economy begins to look like the ‘cottier’ economy of famine era Ireland with several parasitic rentier class types all depending for income on the surplus of the poor sod who is scratching away at a few acres of earth or less .

    The present USA economy structure cannot continue as is without radical change . Where that change will come from is as of now anybody’s guess .

    And the USA wants to export it’s ‘dream’ now become ‘nightmare’ to the developing world ?
    Better to remember and apply old Chinese saying .’He who would rule the world should first fix own house and family ‘

  • http://www.organizedrage.com/ mickhall

    cheers Mack

  • http://www.organizedrage.com/ mickhall

    old Chinese saying .’He who would rule the world should first fix own house and family ‘

    Green Flag
    If only the power elites would take that advice the world would be a far better place. {that goes in the locker for later use)

  • Anon

    It’s like the top 1% whose salaries have went through the roof, and moreso the more you go.There is a bit of a debate kicking about the US left wing blogs about more stratified marginal tax rates. It makes sense to me given that while $/£250,00 is rich, it’s a long way to $1 million or $10 million where the big gains are concentrated. The top 1% running away from everyone does not strike me as socialable desirable aside from probably indicating rent seeking. A bit of a disincentive to spend money on executives and more to reinvest would probably do some good.

  • Comrade Stalin

    I’m having a bit of difficulty making any sense of your argument, slappy.

    I know there’s other work, because despite a growing population and immigration, up until the beginning of the recession we had historically low unemployment. Much lower than during the protectionist years of the 60s and 70s. So your prediction that the outsourcing of manufacturing services should lead to high/mass unemployment hasn’t materialized, quite the reverse in fact; outsourcing has coincided with low unemployment.

    Providing examples of people complaining about protectionism is just argument by qualification and it doesn’t contribute anything to your argument. The idea that the British empire began to collapse when it began to liberalize trade is definitely one of the more novel explanations for the end of imperialism. I do hope historians give it due consideration alongside the more traditional explanations to do with the desire of people in foreign countries to govern themselves.

    No. Our cellphones, all of them made by workers in our nations and not because they are more efficient. Simply willing to take a slave’s wage.

    You’re using that word, “efficient”. I do not think it means what you think it means. If someone can perform the same task for less money then that is the definition of greater efficiency.

    Using Andy Grove as part of an argument against outsourcing, given that Intel has factories all over the world and does the majority of it’s manufacturing overseas, is probably somewhat counterproductive for your case. The links you proposed are less to do with outsourcing and more to do with people complaining that industrial activity in the West is slackening. This is true, but killing outsourcing isn’t the way to fix it. Indeed, all protectionism achieves is ensuring that low-skilled labour jobs are kept here, removing the need for investment in things like training and education.

    And I definitely don’t know where you are going with the implication that devices and widgets are supposed to be manufactured in the country where they are invented. Where do you draw the line ? You live in the USA. Should their be protectionism between the states ? Between cities ? Where do you draw the line ?

    It’s a joke talking about the ladder up to the middle class being no longer there. Are you seriously trying to argue that social mobility was greater in the past, with lower access to university and education, reduced rights for women and racial/ethnic minorities ?

  • Mack

    The question of what constitutes middle class is as you say a very complicated one, with people’s perception differing from the reality very often, especially in the States.

    It depends how you define it. I.e you can look at the lifestyle – Mortgage, a car or two, educational or similar aspirations for the kids – that covers the basics. Counting people who live that way, that would also include a lot people who would strongly self identify as working class. But then I’m not sure working class features as element in, say Warren’s analysis. Or Middle Class in Marx’s (but they seem superficially similar – Bourgeoisie, Proletariat, Lumpen-proletariat compared with rich / middle / poor) . And it doesn’t need to, in order to useful. You still need a word to describe the people in this situation and middle class is as good as any.

    Even with your standard Irish under / working / middle/ upper class systems – at least as it’s implicitly understood by most of us wrt social status. There’s a whole lot of denial. Mostly the other way, I think, than your American observation above. Romanticism of inherited working class roots holds a lot of sway. e.g. I was tempted to ask ‘they?’ in response to the first reply you got when you blogged this story yourself. Regardless of whether or not that particular example is fair, I know a lot of people earning high salaries, that just don’t realise the change. They aren’t working class any more. Many of them are upper middle. In Conor McCabe’s analysis (linked above) Nurses are designated working class. The starting salary on that scale (never mind the overtime and extras) is _solidly_ middle class. A few years in with overtime and it’s upper middle. See this post on Crooked Timber

    http://crookedtimber.org/2010/08/02/do-people-think-of-themselves-as-further-left-than-they-really-are/

    and check out where salary ranges fit relative to British society here

    http://www.ifs.org.uk/wheredoyoufitin/

    haven’t seen one for Ireland. From Crooked Timber -

    Nevertheless, many self-described left-wing academics of my acquaintance, though earning in the very highest percentiles of the income distribution, believe they are underpaid and ought to get more. This belief, I submit, is in practice inconsistent with even sophisticated egalitarianisms, and supports the view that they are more right-wing than they fancy themselves to be.

    Although in fairness, once you discard the labour theory of value for the bollox it truly is – some degree of income inequality for workers within a sensible range is inevitable, even in a communist system.

  • Mack

    Just to expand on the above, and expose the limits of my knowledge of Marxism – I’m presuming

    Bourgeoisie – owners of the means of production (equivalent to the rich)

    Proletariat – sell their labour to the bourgeoise rather than the output of their labour (middle classes under Warren’s scheme)

    Lumpen proletariat – probably the worst fit, but wikipedia does liken it to the modern underclass. So I’m sticking with it..

  • http://garibaldy.wordpress.com Garibaldy

    Possibly the two most dominant interpretations of how to define class in the last century were derived from Marx and Max Weber. To put it very crudely, Marx believed class was dictated by your position in the process of production. So those who sold their labour were essentially the working class (the proletariat specifically being factory workers). The consequence of increasing concentration of ownership of the means of production was that those who were considered middle class previously – lawyers, intellectuals, clergy, journalists and the like – were being pushed downwards into the working class as they lost spending power and status.

    Weber’s idea was that class was about consumption, status and attitudes. Crudely put, if you lived a middle class lifestyle, then you were middle class. So, to take an example. An academic who earns less than a plumber is still considered middle class because of the status attached to the job, and the lifestyle led – stereotypically, that might be using disposable income to buy books, go to the opera, etc, as opposed to going to the pub and the bookies. Which seems to me to be pretty much what you are saying, especially about people considering themselves working class who aren’t.

    The lumpenproletariat was, again putting this very crudely, basically people who in Marx’s view had lost any organic connection to the economy and process of production, and thus led lives that were filled with crime and corruption etc. These people were not the same as an underclass as we understand it. The idea was basically evolved to describe those who supported the regime of Napoleon III in France that overthrew the democratic republic established in 1848. Former aristocrats, ex-army officers and others were included in this, so it wasn’t what is meant by those who use the term underclass today.

    As for income and class. Tricky question. There clearly comes a point where people who work for others earn so much money that it makes no sense to think of them as working class. The question is how much money that is. It’s probably a lot higher than most people like to think. From memory – and this may be wrong – I think that something like 25% of Americans think they are in the top one percent income wise. It’s one of the things that helps the system there survive.

  • Alias

    Warren is right about a two-tier system emerging in America but it will delineated between those who pay income tax on their earnings and those who don’t. Those who don’t pay taxes now form 47% of households in the US (36% after credits and deductions and 11% below the earnings thresehold). The Democrats have made no secret that they want to increase this group of non-taxpayers beyond 50%.

    That will lead by design to bigger government (and higher taxes for the minority tax-paying class) with the non-tax-paying class forming a democratic majority. What is being engineered is a permanent majority for the party that serves the interests of the class that benefits from paying no taxes. This majority of voters will vote, rather obviously, for the party that insists that other social groups owe it a living and must fund its social services while it is entitled to a free lunch.

    This majority will see government as a free service. And the bigger the government gets, the more they get for free. Free, of course, means that the tax-paying minority is paying for it. In that emergent context, the middle class is a goner, and the rich only exist to fund the poor. Democracy is also a goner since it is reconstitutioned as a self-serving majorrity enslaving a prosperous minority.

  • Mack

    stereotypically, that might be using disposable income to buy books, go to the opera, etc, as opposed to going to the pub and the bookies. Which seems to me to be pretty much what you are saying, especially about people considering themselves working class who aren’t.

    Yep. Although the plumber is also probably middle class by the consumption definition. I don’t think cultural artefacts are a good indicator. In Ireland, home ownership / mortgages, car ownership (except perhaps in parts of Dublin), foreign holidays, attitudes to education are probably better indicators than going down the pub or the bookies (as a walk through Ballsbridge would attest!).

    On the other side – if you’re a wage slave I don’t think income neccessarily matters. Goldman Sachs employees earning multiples in salary of industrial capitalists struggling in manufacturing are just as vulnerable to being squeezed should the balance of power switch as low paid factory worker (in such a power shift the industrial capitalists lot may improve. FWIW, currently, I think industrial capital in the US is being squeezed pretty damned hard by financial capital). Given that they’re (Goldman Sachs employees) probably also leveraged to the hilt, they would be very vulnerable. I would guess one of the reasons the system has survived so far, is it has never swung unrecoverably too far in either direction.

    Despite our imbalances today, you still get things like this -

    http://www.msnbc.msn.com/id/38556042/ns/us_news-giving/

    Some analysis
    http://modeledbehavior.com/2010/08/05/you-cant-take-it-with-you-consumption-income-and-charity/
    http://modeledbehavior.com/2010/08/06/what-is-to-be-done-tax-edition/

  • Mack

    Another important factor to take into account here is social mobility. George Soros argues that Marxism is primarily relevant in closed societies where individuals can’t move up (he notes the US is becoming more closed) rather than in open societies. It’s perfectly possible to grow up in corpo flat in the north inner city, get a good job, buy house, live a standard middle class style life – still talk with your own accent, go out on a friday with your mates from home, never visit an opera in your life. But, if they do, despite many things staying the same, it’s not necessarily meaningful (at least in a lifestyle / consumption sense) not to describe that person as middle class.

  • Glencoppagagh

    ‘Democracy is also a goner since it is reconstitutioned as a self-serving majorrity enslaving a prosperous minority.’

    It’s also potentially catastrophic as the taxpayers will flee when the burden becomes intolerable. More likely that the taxpayer base becomes enlarged to the point where taxpayers are in majority.

  • http://garibaldy.wordpress.com Garibaldy

    I take your point about the cultural artefacts; it was just a very crude way of illustrating a point. I also take your point about the merchant banking employee who earns 400,000 a year only to find themselves dumped out of a job one day with few actual resources to fall back on. Still hard to describe that person as working class though. Partly this is to do with the question of class consciousness. If you accept that one’s social and economic circumstances by and large has a huge influence on attitudes, then the person earning 400,000 is not going to feel themselves of a piece with the one earning 15,000, even though their relationship to their employer may be exactly the same. So amounts of money definitely do matter, although you are correct to bring in the question of debt. The idea of genteel poverty still includes the idea of genteel.

    Totally agree with you about finance capital. To be, both Reagan and especially Thatcher represented the victory of financial over industrial capital. The problem of course being that financial capital makes profit through speculation, which is often based on nothing more than wishful thinking. As the south is finding out, there is no long-term substitute for an industrial economy in property and financial speculation. Throw in the question of debt, and the damage done by the victory of financial capital becomes ever clearer.

    As far as I understand it, social mobility is becoming increasingly restricted in the likes of the US and UK. But the myth of the American dream remains a potent one, backed up by the sort of examples of noblesse oblige that you link to. As British universities may well find out in the latest round of cuts, individual philanthropy is no replacement for state funding.

    And just to come back to the class and income question. I guess that at bottom that while there are always exceptions, I am of the opinion that it is wealth that determines one’s class consciousness, and along with that a large range of social and political attitudes.

  • Mack

    That’s an interesting response. It’s kind of moving towards the idea that your position is determined less by what you do and how live, but more by how much wealth you’ve accumulated and income you earn. Which then raises a ton of questions

    If wealth tends to increase overtime, do *all* workers move up in class relative to their forebears? Realistically, no one in Ireland today lives in the same poverty as the factory workers of Marx’s time. If you look at all the advances we’ve had since then (central heating, refridgeration, housing, anti-biotics, infant mortality etc. etc.) – nearly everyone lives better than the very richest of Marx’s day.

    If it’s relative wealth that matters. Then we’re locked into that position permanently. Especially as society gets richer. If you’re a hunter gatherer finding a little extra food improves your lot slightly. But today, becoming a premiership footballer, Goldman sachs employee or founding a successful startup delivers massive extra income & wealth. It’s just a fact that 1 hour of flat out work by different individuals can produce products and services of markedly superior or inferior value. (And most people in my experience, think they are underpaid. And people in the top 10% think *other* people are rich and should pay more taxes etc).

    You also wind up with problems if you regard those with more wealth or higher income as displaying morally undesirable attributes.(And I tend think this is part of the mindset the further left you go, although maybe it’s very implicit). So, is it better not to save for your future? Just so you won’t accumulate more assets than the guys drinking in the pub every night? Is it better not to educate yourself, to improve the quality of the output of your labour, so you can earn more? (You could contrast this with the kind of Protestant / Calvinist attitude to hard work, personal betterment).

  • Greenflag

    ‘Those who don’t pay taxes now form 47% of households in the US (36% after credits and deductions and 11% below the earnings thresehold)’

    So what’s the reason for this ? Has it anything to do with the fact that as Warren pointed out that most of the productivity gains over the past two decades went to the minority of high earners and not to average Americans ? Does it account for the fact that the very wealthy few can now afford to pay tax avoidance specialists who by means of intricate legalistic connivance manage to remove their wealth off shore or out of the reach of the taxman . That of course burdens those high income earners who are not in the top bracket with more of the public burden . Perhaps when Trade Unions are reformed and made compulsory in large businesses and multi national corporations then the number of households who pay taxes will increase !

    ‘The Democrats have made no secret that they want to increase this group of non-taxpayers beyond 50%.’

    Meanwhile the Republicans make no secret of the fact that they want to add another 300,000 to the unemployment lines by removing 300,000 teachers from the public schools . Presumably this ‘brilliant ‘ ideological move on the part of the nutty right will help to swell the numbers in prison from an already all time high to even higher :(

    For those who have faith in really small smaller government -Somalia is worth a study . There the people seek life liberty and the pursuit of happiness while armed to the teeth and looking over both shoulders 24/7 to see if the utterly destitute are about to overcome them and wipe out their families :(

    The majority of people everywhere are now beginning to see government as less their protector and more an instituion which is in bed with the bankers and mega corporations who care nothing for people but everything for their share price and the next quarter’s results -cooked if necessary to comfort thieving management’s sinecures and their upcoming bonus ‘

    ‘Democracy is also a goner since it is reconstitutioned as a self-serving majorrity enslaving a prosperous minority.’

    You know little of human nature or history . It was always the rich and the powerful who enslaved the majority . Today it’s no different . Instead of stealing by colonial expansion or territorial aggrandisement they now steal by corporate contract and under the counter deals with political dictators , russian mafia and the pliant politicians of both underdeveloped and developed countries who are not conscience stricken by pocketing bribes , backhanders or favours !

    In extremis if we get that far will see your ‘properous’ minority not enslaved but incarcerated as an anti social bacillus on mankind . Some may suffer worse fates in parts of the world where there are not enough prisons but millions of people probably willing and able to implement ‘justice’ in the tried and trusted manner of their ancestors . You may know it as mob law or even the tyranny of the majority . Either way the death toll is usually horrific and then the world is plunged into another totalitarianism in which the people will have ‘security’ !

  • http://garibaldy.wordpress.com Garibaldy

    I’m sticking with class being determined fundamentally by your position in the relations of production, but you’re right to say that I’m also trying to allow for some of the anomalies thrown up by lived experience. In so far as class has a subjective element in terms of identity, as well as an objective element, then we need to acknowledge that.

    Wealth is a relative thing. As I noted above I think, the concept of immiseration was always a relative rather than a purely absolute one. I appreciate your point about some working more efficiently than others, and some choosing to spend their income differently that others. I think Marx too appreicated that when he talking about from each according to his means, and to each according to his needs. Partly this is to do with a differing conception of what work would be like in a socialist society. It would not be the alienating experience that it is under an exploitative system, and so some of the problems you allude to were, Marx assumed, dependent upon the overall system.

    I don’t think it’s so much a question of the better off being automatically morally reprehensible so much as the system that created and sustained them being so. Again, one of the reasons that it lasted longer than some might have expected is that its capacity to reform itself proved greater. With the collapse of the Soviet Union, that social democratic model is under serious pressure from those who would return us to the Victorian era. Just look at Cameron for an example of Victorian values in regard to government’s role in society, charity and poverty. Disaster.

  • Mack

    This might be interesting. It argues from a centre-left / US liberal view point, that the very progressivity of the US tax system ensures that the social system viewed holistically remains low tax / low services. The lower paid benefit much more from public services (which mitigate risk) than they do from lower taxes. Ergo – tax the lower paid, and they will demand good services.

    http://www.salon.com/news/feature/2010/08/10/liberal_case_regressive_taxation/index.html

    As it happens, that is the contentintal European model.

    The Irish progressive left, tend to make the same mistakes as their US counterparts, in being confused in terms of how to deliver a successful European style system.

  • Mack

    It was always the rich and the powerful who enslaved the majority

    Actually that’s probably not true. It’s just that the enslavers by definition become more powerful than the enslaved – so it appears that way.

    (Mao & Lenin weren’t rich and powerful, neither was Gengis Khan. I imagine the motivated poor always had as much incentives for conquest / revolution in the past as the empire builders – which of course they became..
    The creatures outside looked from pig to man, and from man to pig, and from pig to man again; but already it was impossible to say which was which.
    )

  • Greenflag

    ‘It’s also potentially catastrophic as the taxpayers will flee when the burden becomes intolerable.’

    Where will they flee to ? Somalia ? Albania ? The ‘potential’ catastrophe referred to will not be a one country affair .

    ‘ More likely that the taxpayer base becomes enlarged to the point where taxpayers are in majority.’

    I would hazard a guess that the vast majority of the present 28 million Americans deemed to be unemployed or unemployed or their equivalents in other western countries such as the UK or Ireland would be only too willing to pay taxes if they could find jobs which pay them enough so that taxes could be paid .

    So where are the jobs to come from ? If the private sector has demonstrably failed then who will create the jobs ? Bear in mind that the estimated number of people in any population capable or able psychologically for the rigors of self employment is somewhere between 10 and 13% and most of those are already self employed ?

    The ‘nutters’ ‘ of the ideological right offer a future of Hobbseian conflict – It’s already seen in the growing disparity in health and educational and opportunity indices between the well off and the bottom half of the population in the USA, UK and Ireland – less so in the central EU countires or the scandinavian democracies .

    Are you up for class warfare , private armed security forces and child kidnap insurance protection being added to your regular domestic expenses:(?

  • Greenflag

    Mao and Genghis Khan not powerful ? Come on Mack pull the other one . I guess by that logic neither Stalin nor Hitler were powerful either . At the same they both contributed mightily to a WW2 death toll of some 55 million est!

    Appearances btw count for a lot in the post Goebbels epoch . Ask any marketeer or corporate sales imager. Never mind the reality watch the spin as money lubricates the image .

  • Mack

    Yeah, they’d be another two examples. They became powerful but they came from fairly humble beginnings.

    If you are rejecting this, then the statement

    It was always the rich and the powerful who enslaved the majority

    is true only because the reasoning is circular. Anyone who enslaves the majority is rich and powerful, because, they’re the ones enslaving the majority. You’d need to take a step back, and ask how they got there. For some they got into the position by raising a peasant army or by motivating the lower middle and upper working classes with fiery rhetoric. Hitler, Mao, Stalin, Napolean all had humble backgrounds.

  • Greenflag

    Mack ,

    When the house is on fire and or the floodwaters have reached the eaves of the house it’s probably not the best time to discuss whether the chicken came first or was it the egg or whether the chicken was poverty stricken before she laid the egg or was that after ;)

    The jews of central europe circa 1940 were not concerned about stepping back and taking an holistic look at the social origins of the ex corporal and recent paint artist . They had more important matters to ponder on .

    ‘you’d need to take a step back, and ask how they got there’

    Usually as a result of the people who were supposed to know what they were doing were seen not to know what they were doing and moreover could only promise people more of the same that they had already not delivered :( Systemic political and or economic collapse of the established order followed soon enough , brought about by war , dynastic struggles, civil wars , imperial collapse etc etc In short the people stopped believing the status quo

  • Glencoppagagh

    Greenflag
    I don’t believe Alias’s assertion that 47% of US households are non-taxpaying unless the US tax code is more progressive than I thought. However, if it ever did exceed 50%, and that majority was exploited to extract increasing amounts of taxation from a minority, then you must expect the tax base to shrink. Even in the unlikely event of them having nowhere to flee to with their assets, they would be less inclined to make an effort. Democratic socialist governments usually recognize this and refrain from pushing tax progressivity too far. The resultant pain for median taxpayers acts as a natural brake on public spending.
    Where on earth do you get the figure of 28m unemployed in the US?

  • Alias

    “I don’t believe Alias’s assertion that 47% of US households are non-taxpaying unless the US tax code is more progressive than I thought.”

    You can check the source out for yourself:

    “About 47 percent will pay no federal income taxes at all for 2009. Either their incomes were too low, or they qualified for enough credits, deductions and exemptions to eliminate their liability. That’s according to projections by the Tax Policy Center, a Washington research organization.”

    http://finance.yahoo.com/news/Nearly-half-of-US-households-apf-1105567323.html?x=0&.v=1

  • Greenflag

    Sorry that should have been 23,344,000 as of July 2010

    the source is the US Labour statistics which is know to understate the figures .

    http://www.bls.gov/news.release/empsit.t12.htm

    Alias conveniently omits to mention sales tax which most americans pay on goods and services although it’s nowhere near as high as european vat rates. The tax base in the USA has shrunk naturally as a result of the property bubble burst and cities and towns and States are all in a state of financial crisis in particular California .

    I take your point that the pain on median taxpayers acts as a natural brake but the USA is now in a situation whereby only 25.2 percent of American workers has a job that pays at least $16 an hour and includes employer-paid health insurance and a pension plan. The American middle and lower middle class is in meltdown and the politicians of both parties are doing everything they can to gloss over the situation and pretend it’s not happening :(

    Or in other terms some 75% of the American workforce are barely able to make ends meet never mind pay taxes or pay for college or mortgages etc etc . As Elizabeth Warren has pointed out the only way they (the American Middle class ) can hope to maintain standards is by having two people (husband and wife working full time ) and if either is laid off it’s goodbye the american dream/nightmare . The ‘economic ‘ bind has of course resulted in fewer children being born to the ‘former ‘ middle class and with more children being born to immigrants and those at the lower end of the economic pyramid there should be no surprise that a larger number of school age children in the USA are from poorer families and that of course will be catered for by building ever more prisons and more crime in the coming generation .

    And the Republican answer to the above is get rid of more teachers .

    There are gobshites in this world and there are suicidal kamikaze gobshites but there are no gobshites anywhere that exceed the American GOP for sheer blind stupidity and greed :(

  • Comrade Stalin

    John, the comment I was replying to was one were you were saying that problems will be caused by the fact that Ireland cannot set its interest rates and that this will lead to straitened circumstances for families, repossessions etc.

    The idea that we enjoy a greater degree of control outside of the Eurozone is a myth. The Bank of England has no means to stop interest rates gradually rising as the banks stiff the rest of us in order to pay down their impairments and repair their balance sheets. That’s the problem that our economy is going to have to deal with and it isn’t symptomatic of Eurozone membership.

    As for the risk of inflation in the UK, it’s hard to say that we’re in the clear – VAT heading up is one pressure I can see; if the ECB increases rates, any subsequent appreciation of the Euro against sterling could lead to an export spike and associated overheating.

    It’s not in the interest of banks to increase interest rates to the point where significant numbers of people are being repossessed. I rather suspect that you’re more likely to see mortgages being renegotiated to extend the term, and possible legislative changes. It’s already relatively difficult for banks to repossess property in the RoI or most of the Eurozone compared with the USA or UK.

  • tinkerbell

    A few thoughts – somewhat spontaneous

    Statistics on household outcomes do not track underlying costs of middle class families. They are all geared towards preventing poverty and maintaining the social welfare net. Children fortunate even to be born into middle class families often adopt an entitlement attitude, underpinned by the marketing strategies of consumer good companies. Credit has arguably created a modern middle-class entitlement by membership of a particular environment.

    This attitude is fuelled by the parents and pressurizes the parents at the same time. There is a underlying guilt syndrome which compensates lack of time with material things. To say no is to have failed. Even to say, I cannot afford something immediately is a partial failure. Not only in terms of the offspring wishes, but also in terms of keeping up with the Jones. Even ‘middle class’ mentality is tangible in schools. A simple example is where parents are expected to spend money for clothing worn for an hour an week at sport with school crests a blazing, instead of a functional cheaper alternative. Because we have it, and it looks nice. What is wrong with a white T-shirt and black jogging trousers? But not one parent will stand up at a gathering and say what many are thinking.

    In the ‘boom’ – a credit facility boom in reality – people forgot about the bust.The trappings of middle class have become chains around many peoples’ necks. Buying property is a no-brainer if you are middle class. The minimum entry card, alongside two cars, and at least one family holiday abroad each year. The pressure to buy to conform has blinded many people when real estate was overpriced. Property ownership is a speculation market, particularly if you have to borrow to buy.

    The numbers of people graduating from tertiary education which would bring them into the Weberian classification of middle class referenced above has increased dramatically in the UK in the last thirty years. Northern Ireland is no exception to this point, but our employment market is not that of our UK or European counterparts. Our airports are full of the double-income middle class representatives, boarding airplanes on a regular basis on the Belfast-UK routes to fulfil their middle management tasks, and flying home for the work-life balance. Many households in NI where money pours down the plugholes of childcare, education and mortgage payments are dependent on non-local parent entity companies and those households may be currently the most endangered. When selection criteria for redundancies or staff cutbacks are drawn up, Northern Ireland invariably draws the short straw.

    Germany is a country that doesn’t really do credit cards. Either you have the cash or you don’t. That was the whole point of the middle class, or Mittelstand. You had your nest egg gathered and you didn’t need credit and you didn’t need state welfare. But Germany has its own industries. Drive down the Stuttgart Autobahn and you can see jobs and industry on either side of the road.

    Northern Ireland is primarily a service economy – methinks perhaps I am wrong. If we don’t have a production industry, we don’t have a real middle-class. The one out there at present is in all likelihood not sustainable.

  • Alias

    “If we don’t have a production industry, we don’t have a real middle-class.”

    True enoughski, and it was the inventer of mass production who also invented the American middle-class by turning his workers into consumers via linking productivity to wage increases. Now, of course, there are 4 credit cards to every adult in America so the consumer fetish of that middle-class is sustained by credit (deferred earnings) rather than actual earnings.

    The EU is in much worse shape than the US (having encouraged a massive credit splurge through deregulating and expansionist monetary policies) with all of the EU member states at the top of the global rankings when it comes to external debt as a percentage of GDP. France, for example, is 188% compared to the US at 98% and Germany is 155% compared to China at 7%, Canada at 62% or Singapore at 11%.

    Ireland, alas, is away with the fairies at 1004% – up from a mere 11 billion punts since it joined the Eurozone/Eurosystem. Its role in the euro order is simply to serve as a consumer of German cars and credit services with the government providing generous ‘scrapage’ payments to any consumer who exports tens of thousands out of the state by importing a shiny new Mercedes, BMW or – to keep the frogs happy – Renault or Citroen. The German-controlled ECB were always happy to flood EU credit consumers with cheap credit for the purpose of purchasing German goods.

  • aquifer

    Consumerism and credit are eating us. Saw a pile of scrapped cars including many that would have been fixed and driven before. Our tastes in food are about fashion, not nutrition. Status anxiety has us bouncing around in half empty houses we cannot heat. Celebrity culture suggests we are not even sure that we have a life of our own.

    Stopping this delusional merry go round for a while could be for the best.

  • Glencoppagagh

    ‘That’s according to projections by the Tax Policy Center, a Washington research organization.’

    It’s only a projection but if the figure is anywhere near that it’s astonishingly redistributive.
    Even more remarkable that the Democrats don’t enjoy landslide support.

  • Glencoppagagh

    Greenflag
    Are you not impressed by this:
    ‘…the top 10 percent of earners — households making an average of $366,400 in 2006 — paid about 73 percent of the income taxes collected by the federal government’

    You can’t say that the affluent classes aren’t bearing their fair share.
    “there are no gobshites anywhere that exceed the American GOP for sheer blind stupidity and greed”

    So the American public, notably the fast-breeding proles, are too stupid to vote in their own self-interest and give the Democrats an overwhelmng mandate?

  • Greenflag

    Are you not impressed by this:’

    No . I’d be more impressed if 23 million people were not unemployed and that average median income had increased slightly in excess of inflation over the past 20 years thus allowing most americans to earn at least some of the productivity increase .

    ‘You can’t say that the affluent classes aren’t bearing their fair share.’

    I don’t recall stating that . I referred to those who have mega wealth and who use that wealth to pay for the kind of tax advice which enables them to substantially reduce or remove entirely their taxes . A case in point might be the New York Mayor Bloomberg ‘s Cayman Islands ‘retreat’ .

    here’s an extract below and the full story is at http://www.huffingtonpost.com/aram-roston/mayor-bloombergs-offshore_b_546133.html

    ‘It isn’t easy to track where Mayor Michael Bloomberg’s money is all invested. But at the New York Observer we took a close look at his “Bloomberg Family Foundation” and found some surprises.

    Hundreds of millions were invested overseas in tax havens like the Cayman Islands, Luxembourg, Cyprus and Mauritius. Why? Well, while Mayor’s foundation doesn’t talk about investments, it’s an interesting thing to look at.

    Until recently, he chose to put his Foundation assets in the hands of financier Steve Rattner’s Quadrangle Group. Rattner is now under investigation for his possible role the New York’s pension fund scandal, and Quadrangle just settled the case with the New York State Attorney General. The firm disavowed Rattner, a friend of Bloomberg.

    ‘So the American public, notably the fast-breeding proles, are too stupid to vote in their own self-interest and give the Democrats an overwhelmng mandate?’

    Given that almost half the American electorate don’t even bother to vote should be enough to tell you that many realise that no matter who they vote for the Government gets in and that Government is in the pocket of Wall St , the Bankers , the Financial services sector and the large Corporations . BTW I was not advocating the Democrats as being gobshite free . With such stalwart ‘incorruptibles’ as Rostenkowski (now deceased) , Blagoyevich and several others in Congress Obama will have his hands full avoiding a major electoral setback come November . What’s in his favour is the ‘brain dead’ factions of the GOP :(

  • Greenflag

    ‘Stopping this delusional merry go round for a while could be for the best.’

    You might think that but the analogy that springs to mind is that trying to stop the Titanic from sinking by sitting down for a rest on one of the musical chairs while a notable guru gives a lecture on the benefits of ‘real ‘ sinking as opposed to ‘real’ nutrition ;)

    As to your scrapped cars it’s worse than that . We have a three year old fridge freezer which came with a one year warranty and I bought an extra year’s warranty even though my gut instinct tells me that the whole business of extended warranties is another barely concealed protectionist racket :( To cut a long story short I can call a service mechanic who by the time he arrives without even looking at the thing will set me back 10% of the fridge freezer cost . Add on the cost of any spare parts plus labour time costs and I’m looking at 60% of the cost of a new one . I had a quick gander at the computer motherboard panel and if that needs replacing it’s 20% of the cost of a new fridge>

    I have long become accustomed to the ‘throw away ‘ tv , radio , etc etc all consumer items which are not worth the cost of repairing . But I have to admit that the throw away fridge freezer is a bit of a stretch when one considers that in not too distant times Argentina was called ‘the white appliance ‘ economy when it’s currency was considered less likely to retain it’s purchasing power than a fridge freezer :(

    So on top of the throw away consumer society we now have the ‘throw away ‘ people society ?

    ‘Ill fares the land ‘etc

  • Anon

    They pay tax. Payroll taxes. State Taxes. Possibly city taxes. Sales taxes. Gas taxes. And on.

    The just don’t pay Federal income tax. Personally I believe taking people out of tax is a bad idea. Everyone should pay and everyone should receive even if they get out more than they put in. That was the original conception behind the welfare state. But it would mean reshaping the tax base, and probably not to the benefit of the rich.

    This is an inane US right wing talking point, though.

  • Greenflag

    ‘Germany is a country that doesn’t really do credit cards. Either you have the cash or you don’t. That was the whole point of the middle class, or Mittelstand. You had your nest egg gathered and you didn’t need credit and you didn’t need state welfare.’

    Neither does Japan . For Germany home ownership is the preserve of about 40% of the population . Most people are content to rent apartments or they have access to state subsidised accomodation . These properties are all well maintained by law which is implemented . Rachman landlordism was never allowed to gain a foothold in German society . Another factor is population density . Were Ireland to have the same population density as Germany we would have to ‘build’ for approx 25 million people.

    What the above means in practice is that the Germans as well as the French and others were much less exposed to the recent property bubble burst than Ireland , the UK or USA .I

    ‘If we (Northern Ireland)don’t have a production industry, we don’t have a real middle-class. The one out there at present is in all likelihood not sustainable.’

    In that case not only will NI’s economy not be sustainable but neither will the economies of the USA , UK and many other western economies . I don’t know what your definition of ‘real’ middle class is but I would think that the ‘professional ‘ middle class – doctors , academics, solicitors etc will somehow sustain themselves at least until such time as the ‘livestock’ they all prey on are so emisserated that they can no longer afford their services ;)?

  • Greenflag

    From the NYT an excerpt on the ‘tax’ issue

    full article

    http://www.nytimes.com/2010/08/11/us/politics/11tax.html

    ‘Most of the tax cuts that were a signature domestic initiative of George W. Bush’s presidency carried an expiration date of Dec. 31, 2010, to limit the potential revenue losses; supporters assumed that they would be extended when the time came.

    Extending them for the next 10 years would add about $3.8 trillion to a growing national debt that is already the largest since World War II. About $700 billion of that reflects the projected costs of tax cuts for those in the top 2 percent of income-earners.

    With the economy still weak, the issue of the tax cuts has led to an economic debate between those who would end all or some of them to reduce the projected debt and those who say raising taxes on the wealthy could threaten the economic recovery.

    For both parties, the dispute has become a defining one as they hone campaign arguments heading toward November.

    Speaking of Republicans at a fund-raiser in a wealthy community near Dallas on Monday, Mr. Obama told Democratic donors, “What you see is a governing philosophy on their part that basically comes down to ‘We’re going to extend tax cuts for the wealthiest among us’ — folks who don’t need those tax cuts and weren’t even asking for them, which would cost $700 billion.”

  • Greenflag

    ‘ It’s nonsense.’

    Like the Weimar Republic and it’s aftermath . The then world ended for 55 million people iirc . Societies do collapse as any archaeologist digging around in the ruins of ancient civilisations will tell you . Why should modern society be ‘immune’ from ‘collapse ‘

    The world will of course will go with or without us or a large chunk of us .

  • Mack

    Well, if you want to see where a fair portion of the gains have gone, this is the Aussie version -

    http://cdn.debtdeflation.com/blogs/wp-content/uploads/2010/08/081010_2302_BankProfits3.png

    Bankers portion of GDP rises from roughly 5% of GDP to nearly 30%
    Workers falls from around 80% (smoothed average) to 60%
    Industrial capitalists falls from around 20% to 17% or so..

  • http://www.labourbelfast.blogspot.com DC

    Well if the plight of the soon-to-be-former middle class is worsening what must it be like for the conventional working class?

  • Greenflag

    ‘The EU is in much worse shape than the US

    Is it ? Not according to the BBC .

    ‘The German economy grew by 2.2% in the three months to the end of June, its fastest quarterly growth in more than 20 years, official figures show.

    “Such quarter-on-quarter growth has never been recorded before in reunified Germany,” the national statistics office, Destatis, said.

    The main reason for the higher-than-expected growth was strong exports, helped by a weaker euro.

    The eurozone economy grew by 1% during the quarter

    On the other hand the Beeb reports signs of a double dip recession in the USA .

    ‘In the US, however, second quarter growth was 0.6%, down from 0.9% between January and March, raising questions about the strength of the recovery in the world’s biggest economy.

    “Second quarter GDP data for the eurozone’s major economies suggest that the region performed very well, both by its own and international standards,” said Jennifer McKeown at Capital Economics.

    “This would be the strongest in three-and-a-half years and mean that, unusually, growth in the eurozone outpaced that in the US.”

  • Greenflag

    The conventional working class ? Nobody cares about them they are all either ex construction or manufacturing employees prematurely retired on unemployment benefits or have been replaced by cheaper Mexicans , Poles , Turks , Lithuanians etc etc depending on geographic location . Many tdon’t bother to vote because they have to work two or three part time jobs to make a living and don’t have time to wipe their arses never mind vote !

  • dalzells

    The era of deflation in household goods has well and truly ended and this may well compound the problems of Ireland’s middle classes. As an Electrical Retailer in Northern Ireland we are constantly adjusting the prices of our consumer electronics and kitchen appliances upwards. This pressure is largely due to the increased demand for raw materials from the far east; Steel, Aluminium, Copper, Oil etc etc. Even if these were to stabilise increased wage demands from employees in developing countries like China will likely continue this upward trend.

    Dalzell’sof Markethill | http://www.armaghelectrical.com