Founded in the 1820s by Connecticut refugee Titus Bronson, my home town was christened Kalamazoo in 1837 and is located along the Kalamazoo River. Over the years, Kalamazoo has been known for the products made there.
After the Civil War, paper manufacturers began building mills in the Kalamazoo River Valley. A physician in Hastings named William Upjohn invented a pill-making machine in 1885 and developed the first readily dissolvable pill. He moved to Kalamazoo and started the Upjohn Pill and Granule Company (later Pharmacia & Upjohn and now Pfizer), one of the world’s leading pharmaceutical firms.
Orville Gibson founded the Gibson Mandolin-Guitar Mfg. Co. there in 1902. Kalamazoo also served as headquarters of the Checker Motors Company, the former manufacturer of the Checker Cab. Parchment paper, which is made from vegetable byproducts, gave the city of Parchment in Kalamazoo County its name.
From my youth, I recall a world where working-class men with necks like tree trunks had union jobs that allowed them to own a decent house while stashing enough money away to send the kids to college and have a place upstate to hunt and fish. But with the rise of China and its incorporation into the global trading regime, many manufacturing jobs began to disappear, imperiling the middle class supported by them.
In 2016 after the passing of my mother-in-law, I drove through parts of Northern Indiana and Southern Michigan that I’d not seen since my youth. Later that summer, my family drove an RV across the Upper Peninsula and parts of Northern Michigan. Trump signs were ubiquitous in the hollowed out towns and landscapes of the rural Midwest. In the summer of 2016, signs of the coming political earthquake were evident. The economic dispossession of Middle America, imposed by elites for their own benefit, will have political reverberations.
The middle class has been shrinking for decades and the trend has picked up speed in the new millennium as I showed in my last piece. A 2014 Pew study, titled “America’s Shrinking Middle Class: A Close look at Changes Within Metropolitan Areas,” analyzed 229 U.S. metro areas and divided American adults into three categories: Low, middle and upper income. For a household of three, the study defined middle class as those with an income between $41,641 and $124,925.
The survey included 10 metro areas in Michigan: Ann Arbor, Detroit, Grand Rapids, Jackson, Saginaw, Lansing, Monroe, Muskegon, Niles/Benton Harbor and Kalamazoo.
Here are some takeaways:
- The middle class shrank in 203 of the 229 metro areas studied. That was true in all 10 of Michigan metro areas
- The percentage of adults in low-income households grew in 160, or 70 percent, of the 229 metro areas, a trend found also in all 10 Michigan regions.
- The percentage of adults in high-income households grew in 172, or 75 percent, of the 229 metro areas. Niles-Benton Harbor was the only Michigan region with an increase in the upper-income tier.
- Households in all income tiers saw a decrease in median income between 1999 and 2014, a trend that held true throughout Michigan.
In Kalamazoo, median income (after adjusting for family size and inflation) declined 15 percent between 1999 and 2014, from $74,783 to $61,232. The percent in the middle class dropped by 5.8 points to 52.5 percent. The percent of high-income households was 16.5 percent, down 0.8 points, and percent in low-income households was 31 percent, up 6.5 points.
How Did This Happen? Globalization
So why is the middle class dying and who killed it? The short answer is that globalization and financialization was foisted upon us by a decadent and greedy Ruling Class.
The fundamental divide in American politics is between a deracinated and self-serving Ruling Class and their underclass foot soldiers, on the one hand, and Middle American groups on the other. By definition, the Ruling Class stretches across “competing” parties.
The late Samuel T. Francis, a former congressional staffer, columnist, and essayist de jour, once lamented that, “We have two parties here, and only two. One is the evil party, and the other is the stupid party. Occasionally, the two parties get together to do something that’s both evil and stupid. That’s called bipartisanship.”
Pat Buchanan has likewise noted the fraud of our “two party system” when he said, “On foreign and trade policy, open borders and centralized power, our Beltway parties have become identical twins.”
Globalism is the linchpin of ruling class power and unites power brokers on the right and left. In practical terms, it depends upon the free movement of people, goods, and capital. It seeks the diminution and ultimate abolition of borders, boundaries, and national sovereignty. The Ruling Class has created a global hiring hall and turned the American middle class into a proletariat–and this effort supported by Democrats and Republicans, liberals, conservatives, and libertrarians for that matter.
The bipartisan consensus of the post-Cold War period agitated for a “New World Order” led by the United States that integrated the economies of North America via NAFTA and the incorporation of China into the global trading regime. Outsourcing has funneled millions of manufacturing jobs abroad, imperiling the middle class supported by them.
Pat Buchanan has called this the “Great Betrayal”:
The winners in a world of free trade and floating exchange rates are regimes whose central bankers manipulate currency values for national benefit, and a global corporate elite that can shift production from one country to another and calls no country home. Losers are the rooted people, the conservative people tied by the bonds of family, memory, and neighborhood to one community and one country.
NAFTA produced hundreds of thousands of lost jobs in the 1990s. But as China has emerged as a great economic power, an epochal shift in patterns of world trade has transpired. Alongside the alleged consumer benefits of expanded trade are substantial costs and distributional consequences, not to mention the loss of millions of jobs as corporations with mobile capital pursue the cheapest sources of labor.
In 2019, Economist David Autor explained that the explosion in Chinese trade killed millions of manufacturing jobs. Shocks to labor markets reduced earnings among men while marriage rates and fertility also fell as a result, increasing illegitimate births, childhood poverty, and the number of men in jail.
Immigration, too, is little more than a wealth redistribution scheme. As I’ve written elsewhere, George Borjas has shown that while immigration produces limited economic growth, it shifts roughly $500 million from workers to employers.
Another factor in the dissemination of the middle class has been the financialization of the economy.
Around 1730 an Irish-French economist and philosopher named Richard Cantillon wrote the Essay on the Nature of Commerce in General, which was published in 1755. Cantillon discussed the distributional consequences of new money creation and the concept of relative inflation. The systematic creation and printing of money causes more dollars to chase the same number of goods, resulting in an increase in prices. But that process is not the same across all sectors of the economy. There is no such thing as “average” inflation because the path the money flows through the system matters. Cantillon showed that the early recipients of new money creation entering an economy will benefit more significantly than downstream beneficiaries.
By way of an overly simplistic illustration, imagine being in a small, enclosed society, perhaps an island, and ten million dollars magically appears on your doorstep one morning. You immediately begin to spend and invest this money, dramatically improving your standard of living.
Over time, this new money flows through the island and prices begin to rise because demand has increased but the supply has not yet increased to meet the new consumption–a process which takes time.
The broader point is pretty simple–those closest to the central bank spigots are the first to be enriched. The politically and economically connected class is the primary beneficiary of loose monetary policy. They’ve had dump trucks full of money unloaded on their doorsteps. For nearly two decades real interest rates were extremely low, allowing those with unlimited credit to borrow vast sums of money at near-zero interest rates. Those with access to cheap money outbid other actors for productive assets, making them more expensive.
The inflation we’re currently witnessing, therefore, has very little to do with the “stimulus” checks handed out to working-class stiffs by Uncle Sugar. It has everything to do with the Federal Reserve.
Stimulus checks during the Covid “pandemic” totaled roughly $400 billion dollars. Asset purchases by the Fed during the same period totaled $4.5 trillion.
Wage earners received some degree of support via direct stimulus but did not benefit in the same way from asset appreciation and are seemingly getting the short end of the stick. Inflation—particularly across food and energy prices—will have a disproportionate impact on their standard of living. Financialization breeds economic inequality.
The financialization of the economy along with the intervention of the federal government has led to increased prices for core goods and services. Housing, higher education and health care were far cheaper in the past. But with the federal government guaranteeing mortgages, handing out student loans and grabbing ever larger shares of the healthcare industry, these industries have effectively become extensions of the state, managed and enforced like cartels–and like all cartels, prices have exploded.
Housing makes up a considerable expense for most American households. Corrected for inflation, the median house cost $193,575 in June of 1971–the month of my birth. At the close of 2022, the median house cost $380,000–nearly twice as much in inflation adjusted dollars.
College degrees, long considered one stepping-stone to the middle class, have become more expensive. The average annual tuition and fees at a state college was $2,440 in 1970 and $9,349 in 2020, after adjusting for inflation
With college costs spiraling, many students resort to loans. The current average federal student loan debt balance is $37,113. The average student loan debt at graduation has increased 2,807% since 1970; after adjusting for inflation, the average debt increased 317%.Health care costs have also exploded. Health spending totaled $74.1 billion in 1970. By 2020 the amount spent on health tripled to $4.1 trillion. On a per capita basis, health spending has increased from $353 per person in 1970 to $12,531 in 2020. In constant 2020 dollars, the increase was from $1,875 in 1970 to $12,531 in 2020.
The costs have soared for goods and services that were once affordable while incomes have by and large not kept pace. American families are struggling to keep up. What can be done?
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