Thursday, March 22, 2012

Support The Middle Class

An economy is predicated on the strength of its middle class. By middle, I mean those individuals in the 40th to 60th percentile of income.

I have a decent economics background, but I don't claim to have incredibly deep knowledge. But for the purposes of this post, that doesn't matter. A focus on the middle class is something that pretty much all mainstream economists agree on. That is why you have both parties talking about supporting the "working man," or "salt of the Earth," or the "Everyman," or "John Q. Public," or any other such ridiculous euphemism for the 40-60.

The problem is that we know full well what kinds of legislation helps the 40-60. We can find examples in dozens of first and second-world nations. Unions, labor protection, cheap education, low income inequality, etc. These are known things, and yet we somehow have huge debates that rage in the public sphere. Indeed, if not for the recent hay-making about female contraception, that would undoubtedly be the primary talking point in contemporary politics.

Unfortunately, the debate actually has nothing to do with what is ostensibly being debated and is actually predicated on underlying assumptions about the state of the world that go unspoken in the debate. The argument is actually entirely concerned with value judgments about segments of the population, and you can see it easily in the toxic words used to describe the "enemy."

For example, medical care. The actual debate is about whether people deserve to die or not. The conservative viewpoint is that if you do not have the money to pay for medicine, you do not deserve the medicine. The progressive viewpoint is that everyone deserves medicine. There are major logical problems for both viewpoints.

The progressive viewpoint cannot answer the one million dollar pill problem. Basically, if a pill is invented that guarantees an extra year of life, but that pill costs one million dollars, who gets it? Everyone obviously can't. There is no answer in the progressive viewpoint. The conservative viewpoint handles this easily. The ones who get the pill are the ones who can afford it. No judgments. No morals. If you've got the money, you get the pill.

But outside of raw hypotheticals, the conservative viewpoint isn't very strong. It says that people who cannot afford medication deserve to die if their condition is life-threatening. That isn't a very easy sell to an emotional public. It's actually rather heartless.

So instead of stating their actual viewpoints, conservatives couch their arguments in dodge words. They try to argue that their plans will offer more medical care. Their plans will grow jobs. Thus we have the now famous, and incomprehensibly ridiculous, statement from Senator Mitch Daniels in response to the 2012 State of the Union Address.

We do not accept that ours will ever be a nation of haves and have nots; we must always be a nation of haves and soon to haves.
Mitch Daniels

Statements like this reveal either abject cluelessness or intellectual dishonesty of a Brobdingnagian level. Their ideas will achieve none of the things that they claim. And of course they won't, no one thinks that they would. But the argument isn't actually about that. It's about fueling ideology.

And that isn't to say that progressives aren't frequently just as ideological as the conservatives. Frequently, they are even more so, rejecting evidence in favor of an idealized world view. And don't even get me started on libertarians/communists. But that's beside the point.

I was sent on this tear by two recent articles, one discussing the rise of the Mexican middle class, and how the border wars near the US are as alien to cosmopolitan Mexico as they are to SOHO, and a second discussing how China now outpaces the United States in smartphone sales and activations. Why is this happening?

There is only one reason: we are sending all of our manufacturing to these two places.

Manufacturing is critical because it provides an economic base that doesn't require pre-investment on the part of employees. You show up, get the job, and learn as you go. Degree-requiring positions, which I argue frequently don't even need the degree, require a large investment on the part of the applicant. We cannot have an economic base that requires more than two hands and a desire to learn.

As education gets more expensive, the need to have an extant support system to see you through the necessary schools becomes ever more important. In our "idea" economy, we are speeding toward a system where it will be nearly impossible to rise from the lower economic classes to the higher ones.

Furthermore, manufacturing is important because ideas, in the "idea economy" are an infinite good. Once created, they are everywhere. The creation of an idea has value, but the idea itself does not. The idea must then be attached to something that does have inherent value, and that means physical goods. Value creation, real value creation that conjures value from the ether, requires the making of something noncorporeal, corporeal.

As such, we take time and physical labor, two non-corporeal things, and apply that to corporeal materials which have set value, and the rearrangement of the materials injects value into them from the work and time. Raw materials are made more valuable than they were alone, thus creating genuine, palpable value that wasn't there previously, thus growing the economy.


There are three pillars to a strong society, and these have existed since the beginning of civilization: the market, the welfare state, and the educational system. There is a fourth pillar, the military, but that doesn't have to do with the actual state but is instead focused on other states and possible threats.

The system works by generating money and value in the free market, which then fuels the welfare state, which gives people the foundation necessary to aspire to education, which then fosters ideas and growth in the free market.

We suck at all three pillars. Our market is wildly unfair, our welfare system is broken and overly expensive, and our educational system deprives those in the greatest need and prices the majority of people out of higher education.

An unfair market is not necessarily bad. It is supposed to be wild and wooly. The problem is when that market becomes unstable and unregulated it can put the stability of the entire system at risk. In a perfect cycle, this would be a small risk; even if the free market causes the collapse of business, the welfare state is there to provide for those ejected into poverty. They can find their feet and head back out, knowing that the state has their back, as it were. Our current system is generating poverty1 and leaving them with little protection.

The welfare state is perfect when it provides all elements of basic life to all people in a society. Three meals a day, a fixed address, and access to cleaning and grooming. If the farthest that people can fall is a dorm room with three meals a day, then they can always get back up again. We aren't doing this. We half-ass everything. Instead of developing and providing food directly to people, we use the inefficient food stamp programs.2

Instead of providing to everyone, we kinda'-sorta' provide to families and children, but then rip our support away at arbitrary times, thus negating all of the benefits that we provided earlier. Our welfare state shoots itself in the foot constantly.

Our educational pillar isn't as hosed as the other parts. Our public education system is actually quite good and our universities and colleges are the best in the world. The situation for particular demographics is awful, though, and things are getting worse.

Those that need the education the most are getting the least. As our society becomes more delineated between the haves and the have-nots, money is flowing out of schools with large populations of underprivileged kids. When budget cuts need to happen, the schools are the first to feel the pain. Scientifically proven programs like Head Start get gutted as step-one. These issues matter little for wealthy schools and families that send their children to private institutions. But for everyone else, things are getting worse.

Again, the economic arguments that I am making are pretty widely accepted. Unless you are an Austrian School lunatic like Ron Paul, these are things that are understood. Yet we have legions of people willing to argue their heads off that these concepts are completely mistaken. Those economists with their fancy degrees don't know shit! But what can one do? Again, the wellspring of this resistance is not logical. There is no arguing.

What really blows my mind is the blockheadedness of opponents. "It's my money!" they yell, without any comprehension about what money is. "Taxes strangle business!" is another popular line.

Let's assume that these people are correct. They are "job creators" and/or the "productive class." What do they think allows them to be job creators and/or productive? The hoi polloi. The legion of socioeconomic bricks that make up the vast majority of the economy. By strengthening them, you become stronger.

Everyone benefits when the working class is made stronger and richer. The economy is more stable and more easily absorbs the fluctuations inherent to a free market. By resisting support to the working class, everyone is shooting our collective foot. We are knee-capping our economy just when competitors are rising with an eye on our crown.

But, yet again, this all has little to do with logic. It has to do with the poor being scum, trash, unworthy of love. And all of their pain, their loss, their suffering, and their want is perfectly deserved. Deserved because how couldn't it be? That world would be unimaginable.


1: According to the US census, the poverty rate plunged by half from 1959 to 1972, then leveled off. We saw spikes during the 1980's and early 90's. The poverty rate in 2010 was the highest since 1993 and it's continuing to go up. Along with this, income disparity is the highest in the Western world (we're just below Cameroon), a majority of bankruptcies are triggered by medical issues, and as the working class earns less, corporations earn record profits. 

2: I don't mean inefficient in the way that conservative pundits mean it. As the system is designed, it works very well. I mean that all programs rely on people going to for-profit businesses to buy food with government money. That means that a percentage of tax dollars is going directly into the pockets of grocery stores instead of into the stomachs of the people who need the food.

A better system is government-purchased food, bought for cheap in bulk, and then distributed free to anyone who wants it. I argue that this would result in growth for grocery stores since people could get simple food for free and save their money for the more elaborate and expensive foods available at private companies.

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