GuidoWorld

Eroding America

May 17, 2009 on 3:15 pm | In General |

Some time ago I referred to the US as a veneer society, meaning a society that looked good on the surface. I’ve felt the affluence of the US a total sham since the nineties, and a growing sham since the Reagan years. We have borrowed and pillaged to maintain our self-proclaimed world leading life style, and the signs of decay have been present for anyone willing to look beneath the veneer.

The erosion of the life of the American middle class has been steady and almost imperceptible in real time. Yet, a simple comparison of the standard of living of those in the 1950’s to today is quite remarkable. The growth in technology and modern conveniences has done well to cover up the steep fall of the modern middle class. Yet, despite having more objects, toys and conveniences the life style of the American middle class is plummeting.

Two paycheck familes no longer can afford the life style that one paycheck generated in the 1950’s. The bursting of the housing bubble and the fall of the stock market have revealed a good portion of American wealth,  for what it has been, factitious.

In the real world middle and upper middle class wealth has been on the decline for a long time. For decades the rise in wages has been lower than the rise in inflation (cost of living). Yet, only through near doubling the workforce per home, increased borrowing, a bull market in stocks and a housing bubble have  we been able to deceive ourselves into believing that we were keeping up.

Since the 60’s workers and workers unions were convinced to take increases in benefits such as health and dental care, retirement plans, shares of company stock and insurance policies in place of higher wages. Workers were sold on the idea that these benefits would generate wealth and security for all in the long run.

Corporations and businesses claimed that deferred pay helped cut down on overhead. Reduction of overhead (business expenses) allowed compaines to expand their operations and invest their profits to generate jobs and future wage growth.

This model of deferred payment being used to propel future profits and growth of companies and the economy in general became the frame work for Reagans famed trickle down economics. Yet, despite all the rhetoric the truth of the matter was that the lived reality of the American worker was that growth in their wages was not keeping up with the rise in the cost of living.

These contractual promises of businesses to provide long term benefits in exchange for workers taking less pay per hour of work came to called entitlement packages. Now, it turns out that many corporations are reneging on these promises and are cutting benefit and retirement plans that were agreed upon years ago.

Without the stock and housing market booms the average middle class American would have been far more aware of the steady decline in their real wealth and the life style it could support. Couple all these bubbles with the credit card and loan booms and most Americans were able to be deceived that their relative wealth and standard of living was actually on the rise.

I see many examples around me of the erosion of the American life style. I hear many people talk of how wages have stayed flat in their profession for years, which of course means their life style has been declining when you factor in yearly inflation. Many health care professionals state that their profit margins have been steadily shrinking because of payment reductions introduced by insurance companies and governmental bodies. I’ve heard some state that they now need to work 60 a week to earn what they used to in 40.

When I was growing up the doctor’s families I knew lived quite well. Even though I lived in a relatively poor suburb of Chicago the two girls I was fiends with whose dads were doctors had very comfortable lifestyles that included swimming pools, country club memberships, maids, frequent travel, private schools as well as ample donations to local and national charities.

The medical and professional doctors I know best today have drastically different life styles. A pharmacist I know though still having most of the historical perks of being a doctor, is having to work many more hours to keep his life style from falling. I know two single female professionals with doctorate degrees who are having to take in borders to make ends meet. One of the women still has a child at home while the other has been living on her own for a number of years.

While I realize that many people’s life styles are in crisis due to conspicuous consumption and living beyond their means I do believe it is masking the real erosion of the American middle class just as well as did the bubbles in real estate and financial markets. One, the bubbles, distorted reality by creating illusions of wealth, the other, bad loans, mortgages and credit is overemphasizing the role greed and irresponsibile behavior has had in harming the middle class life style.

I erosion of the American life style is far more systemic than the illusions lead one to believe. The illusions not only prevent us from seeing the decay, but also have us find false scapegoats and fall guys. This is not just about self-responsibility it is far bigger than that.

It is about the myths of modern economics and capitalism. Our wealth was created by and dependent on empire building. Capitalism is neither the reason for our economic rise nor our eroding life style. Capitalism has been a fortunate benefactor of the empire and is begining to be the recipient of the fallout of a declining empire.

True wealth creation is not something a ruling empire has to concern itself with, but it is a concern for any nation not basking in the protection of the empire.

Hopefully the creation and definition of wealth doesn’t just go from empire to empire, but soon gets framed in terms of a sustainable global community. Wealth, like any other god, should not depend on myth to sustain its existence.

Jim Guido