February 6, 2014--The Middle Class

Finally the 1 percent or the 5 percent or the 20 percent are noticing that the middle class, what's left of it, is struggling and that is bad for them--"them" being the 1, 5, 20 percenters.

It's one thing when the economy is in almost total collapse (as it was in 2008) and how that makes it awkward for those hardly touched to live opulently. Openly opulent that is. (See below.) It's another thing, however, when the shrinking middle class and their shrinking disposable incomes are so reduced that there are no longer enough markets or customers to fuel the bottom lines of the privileged.

Now they are concerned. Concerned because a diminished middle class is bad for business and thus bad for their assets.

On the other hand, the high-end continues to do very well. "Luxury is not a dirty word anymore, reports a consultant with Robb Reports, a lifestyle magazine for wealthy readers. "In 2008, luxury was a dirty word."

No longer.

Maserati, with sales up 55 percent in 2013, is opening dealerships all across the United States and Rolls-Royce had its best, most profitable year last year. The CEO of The Collection, a luxury car dealership in Coral Gables, Florida, was recently quoted in the New York Times as saying that "People were pulling back when they had to let people go. They'd come in to buy, but it would be the same car and same model so no one knew they got a new car." Now, once again, rich buyers are apparently not having a problem flaunting it.

In 2012, the top 5 percent were responsible for 38 percent of domestic consumption, up from 28 percent seven years earlier. And since 2009, the year the Big Recession technically ended, spending by this top 5 percent of earners rose 17 percent, compared with just 1 percent by the bottom 95 percent.

And thus goods and services that have traditionally targeted the middle class are hurting. Sears and J.C. Penney, as evidence, are in dire straits. Both are in danger of going out of business. Sears is closing its Chicago flagship store and J.C. Penney recently announced it will be shuttering 33 stores and laying off 2,000 employees. Loehmann's, where generations of middle-class women clamored to buy discounted designer-label dresses is bankrupt and already out of business. As another sign of the times, high-end retailer Barneys, which moved out of its original New YorkCity store and rented the space to Loehmann's, is moving back in, feeling that the exponential growth of downtown gentrification will assure the store's success.

As bellwethers, restaurants that depend on middle-class diners are suffering. Foot traffic at Red Lobster and Olive Garden has dropped every quarter since 2005. An average meal at Olive Garden is $16.50 a person and that relatively steep ticket requires middle-class customers. And with fewer and fewer of these every year, places such as Olive Garden and Red Lobster are in trouble.

But now the affluent are worried. Not because they will soon no longer be able to get their garlic knots at Olive Garden but because its stock price is way down, as are other companies' that traditionally draw on the middle-class.

Something that I find curious is the passivity of the middle-class as they see their prospects shrinking. Unlike in the past when there were serious downturns and structural reshaping of the larger economy, this time, with the exception of the short-lived Occupy Wall Street movement and aspects of the Tea Party agenda, there is silence.

Economic downturns are common. In fact, they were so common during the late 19th century through the World War II that hard times for the majority was the norm. Also the norm were the ways in which displaced and exploited working people responded to the recessions and panics and depressions.

I've been reading Doris Kearns Goodwin's Bully Pulpit, her biography of Presidents Theodore Roosevelt and his successor and friend, William Howard Taft. From the economic tumult during their collective 11 years in office there is a lot to learn about our current troubles and how the public responded to it.

Between 1901, when Roosevelt became president after the assassination of William McKinley, and 1913, the year Woodrow Wilson took office, there were no fewer than four crises--the Recession of 1902, the Panic of 1907, the Panic of 1910, and the Recession of 1913.

And in every case, right through until the end of the Second World War (there were a total of seven severe economic downturns between 1913 and 1945), including, in 1929, the biggest Depression in American history), each recession and panic elicited direct and credible threats to the United States' economic system.

There were bomb-throwing anarchists and fierce socialists and communists who organized nationwide strikes that paralyzed entire industries from the railroads to the steel mills to the coal fields.

There were many times when our political leaders thought that unless the economy picked up, unless something was done to reform factory work and bust trusts and legislation was passed to provide the beginnings of a social safety net to take care of people falling through the cracks, unless this and more was accomplished, our very capitalist system might be overthrown. All the agitation the result of aggressive investigative journalism (an important subject in the Goodwin book) and pressure from the bottom up, very much including union activity and progressive political advocacy.

Now, again with the exception of a few months of non-violent demonstrations by Occupy Wall Street protestors, things have been preternaturally quiet.

Is there anything ticking out there? Any undercurrent of threat to the system itself?

Nothing of this sort appears to be looming on the horizon.  Perhaps, though, it things for the middle class continue to deteriorate, if they see opportunities for their children more permanently threatened, the great sleeping giant--the American people--will rise from their Barcaloungers, put aside their iPhones,  and . . .

No wonder the 5 percenters are worried.