Friday, August 31, 2012

The Shrinking Middle Class - Part 2

One week ago I addressed the disappearing middle class in terms of people wanting to pass along the blame to avoid acknowledging responsibility.  A failure to take responsibility, to act the victim, is one of the behavioral weaknesses within our society.  On the other hand, the article made some good points about how the gap between the middle class and the rich is expanding.  The 62/29 income split between the middle class and the wealthy in 1970 has morphed into a 45/46 split by 2010.  What can we possibly do about that?  The answer moves the discussion from responsibility to economic understanding and then to a combination of critical thinking and perspective.

I have explained before how money seems to move in a cycle beginning with us as consumers and taxpayers.  We start with a certain amount of money (commonly known as “not enough”).  Then we make decisions, both wise and foolish, about how to spend or save our money.  We should make these decisions based on what we value (perspective) and what will add real value to our lives (critical thinking).  We spend our scarce resources on food, rent, transportation, clothing, education, entertainment, healthcare and a variety of things.  Companies compete for our attention and our business.  Sometimes we make sound choices and sometimes we don’t.  (Examples of how we don’t provides material for this blog.)

When I think about rich people and how they got there, I ask how we contributed to their success.  Some inherited their wealth, but most of them got rich by selling us products, services or ideas.  No one forced us to buy.  They had to be persuasive enough to get their products on our shopping list ahead of their competitors’ products.  That competition for our dollars included similar products, Ford vs. Toyota, but also all the other options for our money:  a new computer vs. college savings, cable TV vs. patio furniture, pay off debts vs. a dental checkup, beer vs. iTunes, designer clothing vs. a tank of gas, the newest smartphone vs. a vacation.  Some of those may seem like odd comparisons, but our resources are limited.  Our money goes either here or there; we can’t have it all.  Meanwhile Wall Street fat cats and bankers invest in companies, trying to make money by correctly predicting our tastes, choices and motivations.

What kinds of choices do we make?  We spend $50 to $150 per ticket, sometimes more, to attend professional football games, slightly less for college games, but rarely is either not sold out.  We pay three or fours dollars for fancy cups of coffee.  (What were once luxuries are considered necessities.) We follow celebrities – actors, singers, and athletes – hanging on their every word and buying what they recommend or endorse.  Nike is about to launch a campaign to sell us Lebron X sneakers for $315.  These are not necessarily bad decisions.  Good or bad decisions are relative to all our possible options and the amount of money available to spend or save. 

What I do know is that Oprah, Bill Gates, Doctor Oz, Alex Rodriguez, the CEO of GM, the Walton family or Lady Gaga did not get rich in a vacuum.  We had to willingly contribute.   At some point between 1970 and today, we stopped supporting each other and started jumping on every bandwagon that came along, moving enthusiastically from one fad to the next, from beanie babies to Crocs to ring tones, from MySpace to Facebook.  With the increased speed at which everything moves, especially information, more money is in play, and people decide faster so as not to miss out on the "next big thing."  Ads for a phone service warn about news being “so 30-seconds-ago.”   Entertainment became far more prevalent and valued in our lives making actors, singers and athletes disproportionately wealthy. We are enamored with celebrity.  We have even made business executives into celebrities, buying their books, attending their lectures, and following them on the news and Twitter.  (Then they cash in on this Super-Star status.)  The terms rich and famous are linked more tightly than ever, because our money follows fame, perhaps in hopes of becoming famous ourselves.  The  media play to this obsession with more and more time devoted to big names and less to hard news. With shorter timeframes and without moderation or perspective the cycle becomes more vicious.

My conclusion is that it’s too bad the rich are getting richer seemingly at our expense, but we are not helpless.  First, when they report such numbers, they like to imply that the “pie” is not getting bigger.  This is clearly wrong.  Merely compare the advances in medicine, electronic gadgets and the safety/reliability of automobiles over the last 40 years.  America as a whole has more wealth.  But how that wealth is distributed is to some extent controlled by our spending decisions and whether those decisions are based on our stated values and sense of moderation (perspective) or on fads, the need to be like our heros or one-up our neighbors and the sale of products with unproven benefits (critical thinking).

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