Tapu Misa: Stability in doubt if the middle wobbles

I once described myself in a column as middle class. My husband snorted when he read it. Middle class? You wish, he said.

Clearly, middle class means different things to different people. I was plotting a mid-point on an income scale; he was thinking of England.

But if I have middle-class pretensions (or aspirations as John Key would say), I am clearly not alone. Some 80 per cent of those who responded to a recently published Massey University survey described themselves as middle class.

Maybe that says more about where the middle is nowadays (the median wage is about $30,000, while half of all households have an income below $64,000).

Most survey respondents said they wanted to see a New Zealand with most of us inhabiting a vast, comfortable middle, and only a few people at the top and bottom.

That sounds like the old egalitarian ideal that a recent Listener survey found was now a myth for seven out of 10 Kiwis.

And a lot like the America that the French historian Alexis de Tocqueville observed when he visited the republic in the 1830s. The Frenchman found an essentially equal nation, with most of its citizenry making up the middle class. He held that it was the strength of that middle class that would make America a great democracy - and save it from the upheaval of violent revolution.

He wrote that the multitude in the middle, being "possessed of sufficient property to desire the maintenance of order, yet not enough to excite envy", were "the natural enemies of violent commotions; their stillness ... secures the balance of the fabric of society".

But the middle class isn't what it used to be. In the US, thanks to unprecedented inequality, record unemployment, mortgage foreclosures, bankruptcies, and rising education, health and other core costs, the middle class is being squeezed out of existence.

Elizabeth Warren, the Harvard law professor and chairwoman of the Congressional Oversight Panel set up to oversee the banking bailouts, writes that an America without a strong middle class is "unthinkable" - "the once-solid foundation is shaking".

In the Huffington Post, Warren writes that the crisis facing the middle class started more than a generation ago, when, even as productivity rose, the wages of the average fully employed male remained flat, as they had done since the 1970s.

At the same time, expenses kept rising, so that, by the early 2000s, families were spending twice as much (adjusted for inflation) on mortgages and health insurance.

"To cope, millions of families put a second parent into the workforce. But higher housing and medical costs combined with new expenses for child care, the costs of a second car to get to work and higher taxes combined to squeeze families even harder. Even with two incomes, they tightened their belts."

America's middle class is stressed - and resentful as hell, particularly of bailouts of the "too big to fail" financial institutions which have been the cause of many of their troubles.

Bruce Judson, a senior faculty fellow at the Yale School of Management and the author of It Could Happen Here: America on the Brink, (2009), blames the extraordinary rise in income inequality over the past 30 years for a much afflicted and angry middle class.

He argues that without a strong middle class America is at risk - of violent revolution.

As he told one interviewer, "ultimately, political stability depends on a strong middle class. If we have a strong middle class, we will do fine. If our middle class disappears, we have a problem."

Judson defines the middle class as people who believe they are, or have the potential to live the American dream.

"The American dream is home ownership, a secure job of some kind, a pension or decent retirement, access to health care, the ability to send the kids to college, and hopefully upward mobility. Those things are under assault."

Judson isn't a fringe dweller. He's a lawyer and entrepreneur who predicted the 2008 crash and hedged against it.

And history is on his side. He points out that the last time inequality rivalled current levels was in 1928, just before the Crash and the Great Depression.

In that case, the US escaped the Depression thanks to Roosevelt's New Deal and World War II. Judson argues that things are much worse today, with the US more divided than at any other time, into a tiny plutocracy of super-rich, on the one hand, and a fragile, indebted, unprotected "former middle class" on the other.

"Historically one of the reasons that economic inequality is such a predictor of political instability is that wealth and power go together. And the wealthy start to do things that distort the economy in all kinds of ways."

Tapu.Misa@gmail.com