The dynamics between America’s classes are undergoing rapid change, and according to Joel Kotkin, the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University, the effects aren’t for the better. In his latest book, The New Class Conflict, Kotkin explores these dividing lines and the rise of a new elite comprised of the who’s who in technology, media, and national policy.
So what does the future hold for the middle class? Kotkin refers to it as the “yeomanry,” harkening back to the self-sufficient, 19th-century family farmers who were too small to contend with the commercial prowess of their plantation-based betters, and suggesting that this societal cornerstone that was so ascendant in the 20th century is now in severe retrograde, and with it, the American dream.
Kotkin recently sat down with Jeffrey M. Cunningham, professor of business and journalism at Arizona State University, to discuss the dire consequences to America of a diminishing middle class.
You talk about America’s growing economic problems in The New Class Conflict. What do you believe is our most pressing problem?
That’s easy. Consumer companies — that implies everything from family restaurants to retail to homebuilding, the auto industry, and airlines — will be greatly impacted by a major secular phenomenon I call the “proletarianization” of the middle class. This is already happening and will impact at least two-thirds of the middle class, and it’s going to have an enormous long-term effect both politically and economically. This is essentially the engine of consumer spending. A middle class that is diminishing has less purchasing power. That means markets are more constricted and increased competition for the wallets of the top 5 to 10 percent means competition for that shrinking group could be at levels that are economically destructive.
Where does the lower-income class fit in this world?
Now that class is in dire distress. They are living in a modern day serfdom in that they will never own property, and they will be permanently dependent on government — and, of course, this is in line with our welfare and healthcare policies. Essentially, the yeomanry, and particularly the more successful part of that group, are essentially paying for other people’s healthcare at the expense of their own.
How likely is it that one political party will demagogue this issue more successfully than the other?
To shout, “the incredible shrinking middle class” is politically potent, but it resonates most resoundingly with that part of the middle class that has done extremely well — the clerisy, people working in universities or in the upper echelon of the bureaucracy, and the media. Politically, they share a common view, which the great social historian Daniel Bell talked about. We now have a more complex, science-driven, knowledge-based economy, and there is a new power player. In pre-revolution France, it was called the first estate, the clergy. This is a new form of clergy — while not religious in the conventional sense, their embrace of certain environmental or social ideals is as authoritarian and self-righteous as the medieval Catholic Church.
Do you see this resulting in a more negative perception of business by most Americans?
If more Americans believe that the future lies in government benefits because they can’t count on the economy providing the opportunity, that’s going to have a huge effect. I think business has its head in the sand on this issue. People who believe the world is great because they are doing well fail to understand that politically, if the middle and even upper-middle class think that capitalism isn’t working as it did for previous generations, there will be increased demands to have forced redistribution — and it’s government will certainly take them at their word.
This redistribution is metaphorically a form of legislated looting, if you will.
Who has lost the most ground in terms of economic classes?
The group that’s under the most stress is what you might call the private-sector middle class. In other words, the small-business person who has not done all that well during this recession. We are waging a war against the very enterprise culture of our country and economy. What corporate America has forgotten is if you wipe out the small-business person, not only are you killing the consumer but you’re breaking the political alliance of those people who favor the free market system. There are a lot more people on the receiving end than there are those who would have to pay for it, and you create a political environment that is going to be very difficult for business and for productivity generally.
You also make the point that this will have an effect on the Baby Boomer and Millennial generations.
You have a cascading effect: an expanding generation of retiring boomers, some with guaranteed pensions that will never again exist. And then you have a young generation that can’t find full-time employment, can’t buy a house. So you’re going to have a poorer younger generation paying for a wealthier older generation, literally for decades or longer. That is obviously not sustainable. There’s also a wishful thought that this new generation is less interested in material things or that they won’t need the kinds of houses boomers built. They’ll be happy to rent and take the bus to work. It is unlikely to be the case. But even if it were the reality is if you spend your entire life renting what happens when you turn 50 and your assets are one year of savings?
Does media coverage play a role?
There are media outlets that literally will not listen to anything that does not follow their party line. As a parallel example, for instance, I think well over 90 percent of all Ivy League professor political contributions went to President Obama. Jonathan Chait, the liberal-slanted writer for New York magazine, made a very startling point — he calls this media paradigm “a vast left-wing conspiracy.”
We saw in Ferguson, Missouri, a broad and apparently unbridgeable racial divide. Is there an economic backstory here?
One objective fact is that African Americans, and particularly young African-American males, have very high levels of unemployment and alienation, and worse conditions under our first African-American president than even before the Great Society. The other disconnect is that the administration has worked tirelessly in the political and media arena to keep African Americans, Hispanics, and, to some extent, Asians, in the Democratic fold without dealing with their difficult economic issues. For example, in California, the green legislation has been catastrophic for working-class Hispanics.
In your book, you contrast job creation in California to Houston, Texas.
It’s simply a matter of natural climate versus business climate. California is a unique case. The state has developed a model that works very well for a small group of people who have created tremendous prosperity in the coastal regions of California, which has the best weather of any major metropolitan area in the world. Texas is more like the rest of America. The weather is not quite as good as California. The topography is not as exciting. But nonetheless, Toyota and Occidental are the most recent and best known of the California defectors, and just imagine all those good middle-class jobs and philanthropic activities that used to be in California that will now be in Texas.
What should business be doing differently?
Business must come up with a way of showing those laboring in the middle class that this system can work for them, and that means jobs, wages, and training so one can become financially independent. As President Clinton used to say, “You work hard, play by the rules, you get ahead.” Otherwise, the corporate world is going to have to deal with a rash of legislative assaults.
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Jeff Cunningham is Professor of media and business @ASU Cronkite and WP Carey Schools. He is creator/host of @IconicVoices, a digital video interview series on leaders, innovators, and disruptors. He was formerly founder of Directorship Magazine, publisher of Forbes Magazine, and has served on numerous public company boards. Twitter or LinkedIn.
This interview appeared in Directorship Magazine, the official publication of the National Association of Corporate Directors.