The Corporatocracy Systematically Destroying the American Middle Class: In 40 Years the Corporatocracy has Shifted Americans from a Sustainable Middle Class to a Perpetual Cycle of Debt Serfdom.

The biggest scam of the century is making a full conclusion with this deep recession.  What made America the envy of the entire world, a strong and vibrant middle class, is being quickly dismantled so the new order of corporate raiders can siphon off life support from the productive economy.  Nothing highlights this grand robbery more so than the current situation of our country.  For eight straight months foreclosure filings have hit 300,000 or more yet banks on Wall Street are gearing up for record yearend bonuses for a job well done.  The average American is seeing the culmination of 40 years of systematic leeching by the corporatocracy that culminated in the largest transfer of wealth in modern history.  A bloodless coup that cemented the true nature of our current economic system.

People wonder why I focus so much on the middle class of America.  This is what has been the fundamental difference between our country and other economic systems.  A vibrant middle class that provided adequate housing, a decent education, and a road to sustainable wealth.  This was built on the backs of a productive economy.  But over the last 40 years we have seen much of the true wealth shift to Wall Street and the financial sector and that has largely eroded the value of what it means to be middle class.  The new system is designed for the few and by the few.  The new financial regulation being touted as the most sweeping since the Great Depression is woefully weak.  Yet this is merely a reflection of the power of the corporatocracy.  We really have the best government money can buy.

Critics always point to the rising household wages since the 1970s.  Yet there is a big problem with this argument since this has occurred with the growth of the two income household:

median-income-households

*Source:  Elizabeth Warren

If we factor out men from the data, the average American male is now making $800 less in inflation adjusted terms than his counterpart in 1970.  So even though income for households has gone up the data is misleading.  Americans now have a harder time keeping the pillars of middle class life intact.  If we had to sum it up it would probably be:

-A good home to raise a family

-Access to a good education

-Quality healthcare

-A decent retirement

The above is still accessible but it has become harder to maintain.  A solid pension and healthcare used to be provided to workers by companies.  That is now gone.  Income is only one side of the equation of course.  Where do people now spend their money?  If we look at the data closely Americans now spend less in clothing, food, and appliances than their 1970s comparison group.  This has much to do with cheap goods from abroad and more competition globally.  So this is good right?  It is but these are more of the smaller line item purchases that Americans make.  The biggest purchases include housing and this is a cost that has gone up exponentially:

median-family-spending

Housing has gone up 100% in terms of cost for the typical family.  Health insurance is now up 103%.  Childcare, a more daily need for two income households, has gone up as well since Americans many times need two incomes merely to break into the more elusive middle class.  The items that have fallen are largely adjustable and elastic substitutes.  For example, you can have macaroni and cheese instead of a steak.  Everyone needs shelter whether they buy or rent.

The gigantic housing bubble has only pushed the tide out further to reveal the disappearing middle class.  If we break down the data further from a study examining the middle class we find that fixed costs are now through the roof.  What is more troubling is that even with two incomes, the ability to sustain a middle class lifestyle has actually gone backwards:

two_income_trap

Source:  Rortybomb

There is also more volatility on income security.  Wall Street and the corporatocracy are running the biggest hypocrisy show in the world.  Middle class families are having to adjust to the new economic reality by filing for bankruptcies, losing homes in foreclosure, and getting gouged with credit cards.  Yet banks and Wall Street have not cut back and have gone the opposite direction by giving out record bonuses to their small circle of cronies.  The bailouts were a large protection of the entrenched corporatocracy.

The biggest scam of the century revolves around the massive growth in debt.  Let us chart this back to the 1970s:

household-debt

The U.S. Treasury and Federal Reserve disconnected the U.S. dollar from any semblance of reality back in the 1970s.  Since that time, Americans have been put into a sleepwalking state where they were drunk on debt induced spending while slowly and surely our manufacturing base was removed from the country.  The above chart hit a climax when household debt actually surpassed annual GDP in this decade.  In other words, we spent way more than we earned and nothing that operates under that system can survive for any length of time.

This has infuriated many since they thought they were part of the new economy but in reality, they were merely treading water until Wall Street and the banks had to hunker down and protect their small inner circle.  Why else is the stock market up 60 percent since the March lows?  Let us look at some data since March and see how well Americans have been doing:

March 2009 unemployment rate:             8.5%

December 2009 unemployment rate:     10%

revolving-credit1

The unemployment rate shot up from 8.5% to 10% in this time and consumer credit has been contracting at a record pace.  At the same time, banking profits are going sky high.  Take a look at some of the big banking names:

banks

The corporatocracy seems to be doing well in this climate even though the middle class American lifestyle is being dismantled piece by painful piece.  Not only is this happening but Americans now have a new line item and that is to fund the bail outs.  This is happening through more clandestine channels like destroying the value of the U.S. dollar by printing inordinate amounts of money so banks can keep on giving record bonuses.  The financial sector is a blood sucking vampire that is draining the real economy of its life.  Why do we even need it at the current size?  All mortgages are now backed by the U.S. government through the GSEs or FHA insured loans.  Credit card debt and access is shrinking.  Banks have curtailed lending to small business.  What is the financial sector doing to justify their current profits?  Pure and simple speculation on the taxpayer dime.  This isn’t capitalism as Adam Smith envisioned.  This is a system called a corporatocracy where the main goal is protecting the too big to fail and allowing everyone else to fail.

The average American has every right to be furious at what is occurring.  The next generation might have it worse than the last.  Not since the Great Depression has this occurred.  Some might say that this was destined to happen.  That is the storyline the corporatocracy would want you to believe so popular anger can be quelled.  Yet this was a deliberate stealing from the American people.  Many of these Wall Street elites have no allegiance to the country.  They put money in secured tax havens in other countries and hide their money in multiple places avoiding taxes from a country that allows them to run their scam.  They have allegiance to only one and that is money.  They don’t care about the productive economy of the U.S.  Lobbying with their fleet of lawyers is simply another business expense.  And here we are, 40 years later with a disappearing middle class, booming financial stocks, millions of foreclosures, and weak financial regulation.  Nothing can be clearer than where the power has shifted.

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8 Comments on this post

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  1. bob said:

    Great article!!……………you put my very thoughts into the charts. These do tell the story as it really is.
    Spin offs like the wife having to work to make ends meet and the kids lacking the necessary motherly love………..broken families…………..and so on.
    An African proverb says ; “………..the downfall of a nation begins in the home………”

    December 13th, 2009 at 3:05 am
  2. JonnyL said:

    I love when people do the leg work.

    On the surface its a changing of a casino regulated financial sector. But it goes much deeper. High priced manufacturing products, which means high paying manufacturing jobs, have been over produced and the market is over saturated. So they must be fired… People must sell the excess supply of goods, bought by credit, over time. Lots of people fired all at once but lower paying service jobs created to make it look like all is well… The difference of amount of capital available to spend shifted too fast and collapse would have occured. To prevent this the fed inserted stimulus into every major country. The Stimulus is created liquidity to fix failed balance sheets at the bank. Instead of a collapse, it has become a gradual decay until equilibrium, which will never be achieved with “created” money constantly being pumped into the system. Collapse is inevitable. 1 year of growth (which is just increasing GDP nominally. Not only that but GDP is a bad way of assessing a countries economic wellbeing) then a decline like nothing we have ever seen. As the housing market fails to return to any sense of normalcy and commercial real estate debts come due, mass defaults will occur and collapse will occur. Commercial real estate debts maturing will increase between now and 2012 (I read somewhere its been 260 worldwide commercial bankruptcies just this year). As these debts have no new equity, because nobody has any cash to buy anything, there will be no money to be made, therefore the bank cant refinance because of the lack of equity. They will be forced into forclosure, and this will happen at an exponential rate.

    The pensions promised to the employees are not there because companies are going bankrupt forcing the baby boomers to continue longer which affects new workforce entrants screwing with the balance of jobs gained and jobs lost… welcome to generation unretired (baby boomers) and the lost generation (? – 27)…these first few bubbles (the housing, the stock market) are just blips compared to what is down the road.

    Im pretty sure these problems today are directly connected to the nature of money and ownership of property itself, these are the final stages in its faulty design. An interest based money system is destined to fail.

    I hope that i am wrong every day… but the evidence keeps building up.

    Although all of this is bad news I am optimistic, New deregulations of communication have occurred and new open source discussion tools are being created right now (scribblelive.com, googlewave.com). This will hopefully allow more transparency of true and valid information to be brought into th spotlight. What im seeing is a tool like wikipedia but for discussion boards, most viewed + highest rated discussions, hopefully this will allow people to make more educated decisions.

    December 13th, 2009 at 6:00 am
  3. Chris Herz said:

    No one can say these silly middle-class Americans were not warned, and repeatedly, by honorable people. Yet because of their own racism and greed they were led willingly to the debacle. They did and still do turn out to vote for these shysters. And worse, they reject as unpatriotic socialists those who did warn them.
    Be it on their heads.

    December 13th, 2009 at 7:42 pm
  4. Alan8 said:

    I’d like to remind people that THE DEMOCRATS LET IT ALL HAPPEN!

    They helped the Republicans to do this. It won’t get any better by replacing Republicans with Democrats; they’re ALL on the corporate payroll.

    We can start to fight back by voting for parties that DON’T accept corporate money, like the Green Party.

    Even 5% of the vote for the Green Party would get them matching Federal funds, and would send a powerful message to the corporate parties that continuing to sell us out will have political consequences.

    December 15th, 2009 at 7:34 am
  5. Jubie said:

    No big news here. If you’ve been working -as I have- for the past 30 years and paid attention to the chess game our government AND corporations have been playing with us, you would have known by now we have been getting screwed. The only way to break the stranglehold of these leeches is revolution.

    Just one case in point, because for everything the middle class has lost, there is a sector who have gained at our expense: When our so-called “merit” raises were tagged to the inflation index, then critical components of said index were removed (for being superfluous and not at all critical??? according to some who don’t have to worry about the price of gas, or how much groceries go up each week, or the ever-rising cost of health insurance if they can get it) so as to consistently understate that rate over the past twenty years, causing us to actually lose ground relative to the price of goods & services, we should have known we were screwed.

    At the same time that our middle class has lost ground, take a look at WHO has gained immense, obscene ground: executives, Wall Street, and bankers. Weren’t bankers the ones who cost the American taxpayers $500 billion back in the late 1980s? When will we learn….??

    We should have known then, yet NOW that we do KNOW, what are we going to do about it? I’ve been writing Congress for years…to no avail. Our government doesn’t give a hoot, they’re in on the whole scam. They more than amply proved this in Fall/2008 when our then Republican President, along with his cronies (Cheney, Paulsen, and Bernanke) raided our Treasury without so much as a blink from Congress.

    These are the very same people who were informed back in 2003 that the rapid heating-up of our real estate market was definitely cause for concern. But they did nothing, choosing instead to play politics with the pith of America. They should all be run outta town on a rail.

    There is so much disinformation swirling in this country about the downward spiral of the middle class, to the point where we have a large pecentage of decent Americans voting for a party who have clearly shown themselves to be hostile to working Americans. Congress is actually debating whether to give the American people relief in one sector: healthcare and insurance.

    God help us all because if the past is any indicator of where their allegiances lay, we will again be screwed.

    December 15th, 2009 at 8:56 am
  6. boqueronman said:

    Uhm. Just a second. We live in a corporate state, which is defined has having a government controlled by special interests. Of course Wall Street finance is one, and probably, in terms of combined leverage, the most powerful. But there are other players in the game, such as union bosses, trial lawyers, racial grievance groups, educrats, “environmentalists,” and, let’s face it, political parties. In order for such a state to come into being in the U.S. the Constitutional principles of “checks and balances” and limited, delegated powers has been respected only in spirit and ignored in operation. The process began when Hoover-FDR pushed past the Constitution to implement “experimental” programs and policies meant to reverse the “Great Depression,” which were heavily flavored with the then popular policies of the fascists and communists of Europe. The slide into the abyss of ever greater governmental “favor granting” since then has been incremental but steady.

    One comment on the “outsourcing” of manufacturing. You seem to imply that the only way to restore the middle class is to recreate a solid manufacturing base. In reality this cannot work. Manufacturing jobs are going the way of agricultural jobs, which now account for less than 3% of all employment. Even China is losing manufacturing employment because, as in agriculture, technology is increasing efficiency and lowering the demand for manufacturing labor. This is a worldwide phenomenon; not one limited only to the U.S. The movement of manufacturing jobs overseas, beyond the natural attrition brought on be technology, has, as you state, been facilitated by government policy. But an article such as this one should not ignore tax policy, environment restrictions, the threat of civil suits (see above para on special interests), and, of course, improving education and productivity overseas augmented by wage arbitrage. I guess I would summarize by saying we need to stop and reverse the debt creation machine, break the special interest power over government, and free the natural energy and creativity of the American society so that the “new” industries and jobs will be established and grown.

    December 15th, 2009 at 3:49 pm
  7. Major Disappointment said:

    The enveloping problem:

    The same corporations deal with an ever-changing parade
    of government employees and elected officials, that eventually
    retire. Corporations possess the experience and a strategy
    to win favors, from the novice replacement government people.

    Investigating RF interference, a likely cause, of sudden acceleration
    and the remedies, will be expensive for Toyota.

    Failing to find the real cause, of sudden acceleration, will kill Toyota.

    Corporations, too big to fail, recently extorted hundreds of billions, from our government.

    U.S. taxpayers, are paying for what?

    Allowing corporations, and our government, to get too big.

    Corporations may outlive a human being by centuries.
    21,666 companies are over 100 years old.

    Corporate entities perpetuate our military-industrial complex
    disease, by selling US expensive battle field supremacy, allowing
    US to kill anyone, anywhere, anytime; thereby discouraging
    priceless diplomacy.

    Corporations possess no soul;
    that may be held to account, as in humans.
    Corporations competing for profit, think like HAL:
    Salvation is illogical.

    Corporations have owned US wage slaves for generations.
    Corporations are buying our government, and all the information
    about us it controls.
    Corporations are being adjudicated the same rights as you and I,
    without being held liable to serve the same time in prison,
    as a penalty for their infractions.

    The creed of Corporatocracy:
    From each, everything that any secret strategy may optimally
    extricate.
    To each, only minimal compliance with hard fought court judgments.

    Corporatocracy is implemented by the elite, for the elite.

    Sleep tight, but not in the saddle.

    March 3rd, 2010 at 10:47 pm
  8. BigAl said:

    Both democrats and the republicans are all in cahoots as they steal money legally. It’s all about the dollar as they pledge allegiance to their secrete society. America is doomed.

    April 2nd, 2011 at 7:25 am

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