By Adam Levitin, a Professor of Law at Georgetown Law School, who also recently served on the Consumer Financial Protection Bureau’s Consumer Advisory Board and was Special Counsel to the Congressional Oversight Panel for the Troubled Asset Relief Program
This is fundraising week for Naked Capitalism. If you planned to contribute and haven’t gotten to it yet, you can dispense with the preliminaries and do so here, right now.
A lot of Americans — right and left — are frustrated with what has happened to the middle class. The gap between the superrich and the rest of the country has widened, and it seems like everyone is having to work harder just to stay in place: wages have been stagnant, two-incomes are nearly mandatory (creating a subsidiary child care issue), and millions have lost their home equity in foreclosures. While there are a lot of people who bemoan the fate of the middle class, and even some want to do something about it, they don’t or can’t do the heavy lifting necessary to figure out why the system is broken and who wants to ensure it remains that way.
If progressives ever want to win the battle over finance and salvage the middle class, they’re going to have to understand finance. Unfortunately, too many progressive just don’t want to bother learning it. Finance is, apparently, not as sexy as thinking about topics like human rights or identity politics. Finance, after all is the world of the man, the world of the suits.
But when, on rare occasion Progressives do bother learning finance — well, that’s Elizabeth Warren in a nutshell. She understands the finance and is therefore able to explain what’s wrong with it. In plain English. So too with Yves, who is an intrepid guide, our Virgil in the economic Inferno. Naked Capitalism has made it a core part of its mission to clean out the Augean stables of the financial services industry.
I can’t underscore what a valuable public service this is. Not only does Yves help educate us and explain complex topics, but I’ve seen her posts repeatedly impact Congressional votes, whether by original content or by amplifying other blogs. And Yves’ recent work on private equity investments is making serious waves among investors.
What makes Yves’ voice particularly important and insightful is that she understands the connection between financial regulation and politics. Sadly, too many economics writers ignore politics, while political writers are scared of finance. Not so for Yves, who intrepidly sallies forth in both spaces.
While I don’t always agree with Yves’ politics, she understands the intersection of finance and politics, and that is where the fate of the middle class will be won or lost. Yves understands that the road to a just and fair financial system that creates stability and opportunity for the middle class rather than enriching the wealthy who are better positioned to cope with (and even profit from) a volatile economy runs through politics as much as through technical regulatory fixes.
She also understands that the game can be rigged against the middle class through all sorts of subtle ways, and that part of the rigging is not just technical rules, but also the larger intellectual capture that affects too many regulators and professionals. It’s no surprise that Yves has never flinched from calling out politicians, regulators, or even judges for perceived cowardice or cravenness. That fearlessness combined with acute insight makes Yves an incredibly important voice in the blogosphere. She will say that the emperor has no clothes, and we need to hear it.
Part of why Yves is able to speak truth to power is because she is not in anyone’s pocket. But blogging at the scale Yves does is not a self-supporting operation. It requires assistance from readers like you. If you think you learn from Yves and Naked Capitalism, if she’s helped you understand the world better, I urge you to contribute generously to the blog here, now. Especially if your name is Zuckerberg.
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I think it would be a good idea to give up on the middle class idea. There are just too many layers of false assumptions and feelings of entitlement baked into the middle class concept for it to be salvageable at all. We need to come up with something else to strive for. Trying to bring back the middle class is like trying to reattach a gangrenous limb that’s been cut off.
Yeah it sucks that life styles of people have been negatively affected, but what we think of as the middle class in western societies was never a sustainable arrangement in the first place. I hate to say it, but it seems like people are just going to have endure horrific suffering before they gather enough motivation to fundamentally change how our society functions. So that’s just how it’s going to have to be.
I’ve been reading Margo Jefferson’s Negroland, which I highly recommend, and one subtle critique that emerges from its insider view of the black elite is how groups that otherwise find some degree of solidarity with one another against larger forces of oppression are pried apart by means of the perceived acquisition of status. In her book, this takes the form of educated elites who not only long to socialize with white educated elites and become integrated among them, but who use this status to look down upon the poor and working class folk within the black community, even though black elites are just as subject to harassment and prejudice as their poor counterparts. If improving one’s station in life were revealed to be a myth, it might go a long way to deprive those who are actually in power of one of their primary tools for creating discord among large swaths of people whose interests are more with each other than with the status quo.
That’s a very interesting comment. Often times talking about the middle class seems to be a way of politely avoiding talking about poverty and oppression and injustice, as if falling home equity or stock market prices is somehow the worst suffering in our system. In aggregate, for example, people who own houses are enormously more wealthy than people who rent.
Even someone as educated as Levitin wants to paint the picture as the superrich vs. everyone else, rather than a cooperative effort between the superrich and the kindarich. By definition, you can’t have middle class households without lower class ones.
Understood. I’m concerned about the Middle Class as it is constructed in our culture. I am worried sick about the poor. Even if the Middle Class gets largely empty rhetoric and little else, it still gets more than the poor, who have been “disappeared” in the political discourse of this nation (except when they are being denounced for their utter “otherness” and failure to “embrace Middle Class values”, as if the benefits of citizenship and decency were only open to people based on their purported “values”).
I like your comment. We need to clear away the distorted notions we all carry around in our brains so we can think creatively about actually solving problems in the world.
How about exploring the idea of an access economy. Everyone should have guaranteed access to certain goods and services. I’m sure the technology exists today that all needs could be met. It’s the greed, corruption, and false sense of wanting more than you need that is the problem.
Loosing the notion the everyone in the world needs to individually leverage their talents in order to survive is an idea that needs to end sooner that later.
Working on fair and just access to the bounty of the world seems more productive- not fighting to bring back the middle class.
You are right about needing to be creative, and the access economy idea seems like a good start.
My idea is that it’s of primary importance is for us all to achieve a state where we can support populations entirely with local resources, and with local currency/credit arrangements.
A place for national and international currency schemes can exist for luxuries, exports, and tribute, etc, but there absolutely must be a firewall (like Glass-Steagall?) between currencies that support local/needs economies and those that support national/luxury economies. That way no matter what deprivations and criminality exists at the national level (and let’s be honest, fraud and corruption always build up in systems over time, right up until they bring down the system–the point we are at now in America), some basic form of life will always be sustainably available at the local level.
I have to agree that the middle class was a temporary phenomenon till their jobs could be automated or downsized away.
The proper solution was always a just money system so we could ALL share in productivity gains. Then the middle class would have morphed into the affluent class and the poor would have been lifted up too. The extremely wealthy would be few.
Well, life’s about learning. Or should be.
“. . .calling out politicians, regulators, or even judges for perceived cowardice or cravenness.”
even judges?
Even (?) Dahlia Lickwick from middle-of-the-road Slate (July 1, 2011) called the Roberts gang, “the radical conservative majority” in torpedoing class action suits.
You can pick from a rich list of examples.
I’m curious about the meaning of that particular observation. Outside the veal pen, to borrow a phrase, there is remarkably widespread and intense disgust about the financial system. In the heretical language of non-pundit approved discourse, TARP was colloquially called the Taxpayer Anal Rape Program. I’m not even sure if it’s appropriate to state such vulgarity, but I feel like not talking about how disgusted people are whitewashes that disgust. Even the US House of Representatives voted against TARP the first time. The bipartisan effort of the elite (Bush, Obama, etc.) had to use the radical maneuver of stripping a bill already approved by the House in the Senate and then reverse-engineering it into TARP in order to get EESA passed. And even then, even after fear mongering of martial law and collapse of the economy and the personal cheer-leading of the widely popular Democratic candidate for President, there was still large opposition within the government itself, particularly Representatives outside the finance HQs of NY and SF and Chi and so forth.
So if by progressive, the author means educated liberals stuck in the bubble of affluence, I could see that being an interesting statement. But if that is meant to apply broadly to the left-leaning public, I find that a rather bizarre charge and would be curious for evidence to back up that claim.
The evidence seems quite the contrary. The public is highly educated. And highly pissed. They want to prosecute the banksters, break up the banks, and tax the rich to pay for the mess they created.
“They want to prosecute the banksters, …”
As if government subsidized private credit creation is not ITSELF a crime against humanity?
Why is it NOT OK to allow psychopaths guns yet it is OK for the rich and other so-called credit worthy, including sociopaths, to borrow the public’s purchasing power to , for example, automate the public’s jobs away? Or downsize them to minimum wage positions? Why is it the thing that is the problem in the former case but not the latter? How about some consistency?
Maybe, but I have some doubts. I know many people who don’t know what Credit Default Swaps are or what Carried Interest is. Are they aware of the extent of the Robo-signing scandal? Nope. They probably don’t even know what Robo-signing is. More than 126 million people voted for Obama or Romney in 2012. Would they have done that if they were truly educated about the scandals in the financial world?
I hear what you’re saying and agree we need subject matter experts to make civilization work. It’s also discouraging sometimes how uninformed and shallow large numbers of people can at least appear to be (madness of herds and all that, right?).
But most people don’t know how to write computer code, yet they manage to use the internet and are frustrated with the corporate cartels that deliver overpriced services to people’s homes. For that matter, most people don’t even understand electromagnetism. But almost everybody understands that the power cable has to be plugged into the wall in order for the computer* to work. And some infrastructure is required to create and deliver that power to people’s homes.
CDS, carried interest, and robo-signing are specific instances of jargon describing the well understood general concepts of gambling, tax evasion, and fraud. That general level of knowledge is all that’s required, and it is quite widespread. That Obama and Romney were the nominees in 2012 speaks to a collective action problem more than a lack of education problem. I think the difference between those two circumstances is very important. On issue after issue, from financial fraud to media consolidation, the core challenge is not an uneducated populace. Rather, it is the disconnect between popular will and how governance actually happens.
Note also there is some differences of opinion on what’s important. Many of the people who did vote for Romney and Obama support many of the things those candidates represent. That’s the difficulty with this framing of the superrich vs the rest of the country. The 99% is not some kind of monolithic force. Quite the contrary, the same kinds of inequalities that exist at the very top are present within the rest of society, which is what was so great about jgordon’s comment. Cutting through the outdated usage of the concept of the middle class, as if there aren’t a lot of people making $80K or $100K or $150K who also benefit from the waste and abuse in our systems of law and medicine and banking and education and housing and so forth.
*For the younger NC readers out there, a computer was a device that set on a desk and had to be plugged in all the time before cell phones became ubiquitous….
What an understatement! Fortunately, paradigm-shifts are possible, as evident in this recently posted video clip. (Another clip from the full Future Dreaming documentary is here.)
Apologies, the 2nd link doesn’t work anymore. This link has several clips related to the documentary.