The surge in inequality since 1980 has been driven from above, by the top 10 percent, and even more so by the top 1 percent and the even smaller fractions of pharaonic wealth. The other 90 percent have not all been impoverished, but they have been abandoned. This has given rise to a bitter journalistic and academic literature in the Global North, an interesting counter-position to consultancy and development bank dreams of the “rising middle class” of the Global South.
To stiffen bourgeois resolve in this moment of crisis and liberal self-doubt, Torben Iversen and David Soskice’s Democracy and Prosperity (2019) presents a homage to “advanced capitalist democracies” (they show more deference to capitalism than to democracy, which is held responsible for the inequality). “The essence of democracy,” they aver, is “the advancement of middle-class interests.”
Iversen and Soskice, both prominent institutional economists, argue that the middle class is aligned with capital via two key mechanisms. One is “inclusion into the wealth stream” created by capital accumulation. The other is the welfare state: the tax-and-transfer system ensures that the gains of the knowledge economy “are shared with the middle classes.” It is precisely this “inclusion” and “sharing” between capitalists and the middle class that is found by recent inequality research to be terminating.
In the beginning, the neoliberal dispensation did favor middle-class interests. The opening up of public services to private business provided some gains for lucky segments of the middle class. Public funding of free private education places, through a voucher system as in Sweden today, gave middle-class parents a welcome chance to send their children to well-kept schools with few immigrant or working-class children. Corporate care has been less popular, and prone to public scandals, but is still accepted by many as a familiar accompaniment to austerity and the scarcity of public provision.
On the other hand, the exclusion of the middle class from prime urban housing continues apace, and income and wealth gaps are widening. Meanwhile, environmentalism is making ever-deeper inroads into the educated middle class, explicitly putting planetary survival and ecological sustainability above the interests of capital.
Falling Behind
As the median is the exact middle of a distribution, the ratio between the incomes of the top 1 percent and the median is a good measure of the distance separating the upper from the middle class. In the United States, this ratio jumped from 11:1 to 26:1 in the years 1980–2016. In the UK and Sweden, it rose from a relatively low 3:1 to around 10:1. In Germany the ratio also climbed, whereas in France it fell slightly from an already high 11:1.