The Vanishing Middle Class: Prejudice and Power in a Dual Economy

by Peter Temin

As Bob Dylan said in a song at Martin Luther King’s 1963 March on Washington, “The poor white remains / On the caboose of the train / But it ain’t him to blame / He’s only a pawn in their game.”

to Donald Trump’s equally indirect claim to “Make America Great Again” in his 2016 presidential campaign—where “great” is a euphemism for “white.”

The Civil Rights Movement changed the language of racism without reducing its scope.

As incomes become more and more unequal, racism becomes a tool for the rich to arouse poor whites to feel superior to blacks and dist...

the political policies that grow out of our dual economy have made the United States appear more and more like a developing country.

Anyone who stirs out of his or her house knows about the problems of deteriorating roads and bridges in our country. And if you are not rich enough to send your children to private schools or to live in an expensive suburb known for having good public schools, you may know also about the current crisis in education.

Education was the key to American prosperity in the twentieth century. It is not too much to claim that we lived through an “American Century” because we had a long traditi...

Schools for the richer sector vary in quality, and the best of them are well within the American historical experience. By contrast, schools for the poorer sector are failing.

African Americans are condemned for violent actions, but they are largely the results—not the causes—of educational failure.

Mike Pence who wants to cut government spending, abandon the state’s pension system, and weaken or destroy public-employee unions.

Scott Walker started earlier and has gone further to allow corporations to contribute directly to political parties and to replace the state’s nonpartisan government accountability board with commissions made up of partisan appointees.

Governor Rick Snyder ignored warnings about lead in the drinking water of Flint, a to...

Despite the absence of directly racist statements, it is worth noting that the states that rejected the free expansion of Medicare under the Affordable Care Act are mostly former members of the Confederacy.

Starting from President Nixon’s declaration of a War on Drugs, the American rate of incarceration has grown from the level of other modern democracies to one previously seen only in totalitarian countries.

By the twenty-first century, one in three black men could expect go to jail.

22 percent of black males aged 35 to 44 had been in prison in 2001, compared to 10 percent of Hispanic males and 4 percent of white males in this age group.

Many poor black families have a member or know a relative or neighbor who has gone to jail.

Too many black mothers are condemned to be single parents struggling to raise their children alone. And many black boys attending school know they have a good chance of being stopped by police, maybe even arrested, and ending up in jail. How can such a child think of the future when his present is so hard?

Politicians debate the value of investing more in urban schools if the students often drop out and go to jail—failing to recognize this is the outcome of a system of mass incarceration and complex public funding arrangements. This cycle is what Michelle Alexander called The New Jim Crow.9

The middle class’s share of total income fell 30 percent in forty-four years.

There was good reason to start in 1970. Real wages stopped growing at that time,

FTE sector to highlight the roles of finance, technology, and electronics

Members of the FTE sector are largely unaware of the low-wage sector, and they often forget about the needs of its members.

While blacks are a minority even in the low-wage sector, the focus on blacks in public and political discussions helps obscure the problems of low-wage whites.18

President Nixon set himself up in opposition to Johnson. He won election to the presidency through a Southern Strategy that appealed to Southern racism and opposition to the Civil Rights Movement. He abandoned Johnson’s War on Poverty and declared a War on Drugs in 1971.

Nixon switched the United States to a floating exchange rate, transferring responsibility for the domestic economy from the federal government, which controls fiscal policy, to the Federal Reserve System, which controls monetary policy.

“We believe all men are created equal.” Our forefathers may have said “all men,” but they really meant all white men.

Powell also wrote that “few elements of American society today have as little influence in government as the American businessman.” Organized lobbying of Congress began at this time, stimulated in part by this statement.

The conservative American Legislative Exchange Council, known as ALEC, was formed in 1973 in order to influence state legislation.

Charles and David Koch founded and funded ALEC as a nonprofit corporation to advance conservative principles of free market, limited government, and individual liberty.

ALEC has about two thousand Republican state lawmakers as members. Its task forces recommend model bills to reduce the regulation of business, privatize public services, cut taxes—particularly for wealthy individuals and large companies—and restrict the efforts of unions.

“individual freedom” was code for the destruction of unions.

White Northerners moved out of cities as African Americans moved in during the Great Migration,

Right at this time, in the middle of the economic disturbances of the 1970s, the real wages of workers stopped growing.

Modern conservatives fear the power of the federal government that grew in the world wars and Great Depression, and they oppose the redistribution in a welfare state. They oppose the New Deal and unions as an “excess of democracy,” whatever that phrase means. They believe that the free market is equivalent to freedom itself and that regulating markets means surrendering political liberty. They draw their inspiration from Friedrich Hayek and Ayn Rand.

The Reagan administration often is seen as ushering in the neoliberal policy stance because he began his presidency by announcing in his inaugural address that “government is not the solution to our problem; government is the problem.”

signaling his intent to continue the war on unions.

But deregulation and the privatization of government functions like the military and prisons started earlier than when he began his first term in 1981 and continued after he left office in 1989.

Reagan lowered top marginal income tax rates for the rich in two tax cuts. He expanded military spending at the same time to threaten the Soviet Union. This combination led to large government deficits despite Reagan’s promise to balance the budget. And it confirmed the exception to the small government that he was proposing. The true conservative posit...

The second tax cut in 1986 coincided with the beginning of the rise in the share of income going to the t...

The top 10 percent of American earners earn incomes in six figures of $100,000 and above.28 That is a high enough income to live in a good school district, own your house, and drive a new car. It is what we used to call a good middle-class living, although the term “now evokes anxiety, an uncertain future and a lifestyle that is increasingly out of reach.”

The median worker earns around $40,000, and the dividing line between the FTE and low-wage sector lies in the gap between these two figures.

The Southern Strategy appealed to white Southerners angered by the threat to their power from the Civil Rights Movement and the expansion of the franchise.

As the War on Drugs expanded in subsequent decades, it was enforced far more strongly for African Americans than for whites, becoming, in Alexander’s widely used term, the “New Jim Crow,” revamping and renewing the racist intent of the repressive old anti-black Jim Crow laws that followed Reconstruction in the South.

This expansion was in part a response to the massive movement north of African Americans in the previous decades. The Great Migration, as it is known, started in the First World War when immigration was cut off and the demand for American war matériel grew.

The Great Migration continued until 1970 when the events described here began. People in the North found by then that blacks were in their cities and competing with them for jobs.

Low wages are the result of decreased labor demand coming from improving technology and increased supply coming from globalization in the varied forms of trade, immigration, and moving production offshore.

The service workers who worked for large companies tended to be paid more than those that worked in smaller companies, preserving equity among the workers at the large companies.4 But as finance expanded in the late 1970s, companies were encouraged to specialize in their core activities, that is, the activities that they were known and patronized for. This would increase their value on the stock market, and outside firms and services could be hired to do menial jobs.

Wages from the parent company have been replaced by contract prices with companies.

since the workers are now hired by competitive subcontractors, their wages are compared with the wages of other people doing similar work rather than with the varied employees of the firm. There is no job tenure, no pension plan, and only relentless competitive pressure from the competition of other workers.