I spent the 1980-81 academic year at a graduate program in Bologna, Italy, under the aegis of Johns Hopkins University’s School of Advanced International Studies. The Cold War was on and it was by no means obvious which side was going to win. Jimmy Carter was in the White House. In Italy and Germany, leftist terrorists struck regularly, murdering police officers, business executives and politicians. Legal communist parties seemed strong enough to win power in France and Italy.
The purpose of our small program, set up soon after the end of World War II, was to broaden the horizons of about 60 Americans, and to teach a similar number of future European leaders the basics of the U.S. democratic system. Our American professors of economics and political science were fond of extolling the great American middle class and its role in our stable, moderate and tolerant society. Because most Americans were solidly anchored near the middle as far as the standard of living was concerned, radical movements that had been shaking Europe over the previous century never took root in the United States.
Everyone at the Center
Indeed, that was the heyday of American egalitarianism. The Gini coefficient, which measures income differences in society and goes from 1 (absolute inequality) to zero (absolute equality), fell from 0.45 at the end of the 1920s to 0.38 in 1968.
But income equality was only the tip of an iceberg. In the early postwar decades, middle class virtues and aspirations were broadly shared by Americans of almost all social strata, from blue-collar workers to upper-income executives and professionals. They included stability, continuity, family values and community involvement — typically at church, in kids’ schools and kids’ athletics.
Even though mortgages and consumer credit made its lifestyle possible, the middle class tended to live within its means and had fairly similar tastes and consumption habits. Families shopped at the same supermarkets and bought the same brands. Price differences at department stores, ranging from Sears and Montgomery Ward to Macy’s and Saks Fifth Avenue were not dramatic. A union plumber might drive a Chevrolet, a salesman might be able to afford a Mercury and a doctor might plump for a Buick or a Cadillac, but price differences between different models were not astronomical.
In the late 1970s, CEOs of major banks made in the environs of $200,000 to $400,000 a year. Senior corporate executives lived in large houses, but they were still white-collar employees, albeit successful ones.
The ongoing polarization of incomes in the United States and the emergence of the super rich classes over the past 30 years is a recognized economic trend. There are various statistics on how well the upper 1 percent or 5 percent income bracket has done, and how incomes in the middle have stagnated or declined. The Gini coefficient has been climbing and in recent years stood at 0.47 — moving closer to countries like Mexico and Brazil and away from egalitarian societies such as Sweden, where the Gini coefficient hovers around 0.25.
Since the advent of the 2008 economic crisis, income differentials have widened. The rich have rebounded from the crisis extremely well, getting even richer as a result of the financial market boom of the past three years, whereas the middle class has been hit hard by the jump in unemployment and the decline in real estate prices.
In recent decades, entire social categories have dropped out of the middle class. The decline in the social status of blue collar workers closely parallels the decline of industrial unions. Teachers, government and municipal employees, university professors, those who work in the arts and humanities and journalists are no longer able to maintain middle class lifestyles. The same is true of airline pilots and even some doctors, who are being squeezed by aggressive cost-cutting on the part of insurance companies and the government.