Western Civilization and the Economic Crisis: The Impoverishment of the Middle Class.   

 

Andrew Gavin Marshall  March 30, 2010 Globalresearch.ca

PART I

 

The western nations of the world have built their great wealth and societies on the exploitation and plundering of the people and resources of the rest of the world. The wealth, freedom, and structures of our societies have been built on the starvation, robbery, deprivation and murder of millions upon millions of the world’s people, both historically and presently.

 

It seemed for a time that “Western Civilization” had worked, even if only for the west. We saw the emergence and growth of a vibrant middle class, which has its origins in the Industrial Revolution, out of which we also saw the formation of the “nuclear family.” The middle classes of the west grew in wealth, education, and access. While the great problems of the world, and for the majority of the world’s people, persisted and expanded exponentially, the great purpose of the middle class was siphoned and expanded into facilitating the development of a massive consumerist society. The function of the middle class became that of consuming, not necessarily contributing to determining the direction of society.

 

Nevertheless, life was good; or so it seemed. Thus, the people were by and large able to turn a blind eye to the plight of the world’s majority. As the decades progressed, however, the great western empires, increasingly united under the umbrella of a US-led NATO empire, grossly expanded their plundering and exploitation of the rest of the world. New avenues for capitalist expansion needed to be found, more money to be made, more assets to be owned, more power to be had. As a part of this process, class structure was being reorganized, which meant that the middle class was to undergo an evolution.

 

In the past few decades, the middle class has been forced to survive on debt. In order to maintain the image of middle class, and to maintain the functions of the middle class (i.e., to consume), the middle class needed access to credit and had to descend into a class of debt. Now, as the world is undergoing a rapid social, political, and economic transformation, the middle class has been marked for death. As a debt crisis takes the nations of the world into debt servitude, the middle classes of the western world will lose their access to credit, and will be forced into repaying their debts. As nations fall under a debt crisis, the middle class will collapse with it. A class built and sustained on debt is not sustainable. We are entering into a period of rapid class transformation on a global scale.

 

The mirage of the middle class is steadily vanishing as our eyes adjust to the reality of our environment. The Empire we turned a blind eye to abroad, is about to hit home; what we do abroad, comes home to roost. The middle class is about to realize the true cost of empire.

 

The Debt Class

 

In 1958, the first successful modern credit card was launched by Bank of America, eventually evolving into what we know as Visa. The origins of MasterCard date back to 1966. The expansion of credit card usage grew exponentially through the following decades.

 

In 2004, PBS published a special report on the “secret history of credit cards.” One of the researchers explained that, “The almost magical convenience of plastic money is critical to our famously compulsive consumer economy,” as “With more than 641 million credit cards in circulation and accounting for an estimated $1.5 trillion of consumer spending, the U.S. economy has clearly gone plastic.” However, credit card companies do not seek as an ideal customer the one who pays off their cards on a monthly basis:

 

"The industry's most profitable customers, the ones being sought by creative marketing tactics, are the "revolvers:" the estimated 115 million Americans who carry monthly credit card debt.

 

[. . . ] Some experts say the profitability of credit cards really began twenty-five years ago [in 1979], when the banking industry successfully eliminated a critical restriction: the limit on the interest rate a lender can charge a borrower. Deregulation, coupled with a revolution in technology that enables the almost real-time tracking of personal financial information and the emergence of nationwide banking, has facilitated the widening availability of credit cards across the economic spectrum. But for some, the cost of credit is often far greater than it appears."[1]

 

Robert McKinley, founder and chairman of Cardweb.com and Ram Research, a payment card research firm, explained that, “[Banks are] raising interest rates, adding new fees, making the due date for your payment a holiday or a Sunday on the hopes that maybe you'll trip up and get a payment in late,” and thus, “It's become a very anti-consumer marketplace.”[2]

 

It was in the origins of the neoliberal era, in the 1980s, that the west saw the ascendancy of credit cards. While the western nations of the world, in collusion with international banks and corporations, plundered the ‘Third World’ through “structural adjustment” at the behest of the World Bank and IMF, the middle classes of the western world were lulled into a debt trap from which they would not emerge:

 

"Between 1980 and 1990, the number of credit cards more than doubled, credit card spending increased more than five-fold and the average household credit card balance rose from $518 to nearly $2,700. With the cost of money sinking and average balances climbing, profits soared."[3]

 

In 2004, “the total amount of outstanding revolving consumer credit, which is primarily credit card debt, reached $743 billion,” which was “nearly nine times the amount recorded 20 years” prior. Thus, “Credit card debt collection has not only become essential, it has become very profitable. The most recent data indicates credit card debt collectors generated $1.2 billion in revenue” as of 2004.[4]

 

In 1994, Federal Reserve figures in the United States showed that, “middle-class families remain stuck with unusually high debt payments as a proportion of their income.” As the New York Times reported:

 

"That high debt, resulting from stagnating wages while low interest rates have encouraged families to borrow, means consumers are living close to the financial edge, and ready to cut spending at any sign of economic trouble."[5]

 

One prominent economist even stated that, “The rate of consumer spending is not sustainable unless there is a noticeable pickup in the pace of income growth.”[6] This has not occurred.

 

In 2006, a major report released by a US think tank revealed that, “The middle class today is less prepared for an economic emergency, such as losing a job or visiting an emergency room, than at any time since the late 1970s.” The report, published 2 years before the outbreak of the global financial crisis, reported that:

 

"Despite a growing economy, a rising stock market and stronger corporate earnings that are helping the rich get richer, the middle class in America is caught in an unprecedented squeeze that makes it increasingly unstable."[7]

 

Among the conclusions of the report, it was revealed that, “Income for middle-class families has remained stagnant or flat since 2001,” while “Prices for big-ticket items -- housing, health care, college education and transportation -- have skyrocketed, leaving families unable to save.” Thus, “Middle-class families are borrowing record amounts of money to pay their monthly bills.” One of the lead research economists at the think tank stated that, “Families are being forced to live beyond their means, just to pay for the basics, such as housing and health care,” and that, “They are not only spending their current income but all their future income.” Further, the report revealed:

 

"To maintain day-to-day consumption, Americans are taking on record amounts of consumer debt, researchers say -- $5.2 trillion since 2001. In June 2006, families took on debt equivalent to 129% of their disposable incomes, a big increase from the 96% in March 2001.

 

Many homeowners are tapping into the equity in their homes, assuming more debt to pay for escalating energy and health-care costs. Falling home prices could force many of these middle-class families into foreclosure or back into apartments.

 

Middle-class families are also struggling with the ballooning costs of higher education. The total cost of tuition, fees, and room and board at four-year public colleges has increased 44% in the past four years."[8]

 

Of course, this is exactly what happened with the onset of the global financial crisis, as foreclosures ran rampant, and household debt levels soared to new heights. This issue is not only confined to America. In 2005, it was reported that:

 

"[T]here are more credit cards than people in the UK (67m, to be precise), and that personal debt is so huge Britain is more indebted than Argentina. If interest rates go up, the experts warn, the effect on ordinary people could be like a “time bomb”. Credit card debt accounts for £2 billion and Britain has in total a £1 trillion debt mountain."[9]

 

In 2006, it was reported that on average, “a Briton has twice the debt of a European,” and “Total consumer debt in the UK is at a record £1.3 trillion.” While Europeans are also mired in credit card debt, “the average Briton owes £3,175, compared to the average debt in Europe of £1,588,” as “Borrowers from the UK now account for a third of all unsecured debt in western Europe.”[10]

 

To be Continued ....

 Notes

[1]        Introduction, Secret History of the Credit Card. PBS Frontline: November 23, 2004: http://www.pbs.org/wgbh/pages/frontline/shows/credit/etc/synopsis.html
[2]        Ibid.

[3]        Robin Stein, The Ascendancy of the Credit Card Industry. PBS Frontline: November 23, 2004: http://www.pbs.org/wgbh/pages/frontline/shows/credit/more/rise.html

 [4]        Mark Chediak, When the Debt Collector Comes Calling. PBS Frontline: November 23, 2004: http://www.pbs.org/wgbh/pages/frontline/shows/credit/more/collect.html

 [5]        Keith Bradsher, MIDDLE-CLASS DEBT IS SEEN AS HURDLE TO ECONOMIC GAINS. The New York Times: March 28, 1994: http://www.nytimes.com/1994/03/28/business/middle-class-debt-is-seen-as-hurdle-to-economic-gains.html?pagewanted=1

 [6]        Ibid. 

[7]        Debora Vrana, Middle class living on the edge? MSN Money: 2006: http://articles.moneycentral.msn.com/SavingandDebt/SaveMoney/MiddleClassLivingOnTheEdge.aspx

 [8]        Ibid. [9]        Debt juggling, the new middle-class addiction. The Sunday Times: April 3, 2005: http://www.timesonline.co.uk/tol/money/borrowing/article376520.ece 

[10]      David Prosser, Britain becomes 'never, never land' as personal debt runs out of control. The Independent: September 28, 2006: http://www.independent.co.uk/money/loans-credit/britain-becomes-never-never-land-as-personal-debt-runs-out-of-control-417809.html