A thing for the New Statesman here
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The British middle class is sinking. Is our politics big enough to meet the challenge?

An interesting statistic crept out of the Department for Work and Pensions last week, while the pubs of Britain no doubt buzzed with discussion about Jean-Claude Junker or how someone in Ed Miliband's office may or may not have recognised someone at a FT summer drinks reception.

According to the DWP, the average household income in 2012-13 was £440, unchanged on the year before. It represents the third consecutive year of stagnation or decline (depending on how you cut the figures). As the IFS have noted, in real terms this leaves median household income in roughly the same place as it was in 2002, and comes off the back of painfully slow wage growth from the start of the 2000s.

In the same week the increase in the price of homes reached an all-time high. Add in that a majority of people on typical incomes now have less than one month's income as savings, plus the slow hollowing-out of middle income jobs, and a pretty clear picture emerges. The foundations of middle class life – a decent income, assets, savings, pensions – are getting harder and harder to attain, especially for those just starting out. In many cases, debt has filled the gap.

This goes beyond just failures of the private sector. The welfare safety net has also become residualised. People on reasonable incomes can work their whole life and receive only paltry amounts when they lose their job. When it comes to both work and the state, people in the middle have been putting more in than they've been getting out for a long time.

It should go without saying that working class communities have had it hardest over the last thirty years. But the idea of middle class decline too is too often met with derision, especially among progressives.

Part of this is down to a distorted view of what "middle class" is, a popular association with what is in effect the upper middle classes; the world of piano recitals and Waitrose where "struggle" means difficulty meeting school fees. Of course, the middle class contains many like this too and they are doing more than fine. In fact, the most interesting development that experts havepointed to in recent years is the fracturing and polarisation of the middle class, between the upper echelons and those at the lower end. And previous generations who started out at the lower end of the middle class, bought a house at the right time, settled into a profession and now face retiring near the top may well be the last to make that journey en masse. In short, the bottom is falling out of the British middle class.

There's been a lot of talk about "narratives" recently. There's also been a lot of talk about how Ed Miliband doesn't have "a narrative". But in his defence, he's one of the few at the top of British politics to grasp this phenemenon, whatever his other difficulties. He's not totally alone – some figures on the right, for instance, including the brilliant Peter Franklin at ConHome, have twigged too. But wider interest is otherwise conspicuous by its absence, in Westminster at least.

Instead we get slightly echoey outdated debates about Europe, whether X or Y is "pro-business" or "anti-business", whether a particular view of public services is sufficiently "reforming" and so on and so forth. But surely the shape of that discussion changes in the face of such huge societal shifts? No doubt this failure to catch up is partly because the senior ranks of the commentariat are largely made up of those at the comfortable end of things (themselves probably among the last who can expect to make a good living out of a profession like journalism) - but it's depressing all the same.

To be fair, the answers are neither easy nor obvious. The likes of Resolution Foundation have been fantastic at laying out the problem of stagnating wages and ways to ameloriate it, but no one has come up with a wholesale plan for reversing the trend. Some of this is because it rubs up against global head winds and the modern divorce between power and politics. It probably requires trans-national solutions, or at least a revisiting of the way Britain approaches globalisation – a debate that hasn't even been opened here.

But those who over-play the inability of national government to fix things are also wrong, and usually have a vested ideological interest in doing so (in this sense the argument between those favouring a "bigger" or "shrunken" Labour offer in opposition is mostly phony, and a proxy for a bigger one about what can be achieved in government). Ideas that would be both effective and achievable include wholesale reform of corporate governance to include a significant role for workers; profit-sharing and other ways of spreading wealth; lower-cost routes into home ownership; breaking up and remaking British banking; decentralisation to cities; the prioritisation of vocational "middle skills"; prioritising British industry in procurement; reform of takeovers etc. When it comes to welfare, there is IPPR's National Salary Insurance scheme or SMF's "flexicurity" proposals.

All of this can only start, though, with a recognition that our current journey back to basically the same political economy as we had before the crash is not what success looks like. It wasn't good enough then and it isn't now.

Marx famously wrote:

The lower strata of the middle class... all these sink gradually into the proletariat, partly because their diminutive capital does not suffice for the scale on which Modern Industry is carried on, and is swamped in the competition with the large capitalists, partly because their specialised skill is rendered worthless by new methods of production. Thus the proletariat is recruited from all classes of the population.

Things may not be as apocalyptic or revolutionary now, but they are bad, and contradictions within modern British capitalism mean the lower end of the middle class is sinking. The entire middle is being stretched, squeezed and polarised as never before. The result is entire neighbourhoods – which on the face of things look serene – in fact struggling to keep their head above water, facing futures significantly less secure, less stable and less well-off than their parents. This shapes millions of people's everyday lives and influences their political attitudes, and it should influence our political discussion too. At the moment, though, it doesn't seem to be. Future generations will surely look back and wonder what on earth we were talking about instead.

Post for ShiftingGrounds--

The rise of resentment in America

Three days on from the re-election of President Obama, the hangovers that followed a night of celebration for Democrats have receded. As a nice bonus, the Republicans, by contrast seem to be facing a four-year long headache. The inquisitions and post-mortems have already began. Demographic shifts have altered the political landscape to leave them with a challenge on par in scale with that faced by the UK left in the late 70s and early 80s.

As it turns out, the GOP didn’t understand (or even want to) the nature of the country they so often profess to love. But if the emphatic defeat of Mitt Romney is provoking head-scratching from the US right about America 2012, it should also cause pause for thought among their bedfellows in Britain who – judging from coverage before and in the run up to the election – don’t seem to have updated their view of the country in twenty-odd years.

As Dan Hodges noted of his Telegraph colleague Tim Stanley back in September, these days “the problem isn’t actually with Lefty idealists transposing their dreams on to Obama. It’s Right-wing idealists who transpose their ideological romanticism on to the United States in general.”

In particular, a cornerstone of this is the notion that Americans have no patience for ‘European-style’ attacks on wealth. The story goes that broadsides on those at the top, calls for them to pay more in tax or curb profit-seeking, are resented by ordinary Joe’s who one day think they could be that millionaire chief executive or investor. Money men are always respected, success never resented, we are told. If we “don’t do God”, the Americans don’t do class politics. For years the British right – aghast at their countrymen’s growing resentment of the top 1% – have gazed longingly over the pond and repeated these mantras.

The plutocrats in the US have long spun the same yarn: bashing a billionaire isn’t only just wrong, it’s un-American. One of the stories of this election campaign, though, has been the total unravelling of this narrative.

For those of you raising a sceptical eye-brow, consider this. Romney ran for President on the basis of being a rich man – a successful businessman – and he lost on that same basis. His entire pitch was that as someone who had made it in the private sector, he knew how to create jobs and get the economy going. In times gone by this would have gone largely unquestioned and unparsed.

However, the Obama campaign (in a move straight out of the Rove playbook) turned this supposed strength into a weakness. Those in the Obama camp arguing for an attack on Romney’s record at Bain Capital won out over those preferring to hit the Governor on the safer ground of being a ‘flip flopper’. From early on the campaign sought relentlessly to define Romney in terms of what he actually did to make his money: outsourcing, asset stripping, firing at will, tax dodging. In doing so, they peeled Romney’s supposed ‘experience’ away from ideas of enterprise or wealth creation. And it worked. His reputation never fully recovered. In the home of free-market fundamentalism, Obama’s team were able to pick and win a fight about predatory verses productive capitalism.

This approach was replicated in the furthest reaches of the campaign. Again and again the Obama campaign counter-posed their candidate’s platform “For All”, as the campaign sticker blared, with that of Romney’s. Over and over, the phrase “millionaires and billionaires” tripped from the tongue of Democrats with scorn any time GOP plans were discussed (so much so it upset those poor dears on Wall Street). Tax rises on the very wealthiest also formed a key policy plank for Obama, as he separated the top 1% out from the broader ‘middle class’ in his tax plans.

All this is no small feat, and took some degree of courage when you consider Fox News has spent the past half-a-decade screaming that the President is some sort of Bolshevik. But the space for it was only made possible by a growing anger among swathes of American society at the country’s wealthiest business and financial elites. This comes not just from the financial crisis, but years of declining wages and living standards, as well as Wall Street excess and the saturation – ratcheted up since Citizens United – of US public life with money, SuperPACs and special interests. Romney’s categorical defeat at a time when all the economic indicators suggested he should have won will be remembered as the time that the groundswell of anger at the super-rich that has built up in Europe over recent years reached American shores, and swept the Republican candidate away.

Quite obviously, the US has not suddenly become a socialist nirvana. American society is still beset by huge disparities in wealth and power, and little basis for its transformation exists in a politics where the most progressive US president in forty years has governed as a pretty conventional liberal by UK standards. If taxes on the wealthy do go up as planned, it will only be to where they were under Clinton – far from levels as recent as the 1970s.

But the way in which Romney was defeated is nevertheless important. Fundamentally, it chips away at a notion that has proven vital to the maintenance of the status quo: that the behaviour of the wealthiest is somehow inexorably linked to the public good, and that anyone who is good at money-making must automatically be good at governing or economics, and afforded special status.

It also means that insufferable sirens of the Thatcherite right have one fewer place to point to in the world where their brand of rapacious economic sadism enjoys broad public support. That once-vaunted bond between free-market capitalism and liberal democracy just got weaker still.

In praise of ‘anti-business snobbery’

Post for LabourList
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This afternoon, David Cameron gave a speech condemning what he called “anti-business snobbery”. This comes after months of self-pity in the business community over rescinded bonuses and the ‘responsible capitalism’ agenda.

This is likely to find a receptive audience in parts of the Labour right, many of whom have spent much of the past 18 months trudging around assorted conferences and events wearily rolling their eyes and waving uninspiring documents that urge the Labour party to match George Osborne every step of the away in his quest to be “relentlessly pro-business”.

The trouble with all this, and with the Prime Minister’s speech, is that in modern day parlance ‘pro-business’ is more often than not a proxy for the total abdication of critical faculties in the face of anyone with a bit of money.

Running through Cameron’s speech is the familiar premise that what is good for business elites and profits is always and inherently good for social progress and the economy at large. This logic has run through the approach politics has taken to economics over the past 30 years, as successive governments went weak at the knees at the sight of anyone calling themselves a ‘business leader’. The corollary is that all the state can do is remove countervailing forces to the ‘creative destruction’ of capital and just shadow it in awe – skill workers up appropriately, provide a basic safety net, and so on.

But all this is just not true. Three different phenomena that have emerged in the past ten years prove it so. Firstly, the unchecked growth and detachment of the financial sector from the real economy, leading directly to the financial crisis, deficit and drying up of credit for small businesses. Secondly, the separation between ‘wealth creation’ and wage growth, and the resulting explosion in inequality and damage to domestic demand. Thirdly, the slow polarisation of the labour market whereby middle income jobs are increasingly outsourced or replaced, leaving a bulk of low-paid, un-unionised jobs at the bottom and a tiny professional-managerial elite at the top; in short, a ‘social mobility’ ladder with the middle rungs knocked out of it. On top of all this, energy and train companies have turned their respective markets into effective cartels.

Some of this is the result of technological change it would have been hard to prevent. But much of it is a result of decades of deference to ‘business leaders’, an unshakeable faith that what is good for them is eventually good for the rest of us, and the hands-off approach to the private sector and globalisation which flows from it.

But none of the resulting damage should even come as a surprise to any progressive. It is in capitalism’s DNA to maximise profit and short-term ‘shareholder value’ by pushing down labour costs and wages. While there remains no coherent alternative to capitalism, this profit motive is regrettably necessary – but it should not be allowed to go unchecked or unquestioned. The business community is an interest group like all the rest. If we let their leading lights dictate economic policy, we’d be reducing the top rate of tax and abolishing the minimum wage. Does anyone outside of top two tax brackets think this is really the route back to prosperity?

It is the job of the CBI and their ilk to scaremonger and threaten – on the rare occasion the left has the confidence to persevere we find it is a rouse, as it was with the minimum wage in the 1990s. It’s only an outburst of ‘anti-business snobbery’ which forced Tesco to pay a wage and offer a job to the unemployed – I haven’t noticed their business model collapsing overnight. Similarly, the austerity agenda (complete with cuts in corporation tax) endorsed by our business establishment has proven a total failure.

A fair and functioning economy needs entrepreneurs, yes, but it also needs workers on decent wages with decent security and job prospects. This is a caveat we too often neglect when we fetishise ‘wealth creators’. Real wealth creation should be a collaboration. If someone wants to found the next Apple or Dyson, fine – good for them – but it is the role of the state and organised communities to ensure they pay tax, good wages and don’t try to monopolise the meaning of public good. If that makes me a snob, then sign me up.