Burying the Middle Class, or The Fall of the Golden Billion

THE CURRENT ECONOMIC DOWNTURN, like others before it, has shattered many dreams. But this is the first to have devastated so many people at once, regardless of class or social status - from pauper to prince. Thanks, globalization.

Well, globalization is not entirely to blame. A crisis like the present one has never befallen such an affluent society, one that has become accustomed to prosperity and opportunities on a mass scale.

Despite the tensions of the Cold War (or possibly thanks to them), the decades of postwar stability generated an unprecedented surge in technology and consumption. Ordinary Europeans and Americans had been breathing the illusory air of the "end of history" long before Francis Fukuyama made his famous prophecy.

The industrial age unwittingly gave birth to its own gravedigger in the form of a bloated, top-heavy financial and banking sector whose loans were crucial to sustain the manufacturing and consumption boom. In the early stages of the current downturn, some noted economists claimed that it heralded a war pitting corporations against banks. Guided by the inertia of the status quo, the elites sided with the banks, pumping them with money to prop them up. But it was not long before the specter of a new wave of instability began to loom over the global economy.

Fear is in the air. In early July, The Wall Street Journal published a poll indicating that 94% of millionaires feared "street violence." This was followed in August by rioting in London. "We keep hearing England's riots weren't political - but looters know that their elites have been committing daylight robbery," a prominent Canadian author, Naomi Klein, wrote in The Guardian. She reflects on Argentina in 2001, when outraged residents "stormed foreign-owned superstores and came out pushing shopping carts overflowing with the goods they could no longer afford -clothes, electronics, meat..."

"Argentina's mass looting was called el saqueo - the sacking," Klein continues. "That was politically significant because it was the very same word used to describe what that country's elites had done by selling off the country's national assets in flagrantly corrupt privatization deals, hiding their money offshore, then passing on the bill to the people with a brutal austerity package. The government called a "state of siege" to restore order; the people didn't like it and overthrew the government."

Klein lays into Prime Minister Cameron for his tone-deaf response to the rioting: "British society, Cameron tells us, abhors that kind of behavior. This is said in all seriousness. As if the massive bank bailouts never happened, followed by the defiant record bonuses."

Angry voices also can be heard on the other side of the Atlantic. In response to the findings of the first ever audit of the U.S. Federal Reserve System, ordered by President Barack Obama, U.S. Senator Bernie Sanders said, "This is a clear case of socialism for the rich and rugged, you're-on-your-own individualism for everyone else."

Over the course of three years, the Fed provided trillions of dollars in secret financial assistance to some of the largest financial institutions and corporations in the United States and throughout the world. The Treasury gave no explanations as to why the aid was given to some rather than others. After protracted litigation, Bloomberg news agency obtained 29,346 pages of documents from the Fed under the Freedom of Information Act. Bloomberg uncovered that some recipients of this secret assistance had stated publicly that they had considerable amounts of cash on hand.

Other shocking facts revealed by the audit led Senator Sanders to remark, "No one who works for a firm receiving direct financial assistance from the Fed should be allowed to sit on the Fed's board of directors or be employed by the Fed."

Given the public's mood, elites will have a hard time making a social contract of moderation with the poor, as well as with the middle class, who know full well that the deal will seriously lower their quality of life. World elites, however, cannot offer anything else. According to Mikhail Khazin, head of the NEOKON expert consulting company, over the last 30 years of Reaganomics, the middle class did not earn like a middle class, but spent like one, financing their lifestyle with a credit binge. "Within the next five to eight years, the middle class as such will disappear, but its current members will never get over their loss of status." It appears, therefore, that Mr. Cameron is right, in his own, to take a hard line on the rioters, who are being dragged out of their homes and hauled off to court, where a woman is sentenced to five years for stealing a pair of shorts.

What's more, the formerly rich, brought down by the economic crisis, could join the disaffected middle class, the poor and the immigrants, although their resistance will not necessarily manifest itself as protests in the streets. The thing is, this crisis has dispelled yet another myth - the myth of the "golden billion".

No one today is talking or even thinking about the joys that economic maximalism will likely bring to one-seventh of mankind. At best, we're talking about a "golden" hundred million or even less. There is too little room under the sun of the super-rich, and so the millionaires may be in for yet another wave of bankruptcies.

How large and diverse will the angry mob be? Bankrupt millionaires, the impoverished members of the middle class, the disaffected poor, immigrants and young people... this would be an explosive mix.