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Corporations Plan for Post-Middle-Class America

April 9, 2012 4:25 pm 16 comments

Citibank branch location. Photo: ficklefinance.com.

American corporations have pretty much written off the middle class. Their actions declare that the middle class is moribund. And they should know since they have been in the front lines shooting down and decimating the middle class. Indeed, American business has dismantled much of its manufacturing and has eliminated untold numbers of other middle class jobs, sending them overseas where cheap labor fattens corporate profits at the expense of American workers. That’s why the employment and housing markets are struggling on life support, food stamp use is at an all-time high and the ranks of the working poor are swelling — while corporate profits soar and the S&P 500 stocks show the best first quarter since 1998.

In view of the assault on American jobs and workers is it any wonder that a Stanford University study reveals a dramatic drop in American families living in middle class neighborhoods — from 65 percent in 1970 to 44 percent in 2009. Robert Borosage, President of the Institute for America’s Future, adds thisalarming note: “The broad middle class — the triumph and strength of America’s democracy — is sinking. Unless we change course dramatically, we will become even more a nation of haves and have-nots.”

Brookings economist Ron Haskins dismisses the notion of a suffering middle class. In his Washington Post commentary on March, 29th, “The Myth of The Disappearing Middle Class,” he argues that “when the insurance value of health care and the value of certain government transfer payments are included in income… the disappearing middle class appears pretty healthy.” Doesn’t this sound like Mitt Romney’s comment — “I’m not concerned with the very poor because we have safety nets there” — applied to the middle class? So I guess we don’t have to worry about anyone. Let’s break out the champagne!

But Jared Bernstein, Senior Fellow, Center on Budget and Policy Priorities, disputes Haskins rosy picture and insists that the middle class has been “squeezed” by the economic downturn. “Squeezed” doesn’t adequately capture the dire state of the middle class though, confirmed by the actions of U.S. industries that are revising their business plans.

What is corporate America’s response? Rather than mounting crash programs for generating solid middle class jobs they have figured out how to profit from the sinking ship.

Corporate America is shifting its focus in product development and marketing to serve the “hourglass economy.” The hourglass has two chambers connected by a slim channel. Translated into economic terms, or better yet, the emerging picture of America, the two chambers represent rich and poor, with virtually nothing in the middle.

Worse, while the traditional hourglass has two equal chambers, the economic hourglass does not. One chamber contains a small percent of the population and most of the wealth and the other is filled with the bulk of Americans, who have little access to resources and diminished hope for prosperity. The hourglass economy has become so entrenched that Bloomberg News credits it with dividing Americans and defining U.S. politics.

Leading the rush into the hourglass economy are some icons of American industry, like Proctor and Gamble. Here’s what Melanie Healey, group president of P&G’s North America business, said to the Wall Street Journal about what her company did when it started losing market share to competitors who were catering to the low end market: “It has required us to think differently about our product portfolio and how to please the high-end and lower-end markets …That’s frankly where a lot of the growth is happening.”

P&G is not alone in catering to the top and bottom of the hourglass and ignoring the middle, according to WSJ columnist Ellen Byron. H.J. Heinz Co is expanding its offerings of lower-priced products to celebrate the hourglass model. And shooting for the high-end, Saks, Inc. is growing its line of pricier products to serve the deep pocketed consumer segment that accounts for most of its growth.

Many other retailers are generating impressive year-to-year gains by marketing to the top and bottom consumers including Coach, Lululemon Athletica, Whole Foods, Family Dollar and Costco.

The hourglass economy is even impacting the “green” industry. Eco-friendly products are typically costly and, therefore, appeal to wealthier consumers. Green marketers are struggling to find strategies for making their products appeal to a cash strapped low-end market.

Citigroup was quick to notice the hourglass trend that was taking root in 2009. To help investors cash in on the demise of the middle class Citigroup recently issued an hourglass investment advisory that highlights 20 stocks of companies targeting low-end consumers and 15 companies targeting the high-end ones. Showing that the hourglass economy is real and gaining momentum, Citigroup’s hourglass index posted a whopping 56.5 percent return between Dec. 10, 2009 and Sept. 1, 2011, according to financial reporter Patrick Martin.

Since business models are projected well into the future, corporate America’s hourglass strategy forecasts a long grim road ahead for the middle class.

Yet politicians continue to express their heartfelt concern for the middle class, pledging to shore up this segment of the population. Are they just placating us while secretly supporting the hourglass strategy of their corporate sponsors? Is it possible that you and I know that corporate America has abandoned the middle class but that politicians are ignorant of this stark reality?

16 Comments

  • Why is speaker Boehner blocking E-verify??? http://www.youtube.com/watch?v=08qq3087OU

  • One reason the middle class is shrinking is the Baby Boomers are aging out of the consumer cycle, retiring at a rate of 10,000+ a day. The baby boom was followed by the baby bust and emerging globalization.

    Now, to make up for lost middle income baby boomers, the government, at the insistance of of business keeps the borders wide open and we are importing poverty. But, they will still consume stuff made in China, that is why they are coming.

    http://exm.nr/ihZDXE

    • ah yes.. it’s the immigrants fault.. what else could it be… dimwit

      • Edward Murral

        But he’s right, dimwit!

      • lol, not ALL of the squeeze is due to immigrants, but some of it is. Immigrants, legal and illegal, compete with Americans for jobs and drive down wages for everyone. Alan Greenspan even told us that’s why he favored more immigration. It’s not accident we’ve had record immigration accompanied by stagnant household incomes, record high unemployment, and an increasing share of this country’s wealth held by the top 1%. It’s also no accident that poverty in this country has increased and that the number of Hispanic children living in poverty now, for the first time, exceeds the number of non Hispanic White kids who, even though there are several times as many Whites as Hispanics.

      • Didn’t say it was the immigrants fault, dimwit. You should try reading before spewing.

  • If I recollect correctly slavery ended? because of economic forces more than moral factors. If economics forces make slavery desirable again might we not see its return?

    • Slavery of the (“99%”) is the goal of the (“1%”)and their political leaders and “Govt.-Hacks” (In my opinion). After all “Money Can Buy Everything”. It has bought a lot of Our Govt.Official’s and many more of them from country’s around the world.It has bought the natural resources people and treasures of world. There is no place for the rest of the worlds inhabitants to hide. Citizens you have to eat and drink to survive. your “Master’s” own and control all the earth’s natural resources, submit to your master”s U.S.A. submit now. The corporate plantations are accepting worker’s now. Work from cradle to grave on only one plantation if your lucky … Money-Rules. Vote-in politicians who represent the (“!%} and be a good loyal slave submit now. Scary huh?

    • Slavery has long been a foundation of US food production. It did not end with the Emancipation Proclamation. After these slaves were “freed” they were designated partial persons by the government and were limited in jobs, working as sharecroppers (virtual slaves) or for low low wages. Many were arrested for “vagrancy” and put to work in fields with no pay. This lasted well into the 40’s. Nowadays many farm workers are illegals, lured here by the promise of jobs to send money home, once they arrive, charged large for travel, substandard housing and groceries , exposed to dangerous chemicals and paid almost nothing

    • Seriously? You don’t believe that having to work to pay taxes which pay off interest on the national debt to a private bank who is holding the citizens of the US hostage to fraudulent fiat currency is NOT Slavery?? I guess you’re the recipient of the Gubmint edumacation and don’t know or understand what a Sovereign individual is, or the FACT that the US was founded as a REPUBLIC, NOT a Democracy….

  • M.Riphenburg

    We the citizens of the U.S.A. need to “vote” the “political-hacks” of the (“1%”)out of office and put someone into power who will work for the (“100%”).”Wake-up” U.S.A. or all we or our children will be carrying in the future will be a shoe-shine box for the rich-man’s shoes and a gun for the rich-man’s wars; (“Serfs”) to our own Govt.and their (“Master’s”) the (“1%”). Politics and the (“Ballot-Box”) is where the battle for this country’s future is taking place. It”s happening now as we comment. It’s our and our children’s future that the battle is for. Make your votes count…

    • Bernard Starr

      Unfortunately, the 99% is not a cohesive organized group—and most have been brainwashed by politicians into embracing policies that hurt them. Until the 99% wakes up we will continue on the downward spiral.

      • M.Riphenburg

        Perhaps until the sounds of the “Liberty-Bell” being rang again and again and again by those who are awake and truly care, wakes up enough of those that are not yet awake to allow the “Hundredth-Monkey-Syndrome” to “kick-in” so that they too will all “Catch-On” and Vote these “Puppets” of the (1%) out of Govt. It can be done. Remember; “I HAD A DREAM”. Wake-Up the entire (“100%”)of the U.S.A. to the reality we face as a nation today if we don’t act… “Serfs”to our Govt. and their Masters the (“1%”). In my opinion.

  • Marx did mention a classless society.

  • Revolution is the Solution!

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