In the US, the ratio between savings and credit-card debt is at its worst in 12 years. Nearly two-thirds of Americans feel their economic prospects have diminished over the past two years. Housing purchases are suffering huge declines as costs have reached the highest levels since 2007, and that’s before the onset of what many predict could be a serious recession. Overall, in the six months from June, American households lost a remarkable $2.3 trillion in value, according to Redfin.
Some of this can be traced to the pandemic. Industries like hospitality were hit especially hard, as were all manner of small businesses. As late as April 2022, more than two years after the pandemic began, two-thirds of American small businesses were still struggling. By December 2022, four in 10 still could not pay their rent, with hundreds of thousands closing down in the first year of lockdown. Schoolchildren, particularly from the poor and working class, have suffered both from lost learning and social isolation.
The pandemic and its aftermath also expanded an already evident class divide. With ever fewer middle-class neighbourhoods, Americans have become increasingly economically segregated. But two classes have benefited. One was the government clerisy, a class of professional bureaucrats who gained and exercised a level of power unprecedented in peacetime. This power will not willingly be surrendered, with many viewing lockdowns as a test run for addressing climate change.
The end of the pandemic has shaken up the tech economy, to be sure, driving massive layoffs and plummeting valuations. Yet none of this threatens the oligarchy’s grip on virtually every critical aspect of technology. The tech of the future – AI, cloud services and underwater fibre-optic cables – is almost totally in the control of oligarchic hands, or in the hands of Chinese firms. The once proudly individualistic culture of ‘garage startups’ is now dominated by corporate giants led by the richest people on the planet.
The key issue is property. The changing class dynamics are reflected by patterns of land ownership. House prices have grown three times faster than household income over the past two decades, as the OECD noted in 2019. In this new order, writes economist Thomas Piketty, ‘inherited wealth will make a comeback’. In France, inheritance as a share of GDP grew from roughly four per cent in 1950 to 15 per cent in 2010. Millennials who received bequests inherited more money than many workers make in a lifetime. The growing importance of inherited assets is even more pronounced in Germany, Britain and the US.
These trends have been exacerbated by a climate-driven housing policy that seeks to pack people into dense urban areas. Such policies are reversing 75 years of expanding property ownership in the US, Canada, the UK and Australia as well as other high-income countries. Property ownership, widely seen as key to middle-class status, is morphing into a rich man’s game. In the decade from 2010, the proportion of real-estate wealth in the US held by middle-class and working-class owners fell substantially, while that controlled by the wealthy grew from 28 per cent to 43 per cent. In this period, high-income households enjoyed 71 per cent of all gains from housing wealth, while the shares of middle- and lower-income families declined precipitously.
For many, especially the young, the chance of ever owning a home seems remote. This is bad news for inequality. In 2019, homes accounted for roughly two-thirds of the wealth of middle-income Americans, with homeowners enjoying a median net worth roughly 80 times that of renters, according to the Census Bureau. Yet large financial institutions, like the UK’s Lloyds Bank and its American counterparts, are today working overtime to buy up the dwindling supply of single-family homes. In a stark illustration of the generations’ changing prospects, only a third of UK Millennials owned a home in 2018, compared with almost two-thirds of Baby Boomers at the same age.
The middle class is also under pressure from green ideology. Perhaps the once aspirational middle orders will resign themselves to renting – a future where they will ‘own nothing and be happy’, as the gnomes of Davos suggest. Maybe so, at least with sufficient drugs and videogames. But as the younger generations age, they won’t be able to fall back on their own assets, and instead will have to rely on the state.
Nor can they count on a reliably growing economy, the traditional engine of upward mobility. Today’s green theology, adopted by both the bureaucratic clerisy and oligarchic elite, has little room for the robust economic growth that might sustain a comfortable middle class. Meanwhile, the elites’ wealth continues to rise regardless, thanks to asset inflation. In the US, recent impressive job-growth numbers came predominantly in lower-wage service professions like restaurants and hospitality. In the past three months, almost two-thirds of all new jobs occurred in historically low-paying sectors.
Rather than expanding the economic pie, green ideology generally favours what is labelled ‘de-growth’, an alarmist outlook based on assumptions about the environment that are often exaggerated or plainly untrue. This quest to reduce carbon emissions at all costs limits the scope for higher-wage jobs, even in traditionally prosperous countries like Germany. After all, skilled jobs, notably in manufacturing, depend heavily on reliable and affordable energy.
Well-funded green advocacy groups are a particularly damaging influence. As energy commentator Robert Bryce has shown, green NGOs received well over four times as much revenue in 2021 as those NGOs promoting nuclear energy or fossil fuels. These groups are also now openly paying ‘journalists’ at places like the Associated Press and NPR – outfits which, surprisingly, prefer climate-change fear-mongering to critical thinking. These reporter-acolytes consistently project a nightmare future of food shortages, devastated coastlines, endless droughts and irreversible poverty. Amid such alarmist coverage, as many as 56 per cent of young people worldwide believe that ‘humanity is doomed’, according to a recent survey in Lancet Planetary Health.
This catastrophism and embrace of austerity reflects a worldview that is best described as ‘eco-medievalist’, in which the lower classes will be expected to make sacrifices. They will be unable not only to buy homes, but also to own cars, especially electric cars, which are affordable only to the rich. As part of a green agenda, some cities are even eyeing policies to restrict the use of cars outside of one’s immediate neighbourhood, as well as making parking ever more difficult.
This assault on the middle class is already evident in ultra-green California and Germany. In California, climate-centred regulations have helped chase away many blue-collar jobs, with ultra-green policies creating what attorney Jennifer Hernandez has labelled the ‘Green Jim Crow’. This draconian policy agenda essentially bans new housing construction on the urban fringe, while wiping out natural gas – frogmarching citizens to an all-electric future which will be both high cost and based on an inconceivable increase in grid capacity.
Indeed, as Deutsche Bank’s Eric Heymann has noted, massive reductions in greenhouse-gas emissions can only come at the cost of declining middle-class standards of living, even in countries that were hitherto widely prosperous. To achieve this reversal, Heymann suggests, ‘a certain degree of eco-dictatorship will be necessary’. In a similar vein, environmental scientists at Leeds University in the UK are now proposing ‘Second World War-style rationing of petrol, household energy and meat’ to fight climate change. Other climate clerics have proposed such dietary strictures as going all-vegan and even eating insects – the new religion’s equivalent of Catholics’ meatless Fridays.
In contrast, the upper echelons of society – like the medieval nobility and clergy before them – will hardly feel the difference. ‘Net Zero’ and its effects won’t stop the higher-ups from riding around on private jets, acquiring massive estates and yachts or even shooting their girlfriends into outer space. Indeed, for some, green ideology provides an opportunity, as the uber-wealthy capitalise on subsidies for wind, solar and electric cars. After all, central to Elon Musk’s megafortune is his clever bet on green incentives through his EV giant, Tesla.
To placate the struggling masses, there has been a steady move in Europe to expand state support. Meanwhile, in America, oligarchs including Musk have argued for a guaranteed ‘universal basic income’, in a post-industrial version of what Marx derided as the ‘proletarian alms bag’. This suggests that the once-ambitious middle-class could be reduced to a modern version of the Roman plebs, who survived by the willingness of the senate and later the imperial regime to provide ‘bread and circuses’. Accordingly, the Wall Street-friendly Republicans, eager to quell discontent about these growing class divides, are increasingly looking at transfer payments as a way to keep the commoners satisfied, or at least to stop them from brandishing pitchforks.
Faced with the prospect of gradual extinction, will the middle class rebel? In Europe, farmers, suburbanites and small-business people are pushing back against policies that threaten their livelihoods. In the US, Gallup notes that public approval for key institutions – congress, the universities, large corporations – is at a historic low. Similarly dismal readings can be found in Europe.
Overall, the working and middle classes are losing faith, particularly the young. As political scientist Yascha Mounk found in 2018, while over two-thirds of older Americans consider it ‘essential’ to live in a democracy, only one in three Millennials feels the same. European youths express similar dissatisfaction. To be sure, such rampant distrust of institutions like the media can be corrosive to a society, but a healthy measure of scepticism, when accompanied by a willingness to speak out, also represents the first step in challenging the powerful.
What’s more, the flight from big cities in the 21st century, which accelerated post-pandemic, could hamper elites’ control over daily life. When people can live and work where they prefer, they have a stronger sense of independence and agency, finding themselves more invested in their local communities. The current surge in new grassroots startups, many located on the urban fringe, also poses an intrinsic challenge to the power of Wall Street and corporate hegemons.
Other expressions of dissent may also include labour unrest, as America’s trade unions attempt to reverse a decades-long decline. In the past year, strikes have targeted America’s universities, companies such as Amazon and even the media, including the New York Times. If the mainstream left could only detach itself from extreme environmentalism, it would see in these developments a great opportunity.
Indeed, whether coming from the right or left, resistance to centralised power is best framed in economic terms, such as antitrust measures and exercising congressional control over Big Tech. It is here that populist conservatives and progressives can find common ground.
Ultimately, as we are reminded every day by the war in Ukraine, humans will never readily submit to arbitrary control. Just as feudalism gave way to the Renaissance and the subsequent growth of democracy, and the fall of the Soviet empire birthed free nations on its periphery, today’s working and middle classes are still agitating for a vibrant democratic economy. Ultimately, their ability to alter current conditions rests with restoring the spirit that overcame the first feudal era.
Joel Kotkin is a spiked columnist, the presidential fellow in urban futures at Chapman University and executive director of the Urban Reform Institute.