The Death of the Middle Class?
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Photo: Chris Larsen
There’s good news in the stock market, which is very comforting given how tired we’ve all become of the endless parade of bad news. Unfortunately this is no time to be sticking our heads back in the sand thinking all will be back to normal in a few months. This is not just the end of the recession, it’s the end of the brief run of the American middle-class that began just after WWII and finally collapsed from exhaustion last year. Unfortunately this middle class will not recover; the patient died.
This will have huge implications for all Americans. First, if you’re already poor in America, take solace. The huge numbers of former middle class now joining you will actually make things better as middle class refugees demand free health care, free public transportation, free education, and maybe even Hong Kong-style free housing. For the poor it will be like having Martha Stewart as a cell mate. You’re still in jail, but the place will feel much more livable.
If you’re part of the rich elite, you’re also much better off. Now your start-up successes and capital investments are global, so your wins are 5 times what they used to be. And with the final death of “the mass affluent” (remember that?), there will be much less competition for the finer things in life.
Unfortunately, for the middle class, a persistent dread is upon you. You’re living with the scary lump that doesn’t really hurt yet but will be fatal if left unchecked. Get treatment now!
First, save in a way that makes Suzie Orman seem like MC Hammer – save 20% to 30% of what you make. Get out of anything that looks like a permanent liability. A 30-year mortgage? Even refinancing your rate to zero is just rearranging the chairs on the Titanic. The whole concept of 30 plus percent of your 2009 middle class income for 30 years is guaranteed poverty. Get to safe ground fast – back to pre-middle class ratios – 5 year TERM mortgages or rent that will plummet as middle class real estate collapses with its owners. Saving for 2009 style college costs? No! The $80K degree for the $25K job won’t survive either. Just save generally and wait for the coming totally free online classes that our children will take for granted.
Most of all, if you’re middle class or poor, look ever more urgently on your ability to become the rich elite. It will be easier and more possible than ever before as everything is rewired and both the market and tools to succeed become more democratized and the current elites lose permanent control.
Help trusted family members or your closest social networks to class jump. As the world splits into rich and poor – one lucky elite could support 50 family or social members. We will expect this of our rich elites – who could be any of us. A few million rich could become the creators of hundreds of millions of adequate jobs. Not in their companies, which will be built on technology and outsourcing (as popular as Twitter is, it only has 55 employees), but personally. In fact, expect a tax structure that encourages this – high taxes on the rich with huge tax credits so that if you employee 50 people you’ll have lower taxes than today. If this sounds outlandish – think back to pre-middle class times – it was easy to have 20 service people – drivers, cooks, assistants. Taking this further out, the rich will employ artists, musicians, poets, writers and thinkers. This becomes the backdrop to the crushing changes ahead and sets the stage for the eventual utopia that’s been called the “end of work.”
Chris Larsen is Chief Executive Officer & Co-founder of Prosper, America’s largest peer-to-peer lending marketplace
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34 Comments so far
leave a commentYou are dreaming about the free online courses–are you kidding me? never going to happen. the elite will still go to yale and harvard, thus keeping the status quo. “End of work?” Let me guess, everyone will live on a commune, where some are artists, some farmers, and some just lead. I think we’ve seen this before in a pretty large country and I’m pretty sure it didn’t work. Dude, you’re in a fantasy world. It sounds nice on paper, but it’s a dream nonetheless.
Chris, you are absolutely wrong about the free online courses.
UC Berkeley has been a part of Creative Commons nonprofit corporation dedicated to making it easier for people to share and build upon the work of others i.e. study and actual course material.
Recently everybody joined the team: Yale, Harvard, MIT, are all amongst members of free education content on-line. Check out the consolidation of all these courses on http://www.academicearth.org/.
iTunes U is now offering courses to your mac, Iphone etc.
So, it is just unfair to state that is “never going to happen”.
It will happen and it is happening!
The reason for this is simple, the information that are freely available helps our nations evolve, collaborate, and bring our lives to a new high.
That is exactly why internet blogging, social collaboration, etc., have success it is had so far.
Not going to happen?
http://about.ck12.org/
http://education.zdnet.com/?p=2935
This week, the efforts of the Foundation seem to have paid off, as they provided electronic textbooks through a California initiative that were clearly more aligned with state standards than any electronic texts from major publishers. According to a report from the California government,
“Of the 16 free digital textbooks for high school math and science reviewed, ten meet at least 90 percent of California’s standards. Four meet 100 percent of standards, including the CK-12 Foundation’s CK-12 Single Variable Calculus, CK-12 Trigonometry, CK-12 Chemistry and Dr. H. Jerome Keisler’s Elementary Calculus: An Infinitesimal Approach.”
It’s already happened. Get with the times.
Ummm, ever heard of OpenCourseWare?
http://ocw.mit.edu/OcwWeb/web/home/home/index.htm
This sounds a lot like a return to feudalism… too bad only those with “worthless” liberal arts degrees know enough about feudalism to see the comparison!
Sorry, you are wrong. Yes, technology lets a couple of guys start a website that millions of people use. This means that if two guys are successful then millions of other dudes will be right at their heels, willing and able to take away their customers.
Twitter is a good example. They are very popular now, yes, but THEY DON”T MAKE ANY MONEY. At some point they will have to start adding adds/charging people/whatever. This will anger some of their users who will then move over to the next service offered by two guys with a website.
This is Economics 101, the more easy it is to compete, the more competition there will be, the better of CONSUMERS are!
Mr. Prosper.com is just having wet dreams about how he will be one of the few anointed elite in the new Economy. Well, keep jerking off pretty boy while I hire myself five Indian coders to re-produce your site and steal what little business you have, which you yourself stole from lendingTree.
Seriously mint, what’s with moronic blog posts! Love your product, but keep this shit up and its wesabe for me (again, proving my own fucking point).
I can’t figure out whether this is painting a future dystopia or utopia.
I cannot believe Mint.com posted something (anything!) from Larsen… Mint.com just lost some of it’s integrity today.
Come on Mint, get it together!
dear mint.com,
I use your service and its fantastic, but you’ve got to drop this ghostwritten blog thing. You’re losing a ton of credibility in your key demo (web-savvy, finance-minded blog readers) when you let random people post on here and degrade your solid brand.
(another post that was almost universally panned: http://www.mint.com/blog/trends/health-care-reform-impact/) articles like these make me think you have a 2-bit operation and that I should rethink trusting you with my info.
Roth/retirement info, how to save money, and stuff like that are great for the blog. get rid of this crap.
Any news on when Prosper will become available in Missouri ..?
This article is retarded. People can afford to own housing, just not houses that are out of their price range. People need to just learn to live modestly and only live in a home that costs 25% of their income. They need an emergency fund saved as well to cover 4-5 months of all their expenses. And they need to buy used cars that they can afford completely with cash without financing. It is overdoing monthly obligations that led to this mess.
As a member of mint I am becoming increasing uneasy with my connection to this company. The articles are betraying a more facist bent. I find this looter mentality disturbing. There is no “utopia” where no one has to work anymore. The reality is that this “Utopia” will subsist on the backs of those that work hard and try to achieve something for themselves. They will be subject to a host of parasitic looters. So what is the reward for working hard? You give it to those who don’t want to work. With this incentive who would want to work hard only to have it taken from you by these parasites. So everyone becomes parasites, and there is no one left to do the work needed to support them. Nothing is free in life, you have to work hard for what you want.
Isn’t it just as likely that the elite will use this crisis as an opportunity to further their claims on the better things in life and not only push the middle class into the lower class, but keep both there permanently?
This would seem to be far more likely given the historical selfishness of humanity, and even the current selfishness of the elite when you look at countries that have poorly defined, or non-existent, middle classes.
It seems like this would be an excellent time to increase the cost of education so that only the elite can afford it, increase the cost of luxuries, and decrease both the opportunities and the availability to free or cheap services that would have formerly allowed the middle and lower classes to jump up a notch.
In the end, the masses are far too complacent to ever question the world that the elite puts in front of us and the likelihood of anything more than slight grumbling from the lower classes is extremely low. We’re all too busy worrying about the dropping value of our houses, the chances of losing our jobs, and what’s on TV tonight to give much thought to the kind of oppression that could be levied against us, and way too busy picking out IPods to do anything about it.
@ryan, thanks for your comment. MintLife strives to be a forum for multiple viewpoints on topics relating to both personal finance and the economy. Chris Larsen’s post is an editorial and does not necessarily reflect the opinion of Mint, our employees, or our investors. We’ll continue to include guest posts as part of the mix but rest assured, we’ve got plenty more articles on how to save money and other personal finance basics in the works.
It would be beneficial to all if the top of this article started out with a clearly shown content type title… i.e. “Guest Editorial”.
It should also have a tag cloud suggesting its content and direction. I found this to be a complete waste of my time and I fully agree with Ryan on the loss of credibility.
@Lee Sherman,
You may want to work that disclaimer in your comment into your template for MintLife articles. The article here was disturbing (ryan’s comments) until I read your post. Its clear you’re going for both useful articles AND editorials, so each category should be stamped very visibly as such.
Thanks,
Mike
@ryan : +1
@mike that’s a great idea and one that we’re already considering.
Chris,
“The death of the middle class” is an interesting and historically and philosophically rich idea–one that, when posted on Mint.com, grabs my attention–but when you don’t describe the idea’s underpinnings or offer a link to a description of them, it’s unfair to expect a reader to interpret your headline as anything but a “dramatic attention grabber.”
You cite the “end of work” theory (Rifkin? Negri?) to support the end of your post. Unfortunately, you don’t offer the reader the version of the theory from which you pull your dramatic social scenario. Consequentially, the way you use the complicated social/political theories at the end of your post seems pretty careless. Honestly, I can’t tell if you’re more than vaguely familiar with these theories.
For example, proposing that the rich will receive tax exemptions if they hire many people and that this will lead to “the eventual utopia that’s been called the ‘end of work’” is an complicated and somewhat counter-intuitive idea. Inherently, anything that predicts the distant future remains debatable. I think these and many other assertions you make require the space of a full-length article (if not a PhD’s dissertation or a book). It’s understandable if you don’t want to elaborate upon the ideas you (mis-)use, but it’s still unfair and thoughtless to include it in a provocative 7 paragraph blog post on a pretty high-profile site UNLESS you take the extra few minutes to helpfully to cite (and, hopefully, link to) your sources.
I’m not trying to say you’re claims are wrong, only that, considering what you’re offering here, there’s no reason for the reader to think that they’re right.
here’s some extremely preliminary citation. Do you have more in depth sources?:
a summary of Rifkin’s argument:
“The End of Work” (from Rifkin’s site)
http://www.foet.org/books/end-work.html
and a counter argument:
“The End of Work or the Renaissance of Slavery?” by George Caffentzis
http://multitudes.samizdat.net/article1927.html
p.s. If the headline doesn’t ’sit well’ for me, the sentence “First, if you’re already poor in America, take solace.” definitely makes me sick to my stomach. Not to take it out of context, but, come on…really? This is closer to The Onion than personal finance help.
p.p.s. i was just going to email this to you, to avoid this comment being misconstrued, but your email address is not listed on mint or on prosper’s website and the person at Prosper’s call center said he wasn’t allowed to give me your email. I can’t even send Prosper an email without signing up, so, here ya go.
Well said John.
After reading this, would you put your hard-earned money into this clown’s web-based mechanism for the re-distribution of wealth (Prosper.com) – where 40% of loans go bad?
I think this is a little too much, Yes, we need to save more than we are now, and it is smarter to not have debt, but I don’t see the USA become a class society.
Thank you soooooooo much for this article!!! I don’t see politics in corporations to last past this recession. When everyone is in it for themselves that breaks the structure down. My assumptions are the same and my ideas about business are in sync. I’m going to Prosper now.
@desiree – you are better off going to Kiva if you want to give your money away… because that’s just what will happen to you at Prosper if your lend money… odds are good it will not get paid back fully… look at their own self-published delinquency stats… yikes, bad bad place to be a lender.
Save 30% of my income while paying off my mortgage in 5 years? What planet do you live on where that is even possible? This post is ridiculous.
This environment is just an echo from the fuck-the-poor republican administrations. The middle class isn’t going away. My plain-vanilla 401K’s went down 40%, now they’re down 15% from their peak. Whoop-de-fucking-do. My house is still worth twice what I paid 14 years ago. So I’ll never pay it off, I’ll just downsize the equity into a condo when the kids are off in college and I’m too sick to work anymore. Anyone who’s been fucked because they just started out in their career in 2001 or fell for some retarded refinance or low-down scheme have plenty of time to recover. It will take a long time to work through it – 10-15 years after the current taser-in-the-ass is over and we actually have to pay for things – but that’s life.
5 year term mortgages? Renting? Jeez, you are a loser.
Agree with most of the comments here… this article stinks. This guy also knows nothing about what it is like to be middle class or poor in America.
First disappointing thing I’ve seen on mint.com.
Chris (I doubt he will ever read this but here is my comment anyways),
I remember listening to your speech on Stanford’s entrepreneurial thought leaders podcast. You spoke intelligently, from experience, about the online lending industry. You talked about overcoming regulatory barriers and the sustainable competitive advantage of being one of the only firms able to have overcome various states regulators resulting in the ability to almost exclusively conduct your particular online lending business model.
However this is a departure from that and now you are coming across like a soothsayer, talking about Utopia and predictions that you cannot possibly backup. Also if you were not the CEO of a well-known corporation I doubt anybody but yourself would care to publish this silly article. The publisher and yourself are obviously trading on your name and background in order to get readership to the site.
@ Larry. I am not yet planning on giving money away. I actually am interested in meeting investors. I am an idea person. Flowing with ideas actually. I plan to give ideas away and give money back to people but with help in implementation. It’s no wonder that most of the money goes bad. People need guidance. Not everyone is successful their first try and information is free but no one knows where to look.
I can’t believe all of the negative feedback this is recieving. You people don’t notice all the millionaires with private jets and the middle class that can’t afford a flight? Open up your minds and eyes. Nothing is permanent, everything is changing. Be a part of that change or be left in the dust. I’m sick of teaching people the importance of a brand instead it is my turn to create a brand. But not in a niche that exists. A niche will also need creating.
I am less attached to money than I am to people. Though I’m a survivalist and can live in the woods for a month at a time.
Chris Larson is a total nutjob! The middle class isn’t going anywhere.
Chris: “Just save generally and wait for the coming totally free online classes that our children will take for granted.”
This is already available (MIT), but taking those classes, while valuable to the individual, does not improve your chances at a job making more than $25k if there is no accredited degree program with it. I think it is sensationalist, naive, and in very poor taste to tell people this is where we’re headed.
There will always be a place for higher learning even when classes and information are available for free (What is a library? Yep guess what, information has been free much longer than you’ve been alive).
We are facing a continual decline of American students entering technical, science, and engineering oriented degree programs that has many people worried. These fields are all rapidly changing and will continue to do so for the foreseeable future, and likewise the amount of study needed to become an expert in the field is increasing…
Free classes may become a reality, but someone will always have to verify that you have the capability to translate ‘book’ learning into skills, and that is a part of what a college classroom does. For technical fields the degree program is not going away in our lifetimes.
As a “senior” with a background in secondary school teaching, software testing and a myriad of other minor occupations I am always a little dumbfounded at the level of discourse on most of these sites. It’s very obvious that education in this country has not improved since I left it in 1972. Very few seem to be able to communicate without vulgarity and/or profanity. No wonder we are in such trouble, people cannot express their ideas clearly.
I strangely felt that this article even though points to our perilous future – it is not way off the mark. I mean it is ok to offer criticism but to call the author names just to make a counter point seems a little shall we say petty and unprofessional.
Anyways, I do think that there is something to what he is saying and of course – for the last 2 years or so – I myself have been a prophet of doom. Take my comments with that pinch of salt.
Having said that, I hope I am wrong and our way of life is nt destroyed.