The New York Times has an article today by Louis Uchitelle titled "Is There (Middle Class) Life After Maytag?" It's about what's happened to Newton, Iowa (pop. 16,000) now that its major employer, Maytag, has shut down. The article focuses on ex-workers trying to scratch out a living on reduced wages, when they can find work at all. The article doesn't dig much deeper than that, but they do point out an estimate that Maytag's presence in Newton had the effect of raising wages all across the county by about $3/hour, a multiplier that will be felt by residents not directly affected by the shutdown. One can easily imagine more multipliers: real estate values, the tax base, government services, all locked in a downward spiral.

In some ways this is a typical story -- factories all across the country are shutting down, dumping their workers into what's left of the trickle down economy -- but Maytag is one of the most redoubtable brand names in American industry, and a rock-solid presence in Iowa since its founding in 1893. As far as I can tell, it was a profitable company until it was taken over by a syndicate of private investors, including a good chunk of Chinese money, and dumped into the laps of Whirlpool, who now gets to sell their crap as Maytag until the brand name decomposes into dirt. Another way we all lose in this is that competition in the appliance industry has just been reduced -- that benefits Whirlpool in the short run, and China in the long run. (The Times also has a big article on pollution in China, but one sidelight is the extent to which China's phenomenal economic growth has been built on manufacturing. They want the work, and given the balance of trade they enjoy with the US, they can even afford to buy it.)

As far as I know, the Bush Administration has done nothing to limit anticompetitive corporate consolidation -- that's what antitrust laws were for, inadequate as they were even before Bush came along -- or capital flows. The effect is to steamroll any isolated pocket of high value, even though American industry depends on product quality to justify higher prices. Not only can China manufacture products more cheaply, the rules work to relentlessly degrade Americans' ability to compete on any grounds. Moreover, the stifling of competition means that the profits of lower costs and reduced quality don't get passed on to customers -- they go into further rounds of capital consolidation. Bush even manages to avoid taxing those profits lest the government be tempted to put them to public use: no US politician since the days of slavery has worked so hard to reduce American labor to third world levels.

The Times article asks whether this will be the end of the middle class in the US. We should be more precise. What's happened to Maytag is just one example of a broad-based drive which will drive a wedge between the working class and the middle class. In the 1945-70 period, unionized workers in high value-add manufacturing industries could afford to buy houses, cars, send their kids to college, spend some extra on entertainment and leisure activities. That continues to be true for those workers lucky enough to have survived, but when you start shutting down the Maytags you can tell how thin those ranks have become. There's a fine line between getting ahead and falling behind, but depending on which side you're on, there's a world of difference in how you feel about the system. As long as workers were getting ahead, living middle class lifestyles, they had no great interest in class consciousness. But the more they find no way to get ahead, the more beef they'll have with the way things work. That may become an important unintended consequence of the squeeze on the cost of labor.

We've been seeing real wages decline for 35 years now, yet there hasn't been much of a political backlash against it. There are a bunch of things that have helped soften the blow or at least cloud the issues: assets like homes and savings have appreciated; there have been significant technological advances; there are cases where productivity increases have lowered costs (although other increases, like health care, have more than made up for them); and there's a lot more credit and debt. But mostly older workers have been picked off one by one -- the median is just a statistic until you lose your job or get slammed by a catastrophic medical bill. Young workers can seem to be making progress until they only belatedly discover they're never quite getting where they expected to be -- of course, they're told that shortcomings are their own fault, not the system's, and too many buy that. In part, that's because there still are middle class jobs available -- in management, sales, professions that promote people as much on their fealty to the system as for the quality and quantity of their work.

For most of our history, America has had a representative, relatively permeable middle class, and that has been key to political stability -- to the sense that we're all in this together. That's increasingly at risk now. Free inheritance keeps the rich ahead, while more expensive education and growing debt burdens keep everyone else from joining them. And those without those expensive education credentials have it all that much harder when all the good manufacturing jobs have moved to China. This is likely to get ugly, especially if/when some of those crutches fail. For example, the whole "subprime" mortgage fiasco is one such fissure; that subprime loans were written in the first place was an indication how desperate lenders were to put their money to work. The whole practice of loaning money to folks unable to pay it back is a way to postpone a crisis that's only likely to become worse in the long run.