The Desperation of the Vanishing Middle Class

By James Kwak

I recently finished reading Pound Foolish, by Helaine Olen, which I discussed earlier (while one-third of the way through). The book is a condemnation of just almost every form of personal financial advice out there, from the personal finance gurus (Suze Orman, Dave Ramsey) to the variable annuity salespeople to the peddlers of real estate get-rich-quick schemes to Sesame Street‘s corporate-sponsored financial education programs. (Of them all, Jane Bryant Quinn is one of the few who generally come off as more good than evil.)

A lot of what’s going on is just semi-sleazy entrepreneurs trying to make a buck, taking “advice” that is equal parts routine, wrong, and contradictory and packaging it into attractive-looking books, TV shows, and in-person events. A lot of the rest is marketing by the real financial industry, which either (a) wants to make a show of promoting financial education so people will think they are good or (b) wants to teach people that they need their products. (You pick.)

The underlying problem with financial advice—besides the fact that most of it is wrong, conflicted (in the conflict of interest sense), or covert marketing—is that, even in the best case, it rarely works. The underlying financial problem that most Americans have isn’t that they buy too many lattes or pick the wrong stocks. It’s that they don’t make enough money to begin with, at a time when many necessities like health care and education are getting more expensive. (Measured inflation is low in part because things we don’t need, like fancy electronics, are getting cheaper.) This, as I’ve written before, is the fundamental reason why many people won’t be prepared for retirement. Olen has a similar viewpoint: the blind spot of the personal finance industry, she argues, is its refusal to even consider the macroeconomic factors that are the real problem.

But the big question is why this stuff is so popular. As Olen points out, we haven’t always had a personal finance advice industry, and it’s only recently that financial education has been embraced as the solution to all our problems. One reason, she suggests, is that we live in an age of stagnant real wages and rising inequality. Add that to a culture that fetishizes individualism and rejects government support programs, and you have a market that is ripe for self-proclaimed gurus or self-interested advertising campaigns that claim that you can get ahead by (insert your choice) drinking less coffee, or going into more real estate debt, or buying a variable annuity, or picking the right stocks. The governments (state and federal) that promote financial education are like Marie-Antoinette advising people to eat cake; if they could eat cake in the first place, they wouldn’t need financial education.

Many of the people Olen talked to were too embarrassed by their financial plight to let her use their names in the book. Somehow we ended up blaming ourselves for the fact that we don’t have a decent minimum wage, real national health insurance, subsidized child care that made it easier to hold a job, or long-term unemployment insurance (other than in special circumstances). If we saw individuals’ financial struggles as a political issue—or a class issue—things might be different.

21 thoughts on “The Desperation of the Vanishing Middle Class

  1. All that is true, but there is another problem with our culture of consumerism that places a higher value on having the latest toys than in saving. We are even told by our government to get out and shop! I know many people whose retirement accounts are inadequately funded, but are borrowing money to buy things like boats and RVs. So we do have to put some blame on ourselves, not just the system.

  2. Keep in mind that they prey especially on Seniors who are home during the day watching channels like CNBC , probably on some medication , hooked by slick ads who offer 800 numbers to call for free advice ,where even slicker telemarketers do follow up calls . This is one of the worst sides of capitalism , the dream of passing on some money to their children turning into a sleezy nightmare of a scam .

  3. Professional analysts are not free to go far enough. Financialisation is to orchestrate the polity in economic decline. Not only do proles not have the resources to “invest”, the financial system is meant to legitimate their losses and the wealth inequalities compiled by harvesters for self-protection.

    Annie is correct on the implications, though not on those responsible.

  4. Just for the record, DONKEY, I have only been addressing the implications.

    Prima Facie evidence to question your “perception” of the same problem….? That would be a search for Justice, not a debate or rationalization.

    Man to land ratio – all regions must wisely set the limits for their maximum security. Which no one seems to have control over anymore – their own security against tribalism and nihilism, heck, any goddamn “ism” for that matter….

    You gotta LOVE Iceland :-)

    “Yeah, that’s not working…”

    Poof – change you can believe in.

  5. Organized labor, during the time of giant factories building the machine age of this world, was a much better threat to kleptos than Bitcoin will turn out to be.

    Call it a hunch.

  6. This blog is really an eye opener, created by students for everyone, just see the power of youth.

  7. Annie: Simply, I meant that rethugs are not the only ones helping people vanish. Which does the trick for ‘isms, too, if you do it stealthily and fast enough.

  8. There is power in youth, whipper snapper, but don’t quite criticize old age yet, pray to reach it.

  9. Wow, you are a Kwak.

    Americans don’t make enough? that’s the problem? I guess the rest of the world is truly screwed…….and the rising prices have nothing to do with the gov’t involvement with healthcare, or the printing of money….or the low interest rates that prevent folks from saving…..

    “The underlying financial problem that most Americans have isn’t that they buy too many lattes or pick the wrong stocks. It’s that they don’t make enough money to begin with, at a time when many necessities like health care and education are getting more expensive. “

  10. BE NICE IF OUR PROGRESSIVE ECONOMIC GURUS (thou?) were to inform the public of the one and only path to rebuild the middle class along with its concomitant bargaining power — and — political muscle. Start with supermarket workers and airline employees — they would kill for … . Pardon my cut-and-paste — turned 70 this week; getting a little lazy:

    MY COMMENT TO: “Who will Save Us from Inequality” by Carola Binder at:

    There is only one mechanically plausible way to rebalance the US labor market (and, because it means massive re-unionization, also reform the US political forum): a post-WWII, industrialist invented (that’s right; not Marxist) setup called centralized bargaining — legally mandated.

    Under centralized bargaining (A.K.A., sector wide labor agreements) all employees working at similar occupations (e.g., retail clerk) in the same geographic locale (where applicable — airlines would presumably take in the whole country) negotiate one common contract with all employers.

    Wal-Mart recently closed 88 big-boxes in Germany where it could not undercut based on lower pay and benefits.

    Where to start: supermarket and airline employees would kill for centralized bargaining. A few years ago Northwest Airlines squeezed a billion dollars of givebacks out of flight crews — to be followed a year later by a billion dollars of bonuses for 1,000 executives.

    Where it stops: not with you — your are a female human. You are able to judge the saleability of a new direction strictly on merits of argument — and not be totally mesmerized by the big world outside that always looks too big, much too big, to seriously change. You are an individual gatherer, instinctively.

    Human males — with their (our) pack hunter outlook — always and immediately check with the world outside and almost always assume nothing can be done (maybe this is so only if we have no immediate personal stake — which academics don’t have in reforming the labor market). Have see this issue after issue over and over for decades.
    * * * * * *
    Realistic way out: just guessing: the $15 an hour minimum wage is sweeping the west coast — and I am spamming the inarguable basics to every journalist and legislature whose address I can track down …
    … spammed 14,000 of simpler arguments about same all over country last year (took three months) so when it comes their way they will at least have the basics.

    I figure that when the $15 minimum wage comes in to everybody’s benefit in the west, it shouldn’t take long to go in the east — meantime it will be time to start pushing centralized bargaining — once the possibility of real change reaches into the male pea brain (midbrain, limbic system).

    I reading Piketty’s magnum opus — when I am finished (month or two) I will be ready to do a real zinger on the labor market overall.

    Different versions of centralized bargaining can be found in continental Europe, French Canada, Argentina, Indonesia.

    Final thoughts (one example) on the human male problem:
    Show a human female that a $15 minimum wage will only raise overall prices 3.5% ($560 billion added to $16 trillion) and common sense takes care of the rest. Males need one more number (before they no longer obsess on the big pack outside): that the 45% of the workforce getting a raise wont be laid off — wont be told: “we don’t need your output anymore” — over a small price increase.

    [ADDENDUM: The Teamsters Union has a version of its own: the “National Master Agreement” — or else Teamster truck drivers and warehouse workers would be as poor as regional (half the) airline pilots. I was a member of local 804 — Ron Carey, local president (later national president) — just a warehouse worker pushing and shoving furniture (didn’t get my driver’s license till years later; New Yorker). Last I heard, some years back, 804 raised its defined retirement benefit (all securities kept under ownership of the union) from $3300 to $3600 a month.]

  11. I really must disagree here. Indeed, macro underlies one’s wages, and that’s at least as important as where those wages go. But is it really so terrible that Dave Ramsey tells families to sit down every month and make a budget? To keep 6 months of exepenses on hand for emergencies? Or that he tells them very frankly they need to do better than minimum payments on credit cards if they ever want to dig out of debt? I absolutely agree that sometimes these guys get the technical questions wrong, and thats a problem. But I listened to Dave Ramsey for 3 months of my life and there was a alot more “come on guys, you need stop eating out and start paying off debt” than “well, you should refinance your home at this rate, then sell your car, take the proceeds and invest in this vehicle” etc. People of all stripes have trouble managing their money, but its the guys who arent making a lot to begin with that turn to these sources – theyre inexpensive. Basically, youre telling them “this stuff isnt worth it, the problem is macro trends”. Thats a hypothetical political plan, not a plan to keep a family liquid GIVEN their situation, regardless of how different you’d prefer it be.

  12. @ddrew2U – I’m a purist – and there was no such discussion allowed on Main Street Media after 911:

    What are the other options available under the current system of issuing FIAT money as debt that the bank can call the note on at any nanosecond from the USA government’s IRS list? Yeah, that is the first list that got handed around to the banksters – the middle class taxpayer.

    Like no one was going to notice the Congolese savagery – gathering the “profits” of the entire machine age of Humanity up to a kid with a gizmo who is going to walk into traffic in 3, 2 , 1….

    Technically, the actual standing army (in the war context one would SANELY acknowledge during a Just War discussion) after Iraq, is the privatized portion of USA military, which is also only as well-regulated as their banks are. Concierge banking….

    I can’t get rid of the crabs embedded in my personal banking life – and this goes all the way back to my sale of Avon Products Inc. stock which caused the first flash crash. Turns out that some HEDGE FUND listed MY STOCKS in their portfolio – said they OWNED them.

    Next part of the trinity is the NSA – Federal Reserve Board, IRS and the NSA.

    Yeah, well then that just means that a long range ballistic missile trained on Blackwater University is not illegal. Trying to steal nukes because of “austerity” policies?!

    The War raging worldwide is against INJUSTICE, not inequaity – talk about a dangerous mis-diagnosis by the psychobabblists…..humanity never backs down against INJUSTICE. But at this point in time, even USA leadership has been infected with LICE – “high frequency trading”….

    We are in the “what next” portion of the program. The Congo savages with guns (bought with labor wages) waiting in the wings until the harvest is picked, came in, killed off the farmers, lived in their houses, and ate the harvest and now they are done – bones laying around everywhere and they are asking “what next?” That’s what happened to USA’s producer Middle Class, in a nutshell. Took advantage of the HUMAN CONTRACT to provide security through “officers of the peace” among the producer class – used our money and our ETHICS to wipe us out. Would UNIONS have helped? Isn’t the question – “Were the UNIONS, as an institution of law and order in the WORKPLACE, even involved in creating a “flash crash?”…..??!!

    I could joke and say it may be time to bring in women to the War Room to solve the problems of “reconstruction”, but the only women let in to that War Room would have to be hawks.

    The privatized army is NOT defending Mom and apple pie…

    Justice may be a much more valued asset of certain “economies” than USA Fiat $$$$ is….wipe out that GOOD in people by wiping out the people that are GOOD?!

    Man to land ratio, population control to maintain a standard of living. But you are going to have this discussion with men who do not believe women have a soul – we’re just another animal in their herd….”stupid is as stupid does”….send in Gump?

    Iniquity is loose in the world – that makes evil the “system”.

    Do “discovery” – get the forum discussion records where they conducted THEIR operations every day.

    Obama did NOT have Executive powers as a Candidate for President to make those deals that there would be no prosecutions.

  13. Annie: ” get the forum discussion records where they conducted THEIR operations every day.”

    Fellow genocidaires, beware! The tribunal may not suffer to find you, but your children will …

  14. If the War Lords got their math so wrong that they are broke after “mission accomplished”, and have to wipe out the Middle Class to “stay alive”, then why is “capitalism” not letting the War Lords “fail”?

    “Meet the new boss, same as the old boss….”

    April Fool!

    When you can’t afford for-profit health insurance, what then? Only one more skin suit shearing stop to go on the assembly line feeding rent seekers. You’ll be slapped over to the IRS for a FINE. The REALLY sick part….? They’re doing that to people who are MORE than capable to be a bona-fide health care provider in their society! Fiat money torn from the Doctor to give to the Torturer.

    ACA is just a new TAX.

    April Fool!

  15. My fee-only financial advisor has made me (what passes for) wealthy. They sell only their expertise (pick one with extensive diversification practice, and a large, centralized back office) instead of pushing stuff that makes them money. Find one at

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