The American middle class is shrinking and, contrary to popular belief, globalization and automation are not to blame. Far from inevitable, skyrocketing inequality is a choice. In this episode, we look at the policy choices that have relentlessly undermined the middle class, and why we desperately need to choose a better future.

Heather Boushey: Executive director and chief economist at the Washington Center for Equitable Growth. Senior fellow at the Center for American Progress. Author of Finding Time: The Economics of Work-Life Conflict.

Twitter: @HBoushey

Matthew Stewart: Philosopher, D.Phil from Oxford University. Author of Nature’s God and The Management Myth. Contributor to The Atlantic.

Website: https://mwstewart.com/

Further reading:
(1) http://evonomics.com/new-social-security-system-sharing-economy-hanauer/
(2) https://www.politico.com/magazine/story/2014/11/overtime-pay-obama-congress-112954

Transcript:

Nick Hanauer: 00:02 It’s more than numbers that defines the middle class.

Heather Boushey: 00:05 I think in many ways we forgot what brought us the middle class.

Nick Hanauer: 00:10 It’s that sense of security. We felt taken care of, and we felt confident that we could build something even better for ourselves. In the ’70s, close to two thirds of people were comfortably in the middle class. By 2015, that number had dipped below 50%. Few people are getting richer, and most everybody else is getting poorer. That just is making people both objectively less economically secure, but also, they feel less economically secure.

Speaker 3: 00:45 From the offices of Civic Ventures in Downtown Seattle, this is Pitchfork Economics with Nick Hanauer, a pointed conversation about who gets what and why with one of America’s most provocative capitalists.

Speaker 3: 01:15 Hi.

Steven Lentz: 01:17 Hello. Come on in.

Speaker 3: 01:18 Thank you.

Steven Lentz: 01:18 Just go right on up there.

Speaker 3: 01:19 Up there?

Steven Lentz: 01:20 Yep.

Speaker 3: 01:20 Okay. Should I take my shoes off?

Steven Lentz: 01:23 Sure.

Stephanie Lentz: 01:23 I’m Stephanie Lentz, and this is my husband, Steven.

Steven Lentz: 01:27 Hello.

Stephanie Lentz: 01:28 Hello. We have our kiddos. Danger is almost four, and then our Vivian is a year-and-a-half.

Steven Lentz: 01:37 I’m a firefighter down in Enumclaw, full-time. I mean, you call 9-1-1, and you think, “Are the police gonna take care of it?” If the answer is no, then the Fire Department does it. Right? So, trees across a roadway, downed power lines, Grandma fell out of bed, CPR, car accidents. Think of reasons someone called 9-1-1 and ask the question, you’ll figure out that’s what we do.

Stephanie Lentz: 01:58 I am a retired elementary school teacher, and I stay home with the kids, and I’m opening a zero waste grocery store called Scoop Marketplace.

Steven Lentz: 02:07 Steph’s grocery store hasn’t started yet, so we don’t have any income from that yet, but I make roughly close to 80 grand a year through firefighting. Living as a middle class is kind of a nebulous idea now. I mean, before, it was white picket fence, two-and-a-half kids, a dog, and a two-story house. But it’s definitely changing, and the whole keeping up with the Joneses thing I think is a very real idea when people think, “What does middle class look like?” I think, really, what it comes down to is being able to live comfortably with a standard of living. Right? So, you don’t have to have two jobs or three jobs to be able to afford to live comfortably. I think that’s kind of where the middle class is, not that you’re independently wealthy or you take six months vacation every year, but that you can have some leisure time. You’re not necessarily stressed by financials, and you can have decent comfort.

Nick Hanauer: 03:05 Today, we’re gonna talk about whatever happened to the middle class, and joining me is Civic Ventures fellow, Paul Constant, and Paul, I believe you are a genuine middle-class person, as I recall.

Paul Constant: 03:16 I am. I have a certificate somewhere. Yeah. I grew up a middle-class kid in Maine. My dad worked at a paper mill in Southern Maine called S. D. Warren. It was in Westbrook, Maine. He didn’t work pulping trees or anything like that. He was in the accounting department, and I still remember we used to drive through Westbrook on our way to church, and the smell was just atrocious. I don’t know if you’ve ever smelled a paper mill, but it’s pretty gassy smell. My dad used to roll down the windows and say, “You smell that, kids? That’s your bread and butter. That’s food on your table,” and he took a real pride in working at the mill.

Paul Constant: 03:54 My mom was a homemaker, and that meant my dad financially carried the whole family on his back, and he did a really amazing job with investing his money and with stretching every dollar, and he made sure … We couldn’t afford to go to Harvard or anything like that, but all four of his kids, we could all attend University of Southern Maine, and he died almost 10 years ago now, but he made sure that my mom doesn’t have to worry about anything. She can retire, and we can take care of her until the end.

Paul Constant: 04:30 I think that my dad wasn’t a very effusive, emotional person, but I think that making sure that we were taken care of was his way of letting us know that we were taken care of, and he really put a lot of work and took a lot of pride in the fact that he did that, that he took care of us, and for me, that’s what the middle class is all about. It’s that sense of security, that idea that something terrible might happen. His paper mill was bought by a South African company a couple years before he was downsized, and he was worried about his job. I remember that.

Paul Constant: 05:07 It was real, but at the same time, he also knew we had this underlying cushion, sort of to protect us, and he knew that he could take care of us that way, and that was his, I guess … Oprah would call it his love language, but it was real, and we felt taken care of, and we felt confident that we could build something even better for ourselves, and to me, that’s what I think of when I hear the term middle class.

Nick Hanauer: 05:32 Yeah. That’s a fantastic story, and honestly, I think it was the dominant story of America for a super long time. It wasn’t, to be clear, the story for every family, and a lot of families at the height of the middle class, certainly families of color, were left behind and treated poorly, but for sure, the story that you just told is the same story that people who grew up in the neighborhood I grew up in and the suburbs of Seattle told. They were Boeing engineers or teachers or mid-level business people, and they all could raise a family really successfully and feel secure and feel enfranchised, and I do think I agree with you completely, Paul, that it’s more than numbers that defines the middle class.

Nick Hanauer: 06:22 I think it was President Clinton who said that the quiet miracle of a normal life, of just the idea that you’re secure and can afford to invest in yourself and your family, and that you’re not hanging on by your fingernails, and I think that’s the most important thing. But that whole thing, that is for sure receding in American economic life, and the numbers are pretty stark. In the ’70s, close to two thirds of people were comfortably in the middle class, and by 2015, the number had dipped below 50%, and a great way to understand what happened is to look at the median income in America today is $59,000 a year for a family.

Nick Hanauer: 07:08 But if the median income had been held harmless by increasing inequality since 1980, that number would be $86,000. So, middle-class people would earn 86,000 if society hadn’t become more unequal, and if we had all individually participated equally in increases in productivity since 1980, the median family would earn over $100,000 a year, and I think that those numbers kind of dimensionalized the relative decline of incomes in the middle class.

Paul Constant: 07:42 That’s interesting because usually when politicians use the phrase middle class, they’re sort of using that as a shorthand to describe all Americans, and I know that a lot of Americans who are not in the middle class describe themselves as middle class. That’s traditionally been the case. So, what you’re saying is we can put a number to it, and that number is in fact shrinking.

Nick Hanauer: 08:03 Yeah. Yeah, and the conventional definition, the sort of economic definition of middle class is people who make between two thirds and double the median US household income, basically the middle of the Belle Curve of income distribution, but the number of people who fall within that definition is shrinking, and it’s shrinking pretty fast, and that’s because a few people are getting richer, and most everybody else is getting poorer, and that just is making people both objectively less economically secure, but also, they feel less economically secure, and another dynamic, of course, going on is just the way in which costs for most people are outstripping the increases in their income, like in Seattle, Washington, where we live. The average house is now $750,000-

Paul Constant: 08:51 Wow.

Nick Hanauer: 08:51 … which is just … It’s a lot of money, and if you have a mortgage on that house, if you try to buy it today, it would cost in the range of $4,000 a month, and as you know, childcare in our city costs whatever, $1,500 a month. It adds up to more than $59,000 a year pretty fast, and it’s getting harder and harder to make it.

Stephanie Lentz: 09:20 I haven’t had to work, and we’ve been comfortable, but it’s obviously changing, and where we have to live in order to maintain that comfort has changed over the last decade, and I think that we would just continue to get pushed further away from the city, or maybe into another state if just stayed at that same income level and that same comfort level.

Steven Lentz: 09:43 It’s kind of like watching yourself in a mirror, looking at how things are changing, or gas. Right? Everyone remembers when gas was 25 cents a gallon. Everyone’s like, “Hey, it’s all of a sudden $4.00 a gallon.” No, it’s not $4.00 a gallon all of a sudden. Right? It’s not an overnight shift. It’s a slow change. So, it’s not anything that off the top of my head I can look back and be like, “Oh, this defining moment is … Healthcare is more expensive, or groceries are more expensive.” It’s just, everything has gotten more expensive.

Nick Hanauer: 10:18 Heather.

Heather Boushey: 10:19 Hi.

Nick Hanauer: 10:22 How are you?

Heather Boushey: 10:22 Good. How are you doing?

Nick Hanauer: 10:23 Awesome.

Heather Boushey: 10:24 So, Heather Boushey. I am the executive director and chief economist at the Washington Center for Equitable Growth.

Nick Hanauer: 10:30 Awesome, and I want to introduce our podcast listeners to Heather Boushey, who I have known for, wow, a long time now, many, many years, and is a warrior in the world of economic justice and fighting against inequality, and has had a ton of roles spanning a bunch of different organizations, doing that work. So, welcome, and today we wanted to talk a little bit about the demise of the middle class, and sort of the facts and figures around that. So, anyway, if you zoom all the way out, Heather, what’s happened to the American middle class over the last 40 years?

Heather Boushey: 11:13 Well, the last 40 years has not, in general, been good to America’s middle class. You’ve seen this hollowing out, an increase in incomes at the top, a sort of flattening in the middle, and a falling behind of those at the bottom. We used to have in America … We used to be a place where you had a lot of economic mobility, or we thought we did. We used to be a place where you could get a high school degree or an associate’s degree and support your family and be able to have some economic security, and all those things that define what we as Americans think of as middle class, and increasingly, the past 40 years have been decades when that’s been out of reach for more and more families.

Heather Boushey: 11:56 Everything that constitutes that basic middle-class lifestyle has become more expensive, housing that is easy to get to from your job, a good education for your kids, a good public school, affording a home in a community that has good public schools that are easy to get to. Higher education, of course, is astronomically expensive. Healthcare, which we made a lot of progress during the Obama years in terms of expanding coverage and making it easier for people to afford it, and we’ve been moving backwards for the past two years. Childcare and eldercare, big ticket items in terms of how we care for our families, all these costs have gone up.

Heather Boushey: 12:35 At the same time, we haven’t seen people bringing home more money for their jobs for lots of different kinds of middle-class occupations. So, it’s been decades of challenges for the middle class, and I think that moving forward, we’re at this moment on the cusp of a lot of really good ideas about what to do about it, but I think a lot of real frustration about where we went wrong, who’s to blame, and we’re thinking this year, of course, with the 10-year anniversary of the collapse of Lehman Brothers, and the start of the unwinding of the US economy a decade ago, and the financial crisis, that also played a role in what’s happened in the middle class, the rising debt that has fueled so much spending that isn’t sustainable, and yet there’s not a lot of other answers for families out there.

Nick Hanauer: 13:24 So, not to put you on the spot, but what are Heather Boushey’s top five or 10 reasons that explain why this happened? As you think about the causes for the demise of the middle class, what were they? How do you parse that?

Heather Boushey: 13:45 Yeah. It’s a great question. It’s one I spend most of my time thinking about. It’s almost like if you kind of pull it together, I think in many ways we forgot what brought us the middle class, and some of that is about a set of policies that directly support workers and their families, but a lot of it was about creating a structure that our economy was embedded in that gave middle-class workers some economic and political power, and we’ve seen that eroded, in no small part due to the rise of inequality, which has stripped families of all kinds of powers. You’ve seen those at the very, very top be able to take on more power in the political realm and the economic realm.

Heather Boushey: 14:32 We can talk about some of the specifics there, but what that’s meant is that the middle class haven’t been able to lay a claim on growth. Right? I mean, I should just say, as we started off and you said, ‘What’s been happening in the middle class,’ it’s sort of this very downbeat story of stagnation, but when we’re thinking about why, one of the biggest things that we need to keep in front of us is that the United States remains an enormously rich country. Our country has gotten richer and richer year after year. Productivity has continued to go up. So, it’s not that American workers aren’t producing stuff. It’s not that they aren’t doing their part, but they’re no longer getting a fair share.

Heather Boushey: 15:17 So, if I were to point to one thing, I would start with the demise of unions, and I would actually think of it not just on the shop floor, the role of unions in everyday workers’ lives, but the role of unions in creating a space for middle-class workers around the country to have a voice in our economic, in our society, and a place to hash out differences and have conversations, and we’ve lost so much more than just whether or not any worker has a shop steerer to go to with their individual problem or to bargain on behalf of their own wages. We’ve lost this place in our society to have a voice for workers, and that’s enormous.

Heather Boushey: 15:59 As we were thinking about the rule of balancing power, I think we forgot that if you allow inequality to just increase and increase, pulling at the very, very top, you’re creating this massive power imbalance, and so many of the policies that have eroded America’s middle class come from that imbalance. I think one thing that economists are talking a lot about now, a lot of people are talking about, is we’re seeing this rise in monopoly power, so fewer and fewer firms accounting for more and more of the products that we buy, Amazon, great companies that I buy stuff from all the time, but you realize, you’re like, “Wow. This is this new power that these smaller and smaller number of firms have,” which does so many things. One, it gives those companies so much power over workers, because in so many communities-

Nick Hanauer: 16:51 They’re the only option.

Heather Boushey: 16:52 Exactly. So, nurses, a classic example. Right? In many communities, there may be a number of hospitals that you could work at if you’re a nurse, but they’re all owned by the same company. So, if you don’t like the working conditions, you don’t have any bargaining power. Right?

Nick Hanauer: 17:06 Yeah. So, can I ask a little bit of an epistemological question, which is what was it, do you think, that led to those policy changes? There’s a really interesting question to tease apart, which is the cause-and-effect dynamic. Right? These are feedback loops, is that, for sure, the richer the rich get, the more economic and political power they have, the easier it is for them to manipulate policy agendas to make rich people even richer.

Nick Hanauer: 17:39 I often think about the Neoliberals of the ’60s, ’70s and ’80s, and the power of those ideas to reshape what became the collective common sense around how a high-functioning economy works. One of the best examples of that is the antisense that the only purpose of the corporation is to enrich shareholders, and that by so doing, we benefit everybody because that’s what’s most efficient. This was an idea presented, essentially, as a law of nature by people like Milton Friedman that totally took over the minds of a lot of Americans. Do you agree with me that that’s a super important part of this story?

Heather Boushey: 18:29 I could not agree with you more. Let me actually take it back to your first question as a way of kind of engaging with you on this. You started out by saying, “Heather, what’s happened to America’s middle class,” and I think when most of us think about the economy, there’s … When I tell people I’m an economist, a lot of times they’ll ask me what I know about the stock market, and I’m like, “What? I don’t actually do that, but that’s fine.” One of the things that comes up time and time in the political context, the person you were talking about, quote-unquote, the economy, what people are really talking about is, “What’s gonna create good jobs in my community? What’s gonna make my community prosper and create economic security for me and my family?” Right?

Heather Boushey: 19:11 That’s fundamental question is a bit mysterious. Right? So, how do those good jobs, are they created? I grew up in the Seattle area, actually. I spent my school years in Mukilteo, Washington, and my dad worked at the Boeing plant where they made the 747s, back in the day when I was a kid. It was about a mile up the hill. When I think about what creates good jobs in the community I’m from, I think of Boeing. So, the story that you’re telling about shareholder capitalism, about what makes the economy grow, this story used to be one that was about, okay, it’s about companies like Boeing, and they’re creating this product, this value that people want, and then they’re creating these jobs, and Boeing is and was unionized, at least in the Everett plant, and those workers are getting some benefit from that production, and so they’re getting these good wages, and then they’re going out and being good consumers in their community. It’s sort of the Henry Ford model we used to think about.

Heather Boushey: 20:20 At some point, we shifted it so that it was just about Boeing making a lot of money, but people were still told, “Well, unless Boeing does good, unless you make them super, super happy, they’re gonna pack up and leave your community,” and it’s connected to this idea of monopoly. For too long, I feel like over most of my career, people have talked about what’s good for the economy as though when they said the word economy, they meant what was good for business, and yet, consumption, which is what you and I do when we go to the store and buy stuff, is about 70% of US total aggregate demand. Right?

Heather Boushey: 20:58 So, what is happening inside families, and families are the ones who supply the workers to the firms that hire them, families are the place where we buy stuff, it is for families and for people that we have an economy at all, because if you didn’t have people that needed them, you didn’t need economy. So, my fantasy is that some day we have as many 24-hour news stations focused on the economy, what works for families and people, as we do for what we see right now on television, which is all of these news stations that supposedly are economic news, which is just focused on this small slice of profitability for firms, and-

Nick Hanauer: 21:35 Yeah, what’s happening in the stock market.

Heather Boushey: 21:37 Yeah. That’s not the economy. So, that’s the one thing I wish people knew, and I think if everybody really got that and voted on that, then we could actually start having a tax system that incentivized the right kind of economic activity, and that brought in the kind of revenue we need to do the things we need to. I’m just a little obsessed with the Trump tax cuts, because I’m so angry about them, but I think that’s [crosstalk 00:22:01] a lot of different policy issues, so yeah.

Nick Hanauer: 22:03 Yeah. No, I think that’s right. Yeah. I love it. Okay, Heather. Thank you so much for your time.

Heather Boushey: 22:08 Oh, my pleasure. Bye.

Paul Constant: 22:10 So, that conversation with Heather Boushey was great for me because it sort of connected the family dynamic with the numbers that we’re talking about, and sort of made the economics real.

Stephanie Lentz: 22:30 I don’t think we’re very much better off than our parents. My mom is definitely probably in a similar middle-class or upper-middle-class position, and then Steven’s parents and my dad are definitely in a better position. I’m not sure that Steven’s parents have made investments that are gonna carry them very far into their retirement. My dad, on the other hand, has invested a lot in real estate, so he’s going to have plenty of passive income over the coming years. So, in that sense, they’re definitely already in a very good position.

Steven Lentz: 23:09 I think with my job, I’m fortunate that if we really wanted to, we could maintain a lifestyle of being able to have Steph stay at home, but we want more than just the limited version of that, and I want to provide a legacy. I think that’s something that’s missing from the current middle-class sector that we’re in, is that I make a decent wage, but I’ll never be able to pay for college for my kids if they want to go. I’m not gonna be able to leave them a whole lot when I retire, and firefighters don’t live long after retirement, statistically, anyway. Right? So, when it comes down to legacy building and the future and building more than just the current now and occasional Disneyland trip, a single job doesn’t cut it.

Nick Hanauer: 23:58 Zach Silk, who is president here at Civic Ventures, got a chance to sit down with a moral philosopher, Matthew Stewart, while we were Boston recently. Matthew wrote this amazing piece on inequality for The Atlantic.

Zach Silk: 24:16 Well, a lot is said about the 1% and the 99%, but what about the 9.9%? Our guest, Matthew Stewart, joins us to tell us about the 9.9% and his thinking on the new aristocracy in America.

Zach Silk: 24:30 All right. My name is Zack Silk. I’m the president of Civic Ventures, and I’m happy to be here in the Boston area. Could you give a little bit of texture to who are these 10%, roughly, these 9.9%, because my imagination is that most of them would not think of themselves either as aristocrats or gentry, or even elite, but who are they?

Matthew Stewart: 24:51 Right. So, the economic measures, I think, are only approximate. You have to bear in mind that you can’t just say, “Oh, you have an X amount of wealth or X amount in income if you are in this group.” Nonetheless, the economic statistics gives us a general sense of what’s going on, and what they show is that they’re, in fact, this top 10% of society that has pulled away from everybody else, whereas before, let’s say 50 years ago, the wealth of that top 10% of American society was about, on average, 10 times that of the median. It’s now closer to 24 times the median.

Matthew Stewart: 25:24 So, what that means is that we’ve got a group that’s pulling away from the median. They haven’t actually been gaining in relative share. That’s all gone to the top .1%, but in terms of wealth, that’s where they are. Now, who are they in terms of people? There’s a big misperception in a lot of the discussions about the top 1%. I think the idea is that they’re mostly fat cats and casino owners or tech bros, and people like that, and yeah, there are some of those in the mix, but when you look at the numbers, many of these people are basically professionals.

Matthew Stewart: 25:57 So, it’s people who have gone up through the meritocratic system, and often, they deserve their position in a certain sense because they’ve competed in the educational races, and they have won to some extent, so they’re not a particularly exotic crew. I’d say by and large, it’s what we think of as the meritocracy, the bureaucratic sort of class, the courtier class, to some degree, in our society. But I think also, we have to be careful to make too many big generalizations because, of course, modern society is incredibly complex, and you can’t just put them all in a big bucket.

Matthew Stewart: 26:30 But what’s important is that this group has a significant role in the sort of political and social dynamics of our culture. One way of thinking about it is that if you think of human labor in the broadest possible terms, everything that we do is some form of labor, but then within our society, there are some categories of labor that essentially are self-regulating and self-controlling, and that are consequently kind of protected. They’re sort of sheltered from market forces. Then there’s another category of labor that isn’t, and that is where people are kind of left out on their own, and basically, our 9.9% is mostly in that protected category, and it’s the rest of society, which is the biggest part of society, where essentially they’re left to fend for themselves against the demands of the Capitalists.

Zach Silk: 27:21 That’s fascinating. One of the things that we really enjoyed in the piece was there is this myth of the ladder of opportunity in America, and that there is a bit of a meritocracy, and you can work your way up the ladder, and you help put a different spin on that metaphor using this idea of rubber banding. Could you unpack that a little bit, because I think it’s an interesting way to think about it. If you’ve got in your head that we have this ladder and that it’s relatively easy to go from rung to rung if you work hard enough, that doesn’t seem to be the case any longer in America. I’d love to hear you talk more about that.

Matthew Stewart: 27:55 Yeah, sure. It’s one of the amazing myths in American society, and it’s hard to imagine how we get away with it, because the empirical evidence is very clear. The United States is not a particularly mobile society. I mean, we’re supposed to be. It’s the land of opportunity, but that isn’t what the data actually tell us. So, here’s what the data says, that we have … Let’s say the rungs in our ladder are farther apart here than they are in many other countries. Now, the question, I think, that people are asking when they’re asking about mobility is, “Well, if I start off on rung number two and I want to climb up and I end up on rung number eight or nine or 10, what are the odds of my doing that?”

Matthew Stewart: 28:31 One way of measuring that is to basically look at the correlation between your parents’ income and your own income, and you can basically then quantify that in a measure that’s called intergenerational earnings elasticity, which is just a measure of how much of your variation of income is explained by your parents’ variation from the standard income, and so you can think of that as kind of a rubber band that ties you to where your parents were on that ladder. So, if that rubber band is very tight, you’re just gonna have difficulty moving up, and conversely, if it’s very tight and you’re born at the top, you’re gonna have difficulty moving down.

Matthew Stewart: 29:09 So, there’s a measure for that, and on that measure, the United States is at the top of the league in developed countries. I mean, we’re up there with the UK and Italy. We have much tighter rubber bands than places like Japan and Germany, and we are much, much less mobile than the Scandinavian countries. We’re on an upward trajectory, and the latest data shows that these rubber bands are getting tighter. We’re getting more and more locked into our place in the ladder, so we’re headed towards something like Chile or Argentina in terms of that number.

Zach Silk: 29:41 If you were to draw lessons from history and then give us a guide to what we might do about this, what are the things that people do in these circumstances that prevent us from sliding further? What are the historical examples, or what guidance would you give?

Matthew Stewart: 29:58 So, I think of it mainly in terms of balances of power and making sure that our distribution of power maps out to the people at large, essentially, to put it in other words, that our institutions and our forms of life are as inclusive as possible. So, that is to say I think there’s a lot of emphasis now on redistribution of income, and for me, the problematic aspect of that is not that that wouldn’t be well deserved. It’s just that it kind of supposes the existing distribution of income actually reflects the contribution of people to society, that, well, the people who are making huge incomes, that’s because they’re helping everybody else out so much by making so much money, and that’s basically a bunch of baloney. Right?

Matthew Stewart: 30:45 So, when you simply take some of that money and redistribute it around, you’re not changing the underlying logic. What does change the underlying logic is, for example, giving people who didn’t have the vote the vote. It’s imperfect because, of course, they can then still be manipulated to some degree, but when you give, for example, the formerly enslaved people a vote, as Roderick Douglas said, “Now that we’ve used the bullets, give us the ballot,” that makes a structural difference. When you give women the vote, that makes a structural difference. Then in the case of labor, the reforms of the early 20th century did a tremendous amount to put power into the hands of laboring people, that allow them to build up unions. There was a tremendous increase in union membership around that time.

Matthew Stewart: 31:29 Those kinds of things, they’re structural moves, but when they’re effective, what they do is they essentially make sure that power matches the actual resources that we have in society, which is people. So, if we can map power away from privileged groups and people, then that’s, I think, the key thing. I mean, today that would mean, I think, breaking up some of the monopolistic and oligopolistic [inaudible 00:31:53] we have in our economy, re-empowering labor. I think it also means that we invest in people. I mean, it’s a kind of cliché political slogan, but we need to have an education system that works and that treats education as a social good and not just a private good that helps people maximize their earnings over the next five years, and the same with healthcare. Other countries have figured this out, that to have a functioning modern society, you need to look at access to healthcare as part of what it means to be a member of our society.

Zach Silk: 32:24 Let’s return a little bit to this question of the 9.9%. What are some of the ways in which that gets reinforced? Right? I’d love for you to talk more about how this works practically, and I would imagine many listeners will see themselves in these things, even though they themselves may not identify as an aristocrat.

Matthew Stewart: 32:46 Sure. You can start with the neighborhoods, for example. We now have huge diversions in real estate values. Everybody who spends time in Zillow knows this, and the effect of that is that people who happen to be in these good areas, not only do they get a financial boon at their work for staying in place, but they can then build on that because, of course, being in that place gives them access to better education. It gives them access to better commutes. Then, of course, what people in that situation do, and I’m talking about basically people in my immediate neighborhood right now, they figure out how to kind of draw up the bridge behind them, or slam the door shut.

Matthew Stewart: 33:33 So, they work pretty hard to make sure that the values in their own neighborhood stay high, which means that they don’t allow new construction, they exclude lots of potential development, and so that effectively consolidates their position geographically, and that’s just one of the ways in which an elite group is starting to separate itself from the rest of society, but it’s probably the single most important one. Then, of course, there’s the education system. Now, education was historically the great machine for opportunity in the United States, and that’s what built a middle class, and there was a time when even access to higher education was close to free, or certainly was accessible in the United States.

Matthew Stewart: 34:15 But we’ve now figured out, or at least a part of the elite, has figured out how to use that as a way of reproducing privilege, and the way we do it’s pretty straightforward. The selective colleges have all decided that rather than invest in creating more spaces and educating more people and offering their goods to society in order to improve opportunity, they’ve decided instead to reduce their admissions rates, make themselves more selective, and the members of this class kind of participate in this by agreeing, well, this is a competition, and we kind of like the competition because on balance we’re more likely to win, and in fact, we are.

Zach Silk: 34:52 Well, terrific. What a pleasure. It was a real pleasure talking to you, and thank you so much for sharing your insights with our audience.

Matthew Stewart: 34:59 Yeah. Great, Zach. I’m delighted to talk to you.

Stephanie Lentz: 35:07 We weren’t taught how to handle our money or what to do with it or how to make it work for us. We were both raised very conservatively to save the money and hope for the best, I guess, I’m not really sure what was supposed to happen there, and not take risks, and always pay your credit card bill every month, which is good, to not carry a balance, but we also didn’t know how to leverage credit or make it work in our favor or allows ourselves to go further faster by getting a little bit creative with financing. So, I think that that is another huge advantage that our kids are gonna as, is we’re gonna make sure that we’re all learning about money, and we all know the best tactics and the skills, and that we just are in the right frame of mind.

Steven Lentz: 35:58 I’ll be doing air quotes here, but that 3% cost of living increase is not a 3% cost of living increase. Right? The statistics that create that statistic are missing, I think it’s groceries, and I think it’s gasoline. I don’t remember, but there’s a couple key staples of things that should influence what actual inflation looks like that aren’t even put in the equation. They used to be, and they were taken out, and it’s to drop what inflation looks like so that when we see it we’re not shocked that it’s actually 6% or 8%. Right? We see a 3% when it’s really more. So, it’s not that you necessarily see something jump, but it’s just this erosion that eats away at it.

Nick Hanauer: 36:41 So, the family that we talked to about the shrinking middle class is already making plans. Essentially, they’re responding to how much harder it is to be in the middle class than it once was, and they’re optimizing around a circumstance that is getting worse. But I think it’s worth zooming out and just sort of re-asking ourselves, why is the middle class important? Why is that story important? Why are the policies that hold it together important? I think that it’s very, very clear from the economic evidence, it’s very clear from the social science that a thriving middle class is an indispensable part of a high-functioning modern society, because it doesn’t just anchor the economy. It also anchors civic life.

Nick Hanauer: 37:36 The thriving middle class means that the majority of citizens, the preponderance of citizens feel like they have something in common. There is social cohesion, commonality, a shared identity, common goals, and that sentiment is what holds democracies together, and that sentiment is what enables a society to move forward collectively through the various challenges that it will face. I think what this episode reveals is that the American middle class didn’t happen by accident. It was built piece by piece deliberately, with policy choices, and today’s disillusion of the middle class isn’t happening by accident either.

Nick Hanauer: 38:31 There are concrete policy choices that we made, that a sort of neoliberal framework ended up encouraging us to make, that has systematically created a society where we’re optimizing for creating a few rich people rather than optimizing for creating a huge number of middle-class people, and I think that these are choices that we made, and we can reverse those bad choices, what I would call unambiguously bad choices, and that’s our responsibility. That’s what we collectively need to do as Americans, and I supposed that’s the point of this podcast, is to alert people to the problem and to enable them to work in their communities, to encourage policy leaders and other folks to make better choices.

Stephanie Lentz: 39:24 I think I wouldn’t be hopeful about the direction the economy is heading, except that we’ve been able to change our mindset and change our plans and feel a little bit more confident just really going against what we grew up thinking about money and how we’re handling it, so I feel like we will be more prepared. Otherwise, if I didn’t know that we had other options, and if I didn’t know that entrepreneurship could be a reality for us, I don’t think I’d feel hopeful about it at all.

Paul Constant: 39:55 So, in the next episode, episode five, we are going to talk about how we should measure the economic, because we’ve been getting that wrong for the last 30, 40, 50 years.

Nick Hanauer: 40:08 Yeah, and by measuring it poorly, we get results that, actually, in terms of people we wish we didn’t have.

Speaker 10: 40:23 Pitchfork Economics is produced by Civic Ventures. The magic happens in Seattle in partnership with Larj Media. That’s L-A-R-J Media, and The Young Turks Network. Find us on Twitter and Facebook, @civicaction, and follow our writing on Medium at Civic Skunk Works, and you should also follow Nick Hanauer on Twitter, @nickhanauer. As always, a big thank you to our guests, and thank you to our team at Civic Ventures, Nick Hanauer, Zach Silk, Jasmin Weaver, Justin Farrell, Stephanie Ervin, David Goldstein, Paul Constant, Nick Cassella and Annie Fadely. Thanks for listening.