The Power Of The Middle Class
March 9, 2009 by admin
Filed under World Events
THE POWER OF THE MIDDLE CLASS
Francis Lobo
I assessed the gathering in which I was a member of the audience. They were from the Middle Class, a critical mass of people, who, with their backgrounds, education and experiences, could, if mobilized, make a difference in the critical times through which we are passing -- the coming LS Elections in India, the global financial turmoil, the waves of crime, corruption and terror sweeping the world. However, the group seemed unconcerned, caught up in their own personal world and self interests, like individual drops of water. Is the Middle Class really so impotent, inactive and insensitive?
What constitutes the Middle Class? It is defined by an economic situation --- not by any occupation. The middle class do not display their affluence by checking into five star hotels on their personal account. Nor do they have to go to bed hungry unless they are dieting and want to reduce size and / or weight. They have assets and a safety net of savings and superannuation benefits. They can give their children an education, even higher education, and take care of normal medical expenses. Contrary to the belief that the Middle Class are the Frozen Chosen, who take the benefits society has to offer and give nothing back in return, this group is the breeding ground for the Great Thinkers and those who can bring about Change. Karl Marx, Gandhi, Martin Luther King, even Dhirubhai Ambani and now Obama have come from this group. Why?
Savings give the Middle Class staying power. A drop in the rate of employment hurts the daily wage earner, who lives from hand to mouth. But a middle class person can be without a job for months, sometimes even years. Hence, she can withstand shocks, take risks --- spend time in education to better her prospects, enter politics, migrate to a new country, which offers better opportunities, invest in property, which appreciates and adds to wealth over the long term.
How is this Power generated? It is through savings. The savings rate has been of the order of 25-30 % of earnings when we consider contributions to provident fund, gratuity, insurance, investments, etc. At this rate in 3-5 years the cumulative savings will be equivalent to a full year’s earnings. That is why we see today that the global funds available are several times the global GDP. The crimes against the middle class are firstly to convince them that it is futile to save --- money value depreciates with time, today’s money doesn’t have the same value tomorrow. Hence, spend, enjoy, live it up, have a great life style, live on Credit. As your earning capacity increases it will be easier to pay off today’s debts tomorrow.
The second major crime that is being committed is to use the savings in speculation and gambling on the stock market. Life time savings have been wiped out in the stock market. People have been tempted by the stock market manipulators to invest their savings where high returns are forecast but there are also heavy risks involved instead of going in for investments with fixed returns. Trillions of dollars have fled the market. Where has the money gone? Obama is attempting to crack down on the tax havens. What are we doing in India where it has been discovered that the Indian holdings in Swiss Banks exceeds that of all other countries combined.
With the passage of time the availability of money grew. Those who have a nose for money smelt where it was and found ways to draw it out. One was the stock market. Whereas getting funds for a few crores was difficult, suddenly mega projects involving thousands of crores became possible. The next was real estate. The middle class was exhorted to become part of the Ownership Society. Housing was an excellent investment --- the only way value of property could go was “UP”. Loans for housing became easy. Those, who were starting their careers and didn’t have much savings, were given loans by their employers. They soon found that these were golden handcuffs limiting their mobility to change jobs. Builders were in no hurry to complete development and pass on property rights to early occupiers as with delays property prices just rose year-on-year. Creating infra-structure like roads was pressed as a basic need for development. Incidentally this also helped push real estate prices even higher.
With the creation of wealth it suddenly became necessary to commercialize basic human requirements like water, health and education, which were earlier left to government, philanthropists, voluntary organizations, religious bodies. Savings were siphoned off by capitation fees and high fee structures.
All this led to On-going inflation and hefty increases in salaries to compensate for this. The Government of India took the lead through increases in successive Pay Commissions, without any corresponding improvement in productivity and performance. This is not sustainable and companies have resorted to downsizing and outsourcing ---. 5 million jobs have been lost in the recent past.
The current crisis is an attack on the middle class Therefore, today it is for the middle class to lead, to educate, to empathize through the Internet, the media, at public meetings and through litigation. The actions to be taken are as follows:
· The share market crash is not just a correction. The money has been drained out of the system. The middle class must demand that the manipulators bring the money back and return it with interest. They must also understand the illusions of paper wealth.
· They must get back into the savings mode and stop living on credit. The savings must not be used by the banks to fan consumption but put to productive use --- like Rand D., agriculture, environmental protection, water conservation, renewable energy, health, education, poverty eradication.
· Earnings must be performance related so that inflation is controlled. Managers must not be rewarded for cutting the workforce and downsizing but rather for creating productive employment.
· The middle class must no longer accept the hierarchical structure and expect those at the top to solve the problems. They must be actively involved in defining the issues, finding solutions and taking a lead role in implementation for the greatest good of all. They must realize that by getting elected or selected to a position of power doesn’t automatically make a person competent to solve complex issues. Dialogue and discussions are necessary to get a holistic view and join all the dots. Vigilance that things are being done correctly is the price of freedom.
There is one thing that the Obama Victory has done and that is to high light the power of the middle class. They can make a difference by making their views heard on the Internet, at public meetings, in the media and by their swing vote. Even the President of the USA would have no power if it wasn’t given to him by the people. He can ride rough over the views of a vocal majority only at his peril. Let’s stop living in the past and instead be architects of the future. Don’t be the drop --- Be the ocean
