WE, THE MIDDLE CLASS…

The importance of a middle class to the health of a country’s economy cannot be overemphasized. In a perfect society, the “normal” is the middle class because extreme poverty of majority is not beneficial and extreme wealthiness is highly unlikely. With most of the population falling within this group of middle income earners, we have a potential group of economic change agents that make it more likely for people on all rungs of the economic ladder to benefit from continuous economic growth and the prosperity of the nation. Simply put, policies focused widely on the rich will leave most people poor and disenfranchised, and policies focused mainly on the poor will stifle growth.

The middle class is the driver of policies that are most favourable to the general public. With a large middle class there is a push for government to invest in public education, the health care system, physical infrastructure like roads, bridges and airports, and so on. As it is, democracy is in fact a slave to wealth and so policies are largely influenced by private individuals and corporations who can afford to lobby for policies that are beneficial to them. The combatant of this form of unfair law making is a middle class that exists to check the excesses of law making bodies. This is why the outcry to Get Private Money OUT Of Politics. With a large middle class that does its job as the police of policy makers, we have government money going towards building infrastructure- which facilitates production and encourages innovation- that the middle class and the poor benefit from, and that the rich also benefit from should they decide to use it. Without prejudice to any particular group, the wealthy can afford private jets- so there’s little need for government built roads and bridges- private schools, and private healthcare, which is why they tend to find government spending on public goods and on particular projects that they, the 1%, do not necessarily depend on unsatisfactory. This illustrates in a simple instance how majority will be left disenfranchised if the rich have greater power to influence policy than majority.

With their large influence on policies, the middle class will tend to be more inclined to participate in politics as they expect that their voices will not be blurred out by big money. This is of course where trust comes in. Knowing that government will, most of the time, act in favour of majority encourages trust in the institution of government. The policies that the middle class is in favour of are growth spurring- right from the middle and the bottom of the ladder, As opposed to from the top as proponents of Trickle Down economics suggest- and will tend to raise people out of poverty more effectively and probably within a shorter period. When the middle class is the middle of the bell curve- i.e. when they make up majority- studies show that trust increases in the society. Social trust is a growing area of concentration in economics but the main point is that lack of trust is a deterrent to growth. Lack of trust among economic agents introduces something of a transaction cost that slows down the economic machine. With a large middle class people can assume their neighbour down the street has interests similar to theirs, that they are fighting for a common goal, which fosters social connections. There is therefore, less cost taken up in business transactions to make sure that the other person is not cheating (interestingly, this can be tied to Asymmetric information).

There’s a certain level of political polarization that accompanies great inequality. The people on the left are angry at the rich and at government for seeming to favour policies that are beneficial to the rich. On the right however, people are angry at government for spending money that they pay in taxes (being the biggest albeit unwilling contributors) on things they can do without- Public goods-, angry at the poor for spending their money, and angry at immigrants for benefiting from their tax payments. This introduces a society rife with hate which introduces another form of instability. In a more equal society- meaning a society where majority qualify as middle class- the significant majority have aligned interests, economic agents are less frustrated and are more willing to work together.

A nation cannot completely rid itself of inequality, that would require punishing productivity by excessively taxing the rich and giving unfair handouts to the poor. The emphasized importance of a middle class does not mean that the poor and the super rich are irrelevant in the grand scheme of things, but that policies that are geared towards favouring the middle are more beneficial to the general public.