Disappearance of the Middle Class

Most people (who are likely to read this post) think of their financial station as middle class, so you might find it strange that I should say the middle class is disappearing. But the polarization in the wealth distribution of the world is very real, and it is visible at every strata of the society. I would like to convince you by anecdotes and examples before getting logical and formal about it.

I used to go and watch Singapore Open Badminton a few years ago. The ticket prices used to be in the 40 to 60 range. About two years ago when I checked, there was to be a new category of tickets called premium, costing about three times as much as the normal tickets. Sure, the seating is probably better, but that doesn’t seem to justify the high price. It seems to me that what is being sold is not so much the seats, but a kind of exclusivity. Those who have money now are willing to pay a premium to be separated from the masses.

Similar trends can be seen in our shopping habits as well. When you buy yourself a watch for say $10k, you are not only paying for mechanical perfection, but also for the fact that normal people cannot own it. You are paying for exclusivity. Shrewd brand executives know this, and realize that exclusivity in pricing is all it takes to lure wealthy clients to their products. (I recommended this pricing strategy to my wife in her boutique, but she, being far shrewder than me, declined.) Sure, the products can be of very high quality because it takes only a fraction of their exorbitant prices to ensure quality. But quality is not what we are paying for.

When we dine at a fancy restaurant or take an exotic vacation (and post the images on Facebook), we do enjoy the experience, no doubt; but we also enjoy the secret pleasure that not everyone can do what we do.

This economic reality is mirrored in the Manna story I posted last week. What is being decimated in the story is the middle-management, the middle class of the corporate world, if you will. The top end (senior management) gets fatter, and the bottom end (those poor saps managed by Manna) gets leaner.

I have a bit more to say about this, and how western style democracy has become a plutocracy (as reflected in the Fox “News” Network), but this post is already a bit too long. Stay tuned for the next one!

Photo by Cory M. Grenier cc