Book Review

Don't lament for the middle class

Why Piketty’s Capital matters for Canada
Photo: Lendingmemo

The US is in the throes of a debate about inequality: It's the Waltons versus the Walmart workers on food stamps, the runaway rich in the 1 per cent versus everyone else. Meanwhile, Canada's inequality discussion has been largely confined to the woes of the middle class. Even the New York Times added grist to the mill by proclaiming Canada's middle class better off than its US equivalent.

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Similarly, while the US has made a veritable rock star out of French economist Thomas Piketty, whose 600-page economics tome Capital in the Twenty-First Century has topped best-seller lists, Canadian reception has been much more muted. This is a bit surprising because Piketty, in drawing out the link between capitalism and inequality, tells the story of a new Gilded Age replacing the post-war Golden Age that saw the middle class establish itself. One reason Piketty's book may have left less of a mark on Canadian debate is that more of a middle class has endured in Canada. But will today’s middle class survive?

What exactly is the middle class?

droite Hold the champagne corks and the gloating over that New York Times report — perhaps Piketty has something to say to Canada after all.

Hold the champagne corks and the gloating over that New York Times report — perhaps Piketty has something to say to Canada after all. Here is a passage expressing a thought rarely mentioned in discussions of his work:

Make no mistake: the growth of a true “patrimonial (or propertied) middle class” was the principal structural transformation of the distribution of wealth in the developed countries in the twentieth century.

By the mid- to late-20th century, alongside a “social wage” provided by the welfare state (insurance schemes, health care, higher education and more), a significant number of workers had gained access to some wealth, primarily in the form of houses and some private savings, including pensions. They acquired property that could be used and passed down to heirs, thereby becoming “patrimonial.”

By defining the middle class in terms of wealth (rather than income), Piketty focuses attention on long-term social position rather than more transitory changes. Today the middle class comprises the 40 per cent of the population between the poorest 50 per cent, who have never had access to wealth, and the richest 10 per cent, who are increasingly dripping in it.

In essence, this analysis in terms of wealth is what more radical economists refer to when they speak of the development of different strata in the working class. (If the language of the “working class” seems dated and quaint today, it is because we are accustomed to an industrial caricature that no longer applies to most workers in the North.) The middle class is not so much the rich neighbour who moves in next door as it is the sibling who strikes it moderately rich. Like the wealthless bottom 50 per cent, the middle class continues to earn its livelihood largely from work, not from investments in land, stocks or other assets.

gauche The middle class is not so much the rich neighbour who moves in next door as it is the sibling who strikes it moderately rich.

Nevertheless, this partial access to wealth has kept radicalism at bay; once implicated into wealth ownership, the middle class was more easily rallied behind political and institutional changes that favour the wealthy, such as low inflation, public debt management and sustained growth in the prices of stocks and other assets (at times via bubbles).

Parts of the middle class rose even higher, helping form a new professional, managerial and "supermanagerial" elite, which Piketty describes as increasingly moving into the top 1 per cent.

At the other end, these changes took place in a context of discrimination based on factors such as race, immigration status, gender and First Nations status. The creation of a middle class helped entrench discrimination, while further curtailing radicalization by pulling some members of marginalized groups into its ranks.

How does Canada's middle 40 per cent stack up today?

A slow deterioration has set in for the Canadian middle class. According to the 2005 Statistics Canada survey of wealth, the bottom 50 per cent of families own a mere 3.2 per cent of wealth, and the top 10 per cent hold a whopping 58.2 per cent, leaving 38.6 per cent for the patrimonial middle. The same survey in 1984 showed the poorest families had 5.3 per cent and the middle held nearly 43 per cent.

According to this same survey (updated in 2012 but with no detailed data available yet), housing is the most important source of wealth for the middle class. The majority of businesses are owned by those at the very top, with 92 per cent of enterprises belonging to the upper 20 per cent of the population.

Despite the economic slowdown stemming from the 2007–08 global financial crisis, Canada's housing wealth has not evaporated to nearly the same extent as it has in the United States, United Kingdom and a number of Euro-zone nations. And income has been eroding more slowly than wealth — the income share of the middle 40 per cent has not fallen by as much thanks to continued transfers from the welfare state, even as it is being transformed and dismantled.

These facts help explain why the middle class remains a focus of public debate in Canada.

A disappearing middle

If Piketty is right and capitalism has an inherent tendency towards the concentration of wealth, then the days of a large middle class are numbered.

Its decline looks to continue into the 21st century as more middle-class work is mechanized and the unique conditions of this century recede into the past. Piketty claims that the post-World War II boom merely obscured the basic fact that inequality is endemic to capitalism. The middle class of that era is then similarly a blip.

droite Piketty claims that the post-World War II boom merely obscured the basic fact that inequality is endemic to capitalism. The middle class of that era is then similarly a blip.

The question is not whether the middle class will be worse off, but how much of it will survive as a hollowed-out rump. With the bottom 50 per cent already owning nothing, a continuing concentration of wealth will come at the expense of the middle.

Piketty, however, pulls away from more radical conclusions. For him, the middle class could be saved through a renewed tax agenda focused on taxing away the wealth of the rich. Yet just as the rise of social democracy in the 20th century cannot be attributed merely to war and economic depression, its future revival is unlikely to result from tinkering with the tax code.

Human agency, through workplace agitation within the “old” working class, helped shape the conditions for the rise of a middle class. Likewise, its nascent members were able to “tone it down” as part of that historic compromise that saw significant wealth penetrate the upper strata of the working class. Agency in Piketty's story is too limited: a time of war and depression also saw a dramatic rise in working-class politics and action.

A common wealth

The middle class is deeply anchored in the post-war consensus. The institutions that provided particular workers the means to wealth ensured that half of the population remained, as it always has been, shut out. These ties of wealth then pulled the politics of the middle class upwards, closer to the truly wealthy. Fear of debt, inflation and taxation anchored a politics that is now biting into the middle class by helping wealth concentrate at the top.

While Canada debates the middle class and laments its demise, Piketty asks coldly and analytically whether capitalism needs a sizeable middle class at all. This puts the question of the future of the middle class — one that revived capitalism after the war by working, saving, consuming and adding women to the labour force — in a different light.

Lament for the middle class is a lament for the past

The lament for the middle class is a lament for the past, and, if Piketty is right, it is a lament for a past that will likely not repeat itself. Seeing the middle class as a sputtering anomaly rather than a malfunctioning constant might mean toning down the dream of individualized patrimony, while reigniting a vision of a common wealth and a democratic franchise over it. Think social housing rather than the suburban bungalow with a picket fence.

To get there, we'll need not just a friendly reimagining, but difficult, conflicted and honest political work that rebuilds the bottom tier of the economic pyramid as an agent — what we used to call a class. The first step may be giving up the current lament.

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