The American middle class was not “natural.”
It was engineered.
The American middle class did not magically appear.
America talks about the middle class as if it were a natural resource: amber waves of grain, purple mountain majesties, and a two-car garage. But the middle class was never natural. It was built. Not perfectly. Not equally. Not universally.
But materially, legally, and institutionally engineered.
The colonial period of America did not have a middle class, despite the American colonies having the highest average income in the Western world1. The colonies produced an average income that exceeded the established powerhouse economies of the era in England and France. The colonial period's biggest asset: cheap land and virtually endless expansion possibilities2.
The colonial period also brought the Western Hemisphere’s first economic depression. The Revolutionary War came at great cost. Between 1774 and 1789, the American economy (GDP per capita) shrank by close to 30 percent. The casualties and expense of war made it all the worse.
New York City merchant Anthony L. Bleeker said in 1786, “As money [has] become exceedingly scarce and business very dull, the shopkeepers, country dealers, &c. are very cautious and backwards in buying; and it is really very difficult to make sales to any tolerable advantage, especially when immediate payment is required.”3
The Depression of the 1780s was the giant red flag while moving forward in America’s economic history. The facts of slavery, indentured servitude, women under coverture, landless laborers, etc., of that era did not help; in fact, those things eliminated the possibility of a middle class during that period. But that was a different time, and we were a start-up country with a simple (by today’s standards) agrarian economy.
Colonial America had pockets of yeoman independence, but not a mass middle class. The difference matters. A farmer with land and a debt problem is not the same social creature as a postwar household with a union wage, a 30-year mortgage, public schools, Social Security, and an employer pension.
The Gilded Era and industrialization did not build a middle class. There is a false myth that “factories created the middle class.” Factories produced output. Railroads created markets. Capital markets created fortunes. But without labor power, wage standards, antitrust, workplace safety, and public investment, industrial capitalism created a huge working class and a tiny ownership class. Industrialization led almost immediately to the stratification of the economy as capital holders reinvested in machines and created mountains of concentrated wealth.
So, in the first century-plus of American history, there was not a middle class, nor was a middle class an automatic outcome of A, B, or C factors. Then the Great Depression hit, and then the Dust Bowl at about the same time. Utter, compounding disaster for America, especially laborers without land and/or capital. But that rough period for America, that technically did not end until World War II and the Treaty of San Francisco, set up something for America’s and working Americans’ future. As the economy and population grew, stability became an increasingly important factor in American life, business, and governance.
During the height of the Great Depression, the New Deal was enacted. The best part (especially applied to today’s wealth inequality problem) was the passage and ratification of the 16th Amendment, which allowed higher tax rates on higher incomes. It was the birth of the progressive tax rate system (that Reagan et al later abandoned). The average worker was afforded protections and rights for the first time. The Wagner Act/National Labor Relations Act of 1935 protected collective bargaining and created the NLRB with enforcement power.4 Fair Labor Standards Act: The FLSA banned oppressive child labor (something Trumpian politics wants to bring back), set a federal minimum wage, and created a maximum workweek.5
The New Deal did not abolish capitalism (albeit the Reaganites abandoned capitalism for Corporate-Socialism). The New Deal made capitalism survivable for people without land or vast capital reserves.
Not all of us have a swamp castle:
Where did the American middle class really start? Post-World War II. There were a plethora of reasons for that. The wars in Europe troubled many of our leaders of that era, including General, Supreme Allied Commander, and later, President Dwight D. Eisenhower.
“Good wages, respectable working conditions, reasonable hours, protection of status and security; these constitute the necessary foundations on which you build to reach your higher aims.” — Dwight D. Eisenhower, December 5, 1955, telephone broadcast to the AFL-CIO merger meeting.
Eisenhower saw the stability of America through the lens of an unstable Europe that led to the conflagrations of the World Wars. Eisenhower fully understood what led Europe to war and how others could follow Europe's egregious mistakes.
“Moreover, we cannot be satisfied with welfare in the aggregate; if any group or section of citizens is denied its fair place in the common prosperity, all others among us are thereby endangered.”6
The postwar middle class was built from several overlapping systems:
Private-sector union power.
High marginal tax rates.
Public infrastructure.
GI Bill education and housing subsidies.
FHA/VA mortgage architecture.
Mass public education.
Stable manufacturing employment.
Employer health insurance and pensions.
Social Security expansion.
A huge pillar of stabilizing our society was the educational efforts under the GI Bill. We would not have had NASA, big tech, or biotech without it. We would have lost the space race to the Soviets without it. The GI Bill was phenomenally successful. Studies have said that America achieved a massive ROI (return on investment) of nearly $7 returned to the U.S. economy for every GI Bill dollar spent. Not too shabby. Compare the GI Bill and Pell Grants to the usury of student loans.
GIs with VA-backed mortgages caused the suburbs to explode. GIs and post-WWII government programs built out what Americans collectively refer to as the middle class.
Albeit imperfect, the post-WWII tax schema disallowed the wealthy families from endlessly walking away from the rest of the economy. The marginal tax rates were very high, and the taxation was looped back into stabilization efforts of the middle class and the elderly. The United States had extremely high top marginal tax rates during the era most nostalgically remembered as the golden age of the middle class. Tax Policy Center data show top marginal rates above 90% in the 1950s and early 1960s; for example, 91% in 1951, 92% in 1952–1953, and 91% from 1954 through 1963.
Here was the win of that tax era: The wealthy gained more wealth without the governments (federal, states, counties, municipalities, etc.) going into a black hole of debt, nor did the middle class free-fall towards poverty, bankruptcy, and the destruction of the middle class. Because that’s really today’s tax versus government revenue versus working class affordability—the wealth of oligarchs is skyrocketing while governments and the middle class go broke.
“The American employer can never forget that, since mass production assumes a mass market, good wages and progressive employment practices for his employee are good business.” — Dwight D. Eisenhower
Then the turbulent 1960s, Vietnam, the counter-culture, and years of chaos took hold of America. The country’s intelligentsia dismissed Eisenhower’s warning over stability, and took a turn for the worse.
In a previous article, I created a data model using the major financial burdens of a working family: Housing, education, healthcare, and tuition. The American system of a stable, and yes, capitalist system did work from the post-WWII period to 1969. But then Nixon left the Bretton-Woods agreement (aka the modified gold standard) and threw the economy into a tizzy (along with the oil embargo). Then the misnomered Conservative Corporatist Revolution occurred under Lee Atwater, the 1978 midterms, and then Reaganism. The result was that the American Dream was assassinated in 1978.
The Reaganites went hog wild; they threw out any sense of stability, community, and nation-building. They no longer cared about the middle class, unless they were at the lectern bullshitting us. They quickly replaced it with a rigged economic system, Corporatism or Corporate-Socialism, and destroyed labor rights nearly across the board. Reaganites anointed debt as capital and labor their avowed enemy. If they could design a casino that worked for the campaign donor class, they saw no need for the rest of society. The economy was dismantled and provisioned exclusively for the wealth holders…so they could astronomically increase their wealth faster than the economy was growing. (That’s how you know it’s rigged, when only the oligarchs can get ahead of the game.) They privatized profits, jerry-rigged the tax code to give themselves a tax-free lifestyle, and took the money and ran. Then the U.S. Treasury and the working class’s paychecks simply became a backstop for corporate failures, while every corporate success went straight to executive bonus checks and institutional shareholders.
We had a system, while far from perfect (especially with the aspects of racism and misogyny), that worked. That was dismantled, intentionally so. While worshipping the almighty dollar (not Jesus of Nazareth, by the way), the country lost its way. We did not forget, but we did choose to ignore the lessons of history and America’s own past. They no longer cared about improving the quality of life for Americans. They dismissed the gains of a growing middle class and a more distributed economic basis. The American post-WWII plan was that the next generation should be better off than the last generation. More educated, less poverty, more opportunity. You know, actual peace and prosperity. Oh, and lower crime, too! The corporatist right loves to complain about “high crime” but puts their head in the sand when you point out the real levers of that lower crime: Prosperity, stability, solid family units, job security, education (without usury), and fairness within a society.
The American middle class is neither natural nor accidental. It is not the automatic child of capitalism, industrialization, or national virtue. Colonial America did not have a modern middle class; it had an agrarian order of landowners, tenants, merchants, enslaved people, indentured workers, artisans, and debtors. Industrial America did not spontaneously produce a broad middle class either; the Gilded Age produced fortunes at the top and insecurity below. The modern middle class emerged only when democratic policy forced industrial capitalism to share: progressive taxation, labor rights, Social Security, wage-and-hour law, public education, mortgage policy, infrastructure, and the GI Bill.
The middle class was built.
And because it was built, it can be dismantled.
Beware, that’s the current plan under Trumpianism.
Until next time…
Please.
Think about it.
Mount Vernon dot org
If you ignore the Native peoples who already lived here, of course.
Mount Vernon dot org
FDR Library
U.S. Department of Labor
The American Presidency Project
Ah, yes. To grow up in the 50s. Boom times for the middle class.