August 9, 2010

Middle class dying a slow death

Posted in Sunday Business Post · 80 comments ·

Last year, I was lucky enough to interview Elizabeth Warren, a Harvard law professor and likely new head of the new US consumer protection agency.

We discussed the US banking crisis, but my interest in writing about Warren stems not from her views on the US banks, but from what she has been saying for years about the financial fragility of the American middle class.

In her book, The Two-Income Trap, Warren documented how middle class working families in the US were in a trap, and how their financial existence was becoming increasingly precarious.

She contrasted this experience of huge debts and constant bill-juggling with the reasonably secure experience of the same middle class in previous generations, particularly the post-war generation.

This phenomenon featured in an excellent article in the Financial Times last weekend.

Warren’s view is that the American middle class is getting progressively poorer, relative to those at the very top of the tree in the US, as well as to people with similar jobs and education elsewhere around the world. She has been writing for some time about the disappearance of the old US middle class and the American Dream.

This is not a revolutionary idea; many others have various theories as to why this is.

The reasons vary from the breakdown of the trade union movement to the rise of China and the constant peddling of debt from an unregulated finance industry.

Whatever the overall reason, the trend of a middle class that is either running to stand still or actually falling backwards is of crucial significance here, because the Irish middle class is about to take a giant leap backwards.

This group is now getting hammered by the collapse of property prices – which, ironically, has to continue if we are to get competitive and become a proper trading nation once again.

This is the central dilemma for all of us: we need to ‘lock in’ cheap property as a competitive advantage for the country, but that means trapping the property-owning middle class in a brace, where their debts remain static but the value of their assets falls.

This means, in its simplest form, that middle class Ireland is broke for the foreseeable future.

We can only avoid this vista by reengineering a property boom, which will just end in a bust a few years hence, putting us back to square one – with more debt.

This is not an option and, even if it were, it is unclear where the credit would come from to push up property prices, due to the broken banking system.

So the Irish middle class is stuck in a debt trap.

On top of this, we face the prospect of huge increases in taxation in all sorts of areas in the next few years, and we are using a currency which is far too strong for our enfeebled economy.

Regarding the currency, what our conventional wisdom peddlers don’t realise is that a strong currency makes weak economies weaker. In fact, no country in history has ever got out of a debt/deflation spiral without changing the value of its currency.

Meanwhile, the argument that euro denominated debts would just rise if were to have a new currency, while accurate, is not particularly compelling – because the ability to pay back debt is a function of being competitive.

This means generating a cash surplus from whatever you do for a living to pay back the debt.

This dilemma remains the case, irrespective of what currency you choose to pay yourself in.

The challenge is to get that economic surplus first and then translate it into hard currency – not get the hard currency first and hope to translate it into an economic surplus.

But there is little point explaining this basic economic truth because we will not leave the euro: the political establishment just won’t countenance it.

This leaves us with the prospect of the Irish middle classes overpaying themselves in an overvalued currency that bears little relation to the economic facts on the ground.

So the insiders who pay themselves in the hard currency, the euro, but don’t actually generate the surplus, get a huge subsidy from those who have to go out and actually generate the surplus in the first place.

This policy choice is a recipe for what we saw last week – much higher levels of unemployment.

This is what our government appears to tolerate.

The ‘insiders’ who have jobs will try to protect themselves, and the ‘outsiders’ – the ones who lose their jobs, or are already on the dole – have to make do.

It was the same in the 1980s and the 1950s. History is just repeating itself.

As in the 1980s,unemployment has now begun to rise dramatically among white collar workers.

This spreading of unemployment is always the way it happens. Initially, the jobs in construction go, but gradually, as demand evaporates, unemployment seeps into other areas which were initially thought to be immune.

In the 1980s, the middle class responded by emigrating. Atypical emigrant in the late 1980s was three times more likely to have a university degree than one who stayed at home.

This trend will probably repeat itself, and the fiscal situation will deteriorate as unemployment rises and tax revenue falls. Ireland is on course for a failed fiscal adjustment – all the indicators are pointing to it.

The state will then try to get its hands on cash from wherever it can.

This is why a tax on savings is likely to be introduced, as are all sorts of other charges and stealth taxes.

All the while, the position of the middle class – which seemed to be so strong a few years back, when the property scam blinded people – will become more and more edgy.

This is exactly what Warren documented in her book.

So what are the alternatives? Whether we like it or not, with the balance sheet shattered, some form of debt restructuring for Ireland’s private sector is a given.

Time will tell how this will work out.

Also, given an anticipated last-gasp, smash-and-grab exercise from the state, the middle classes will take some of their cash out of the country and the Irish banks.

This is what happened in Latin America for decades when capital flight was endemic.

The Irish middle classes have a choice. Either they vote for massive and radical economic change – if a new party emerges which advocates such a manifesto – or they will experience slow but gradual impoverishment.

The issue isn’t about the direction of the move; just the speed of getting there.

  1. jkforde

    First time I came across Liz Warren was in The Corporation – worth a watch:

  2. Spot on their David,
    Been unemployed now for two years and not in receipt of any form of support, Dole or otherwise
    I am slowly be drained of my independent financial resources, instead of helping me to re train
    I am left to rot on the scrap heap, having taken the chances and investing in my own companies I was quite successful for 20 years and at one time employing up to 13 people
    I took the risks and invested my own money I got no help from the state and I paid all my taxes
    due to no fault of my own other companied failed to pay me for my services and goods and I was force to close down my operations and with the crape broadband the competition elsewhere around the world was able to catch up and are now so far ahead with no real investment in broadband we are in no position to roll out this so called smart economy
    Our broadband in the Stone Age after promising 2 years ago to do something about it nothing has changed
    In fact my broadband in worse even as I pay eircon for 8 Megs I am only at best getting .759 of a Meg
    We need to get the 500,000 currently unemployed back into the work force and an immediate
    5 billion Euros retraining scheme is the bare minimum after all educated unemployed people have a much better chance of getting work
    This is a no brainer! But I expect that the current Government policy is to pump the countries resources into the toxic toilet that is NAMA and give lip services to the rest of us
    The current governing system of this state has no creditability left and needs to be totally abandoned and replaced with a new direct democracy where the ordinary citizens have the ability to sack any and all public servants(Local Politicians and TD,s) that they believe are not performing or have broken promises to them or have switched sides .
    This is to be done by calling local referendum in the TD, s electoral area and in any case I personally TD,s should first have to go through a probation period
    We the public should not have to wait for 5 years to be able to have our say as in the modern world things are moving a lot faster and with the use of the internet we can and must come up with a new modern system that will serve our people in a more transparent democratic way

    • coldblow

      Hi Macholz, your call for direct democracy recalls an earlier train of thought of mine about the Chartists of the mid-19th century, led if memory serves by William O’Brien, an Irishman. They called for annual elections, secret ballots etc. I think it’s probably time to abolish the secret ballot to make people open about who they vote for. (Plus maybe also full transparency on all individuals’ and companies’ assets and cashflows (‘private sector FOI’), random general knowledge testing at roadblocks, property DISqualification for the franchise.) Alright, I’m being facetious. Politicians defend themselves by pointing out that they are representatives rather than elected delegates — except of course when it’s the other way round when it suits them to appeal to their ‘mandate’.

      Here’s another idea for a modern Charter: TDs to be paid the national median wage (including the jobless) and no expenses — if the people prosper so will they, and perhaps they could get a modest bonus if that happens.

      The current system whereby you have to exhaust all your savings before you can get any assistance is a pure disgrace. You may as well spend the lot fecklessly (plenty would do it) and then go to them. Here again there is just no sense. (Crotty called for a ‘national dividend’ payable to all citizens irrespective of their circumstances.)

  3. Thomas
    I apologise for the mistakes as I pressed the post button before I had checked for mistakes

  4. michaelcoughlan

    Having read this article in the newspaper it prompted me to think how the end game will finally come about. As David said there will probably be a tax on savings as the government will want to incentivise the citizenry to spend their money in the economy. Since the same citizens are lodging their large sums of money with the post office rather than the banks what they will probably do is take their savings out of the banks and lodge it elsewhere to “avoid” this tax. In other words a tax on savings may have the opposite effect of getting things going and spark a run on the banks because people still want to save their money rather than spend it. It will be very interesting to see how a tax on savings will affect the economy in the real world out here rather than the rarefied atmosphere in Dail Eireann.

  5. My thoughts include :
    a)Is there a limit on charging citizens. Irish electorate ‘interest on interest’on bank loans and credit cards ; and
    b) Why are loans under sharia law from Irish Banks excluded from foreclosure of homes ; and
    c)Irish Taxation Laws are based on Equity of charge and enforcement so why can FF charge the Irish Electorate a tax on savings in an Irish Bank when tax was already paid beforehand to accumulate it?; and
    d) Irish Law Reform Committee needs a REFORM before they can work again and to include others outside the legal professions ;and
    e) We need to see ourselves in this Forum as The ELECTORATE and not some disposable tissue; and
    f)Only The Electorate can save their families and their neighbours and they must be seen to do so .They owe a responsibility to themselves .

  6. ps200306

    Elizabeth Warren has a good head on her shoulders ( I wasn’t surprised to find she’s a practicing Methodist — that oldline American Protestant work ethic shines through). I recommend taking the time to watch her one-hour youtube video from two years ago about the decline of the middle classes. While obviously American-centric, I think people will recognise the relevance of the issues for here.

  7. lff12

    Every 50,000 extra people on the dole represents a minimum “cost” of 1 billion in lost taxation and welfare payments. This doesn’t take into account the soaring cost of running such services, means testing, healthcare costs, potential housing costs which can run into billions due to the excesses of the notorious “rent allowance” aka “Landlords Dole”. These people obvious are constrained in their spending so VAT reciepts fall and the knock on impact of lower spendng hits business.

    I think the traditional notion is dying for 2 reasons – firstly a lot of formerly qualified, skilled and well paid jobs are now either no longer requiring skills and thus pay rates fall, or the job gets “offshored” to a low cost developing nation at a fraction of the flat cost. MEanwhile a minority of middle class people continue to reap very high wages – mostly those in very specialised high demand functions.

    Of course the one way the government can refuse responsibility is to disqualify more people from welfare. This is quite easily done – firstly remove it by restrictions such as habitual residence which is generating yet another kind of new poor who get no assistance at all.

    The second way of disqualifying and forcing the bill down is easy and you can see – guess why “entrepeneurship” and “be your own boss” is heavily promoted, glamourised and sexed up – yes you got it, they don’t qualify for JSB! Which means if they are lucky enough to own more than one home, or don’t own any at all but have savings over 20k, they can’t get welfare! So lets all go and be sex entrepeneurs so we can suddenly discover there is no safety net for us if it all goes tits up!

  8. liam


    “The Irish middle classes have a choice.” As far as I can make out in fact they don’t, at least not in the political domain. As somebody recently put it, policy is not constructed around facts, the ‘facts’ are re-interpreted to support policy. Ireland must be the hardest place in the world to be a political satirist, since the absurd is accepted as normal. Politics in Ireland, in the political parties themselves and within the public services, local government etc etc reduces to a collection of spectacularly unenlightened feudal lords protecting and building their dominions. The idea of long-term planning or visionary thinking emerging from such a system seems about as likely as Ghengis Khan introducing free universal healthcare.

    You highlighted perfectly the problem of our spectator democracy in your previous article, as did Hugh Linehan (though from a slightly different angle) in a recent IT article:

    The choice that people have is in fact what they do for themselves, since it seems there is little to be done with Irish politics, short of outright revolution. 5,000 people a month are leaving this country according to a report I heard on BBC’s Today Programme and on PRI’s The World. Thats perhaps more relevant when it comes to the pragmatic choices that people face. As you suggest, its those that have marketable skills who will leave, and I keep hearing stories about how many of this year’s university graduates have emigration on the top of their list as opening career moves. Life’s too short to fight losing battles, especially if your not a stakeholder in this country’s economic life.

    • liam

      David, btw dunno if this is the article you refer to it talks about middle America, which is not quite the same as what we understand when we say middle class, but its also an interesting read:

      • coldblow

        Excellent article. It illustrates what Hutton and others have been talking about for some years now. The banks were pestering them to take out loans and then turned on them overnight looking for reposession, as in the case of the house which had nearly been paid off and where payments to the bank of over $160k had been made (several times the purchase price).

      • adamabyss

        Great link liam and yet most young people’s depth of interest in the American nation today, focuses on a bunch of obnoxious, self-obsessed rich kids running around in the final episode of ‘The Hills’, airing this evening. This includes a lot of Irish young people; they are abuzz with chat about it today on the forums and Facebook etc. They couldn’t be bothered reading about the struggles and decline of normal American families. Might remind them of their own problems at home. Escapism is the order of the day.

  9. To capture ‘the surplus’ is indeed the problem, David, and had Ireland done this she would not have hiked up her land prices to nose-bleed heights.

    By Book 3 Marx was coming to conclusion himself that production’s surplus had to be captured for government. His US contemporary, Henry George, no communist, insisted that land and natural resource rents were the surplus that must be socialised if a halt was to be put to boom/bust cycles.

    But try to do it! Australia’s Secretary for the Treasury, Ken Henry, recently played his part, recommending both a land tax and a minerals resource rent at the rate of 40% of net profits. The Labor government rejected the land tax out of hand but took up the mining rent.

    The latter got the incredible sight of mining billionaires protesting in the streets against the ‘resource super profits tax’, so the new Labor prime minister, Julia Gillard with a looming election in front of her, backed off and dropped the resource rent to a miserly rate of 22.5% only.

    When the world comes to realise that the value land and natural resources rents is truly the natural surplus, we might start making inroads against the rent-seekers (including banks) who have ripped us off remorselessly, but I’m not holding my breath on that one, David.

  10. adamabyss


  11. Gege Le Beau

    Reports in the US suggest Elizabeth Warren (intelligent and decent person by all accounts) may not get the consumer agency job.

    Larry Summers rules the economic roost in the White House (he also made the infamous comment while President at Harvard that the under-representation of women in science and engineering could be due to a “different availability of aptitude at the high end,” and less to patterns of discrimination and socialization.). Indeed as the New York Times and Huffington Post have highlighted, there have been several resignations from Obama’s economic team (Christina Romer is going with some reports suggesting she felt crowded out, ineffective/did not have Obama’s ear).

    Summers, Geithner and no doubt Rubin (plus any GS men they can find) are calling the shots with a ‘double dip’ more likely now than at any other stage, certainly unemployment is rising, house purchases not looking too good, and think Krugman may have been right when he said the Obama stimulus wasn’t big enough, something Romer also pushed for but did not get. Said it before, think 2011 is going to a year of considerable change.

    I agree with the central theme of this article, the destruction of the middle classes is in train (whether intentionally or a consequence of social and economic policies, the truth is probably somewhere in betweeen – yes there are neoliberal types in Ireland, but think a lot of them just followed the prescription, doubt there are too many original thinkers, more model copiers than anything else – one of their solutions after all was a blanket guarantee, like throwing a tsunami at a candle. So people are caught in the classic debt trap (reminded me of the game ‘mouse trap’) and in Ireland to an astonishing degree.

    This hammering of that class of people (working people are being smashed as well in terms of salary/benefit cuts) this will be being followed by polarisation in the class system, small, extremely wealthy elite and the rest (closer to Boston than Berlin).

    We live in a time when the rich have never at any point in history been richer, nor the poor poorer, in global terms in countries in Central America, Southeast Asia and Africa the extremes are something to behold, maybe that is what the West is gunning for. After the short age of turbulence (2008-2012), we enter the age of extremes as the historian Eric Hobsbawm has talked about.

    • liam

      Gege Le Beau, I mean nothing personal about this: there is one interesting phrase you use and which I keep seeing elsewhere: “double-dip”. Now I don’t know what the feck to make of that, as far as I can see we never left the first dip… It belongs along with the V shapes and W shapes and L shapes and the whole alphabet soup of political and pseudo-economic blather from governments and banks and all the rest that seems to have erupted to finesse the essential problem that the average citizen is still in line for an almighty buggering.

  12. Deco

    Very good article. The essence of being middle class was that your wages were not reliant on physical labour input. There was a status thing involved, for many people – the work was not sweaty or dirty. This meant that some participants had contempt for those below them, and were aspiring outwardly towards equality with those above them. This psychological condition has been used as a means of generating a more intense for of consumerism in the past twenty years, that has got progressively more dependent on borrowing.

    I think that we are about to find out in a realistic sense, that the headline is correct. But we should expect the media telling us that it is business as usual for a while.

    I find it hilarious in the context of the above, that you have buffoons like Dermot Ahern telling working people that they are saving too much. Somehow or other I imagine that this percentage is not the requirement from members of the political establishment, IBEC or the media establishment. But for working people that is the average target.

    And as regards, personal freedom – that is something you are not supposed to aim for. Our advertising sponsors, and the sponsors of the political establishment do not want that. IBEC gets consulted continually. ICTU once a week. The electorate twice every decade.

    • Gege Le Beau

      @ Deco – interesting comment

      The process has been in train for a while more so in the US but now here.

      “The huge disparity is now between those educated and the uneducated, the huge gap is among the educated, fund managers v teachers – Krugman.

      • Deco

        I think that in the US the development is probably more ‘advanced’ (sic) as a result of the power of both Finance and advertising in US society. As Kunstler commented, the dominant religion in America is shopping. Again, we are back to the “manufacturing of consent” again. Of course, every individual has a right to screw up his own position as he feels free to do so. However, what I am against is the monopoly on truth that eminates from the IBEC agenda. And I don’t regard a duoploy on truth as any better. Because it effectively functions as an intellectual straightjacket for the entire society. In Ireland, we have ‘Beer&Circuses’ as the dominant religion. Your purpose is not to think or reflect on what you see around you but just to continue to live in an illusionary state of existence. And the key message is that the illusionary existence, seeking the latest thrill and buzz, is reality. Fiscal reality is determining reality for a lot of people. So we are borrowing 19 Billion a year, because Beer&Circuses is our religion and it must be worshipped like the “stone statues” in Easter Island.

        I am sceptical on Krugman. He is advocating fiscal policies, which sound very caring. But the real consequences of sustaining the unsustainable lifestyle in the US. He is in favour of tight regulation of the financial sector, but it is less known that he advocates urgent action when any of them becomes insolvent and needs a bialout. He also advocates low interest rates ‘ad infinutum’. This is exactly the type of environment that creates debt growth and asset bubbles. I also think that his blindside is the bond market. And he is on record, when the subprime bubble bust, as saying that the solution was a new bubble. I find him hard to take Krugman seriously. I always differentiate between the promise (which is virtual and is therefore bullshit) and the reality that is delivered (which is real, and is undeniable).

  13. [...] with a large deteriotation in their expected asset wealth.With the death of the Celtic Tiger, David McWilliams argues this is the fate facing the Irish middle class. Large debts, decreasing asset values, shrinking real wages (whether via increased taxes or levies, [...]

  14. If you think the government are humping you, why give them lube? Take your cash out of Irish institutions (including An Post). Keep the minimum amount you need in a local ‘operating’ account, but keep all surplus elsewhere e.g. in a French or German back. It’s simple, and it’ll force the situation in Ireland to a head. If people don’t take some action, sites like this are just futile verbiage, right?

    • michaelcoughlan

      You are absolutely correct. Without action sites like this are worse than useless and indeed are futile verbiage. Like I said above and I agree with you completely what will spark the Dead Enders /Fair Shitty brigade to move their savings to foreign banks is a tax on savings. I figure you are better to buy gold since this could be considered an investment in a commodity rather than a saving circumventing any savings tax legislation and protecting your wealth at the same time. It will be interesting to see what will be in the fine print of savings tax legislation. This could prompt a final run on Irish banks which will be the end for them if it pans out like that.

    • coldblow

      Ok, action not words.

      From an email received from RaboBank, 4 Feb., in response to my query about opening an account in Holland:

      “(4) You must be a resident in the respective country to hold an account there. In the highly unlikely event that Ireland will be deemed bankrupt, RaboDirect customers’ monies are safe as RaboDirect are part of the Dutch group RaboBank.”

      What a relief, we almost certainly won’t go bankrupt. (David please take note.)

      Opening this account required furnishing stringent proofs of ID and residence imposed by the Financial Regulator (recent utility bills, no photcopies, etc), no doubt all for my own good. Assuming the French and German Regulators are as efficient as ours (pause for hollow laughter) you’d need to prove residence among other things. I imagine that all the ‘safe’ countries operate similar controls. So, what about the dodgy ones then..? I imagine the Insiders know all about this as, after all, “This is What We Do!”

      Someone here suggested recently buying German property, an idea I had also been toying with for the past year (for my savings as opposed to unearned capital gains courtesy of our economic roulette wheel). I know a couple who bought a cheap apartment there in recent years. But my instinct is against it and, besides, there are also practical reasons in that if you can find someone to advise you there exist, By Definition, doubts regarding their (1) honesty and (2) competency.

      Anyone know anything about sturdy, waterproof plastic containers for burying notes in the back garden?

  15. wills


    Following the logic of the article further, one can deduce the modern day *middle class* is an illusion.

    It never really existed due to the fact it was underpinned by more debt than surplus so in the final equation its property owners class and rentiers class.

    Then there is the social group in between keeping out of this *debt trap scamarama* and getting on with things, like your good self, lets call that group, the flexr class.

    Now, the illusionary middle class of modern day who are in the *red* and and sinking deeper into its quicksand is another riddle.

    This modern day middle class are in fact in debt on a *lifestyle*, not, in debt relating to their needs but in debt relating to their *lifestyle* choice.

    This is I think is a critical point.

    This social group merely has to readjust its lifestyle to fit in with the new economic paradigm we are now in, the *post POnzi property bubble* economic model, which is well underway now, ‘cos, this social group had no difficulty on jumping on the POnzi property bubble paradigm when it was rattling down the tracks full speed.

    Alot of these modern day middle class people must ask themselves maybe its not a good idea to be driving a Land Rover to the shop when they have a massive mortgage to be paid.

    You know lets get into the nuts and bolts here of the truth.

    • Deco

      Wills – I agree. You are talking a lot of sense.

      Middle class today is about a choice of lifestyle. It is unrelated to income levels. And it is deeply connected to debt.

      Basically, those who believed the promise, are in debt. The believers are in the soup. The sceptics are the survivors.

      Here is a documentary that I seen recently online. It concerns the Ancient Greek Philosopher Epicurus, and his views on what defined a stable form of happiness. I recommend it to all of you. It provides an interesting critique of the pervasive message that is being beamed at all of you, on a continual basis.

      Ever wonder why Epicurus never appeared in the profile section on the back page of the IT (where usually you find the bankers) ? Maybe because he might have a message that is relevant for your own happiness. And yes, the world went mad for a few years, and is now trying to correct itself. You could tell it was going mad when the Ditherer was making a show of himself, and Gordon Brown was smiling smugly in 2006 lecturing everybody.

      No mention by Epicurus of the props of iillusionary happiness in modern in Ireland. By this I mean, “Beer&Circuses”, authority, celebrity, “shopping macht frei”, the attainment of ‘something for nothing’ or ‘pride for pride’s sake’. Or yeah, and “Sophistication”. Very important in recent years.

      The genius of Epicurus was that he had it figured out very simply. And in our age, simplicity is shunned for the same of outward projection of sophistication. Try arguing with anybody who regards themselves as part of the ‘educated generation’ and you get what I mean. If they were really educated, they would be humble not proud.

      • Gege Le Beau

        Excellent post, this film on Epicurus could not have come at a better time. Much appreciated. Analysis of our problems is important, outrage, anger and even despair are important, but slowly there is a turn towards creative solutions as highlighted in this post. Crisis is afterall a medical term which means the turning point of a disease for better or worse.

        In relation to this post, I heard a story of the Medici recently, they put up two mosacis in a town, one mosaic indicated a town with the citizenry involved, this town was flourishing, peaceful, in harmony. The other mosaic depicted a town without its citzenry taking an active role, disengaged, it was a place bedeviled by crime, alcoholism, sickness. So while the Medici grew rich, they took time to glorfiy their surroundings through architecture, patronage of the arts etc and also threw in social commentary for good measure.

        One may argue about how they made their money, as we do with Irish people and ‘tycoons’, seems to me we need some of our university philosophers and Medici like characters to come out of the shadows and for all sides most especially the citizenry to engage in the creative process. We could start with open, public discussions – a so called ‘grass roots’ response, as the danger with any political party is that it can tend towards the system, attract the same type of people who tell us ‘they have the solutions’ as oppose to challenging the system itself.

        • coldblow

          Gege, re your final point, this was examined a century ago by Robert Michels in his “Political Parties” which looked at the phenomenon whereby the leadership of popular parties always ended up the same as the rest. According to Wiki, its subtitle is “A Sociological Study of the Oligarchical Tendencies of Modern Democracy”.

          What we need. What we need… What Ireland needs is a people’s champion, along the lines of Rick from the Young Ones. Or Big Jack to front a plain speaking no-nonsense “Make the Cuts NOW Just F**cking Get Over It” coalition? How about a dual consulate, Noddy and McUseless, taking us by the hand into a caring (if not sharing) future?

    • Deco

      The Anglo scam is still ongoing.

      Does anybody have any idea how much money Anglo Irish bank really needs ? I mean, one way to know would be to allow Anglo to fail. And thenthe market would take over. Where is Mama Harney when she is needed to stand up for the market as a pricing mechanism. It might well be the only occassion in her political career when she might actually do something useful.

      I can see a lot of merit with comments by Furrylugs on the definition of Middle Class. It is becomming a lifestyle statement rather than an income statement. We are all knowledge economy workers now, and this has been the drift since the invention of the semiconductor. It is really hilarious to hear opportunists in the political establishment talk about how they are directing the knowledge economy. Usual load of BS from that department – considering none of them had sufficient knowledge to see this ‘crack-up boom-crash’ scenario coming when cheap interest rates were driving up asset valuations to ridiculous levels. Tom McGurk (SBPost) was correct. How many more Ivor Callellys are there in the political establishment ?

      China has recorded a massive surplus again and seems to be doing well at sucking in the world’s spending. This is the problem with the various stimulus packages in the West – they all end up stimulating China more than anybody else. Basically, the West has structural problems. And Krugman et al are not grasping this. The Chinese are increasing their strenght. And China is using this to leverage their position in the bond market. Because the bond market controls all financial markets.

      As if to show that the clowns in charge here don’t get it, the ESB is proposing to increase electricity prices. The ESB is implementing a policy that exists in oligopolistic parts of the private sector, and in monopolistic parts of the public sector, in it’s response. Basically, it is ensuring that a fall off in demand does not change anything inside it’s institutional environment. The IDA have responded by saying that this is going to cost jobs in the private export sector. Minister Ryan is on holidays. And no FF minister will disagree with the GP. Maybe a few rogue FF backbenchers might, but they will be routed by RTE (which is answerable to a GP minister) and the IT. Convenient timing that, by Minister Whine. A news release when the Minister is not available for comment. The fact is that the GP take an ideological standpoint that electricity is too cheap. It would be better for the planet if it were more expensive. And FF cronies in the union movement are happy to oblige ensuring that Ireland’s electricity workers are probably the highest paid in Europe. Even those who do nothing are highly paid. Therefore our young people will have to get in a plane to get a job somewhere else on the planet (Australia maybe), and consume cheap electricty elsewhere (with airconditioning, etc). Now, that is not good for the planet. As usual, we have the GP as idiots on a mission, calling the tune.

      If any of you are constituents of Jacky Healy Rae, or Michael ‘extension’ Lowry, perhaps you might lobby them to prevent the ESB price increase. It would expose the GP in a manner that would unhinge the entire political system. Or else make it an issue with candidates canvassing in any of the three constituencies that are due a by-election.

      • Hat-Tip Deco.
        Wait till the North Koreans cop on that China owns America in all but Constitution.
        Wherefore the “Dream” then?

        We seem to be entering a groundhog day from 2 years ago. Nothing has really improved at all. The same debt was just transferred to the people a lá Weimar Republic.

    • Deco

      I wonder how many votes from people who identify themselves as middle class, went to the GP in the last general election…..

    • Deco

      A slightly embarrassing mix-up I think.

      I just hope that this is not an indication of what is to come…

  16. Gege Le Beau

    So the middle class collapses, and Western countries begin to take on increasing aspects of 3rd world countries, stagnant to rising unemployment, declining services, high levels of corruption, trophy projects which go over budget, zero political accountability, cronyism, nepotism, dynastic political families, ignored poverty, democratic deficit etc

    ‘Third World America’: 11 Books Predicting The Collapse Of The Middle Class

    • Deco

      It is true that many Western societies are taking on characteristics of failing societies. I would add substance addiction, the tendency to be eurphoric, reliance on pride rather than real achievement, and a failure to admit to the true state of affairs. I would also add a legal code that complex to the point that it serves the common citizen poorly, and facilitates the abuse by insitutional power.

    • michaelcoughlan


      This is a good and informative post and is a massive sign post to the direction our country is going in.

  17. paddyjones

    Most of the middle class I know bought second , third even more houses. Why would anyone borrow money to invest, would you borrow money and then gamble it on the stock market, then why borrow money to gamble on property. I know one chap who bought 5 houses and he is only on 30k he is now left with a million euro debt and houses he can’t sell or let out because all the Polish renters have gone home.
    The middle class put all their eggs in one basket , Irish property and Irish stocks and shares linked to property e.g. the banks.
    I took all of my money out of Irish banks long ago and just operate a current account to manage my bills.
    Never again will I trust Ireland Inc.

  18. paddythepig

    This is yet more fodder for the ‘what about the NAME for me’ brigade. The Irish middle-class described in this article want everyone else to pay for their mistakes. This is because they believe they have a divine right to stay middle-class, or do even better. They are too good to live in a smaller house, or drive a banger, or to move to a less affluent area. The biggest inertia of all is their own snobbery.

    People should pay their debts, even if it means sacrificing their creature comforts, including their visits to the theatre to hear their favourite pundit telling them it’s not their fault.

    This article is right about one thing. The Government will suck the productivity from the private sector and the entreprenuer, to feed the waste that they refuse to deal with. Politicians know no better, and that goes for all of them.

    • Come on, there’s a bit of selective, blind and blinkered myopia going on here!

      You say, “People should pay their debts”. Fair enough.

      However I also assume you mean by this that people should also pay the debts of banks!.

      You’re happy today to hear you as taxpayer will be giving to Anglo €24.3 bn, which is greater than the annual budget of Dept Health.

      Don’t blame the ‘middle class indians’ for drinking the whisky handed out to them by incompetent and corrupt FF, incompetent bankers, developers, corrupt planners, cronies and the rest of the insider cabal that got us into this mess.

    • Well said, paddythepig. If middle class means anything, surely it means taking responsibility for one’s own actions. Bailing out former property junkies would be a scandal. I don’t want to pay taxes, and have my children pay taxes, so that Fianna Fáil can pander to imprudent fellow travellers.

  19. wills


    Thought inducing comment as always.

    Middle class and its *lifestyle* destruction is a fascinating sociological event.

    Where do sympathies go. On the one hand there are those in middle class who have been suckered.
    On the other hand there are those middle class who knew buying into debt to fund a lifestyle is going to end slamming into a brick wall.

    So on the hand one must consider the middle class group duped and on the other hand one must finger point the middle class scammers who knew what was going on and milked it big time all the way.

  20. Malcolm McClure

    Trouble with we Irish is that we are too egalitarian. The English got it sorted long ago. The middle class could be instantly recognized by their trilby hats and the Esq. after the title.
    Also smile with Cleese, Barker and Corbett:

  21. Tumbrel Cart

    Why are you concerned that there should be a tax on saving? Most of the 450,000 out of work have no such concern. They don’t have savings of any kind to tax. The issue is the €20 billion annual gap in the State’s coffers. Spending €50 billion taking in €30 billion. There are options other than leaving the euro. Let those who benefited and are still benefiting pay through increased taxes,a property tax,removal of pension breaks and removal of heads of tax exiles. Yes, it will mean Scandinavian rates of tax. So what. Let the insiders pay, they are ones who benefit.The expenditure cuts option is for the most part utter rubbish. One would have to stop paying all the public servants to find €20billion. But public service pay should be capped at €100,000 for three years. If people don’t like, good luck and good riddance. However I do agree that that there is no sense of morality, justice or balls to do anything concrete or radical enough to save the collapse that is now quite close. Politics as always is the driver. Fianna Fail’s only concern is saving their own necks but they will try to ensure that the final financial collapse will happen when they have “left” government. It would be bad for their image if the final collapse happened when they were still in the bunker. These boyos are far too cute for the cyanide pills. The Irish citizens deserve their fate. You get what you vote for.

  22. StephenKenny

    The alternative is, of course, that everyone joins the existing political parties, and starts to transform them from the inside, through sheer weight of numbers. And I mean ‘transform’.
    It was interesting to watch the party apparatchiks flood the entire media, after the George Lee thing. It was clear that he hadn’t fallen into line, and operated they way they expected him to. Well, perhaps it’s time the line was redrawn, and the expectations were changed.
    If every unemployed person could be persuaded to join one of the political parties (or all, come to think of it), and pay attention, maybe something could happen.

  23. As an outdated concept, for the first time, I can’t agree with this post from our host.
    This pigeon-holing of intellect only suits the insiders with day-one access to privilege.
    Any class system exists to limit general aptitude and as such is contrary to our Constitution and panders to a previous autocracy.
    Which allows Leeson Street and its environs to maintain control over the poor and the weak, those who have been penalised a paltry 5 euro a week to care for blind relatives whilst Ministers continue to claim 5000 euro per month in unvouched expenses. On top of their generally untouched salary.
    Mea Culpa David.

    I’m done with class distinction.

    • Tull McAdoo

      I think you right Furrylugs, after all I dont think a class system can be accomodated in a Republic. A Republic has a totally different structure. I must write to Brian Cowen and ask him if he is interested in turning Ireland into a Republic. LOL.

    • coldblow

      I remember from one of David’s books seeing ‘middle class-ness’ defined as escaping from a hand to mouth existence where you are unable to plan for the future, where every penny is spent as it is earned.

      Although (I wish I didn’t get so sidetracked always) there is an attraction, even a basic human right, to living in the present moment. I keep thinking about the Paraha, a small unassimilated tribe of ‘Noble Savages’, discussed in Everett’s “Don’t Sleep, there are Snakes”. Their language doesn’t even allow the concept of discussing anything that happened in the past, and had trouble also with anything not actually present and in view. My son saw the pictures of them and said “They all look really happy”. Another odd thing about them is that, despite Everett’s (who had learned their language)best endeavours he could never succeed in teaching any of them to count past 2. (I will refrain from making cracks about Irish b*nkers.)

      I’m also not sure if they want to control the poor. I think they’d rather they just went away.

  24. Garry

    Well someone has got to pay the debts…. and thanks to Lenhian and his fellow traitors, it ain’t going to be the developers or the bankers.

  25. Tull McAdoo

    I remember back on Feb 24th 2009 @12.50 pm Stephen Kenny posted that Elizabeth Warren link, of her one hour video, in which outlined the destruction of the middle income/ middle class in America. I remember saying to Stephen back then that I was “gob smacked” to hear that more American children would witness their parents filing for bankruptcy than filing for divorce. I wonder if the bankruptcy laws in Ireland were the same as America’s i.e. much more accommodating, then would the same be true of Irish children?
    On the more sober Economic point of the deterioration of the middle income and in most cases double income households, I also pointed out what seemed to me to be a clear relationship (from the data I studied) between greater availability of the so called “equity release loan” and the undermining of these income groups. I pointed out back then and my opinion has not changed since that this process began to take hold in America from about 1965/66.
    I think at this juncture it is also worth noting that most of the equity released by the Americans through these years does not seem to have generated a good return on the Capital invested and if it did then its only fair to assume that the people involved expanded their lifestyle to accommodate this new found source of income.
    I think it is fine for people to aspire to improve their own circumstances, but the sobering lesson from America is to avoid the traps and pitfalls been constantly promoted by what Deco calls “our advertising sponsors”. In the interest of clarity I think its only fair to link to Stephens post.

  26. ahsureitwilldo

    The Irish Middle class are too polite to revolt. For them ,it’s always “them” ( the government) that is the problem. Maybe it’s a post colonial hangover that people feel disempowered when it comes to real change.”We” are the people with the power and sooner “we” get this the better for our country.

    • Deco

      A lot of what is happening is a controlled means of ensuring that the middle class lifestyle continues, even though the underlying position is one of deterioration. This is the manufacturing of consent.

      Even though the middle income spectrum of the population is being assaulted economically, the lifestyle aspiration model has been retained in a fairly intact state.

      We are borrowing 19 Billion per year to create the sense that nothing has changed. This is putting off the eventual day of reckoning. There was very little that was real and sustainable behind the Binge period.

    • 20yearsagrowin

      Why is it that Irish Citizens living abroad cannot register to vote? Surely there sould be a campaign to change this to allow all Irish Citizens regardless of where they are to have a vote. This would be one way to introduce the needed step change in Irish Politics….to reverse the current Insiders hold on the Outsiders….how would we do this? Start with a Facebook campaign? A online page with signatures?

      David-how about on your page?

  27. Folks, we are caught in a triple lock.

    1. The failed ‘static kill’ of NAMA leaking hugely as we speak, costs mounting through obsolescence, property damage, mirage of LTEV etc etc

    2. Failure to reform the political system, the ‘boyos’ in charge who made the mess are making it bigger as we speak! What should take 30 minutes to examine a few invoices being dragged out over months, expensive committee meetings, waste of space. An end of the Seanad, a slimmed down and reformed Dail based on a Scandinavian list system not a chance while the ‘boyos’ are milking it.

    3. Failure to address the banking system. Anglo hemorrhoraging more and more as we speak currently up to €22 bn. With all that taxpayers money, one of the first thing Dukes does is give everyone a rise, not a 50% cut with no bonuses. With taxpayers money they’re working in there to build a Frankenstein Anglo ‘good bank’, ‘bad bank’. Jeepers creepers. AIB passes a stress test on the basis somehow, somewhere in the future, they can find €7 bn. Bet you’d like your own bank manager to take that attitude with your loans especially loans target of foreclosures!

    This situation cannot last indefinitely. It reminds me of the Berlin Wall constructed in 1961. In our case it’s to imprison taxpayers and keep reforms to deal with above out.

  28. Alan42

    The Middle classes are on the slide because of debt . The way people speak of equity in relation to property is nuts . Anyone would think that with terms like ‘ release your euity ‘ or ‘ is your equity trapped ? ‘ You would think somebody ws going to knock on your door and hand you 25 grand , no questions asked . Equity is debt . To my mind the idea of paying a mortgage is to one day own your house . Not to treat it like an ATM tp pay for cars or holidays or property in far flung places that not only have you never visited they don’t even know anything about the local economy .

    If they there to be debt restructuring it should go hand in hand with some basic financial education .

  29. 20yearsagrowin

    Why is it that Irish Citizens living abroad cannot register to vote? Surely there sould be a campaign to change this to allow all Irish Citizens regardless of where they are to have a vote. This would be one way to introduce the needed step change in Irish Politics….to reverse the current Insiders hold on the Outsiders….how would we do this? Start with a Facebook campaign? A online page with signatures?

    David – how about on your page?

  30. Tim

    Folks, further evidence (as if that were needed by readers here!) that the EU is “in on it”:

    EU approves further injection of up to €10 billion in ANGLO (mentioned in the Indo link by Deco, above):

  31. coldblow

    I’ve been busy this lunchtime. Below is a table from Ireland in Crisis showing the social composition of Ireland compared to Britain nearly a century ago. 29% of occupations ‘middle class’. No wonder there was little comfort for you if you were a ‘mere labourer’.

    Population by Social Class. Britain (1921)
    and Ireland (1926)

    Occupation Eng/Wales Ireland

    1Farmers 250,024 268,930
    2Shopkeepers 470,842 29,106
    3Clergy/nuns 36,987 14,145
    4Other Profs. 387,274 21,896
    5Tot. 1,145,127 334,077
    6Tot. in jobs 17.178m 1.145m
    Tot. pop. 37.9m 3.0m
    5 as % of 6 6.7% 29.2%
    5 as % of 7 3.0% 11.2%

  32. coldblow

    And further to Stephen Kenny’s post above, this reminded me of a passage from Crotty’s A Radical Response which has stuck in my mind over the years.

    “In the matter of referendum campaign tactics, I somewhat regret, as indicated already, not having emphasized more the economic implications of the SEA. A more substantial regret was my failure to activate the country’s quarter million unemployed persons. This is the sector of Irish society with which I most closely identify.

    “They are the casualties of a corrupt, inequitable and inefficient socio-economic order which I have studied for decades. It is an order which I perceive to be irredeemable, and which I most earnestly hope to see destroyed and replaced by one which allows every person to secure in Ireland a livelihood as good as is available anywhere else in the world. The unemployed above all have least reason to support and most reason to destroy a regime that denies them a livelihood, inflicts unspeakable indignities on them and robs them of their entitlements as members of the nation.

    “Of course one knoew that it is not the most downtrodden who are the most eager for change. The downtrodden are too drained of resources, or too anxious to get out from under, to be concerned about changing the system that treads on them. Indubitably the most horrendous feature of the more than usually harassing history of Ireland was the death by starvation of a million Irish people in the 1840s with scarcely a murmur of protest. The more depressed people are, the more tractable become. The Irish unemployed have traditionally been doubly selected for ineffectualness: they were unable to get employment in an economy which, thanks to massive emigration, has usually experienced approximately full employment; and they hesitated to join that half of the Irish population stream that has normally emigrated. Traditionally therefore the unemployed have not been a force for change in Ireland. But there has been a major break with tradition. Because of the recently imposed barriers to the free flow of emigration from Ireland, most of the casualties of a corrupt, inequitable and inefficient socio-economic order can no longer leave. Very many of the country’s 250,000 unemployed are among the best educated and most gifted people in the world.

    “These considerations made me anxious to mobilize the unemployed against the SEA, which will unquestionably add to their number and lessen even further the chances of those already unemployed securing employment. In mobilizing against the SEA, the unemployed would also be mobilizing and voting aginst the political establishment, those politicians and party policies which, since the state’s foundation, have denied a livelihood to half the Irish people. A vote against the SEA by the unemployed and their dependants of voting age was by far the most productive thing they could have done on that 26th May.

    “Immediately the referendum campaign commenced, I tried to contact Noel Hodgins who heads the Darndale Unemployed Action Group, the best known of a number of similar groups which are emerging around Ireland. I had written to Noel a year earlier on another matter, but also related to unemployment. A meeting was arranged, though not as quickly as I would have liked.

    “I found Noel, whom I met in the Darndale Unemployment Action Group’s office with an associate, pre-eminently pragmatic, and sceptical of the possibility of eliminating unemployment. He was particularly cautious of allowing himself and the people who had chosen him as their leader to be used as the ball in any political football match. That became particularly apparent when I enquired if a relationship similar to that between other groupings of unemployed persons in Dublin and elsewhere and the trade union movement obtained between the Darndale Unemployed Action Group and the trade unions. Noel vehemently asserted that no such relationship existed, and that he himself would have no part in any such relationship. He perceived the unions as “the cause of half of his associates being unemployed”. It was a view with which I fully concurred.”

    “Unsurprisingly but disappointingly, the effects [ie of this collaboration in the Referendum campaign] do not appear to have been substantial.”

  33. jkforde

    Savage Eye on our idiotic obsession on home ownership… priceless, genius stuff

  34. Gege Le Beau

    Alain de Botton: A kinder, gentler philosophy of success

  35. NO HOPE

    Middle class are not dying a slow death- they are dead. As dead as dodo`s. It is only a matter of time. The waste, gross incompetence and lies continue, and all the while the incompetents who run this place, do nothing to come up with workable solutions for this country. They sit back and scratch their heads and raise taxes, cut social welfare, essential services etc…. They have no clue. The middle class is trapped in an ever downward spiralling morass of negative equity. That is until they lose their jobs, and get hauled off to a court to answer for the dastardly act of having a credit card and mortgage they can no longer repay. If they are lucky they won`t end up in jail. In the UK a bankrupt can be rehabilitated after 12 months and start their lives again. In Ireland, because we are exceptional and special (NOT!) it takes 12 yrs!!!!!!!!
    The dull, apathetic justice dpt. are too slow to comprehend that poverty is the new reality for more than 500 000 people in this country. They should have revised debt laws dating back to 1926, 2 yrs ago to accommodate the new age of poverty. When FG take power it will take them another 2 yrs to revise our archaic laws and hopefully stop jailing people for debt and minor infractions like not paying televison licences which we cant afford, which pay for presenters obscene salaries. Maybe just maybe, someone will wake up after the next election and then do something to relieve hundreds of thousands of stressed people who are suffering in Ireland today.

  36. Philip

    This is here is one of trade and the speed with which you can become operational. In the US, China has destroyed all reason to have any onshore manufacturing and thereby the real means of employing people. Am not blaming China. That’s the way the cookie crumbles.

    Ireland is no different. Trade. It is about being competitive.

    The orthodox system of generating fundamental wealth is broken. The powers that be are scrambling to maintain a rapidly ebbing status quo. It is over. Elections are coming fast and people are waiting in the long grass and a few changes will emerge, but little will really make any difference.

    Many talk about emigrating. To where? It is all going pear shaped. This massive race to the bottom with the peddling of cheap debt to keep the dream going has caught everyone on the hop. US, UK and indeed Europe has had it for now. And with China’s markets dwindling and with no innovation of its own, I see nothing that would suggest we have an emerging market which would be economically accessible at the scale needed to reverse the dwindling fortunes of the 2000s club. Club 2010s have had it.

    Come on David. Less of the orthodox economic group think for a change. Competition is an issue, but it is the long term sustainable goal? Then maybe I do not understand what you mean by this term “competition”. I know of 2 engineers graduating and heading back to do Masters and maybe beyond…no jobs…anywhere. Maybe that’s the problem. We all want “jobs”. Yet the need is huge! 7 billion and rising on this planet – that’s the market that should be working, but only 10% is barely functional.

    I look at Ireland. A lovely climate (relatively), politically stable and an incompetent government. What more can anyone want? One can live well if you have a reasonable IQ. Maybe we need people to start thinking straight at a community level. We complain about levys, taxes etc. but in the end we really need to understand how people can plug into the real wealth creation possibilities at government and community level. By that, we need to understand what are the real problems we should solve rather than running away to a greener field that really does not exist any more.

    • @Philip,

      We need 21st century R&D at all levels of society.

      We’ve a fantastically rich island with great access to markets worldwide, an agriculturally great climate. Our food industry with all the spin offs it can yield. Construction industry, some of the greatest builders in the world in Ireland with help could spread worldwide to provide global services in this area. Crafts and skills if proper R&D could be honed to produce superior products in specialised niches to replace/compete with China imports. Tourism developed to at least be as successful as London. Some examples there but all this can only come about through the development of a meritocratic society that promotes talent, brains and hard work and isn’t fettered with the chains of insider corruption that have led us to where we are now. It should be possible out of the ashes to create an environment in Ireland where art, humanism, industry, innovation can flourish not exactly based on Medici textiles but the raw material is here even though its currently asphxiated.

      • Tumbrel Cart

        We don’t have ashes yet. The fire is still warming the arses of the politicians, bankers and higher civil servants while everyone else in the outer circle is frozen out. And who would to lead this transformation to the new Ireland? The old system and its leaders must be cast aside first. The Germans have a word for it called Gotterdammerung.That it what Ireland requires in order to be ready to start again.


    Another Middle Class Tax.
    Our elite either don’t pay taxes or are in receipt of bail-outs.
    Our jobless and / or unprivileged are subsidised to some degree or other (until we cannot borrow any more, given the rise in Bond spreads today).
    So the “Middle Class”, AKA anyone left lucky enough to still have a job, will pay for Ryans Fancy.
    Windfarms are 30% efficient at best due to lack of wind or excess wind forcing the machines to use their energy for braking measures so they don’t up sticks and fly off the hilltops. Notwithstanding the dubious carbon hoofprint burned up in producing and installing the things, they don’t hold a candle to hydro power which is virtually limitless along the western seaboard.
    But then again, those who are getting planning permission to build these whirlygigs are predominantly FF heads. Same old. Same old.

    Ryan needs to get his head out of his Janet & John Herrenvolk Book of How to Green the World and start looking at Nuclear or Hydro. And maybe realise that Ireland doesn’t stop at Naas.

    God protect us from Urban Boyscouts.

  38. [...] August, 2010 David McWilliams blogged this week about Middle class dying a slow death “This is the central dilemma for all of us: we need to ‘lock in’ cheap property as a [...]

  39. Tumbrel Cart

    For how long can While western economies continue to import products from China, while paying a huge minority (up to 20%)to their own citizens to remain idle? One must either discontinue social welfare or stop the nonsense of globalization. The so called bullshit that western economies will export “services” to China. The middle classes are caught in middle, trying to retain the ability to compete with workers on 1/20 of the wages. It cannot work.

    One further question? How is the unemployment percentage defined. Am I correct in saying that the denominator is all persons aged 15-70?. If so the percentages are very very misleading indeed and grossly understated.
    Perhaps some reader will be good enough to post reply to unemployment calculation. Thanks.

  40. Josey

    Ban USARY and compound interest, print our own debt free money= all our problems solved!!!

  41. This will all blow over in a couple of years and David will be back to commenting on the suburban decklanders again. First the Bono Boomers, then we had the Pope’s Children, and soon we’ll have the Boy George Brigade

You must log in to post a comment.
× Hide comments