This is exactly what both the left and the right are propagandizing the middle class to do: lower expectations. In some cases, it means lowering our expectations to below those of our parents.
Think about that for a minute.
Find me a corporation or an entrepreneur who thinks like this. Imagine a CEO saying this to shareholders and the board:
"We didn't make our goals this quarter, and many in our industry also showed reduced sales numbers. It is clear that we need to reduce our expectations. Next quarter's numbers will be lower, and shareholders are just going to have to take a loss."
He'd be out on his ass the next day.
Related to this is the idiotic garbage that the working class are fed by the media: that they should hate people who make good wages and agitate to cut those other peoples' wages down to be in line with their own.
Again, find me a corporation that thinks like this. Apple is currently worth more than Microsoft. Is Microsoft thinking "how can we make them make less money?!?" No. They're thinking "How can we grow? How can we make as much money as Apple is making?"
Unbelievable.
You realize that you're being sold into fiefdom on the feudal "lands" owned by the financial industry, right?
Edit: I'm not a socialist. I'm a capitalist.
Part of capitalism is negotiation. The American middle and working classes have been fed this ridiculous line of baloney that capitalism is a magical hands-free machine that will elevate their standard of living if they do nothing. It doesn't work that way, as every businessman and entrepreneur understands. You have to negotiate. You have to push. They push, and you push.
Studies have shown that the ideal point in negotiation is often precisely where both parties feel a bit, but not too, unhappy. Right now the rich and corporate interests are rolling in it, happy as clams, and everyone else is suffering. That's because one side is pushing and the other side is not.
So how do workers and professionals (whom I count as workers... the white/blue collar distinction is increasingly meaningless) push?
The old way was unions, but that's definitely shown its age. We need some new ideas.
Lowering our expectations is not a particularly productive idea.
Edit 2: I also think using government to push is fair game.
Why? Because the rich and corporations do it. They take corporate welfare, bailouts, special infrastructure investments, government contracts, and benefit hugely from publicly funded R&D.
But they want you to refuse to use the government as a lever because... it works!
So capitalists really ought to be socialists, at least for now. Only give up a lever in a negotiation if the other party on the other side of the table also gives up that lever. The rich want you to be principled libertarians while they munch at the government trough.
>"We didn't make our goals this quarter, and many in our industry also showed reduced sales numbers. It is clear that we need to reduce our expectations. Next quarter's numbers will be lower, and shareholders are just going to have to take a loss."
Uh, they do say that all the time.
I tend to agree with the other poster: our expectations are too high. It's a product of having witnessed one of the greatest runups in wealth (and debt) we've ever seen in history.
A 2500 sqft house, two (or three) cars, regular vacations to Europe or the warm south, maybe a summer house, boats, motorcycles and other toys...these things are now expected by the "middle class". It's completely out of whack with history and the rest of the planet.
So whether you choose to lower your expectations or not has no bearing on what will actually happen. We're going to have a deleveraging run where the average Westerner is, as a whole, poorer than the generation before us.
I know a lot of professional people in my generation, and I know of only a few that have anything like what you describe.
One managed to land a six-figure job in Kentucky, one of the lowest cost of living places that was largely passed over by the housing bubble. The major reason he's well-off is that his house was affordable and he went to a lower priced university and didn't need much in the way of student loans. He lives in a ~2000 sq. ft. house that cost about $175k when he bought it. Where I live that house would be $400k, and it's not even a major city. Median incomes where I live are no higher.
Another had a liquidity event. Another owns a hugely successful online company.
The vast majority -- vast majority -- of the peers I know do not live anything like what you describe. These are not slackers either. These are hard working, highly educated professionals. Many of them routinely pull 60 hour work weeks doing things like computer programming, business, marketing, and high-end interior design for wealthy clients.
I honestly have no idea how people making the median family income can live, unless they live in horrible neighborhoods or in the middle of nowhere.
I didn't say "Earth to Planet Trust Fund" just to be snarky. There is a culture of people who grew up with wealthy parents, had mostly paid for rides to places like MIT, and earn six figures, and really do have kind of a "why do they not eat cake?" view on this stuff. In my experience they're not bad people. They're just insulated and ignorant. They have absolutely no idea what they're talking about if they think their situation is anywhere near normal.
Again, public enemy #1 here is the housing bubble, which from an income/value ratio point of view is still in effect. #2 is the cost of college. The former has increased somewhat in quality since the previous generation, though not enough to justify a quadrupling (or more) in cost. The latter hasn't increased much in quality at all, but the cost has skyrocketed.
In the UK, our parents' generation paid zero. They got given grants...
That includes the elite, politician-farming universities.
The current government just tripled the fees, after one coalition partner promised to abolish them in the campaign. That's why students ended up trashing (actually the other partner's) HQ in 2010.
Agreed, tatsuke95's comment is ridiculously out of proportion. My friends are all middle class, with two exceptions who are upper middle class -- myself & my husband, and another married couple who run a software business like we do. They have an expensive house and a very nice car, but they live well within their means and save a lot of money (and they worked their asses off to earn that money). They certainly don't have a vacation home. My husband and I just bought a house which cost just less than our biz's gross receipts last year, but we got a 30-year mortgage and we don't even own a car. We do travel fairly often and for longer periods (up to a month) but it's almost always a tax write-off, organized around conferences.
And, that other couple aside, we're by far the most extravagant people in our friend group (designers, developers, creative class all). Only a couple of our middle class friends own anything, much less expect to own two houses and cars.
The specter of wide swathes of middle class people who "expect" two houses and cars and European vacations is simply a strawman argument, conjured up to "prove" that these people "deserve what they get."
>"The specter of wide swathes of middle class people who "expect" two houses"
In 2006, 40 percent of home sales were for "second homes", with the typical buyer having a household income of $80,000.
>"tatsuke95's comment is ridiculously out of proportion"
I'm glad you think it's out of proportion, based on your personal anecdotes about your friends (except for two, but you've defined them as upper middle class, so they don't count!).
But the "wide swathes" of indebtedness, bankruptcies, defaults and deleveraging in the US says otherwise. Where have you been for the past five years? Those are facts. It occurs when people "live beyond their means", which is nearly synonymous with having too high expectations: you want more than you earn. Do you think it's the rich people living beyond their means? Is it the poor people buying cars and houses they can't afford? No, it's the middle class.
What incentive do we have then, to not forcibly extract that wealth from the previous generation? To me it seems that if we need to de-leverage, why on earth should we pay these people their pensions? All the intergenerational trust and good faith is already gone anyway.
Note: the views casually related above may or may not represent the actual considered opinions of the management.
>"What incentive do we have then, to not forcibly extract that wealth from the previous generation?"
We do have the incentive. And we will extract that wealth. But it takes time, since "they" currently have the political power.
What you describe is what is happening in the real world. Reform everywhere so they get the pensions and benefits, but nobody after them will. This is happening both publicly and privately. Even unions are stiffing new members.
We'll have the last laugh, though. Eventually the boomers will need to divest. At that point they'll find out we don't have the money to buy their assets.
>We'll have the last laugh, though. Eventually the boomers will need to divest. At that point they'll find out we don't have the money to buy their assets.
Hadn't thought of that. Might be quite funny...
I suppose they'll just give it to their offspring. So for now... kill rich kids? Just brainstorming here.
It's interesting. I believe it's going to be a crisis, at least here in Canada, where our boomer bulge is the largest in the world.
Much like our southern neighbours, our soon-to-be-retirees don't have much in savings, and the vast majority of their net-worth is tied up in their homes. Unlike the US, we haven't had a housing price adjustment yet. So these boomers are counting on having the current value of their home as their future retirement fund. But as we've learned, that number may as well be fairy dust until someone hands you a cheque.
So what happens when these boomers go to retire, and they find out nobody can afford (or wants) to buy their $500,000 McMansion? When every boomer actually has half, or worse, the amount of money to retire as they thought?
I make high middle class money and I don't know anyone in my peer group who has "A 2500 sqft house, two (or three) cars, regular vacations to Europe or the warm south, maybe a summer house, boats, motorcycles AND other toys".
You are describing the upper echelon of lawyers and execs.
Yeah, our household income is ~30-40% higher than the median for our state (WA) and with two modest cars, a 1300 SqFt home(in an "up and coming" neighborhood, lol), student loans, a new baby, and very, very few electronic devices (our phones are our most expensive computing device - and we only have a small 26" LCD TV), we barely squeeze by, or so it feels. We don't vacation at all, at least in terms of going to Europe - we might road trip to Vancouver, BC for a weekend once a year.
Also, no other Toys - I have a weight set (power rack, olympic weights, heavyweight bench, etc) that ran me 1300 brand new, other than the car and the house that is our most expensive purchase... ever. I could have sworn once we reached a six figure income we'd be "well off." I guess that is a dream.
I'm going to go out on a limb with an assumption: the fact that you hang out here probably says a lot about you and your socio-economic status and general intelligence, which relates to your financial sense.
But there were/are a generation of blue-collar, "middle class" people out there living the life I describe. I know some of them. They aren't lawyers and execs, they're public servants, unionized factory workers and such, most of whom make less money than me. Their boomer parents were middle-class wealthy, and their expectations are higher. Only the economy no longer supports it. So they fulfilled these expectations via copious amounts of debt. Then everything broke.
I can't help but nitpick. Companies lower guidance and expectations all the time. Share price almost always falls when this happen, but it's not uncommon and not cause for the CEO being ousted.
...lowering our expectations to below those of our parents.
Go read the article I linked to. We are richer than our parents. We own more and bigger houses and cars than they owned.
To fix your analogy: "Next quarter's numbers will be higher, and shareholders are just going to accept 10% growth rather than 20%. Expecting 20% growth forever is unrealistic."
If you want to argue that growth should have been higher than it actually was, or that somehow the evil vampire squid is holding us back and making us into serfs, go ahead and make that argument. But you still need to square your argument with the fact that we are consume more than ever.
We consume more than ever, but does that mean we're richer? (especially in terms of wealth per unit work, given that this generation has vastly more participation of women in the workforce). The fact that we have bigger houses and more cars doesn't mean anything if we're having to take on more debt, or devote higher percentages of our income to them. And at least for your "average" middle class family there are often two wage-earners now...
Also, wrt growth, the argument I would make is that for much of the last 30 years, most of the economy's growth has not been shared with the middle class. Some of this is undoubtedly structural - the technology revolution has put a higher premium than ever on those with highly developed skills/education and there are certainly workers who have just been left behind. But if you look at the data, the wealth gains over the last 30 years have pretty overwhelmingly been concentrated in the VERY top of the income distribution (I hate to use the rhetoric of the Occupy movement just because it is very inflammatory to a lot of people, but it really is a top 1% phenomena). If this inequality could be mostly explained by education/skills, you'd expect something more like the top ~20% to be vastly pulling away from the bottom 80% of the distribution.
I agree that growth forever is unrealistic. I'm referring to the fact that growth has stalled for everyone below a certain bracket, but is continuing apace for everyone above.
This has been true for a very long time, but people were filling it in with debt. Then everything got over-extended and collapsed.
Think about that for a minute.
Find me a corporation or an entrepreneur who thinks like this. Imagine a CEO saying this to shareholders and the board:
"We didn't make our goals this quarter, and many in our industry also showed reduced sales numbers. It is clear that we need to reduce our expectations. Next quarter's numbers will be lower, and shareholders are just going to have to take a loss."
He'd be out on his ass the next day.
Related to this is the idiotic garbage that the working class are fed by the media: that they should hate people who make good wages and agitate to cut those other peoples' wages down to be in line with their own.
Again, find me a corporation that thinks like this. Apple is currently worth more than Microsoft. Is Microsoft thinking "how can we make them make less money?!?" No. They're thinking "How can we grow? How can we make as much money as Apple is making?"
Unbelievable.
You realize that you're being sold into fiefdom on the feudal "lands" owned by the financial industry, right?
Edit: I'm not a socialist. I'm a capitalist.
Part of capitalism is negotiation. The American middle and working classes have been fed this ridiculous line of baloney that capitalism is a magical hands-free machine that will elevate their standard of living if they do nothing. It doesn't work that way, as every businessman and entrepreneur understands. You have to negotiate. You have to push. They push, and you push.
Studies have shown that the ideal point in negotiation is often precisely where both parties feel a bit, but not too, unhappy. Right now the rich and corporate interests are rolling in it, happy as clams, and everyone else is suffering. That's because one side is pushing and the other side is not.
So how do workers and professionals (whom I count as workers... the white/blue collar distinction is increasingly meaningless) push?
The old way was unions, but that's definitely shown its age. We need some new ideas.
Lowering our expectations is not a particularly productive idea.
Edit 2: I also think using government to push is fair game.
Why? Because the rich and corporations do it. They take corporate welfare, bailouts, special infrastructure investments, government contracts, and benefit hugely from publicly funded R&D.
But they want you to refuse to use the government as a lever because... it works!
So capitalists really ought to be socialists, at least for now. Only give up a lever in a negotiation if the other party on the other side of the table also gives up that lever. The rich want you to be principled libertarians while they munch at the government trough.