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Rankin's Thursday Column Whither the Bourgeoisie?

19 August 1999

By Keith Rankin

We frequently hear these days about the plight of the middle class, or the middle classes. But who are the middle classes? Are they simply those people (or households?) who earn between the median income and the 90th or 95th percentile? Can we really regard salaried persons as middle class? (After all, salaries started out as stipends of salt paid to soldiers.)

Historically, the bourgeoisie were urban capitalists: merchants, financiers, self-employed professionals, manufacturers. The middle classes were entrepreneurs; they worked for profit, not wages. They came to be seen as dour, because - unlike the upper (landed) and lower classes - they (being insecure, with less tangible assets than land) saved like crazy. Because they ploughed their savings back into their enterprises, or into others' enterprises, they were seen by the classical economists as the agents (although not the ultimate beneficiaries) of economic growth.

The classes were defined according to the sources of persons' incomes: land rent (upper class), profit (middle class) and wages or peasant farming (lower class). The class system arose because most people received all their income from a single "fund" (eg the "wage fund").

(You could even define whole nations according to this class system. Countries like Australia, New Zealand, Argentina and Saudi Arabia, which derived their income mainly from land, were upper class. Western Europe was middle class. The Third World was lower class.)

Classical economics predicted that the lower classes would be something of a reserve army of labour (in perpetual oversupply), while the middle class capitalists would make the key investments. The upper classes would sit back and collect the rent, eventually leaving everyone else in penury. As late as the 1950s, this class division seemed to make sense, both for households and for nations.

The class system went awry with the emergence of a salaried professional class, and the replacement of proprietorial and partnership businesses with the corporate business sector. "Businessmen" became managers. By the 1970s, the social elite, in fulfilment of Joseph Schumpeter's predictions in 1945 (Capitalism, Socialism and Democracy), were working for wages. (Could any of us imagine Jane Austen's social elite being employees?)

So, when we muse over the plight of the middle classes, are we musing about the future of professional employees? Or are we musing about entrepreneurship? Will those in the vanguard of the brave new knowledge economies be employees of corporate organisations? Or will they be electronically connected individuals selling their ideas to the highest bidders?

Maybe we should bury the class system as a relic of the fading millennium. The era of the highly paid full-lifetime employee is dying, if not dead. Those 40-somethings who identify with that kind of career path, and who have made financial commitments on the expectation of fulltime careers with ever rising salaries, really do feel a sense of dread. Their perceptions of their standing in society are determined by both the particular professions that they are in, and the size of their salary packages. Although their social status is displayed through conspicuous consumption, their social status means much more to them than does the mere consumption of goods and services.

The irony of the present times is that economic circumstances are propelling them from elite working class towards something more closely resembling the nineteenth century middle class, with all the insecurities that that implies.

The key difference is that our worried salarymen will not lose all of their security. They will not end up in a debtors' prison if their incomes fall in Dickensian fashion from "20s 6d" to "19/6d" while their expenses remain at "£1". We have already come to live from multiple income streams.

It is now normal for families to derive their incomes from a variety of sources; some from wages/salaries, some from profits, some from rents/interest/benefits (and some from crime). The class system ceases to have meaning when we no longer depend on income from a single class fund.

The class system vanished:

1.. with the multiple-income household becoming the norm. Many people receiving entrepreneurial income have partners who receive wage income. 2.. with individuals increasingly working through varieties of contracts, many of which are much closer to customer-supplier than employer-employee relationships. An individual with two or more jobs is not unusual. At least one of those "jobs" might involve some creative activity that might yield a substantial profit but more likely will not. 3.. with the creation of the welfare state, and its evolution into a welfare society. Beneficiaries are analogous to the landlords of the ancien regime. Benefits are paid out of a social wage fund that represents a return on all our forms of collective capital: our bequest from nature (read "environment" in place of the classical "land"), our past social investments, and our present social and intellectual capital. We are all beneficiaries. We all depend in full or in part on the public purse. Indeed, those in Treasury who worry about "middle class capture", acknowledge that our well paid salarymen and women receive considerable support from our social wage fund.

We are all landlords on account of our public property rights. That's why our lives are will continue to be much more secure than those of the Victorian-era bourgeoisie. When our income from one private source fades, we have incomes from other sources to fall back on. Our social wage, as our most stable income source, protects us from the catastrophic consequences of economic failure that blighted our past.

When we know that we have at least one secure "income stream" - albeit a collectively sourced stream labelled "benefit" - then we can take risks with our private activities. That's what I mean when I see an almost unlimited set of entrepreneurial opportunities ahead of us. Most of our sources of "profit" in the future will not return enough to support a person or a family on their own. Most of us will sustain ourselves in comfort through a mixture of wages, benefits and profits. Probably, most of us do already.

We have been embracing an economy of uncertainty since the 1970s. The 1980s were a time of wages/salaries or benefits. The 2000s will be a time of profits and benefits.

The new economy of uncertainty will be a vast improvement on the career straightjackets of the 1950s and 1960s. That is, it will be an improvement so long as private incomes continue to be buttressed by the institutional apparatus of a welfare society.

We still have a long way to go. We must get rid of the sense of guilt that arises from our acceptance of benefit income. And we need to make our welfare institutions efficient. Our social welfare gatekeepers are beneficiaries masquerading as salaried professionals.

The bourgeoisie is dead. Long live the bourgeoisie.

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© 1999 Keith Rankin

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Thursday Column Archive (1999):

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