LES ULIS, France — When their local bakery in this town south of Paris raised the price of a baguette for the third time in six months, Anne-Laure Renard and Guy Talpot bought a bread maker. When gasoline became their biggest single expense, they sold one of their two cars. Their combined annual income of 40,000 euros, about $62,500, lands Ms. Renard, a teacher, and Mr. Talpot, a postal worker, smack in the middle of France’s middle class. And over the last year, prices in France have risen four times as fast as their salaries. At the end of every month, they blow past their bank account’s $900 overdraft limit, plunging themselves deeper into a spiral of greater resourcefulness and regret. “In France, when you can’t afford a baguette anymore, you know you’re in trouble,” Ms. Renard said one recent evening in her kitchen, as her partner measured powdered milk for their 13-month-old son, Vincent. “The French Revolution started with bread riots.” The European dream is under assault, as the wave of inflation sweeping the globe mixes with this continent’s long-stagnant wages. Families that once enjoyed Europe’s vaunted quality of life are pinching pennies to buy necessities, and cutting back on extras like movies and vacations abroad. Potentially more disturbing — especially to the political and social order — are the millions across the continent grappling with the realization that they may have lives worse, not better, than their parents. “I have this feeling that there is a wall in front of us,” said Axel Marceau, a 41-year-old schoolteacher living outside of Frankfurt. “We’re just not going to get any further.” His concerns are well-founded. A study by the German Institute for Economic Research in Berlin found that the broad middle of the German work force, defined as workers making from 70 to 150 percent of the median income, shrunk to 54 percent of the population last year, from 62 percent in 2000. Mr. Marceau’s father had a teaching job that afforded the family upward mobility, from owning a home to fancy ski vacations. But today, Mr. Marceau said, a new class of bankers, executives and other high earners has taken over. “I feel like we’ve been in a slow process of losing to the people up top,” he said. “No one thought during the 1980s that they could possibly belong to a group of people who slide down the social scale,” said Markus Grabka, an economist at the institute for economic research. “No one had existential angst of the sort you have today.” To be sure, Europe’s middle class is still larger than the number of people at risk of falling into poverty — and, by many measures, more protected than the American middle class. But policy makers worry that could change as the European economy starts to feel the drag of an American slowdown and high inflation. “The problem,” said Julián Cubero, chief economist for Spain for BBVA, a leading Spanish bank, “is that if your salary rises more slowly than the cost of products you buy on a daily basis, you feel poorer every day.” That simmering concern turned into anger last week in Britain. Striking teachers closed schools for the first time in two decades, protesting pay packages that did not keep pace with the soaring cost of living. Proposed raises were about 2.5 percent, while food has risen 7 percent and oil costs have surged 20 percent in Britain since this time last year. The teachers’ rallying cry was just the latest to echo across the Continent. German workers from several industries waged a series of strikes last month demanding a greater piece of the economic pie after years of being asked to make salary concessions — flexibility that, some economists argue, has helped a leaner, meaner Europe stave off recession so far. In France, where purchasing power has replaced unemployment as Public Enemy No. 1, unions representing workers from teachers to factory workers have taken to the streets in protest. This month, thousands of European workers converged on the capital of Slovenia, which currently holds the European Union’s rotating presidency Quantifying the squeeze on Europe’s middle class is tricky; there is no universal definition of middle class, and national agencies differ on how they calculate purchasing power, making cross-border comparisons difficult. Tallying inflation is simpler: Since 1999, prices have risen 22.5 percent in the 27 member states of the European Union, and 18.8 percent in the 15 countries that use the euro. Much of the declining purchasing power of European workers can be traced to those numbers, and to policy decisions and economic developments over the last decade when globalization began to reshape Europe and the world. In Germany, Europe’s largest economy, the decline in purchasing power began in 2000, when employers started wresting wage concessions from unions, or simply shifting jobs to Eastern Europe and China. Inflation-adjusted incomes rose from 1 percent to 2 percent in the late 1990s, but more than one million Germans lost full-time jobs during and after a recession in 2000 and 2001. Subsequently, workweeks got longer without extra pay, and from 2004 through 2007, inflation outpaced income increases for the average family. In France, the 35-hour workweek kept average annual pay increases below 1 percent for nearly a decade, said Robert Rochefort, the director general of Credoc, an organization in Paris that researches living standards. But French hypermarkets — big-box supermarkets that dominate the retail market — kept prices high, he said. Spain generated thousands of jobs by pumping up the housing market, but has undergone a joblessness jump since the turmoil in real estate markets while wages have been consumed by inflation. “When I started working at 23, I earned almost the same wage that I earn now,” said María Salgado, a 37-year-old director of television documentaries living in Madrid. Fourteen years ago, her monthly salary of about 1,200 euros ($1,873), bankrolled a full social life. No longer. “The well-to-do middle class has become the tight middle class,” she said. “I’m surprised we haven’t started a revolution.” Instead, Ms. Salgado cut her fish purchases to once a week, switched to supermarket brands and away from health-food stores, and halved her visits to the psychotherapist. She spends some weekends with her children, Violeta, 9, and Juan, 4, at her ex-husband’s parents’ home in the countryside — a stressful arrangement, but one that enables her to avoid expensive weekends in Madrid. “Violeta asked me, ‘Mama, are we poor?’ I said, ‘No, we’re not poor,’ ” Ms. Salgado recalled, laughing. “But the middle class used to live well. And if you have lived well, it’s hard to live so badly.” Stagnant pay and soaring prices have hit Italy hardest. Recent statistics from the country’s main shopkeepers’ union showed consumer spending was down 1.1 percent in January from a year earlier, the biggest drop in three years. Leisure and recreation spending fell 5.5 percent. Francesca Di Pietro, a secretary, and her partner, Gianluca Pompei, a project manager, are part of that trend. Since their son, Mario, was born nearly two years ago, they have spent little on entertainment. “I’ve become anxious about unexpected expenses,” Ms. Di Pietro said. To stretch their monthly income of about 2,500 euros ($3,900), the couple has been getting hair cuts at the local beauty school, packing a lunch for work, buying secondhand clothes in market stalls and vacationing at campsites instead of hotels. They have abandoned their dream of living in central Rome, from an outlying neighborhood. “I look at people on the bus and they seem sad and beaten down,” said Ms. Di Pietro, referring to Italy’s malaise. “We’re 40 years old. We should be feeling more combative, but really all we feel is frustrated.” Some European governments are promising relief, but their ability to curb inflation or raise pay is limited. Italy’s warring political coalitions both ran in last month’s elections promising to lighten the financial burden of average Italians. Their proposals ranged from eliminating unpopular real estate taxes to subsidizing dental care. In France, the administration of President Nicolas Sarkozy is, among other things, looking into charges of price gouging by food merchants. German leaders are considering lower taxes. It may not be enough. Frustrated unions are taking tougher stances in wage talks. Public sector employees, as well as workers in the steel and chemical industries, have recently won wage increases. “The idea that ‘I will sacrifice to save my job’ is dying,” said Ralf Berchthold, a spokesman with Ver.di, the largest services union in Germany. “People are ready to fight now.”
Their combined annual income of 40,000 euros, about $62,500, lands Ms. Renard, a teacher, and Mr. Talpot, a postal worker, smack in the middle of France’s middle class. And over the last year, prices in France have risen four times as fast as their salaries.
At the end of every month, they blow past their bank account’s $900 overdraft limit, plunging themselves deeper into a spiral of greater resourcefulness and regret.
“In France, when you can’t afford a baguette anymore, you know you’re in trouble,” Ms. Renard said one recent evening in her kitchen, as her partner measured powdered milk for their 13-month-old son, Vincent. “The French Revolution started with bread riots.”
The European dream is under assault, as the wave of inflation sweeping the globe mixes with this continent’s long-stagnant wages. Families that once enjoyed Europe’s vaunted quality of life are pinching pennies to buy necessities, and cutting back on extras like movies and vacations abroad.
Potentially more disturbing — especially to the political and social order — are the millions across the continent grappling with the realization that they may have lives worse, not better, than their parents.
“I have this feeling that there is a wall in front of us,” said Axel Marceau, a 41-year-old schoolteacher living outside of Frankfurt. “We’re just not going to get any further.”
His concerns are well-founded. A study by the German Institute for Economic Research in Berlin found that the broad middle of the German work force, defined as workers making from 70 to 150 percent of the median income, shrunk to 54 percent of the population last year, from 62 percent in 2000.
Mr. Marceau’s father had a teaching job that afforded the family upward mobility, from owning a home to fancy ski vacations. But today, Mr. Marceau said, a new class of bankers, executives and other high earners has taken over. “I feel like we’ve been in a slow process of losing to the people up top,” he said.
“No one thought during the 1980s that they could possibly belong to a group of people who slide down the social scale,” said Markus Grabka, an economist at the institute for economic research. “No one had existential angst of the sort you have today.”
To be sure, Europe’s middle class is still larger than the number of people at risk of falling into poverty — and, by many measures, more protected than the American middle class. But policy makers worry that could change as the European economy starts to feel the drag of an American slowdown and high inflation.
“The problem,” said Julián Cubero, chief economist for Spain for BBVA, a leading Spanish bank, “is that if your salary rises more slowly than the cost of products you buy on a daily basis, you feel poorer every day.”
That simmering concern turned into anger last week in Britain. Striking teachers closed schools for the first time in two decades, protesting pay packages that did not keep pace with the soaring cost of living. Proposed raises were about 2.5 percent, while food has risen 7 percent and oil costs have surged 20 percent in Britain since this time last year.
The teachers’ rallying cry was just the latest to echo across the Continent.
German workers from several industries waged a series of strikes last month demanding a greater piece of the economic pie after years of being asked to make salary concessions — flexibility that, some economists argue, has helped a leaner, meaner Europe stave off recession so far.
In France, where purchasing power has replaced unemployment as Public Enemy No. 1, unions representing workers from teachers to factory workers have taken to the streets in protest.
This month, thousands of European workers converged on the capital of Slovenia, which currently holds the European Union’s rotating presidency
Quantifying the squeeze on Europe’s middle class is tricky; there is no universal definition of middle class, and national agencies differ on how they calculate purchasing power, making cross-border comparisons difficult.
Tallying inflation is simpler: Since 1999, prices have risen 22.5 percent in the 27 member states of the European Union, and 18.8 percent in the 15 countries that use the euro.
Much of the declining purchasing power of European workers can be traced to those numbers, and to policy decisions and economic developments over the last decade when globalization began to reshape Europe and the world.
In Germany, Europe’s largest economy, the decline in purchasing power began in 2000, when employers started wresting wage concessions from unions, or simply shifting jobs to Eastern Europe and China.
Inflation-adjusted incomes rose from 1 percent to 2 percent in the late 1990s, but more than one million Germans lost full-time jobs during and after a recession in 2000 and 2001. Subsequently, workweeks got longer without extra pay, and from 2004 through 2007, inflation outpaced income increases for the average family.
In France, the 35-hour workweek kept average annual pay increases below 1 percent for nearly a decade, said Robert Rochefort, the director general of Credoc, an organization in Paris that researches living standards. But French hypermarkets — big-box supermarkets that dominate the retail market — kept prices high, he said.
Spain generated thousands of jobs by pumping up the housing market, but has undergone a joblessness jump since the turmoil in real estate markets while wages have been consumed by inflation.
“When I started working at 23, I earned almost the same wage that I earn now,” said María Salgado, a 37-year-old director of television documentaries living in Madrid. Fourteen years ago, her monthly salary of about 1,200 euros ($1,873), bankrolled a full social life.
No longer. “The well-to-do middle class has become the tight middle class,” she said. “I’m surprised we haven’t started a revolution.”
Instead, Ms. Salgado cut her fish purchases to once a week, switched to supermarket brands and away from health-food stores, and halved her visits to the psychotherapist. She spends some weekends with her children, Violeta, 9, and Juan, 4, at her ex-husband’s parents’ home in the countryside — a stressful arrangement, but one that enables her to avoid expensive weekends in Madrid.
“Violeta asked me, ‘Mama, are we poor?’ I said, ‘No, we’re not poor,’ ” Ms. Salgado recalled, laughing. “But the middle class used to live well. And if you have lived well, it’s hard to live so badly.”
Stagnant pay and soaring prices have hit Italy hardest. Recent statistics from the country’s main shopkeepers’ union showed consumer spending was down 1.1 percent in January from a year earlier, the biggest drop in three years. Leisure and recreation spending fell 5.5 percent.
Francesca Di Pietro, a secretary, and her partner, Gianluca Pompei, a project manager, are part of that trend. Since their son, Mario, was born nearly two years ago, they have spent little on entertainment.
“I’ve become anxious about unexpected expenses,” Ms. Di Pietro said. To stretch their monthly income of about 2,500 euros ($3,900), the couple has been getting hair cuts at the local beauty school, packing a lunch for work, buying secondhand clothes in market stalls and vacationing at campsites instead of hotels.
They have abandoned their dream of living in central Rome, from an outlying neighborhood.
“I look at people on the bus and they seem sad and beaten down,” said Ms. Di Pietro, referring to Italy’s malaise. “We’re 40 years old. We should be feeling more combative, but really all we feel is frustrated.”
Some European governments are promising relief, but their ability to curb inflation or raise pay is limited.
Italy’s warring political coalitions both ran in last month’s elections promising to lighten the financial burden of average Italians. Their proposals ranged from eliminating unpopular real estate taxes to subsidizing dental care.
In France, the administration of President Nicolas Sarkozy is, among other things, looking into charges of price gouging by food merchants.
German leaders are considering lower taxes. It may not be enough.
Frustrated unions are taking tougher stances in wage talks. Public sector employees, as well as workers in the steel and chemical industries, have recently won wage increases.
“The idea that ‘I will sacrifice to save my job’ is dying,” said Ralf Berchthold, a spokesman with Ver.di, the largest services union in Germany. “People are ready to fight now.”
Source.
Oh, woe is the poor, exploited proletarian worker-slave, by those evil greedy capitalist dogs! See how they are driven by greed, leading the poor worker-drone to starvation with their price-gouging? If only his noble overlords would come once more to his rescue, and crush the evil exploiters!
I'll weep a tear for these idiots when they realize their governments are the ones they should be revolting against.
Ah, I saw this a while ago. Funny thing - aren't taxes the highest form of price-gouging? I mean, the government is the monopoly supplier of the various "goods" in question and can charge as much as it wishes. No competitors exist to undercut it, it is driven by no motive such as that of profit - it simply extorts as much as it can.
-Jon
Freedom of markets is positively correlated with the degree of evolution in any society...
Inquisitor: I'll weep a tear for these idiots when they realize their governments are the ones they should be revolting against.
They have no idea it's the central banks and endemic inflation that is robbing them of their wealth. Why should they? Even most trained economists these days are unaware that inflation transfers wealth from the poor/working classes to the government/banks/military-industrial-complex (since they look at things aggregately and ignore methodological individualism), and think the Fed is necessary to "manage the money supply". Socialism fails in large part because it expects people to be other than they are... must anarchists make the same mistake?
No, this is not a failure of the followers. It's a failure of leadership. Failure to reveal, failure to teach, failure to inspire, and most importantly, failure to enter the political battle. We can't blame people for not knowing what they've never been taught, or not embracing leaders that don't run.
"He that struggles with us strengthens our nerves, and sharpens our skill. Our antagonist is our helper." Edmund Burke
True. I'm just frustrated by individuals buying into these lies repeatedly and unquestioningly - invariably blaming the wrong institutions. But you're right, the blame is not (solely) theirs.
Inquisitor: True. I'm just frustrated by individuals buying into these lies repeatedly and unquestioningly - invariably blaming the wrong institutions. But you're right, the blame is not (solely) theirs.
Who do you think a teacher and postal worker are going to blame? Who signs their paycheck?
The fallacies of intellectual communism, a compilation - On the nature of power
maxpot46: No, this is not a failure of the followers. It's a failure of leadership. Failure to reveal, failure to teach, failure to inspire, and most importantly, failure to enter the political battle. We can't blame people for not knowing what they've never been taught, or not embracing leaders that don't run.
My feelings exactly. You can't expect the middle class to do anything but what they're told and gripe about it. The middle class never produced leaders.
You must be their leader. You must tell them what to do. If you don't, nothing will change.
Stranger: My feelings exactly. You can't expect the middle class to do anything but what they're told and gripe about it. The middle class never produced leaders. You must be their leader. You must tell them what to do. If you don't, nothing will change.
I don't agree with any of that. People are quite capable of choosing which option is better for them. It would just be nice if they had libertarians to choose from as well as statists. Leaders don't tell people what to do, they offer an inspiring vision and a plan to get there, which people choose to follow and implement of their own free will. Persuasion, not coercion, you see.
maxpot46:Leaders don't tell people what to do, they offer an inspiring vision and a plan to get there, which people choose to follow and implement of their own free will.
I can't imagine how you would not consider that to be telling people what to do. The majority of the people will not understand how the plan works, they will have to make the choice to follow you on pure faith in your leadership.
They will make their decision based not on their comprehension of the means, but on their approval of the ends. But yes, leadership is critical.
maxpot46: They will make their decision based not on their comprehension of the means, but on their approval of the ends. But yes, leadership is critical.
Well if 10 candidates are for change, how are they going to choose whose plan to back? It is all the same end, only the means are different.
Hi guys. What do you feel about a project to handout books on economics (something relatively small and interesting) to highschool students or those entering college? I think the problem -- at least here since there isn't an economics class in the public school curriculum -- is that people haven't developed any thoughts about it... We really got to spread some information around.
Kids at that age feel excited about making money, they are still deciding what they want to do, etc. So I don't see why schools would object to it (of course it can't explicitely state that "government is bad", and we wouldn't want it to state it like that anyway -- just point out intervention flaws and possibly explain how intervention begs further intervention), and I'm sure a lot of the kids would read it (Johnn Stossel in one report shows kids in a poor school, that do poorly academic, getting all excited when talking about making money, opening businesses etc). The financial support would be the real problem -- I personally could barely afford one school. :/ With regard to the material, I like Economics for Real People -- it would need to be extended of course. I guess Jonathan's Gullable would be very funny, but don't think it is really appropriate...
Equality before the law and material equality are not only different but are in conflict with each other; and we can achieve either one or the other, but not both at the same time. -- F. A. Hayek in The Constitution of Liberty
David Gordon's introductory text on economics might be appropriate for that purpose, perhaps if combined with Hazlitt's Economics in One Lesson.
Economics in One Lesson is incredible! I read it when I was 13; it turned me from anti-utopian into pro-market.
Don't allow leftists to play games with definitions! Some of the libertarian-leaning leftists at this forum will try to redefine "left-wing" back to its original defition (Third Estate, limited government, free-markets, laissez-faire reforms, etc.). Fine! We non-leftists can't stop them from using their own personal definitions; they can use whatever labels they want to describe any concept they want.However, they have the audacity to then use their personal definition of "left-wing" (remember, the original definition, which is no longer valid) to prove that modern leftists are more libertarian than modern rightists! They will say that libertarianism is "inherently leftist" (again, using the original, no longer valid definition), and use that to insist that we should prefer and side with modern leftists over modern rightists.
Question their motives.
The British and Italian left-wing governments owe their recent and catastrophic defeats to a very simple fact: people felt like "the Government isn't doing enough about his economic crysis". Talk for five minutes (if you can manage it) with your average Joe from the street and it will be all about "the Government should set a cap on fuel/bread/whatever prices, the Government should increase pensions, the Government should subsidize this or that". They do not realize that their worst enemies are actually the one they are desperately turning to for salvation, they do not realize that they are willingly delivering themselves in the hands of rapacious demagogues and extremely dangerous social engineers. The man from the street actually dreams about a "strong man" who will give him fixed prices, a fixed income each month, cheap credit, a generous pension... think about a Scandinavian social-democracy run by Mussolini and you get the picture (and a few chills down your spine as well).
Europe is now facing a choice: they can continue towards the present path (which will mean an accelerating economic and political decline), they can start serious, real free-market reforms or turn once again to authoritarian regimes. Everybody in politics, even the most hardcore Communist survivor from the Cold War, knows that reforms are desperately needed. The problem is nobody's willing to do them. The first step would require an hefty cut of the fiscal pressure (which in most countries is now over 40% of the GDP and in Sweden and Italy over 50%), which would be quite obviously followed by an equally hefty cut of the welfare state. Politically speaking is a suicide: every single European country has a sizeable chunck of population living solely on welfare and an ever bigger part that can afford a cushy life because of overgenerous Government intervention (think about the French, Italian and Spanish farmers and fishermen who get paid for not working). My bet is tha Europe will try to go ahead, muddle through, if you like using the present system and will resort to some authoritarian and/or Socialistic measures (fuel rationing? Price caps on some goods?) in the future to try to appease at least part of the population. Should the crisis get worse, I am even prepared to see authoritarian figures stepping in (Italy's Berlusconi and France's Sarkozy are two early and quite sedate experiments of the shape the future could get).
Finally let me close with yet another quote from The Clash "Why not phoning up Robin Hood and ask for some wealth redistribution?".
Ego: Economics in One Lesson is incredible! I read it when I was 13; it turned me from anti-utopian into pro-market.
I am not sure the presentation is very appropriate; I mean you need to sell the idea to schools or the municipe, you are not going to sneak them in :), so you need something that looks more like a textbook. Besides, it seems more targeted for someone with some background on economics; though I guess it does make people think... Some short FAQ could be provided...
And of course, I would want to cover business, to incentivate entrepeuners. Explaining how McDonald's, Blockbuster, etc are franchises, they don't actually own the stores, they provide the framework for entrepeuners. (It's actually funny how a few coffee shops are exhibiting the same menu with a few quick meals -- as like the icecreams billboards -- I'm guessing some business is providing this service, to enable small coffee shops to compete for customers from the fast food chains). Private vs public companies, and the stock market. Some enumeration of taxes and regulations. Not the chunk of it, but it has to cover it...
Anyway, will post here a thread about it when I'm in a situation to get something like this going. But education is the only way I see to fight the trend -- well, I wish they had the guts to go fully into socialized economy, instead of the mix parasite one. Would self-destruct much faster. :P
Kakugo:Politically speaking is a suicide: every single European country has a sizeable chunck of population living solely on welfare
Even those that are not actually in welfare, don't make enough to afford being unemployed for awhile, so they want unemployment pay. There's plenty of unemployment, so people want it to be extremely difficult to impossible to fire anyone, so they feel like they have job security. Etc, etc. This kind of thing of course just aggravates the problem in reality, but people will blame the capitalist or whatever (people also dislike politiceans, but because they don't do enough! they feel like they are in bed with the "powerful interests"). Btw, Salazar, our Mussolini-like dictator, was recently elected as the Greatest Portuguese in some TV show. :/
Also, the truth is people don't really care whether they are exploiting others, and the exploited don't care much either because I guess they feel like the cost is going to be socialized, so they aren't hit much. Politiceans have lost elections because they proposed paying highways for usage (tolls), instead of through taxes for everybody. Teachers just organized some massive protests here, because the minister wanted to change the pay-raise model -- instead of every teacher getting promoted every two years, they were trying to get some evaluation system to raise the better working half every year. (now, such system would hardly work that well, but most teachers didn't even had a look at it, they just didn't want to lose the steady career progression.) I dunno why there weren't much protests when the social security retire age increased from 60 to 65 years old -- if social security was private, you can bet those responsible would be serving jail time for fraud, and the all thing would have been more transparent in the first place.
Recently I was thinking about how could one teach some basic economic sense to the masses in a palatable way and found the following:
1. Forget money, think in real goods, as if it was a barter economy.
2. Forget ownership, think in terms of consumption.
If we do just these two things suddenly everything snaps into place. For example, say, one guy owns a food factory worth a billion while others don't own anything but their houses - how unfair! But thinking in real terms and in consumption what we see is that the factory feeds tens of thousands of people while what the owner does with the profits is basically that he consumes a somewhat better quality food than his customers: not a very big difference at all. And so on.
Miklos Hollender: 1. Forget money, think in real goods, as if it was a barter economy. 2. Forget ownership, think in terms of consumption.
Yeah, if you are going to touch some economic concept with someone, you need to make the situation simple, trying to involve as less as you can. So, it makes sense to talk barter if it's a dynamic between two parties. Money is an important issue though... With regard to property, just avoid getting much capital involved. Talk about farms and cattle, or services, not manufacturing. Stuff that need less investment.
The problem is when dealing with social problems. People want a fast fix, they don't want to hear you about how some problems come to be, some sustainable approach to it...
In general people are badly informed, and don't give much thought to economics either, so avoid coming across some smart-ass is important. ;) Avoid using extra-ordinary terms, and sometimes its better to not correct people at everything, and just let them breath a bit, that hopefully they'll make sense out of it.