Strip-Mining The Middle Class: Neoliberalism Comes Home To Roost

But once this last pool of wealth – America’s middle class – has been siphoned dry, then who’s left to stripmine and exploit?

Neoliberalism loves markets, because markets enable the wealthy to own everything that produces income and capital gains. Neoliberalism–the superficially attractive notion that opening local markets to global capital generates prosperity for all involved–is all fun and games when it’s stripmining some distant developing-world nation, but since opportunities have dried up globally, the stripmining machine has come home to America and its target is America’s middle class.

I have long called this the Neocolonial-Financialization Model: in essence, Neoliberalism is a new, improved version of the old Colonial Model, in which the capital-rich colonial power grabs the political and economic reins via force or subterfuge and proceeds to strip the colonized nation of its wealth and resources and exploits its labor force to manufacture cheap goods for home markets.

In Neocolonialism, the forces of financialization (debt and leverage controlled by central banks and banking cartels) are used to indenture the local populace to the financial center: the peripheral “colonials” borrow money to buy the finished goods sold by the “core” corporations, doubly enriching the center with:

1) interest and the transactional “skim” of financializing assets such as real estate, and

2) the profits made selling goods to the debtors.

Essential to the appeal of this colonialist model is the broad-based access to credit: everyone and her sister can suddenly afford to speculate in housing, stocks, commodities, etc., and ride this speculative bubble to a lifestyle that was once the exclusive preserve of the upper class.

Credit-poor colonials are suddenly offered generous credit at modest interest rates. It is an offer that’s too good to refuse and the resultant explosion of private credit feeds what appears to be a virtuous cycle of rampant consumption and rapidly rising assets such as equities, land and housing.

But all bubbles pop, and once the asset bubble pops, the credit bubble pops, and all the illusory wealth vanishes, leaving only the debt and the crushing monthly payments. Welcome to the Neocolonial-Financialization Model, neofeudal debt-serfs and tax donkeys!

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