Is Europe Destroying The Middle Class?

As a follow up to Darwin’s post, I think it’s important to note that what the Financial Times calls the Great Stagnation is not just limited to the United States. Growth slowed throughout the developed world after 1973, and in fact slowed more in Europe than it has in America.

Here, for example, is a bit of an article from before the current crisis about wage stagnation and the decline of the middle class in Europe:

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.

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.”

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.

The article goes on to list some of the proposed solutions to this stagnation:

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.

You’ll note that’s twice the article suggests that French wage stagnation is really caused by greedy grocers. That makes about as much sense as the Italian idea that people will earn more if only they have clean teeth. Germany, at least, seems to be in the vicinity of a sensible answer to the problem, though whether this will be enough remains to be seen.

I bring all this up not simply to talk smack about Europe, but because it gets wearying to hear people talk about a particular economic phenomenon as if it were something unique to America when in fact it is happening all over the place (Darwin’s aside about the high rate of medical bankruptcies in Canada being another example).

7 Responses to Is Europe Destroying The Middle Class?

  1. Art Deco says:

    Your link is to a New York Times article. Maybe it is happening all over the heads of innumerate newspaper reporters employed by our domestic news agencies.

  2. Ivan says:

    It is one more wake-up call for the Europeans. Their lotus-eating days may be over soon.

  3. Doug says:

    It is good to read something about the average persons economic situation in Europe. Our news media lacks this kind of reporting outside the country this days.

  4. T. Shaw says:

    I’m confused.

    Why would the US or Europe want to destroy the middle classes?

  5. Gabriel Austin says:

    T.Shaw asks “Why would the US or Europe want to destroy the middle classes?”.

    There is no moral agent called “Europe” or “the U.S.”. There are people living in a particular area in which certain customs have developed – customs which gave rise to the European civilization, and its American offshoots. The customs are now being destroyed – actively and passively. The middle classes are not being destroyed; they are collapsing.

  6. Art Deco says:

    The middle class is not being destroyed. There is and will remain a stratum of salaried employees, professionals, and small business. (Unless you suppose we are going to regress to a purely agrarian society). It is true that much of the personal discipline and regard for standards that animated that class of people in 1948 has dissipated.

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