Serving the one per cent

Goods and services are exchanged for money, which pays production costs, salaries and profits. Added together these exchanges make up a nation’s produce, but the proportionate balance of goods and services has changed considerably over time. Classic economists, from Quesnay to Marx and beyond, argued that the only wealth produced had the material form of goods, that service providers did not add wealth but partook in the wealth produced by others. At the time, 18^th and 19^th centuries, a large portion of the urban working class was employed as domestic servants – an estimated 1.9 million in Victorian England – while lawyers, doctors and teachers also provided the upper classes. Services were just part of a bourgeois household’s consumption.

The social upheavals and wars that shook Western society in the first half of the 20^th century all but eliminated domestic employment. By mid-century middle-class housewives were managing chores on their own, assisted by electrical appliances such as washing machines and vacuum-cleaners. Instead of overseeing servants, they were left on their own. This isolation could be resolved by a “mother’s little helper”, but many women chose to grapple with the wider world, in universities, businesses and employment. Gender equality became a major political battle that overshadowed social and racial disparities. Meanwhile economic theory had changed attitude and had integrated services into the production of wealth.

Services are immaterial and goods are made up of matter, but the two are often combined. A doctor, for example, will make an immaterial diagnostic which involves the taking of a material medicine. This led to a sort of scale, with “pure” goods at one end, “pure” services at the other, and a varying mix in between. Notwithstanding this ambiguity, around three quarters of the wealth produced in developed countries is now attributed to services. In fact, economic growth in these countries over the past four decades has been largely due to the fast expansion of services, notably financial and personal services, looking after people’s money and lives. Vast sums had accumulated to provision insurance and pensions, and women were qualifying for all jobs. The result was a lot of lending to keep money circulating, and countless domestic employees to replace absent housewives.

The model middle-class home of fifty years ago has disappeared, and stay-at-home parents, male or female, have become curiosities. But the presence of women in the work-place has not doubled household incomes, because of strong gender disparities and because salaries in general have contracted. The post-WW2 middle-class had benefited from the wild growth rates of the 1950s and 60s. It increased in numbers and proportional wealth, thanks to productivity, global dominion and the survival of wartime egalitarianism. This changed with the war in Vietnam, OPEC, Women’s Liberation and Black Power, dropping out, etc. In Europe, the pre-war elites had compromised themselves with fascist regimes. As a class they had lost the war twice, in 1940 and in 1945. Their defeat opened up social mobility, and allowed a rapid expansion of the middle-classes. But the 1970s fractured the ideal beyond repair.

With hindsight, the late 1960s and early 1970s were a turning point (they felt quite revolutionary at the time). The war and post-war social and industrial model had run its course. Mass production, mass media, homogeneity, and drab black and white, were confronted by individuality, diversity and a blaze of colours. Pressured by technology the world had to change, and it did. But in stepping forward, it seems to have stepped back. Thomas Piketty has pointed out that wealth distribution in developed countries is comparable to what it was at the end of the 19^th century: a few very rich people, a lot of working poor and not much in between. The middle-classes stopped their expansion in the 1970s, and their numbers have been shrinking for the past decade or so. It began as a rebellion against the nine-to-five office job in private or public administration, against a pointless and brutal war in South-East Asia, against all sorts of discrimination, against a morality shaped by religious prejudice, against a power structure that was completely redundant, against black or white, and for a rainbow nation. The empire resisted the onslaught. It hired public relations specialists to change its image and presented a new liberal facade, but the middle-classes were moribund. The levelling project born in the uniformity of total war had failed because it was dull and grey, and because mechanical processes were being replaced by electronic ones. The mind-set of coal and steel could not apply to a world of plastics and processors.

The access to middle-class jobs by middle-class women improved gender equality, but it was also a loss of status. After all, working-class women had been toiling away at disparaged and demeaning work for most of recorded history. Being employed meant that middle-class women abandoned the role of household goddess comforting homecoming harassed bread-winners. Couples became partners and domestic chores were outsourced. This new female work-force provoked a surge in the services sector. Middle-class women were employed in banking, retailing and education, while their absence from home meant hiring a variety of domestic workers. The movement of women joining the corporate and professional rat-race and breaking “glass ceilings” was a profound cultural change, as well as an economic re-composition. The service sector’s expansion was the result of doubling the potential work-force, outsourcing manufacturing and an increasing demand for care and upkeep. And it was all profitable for employers.

A global bi-gender workforce strengthened the competition for jobs, across borders for manufacturing and internally for services. It was a great opportunity to cut labour costs. So factories were moved abroad to “developing” countries, and middle-class households were finding that their living standard with two salaries was no better, or worse, than it had been previously with just one salary. Housing was more expensive, children’s education was a financial burden and working incomes had stagnated, reaping no profit from the increase in wealth production. The middle-classes have been contracting for a while – the brief Yuppie revival twenty years ago did not outlive the millennium, and the millennial generation is struggling not to be déclassé – and this contraction is polarising society.

The middle-classes are a buffer between capital and labour. They accept, partake in and propagate capitalist ideology, with some social and material advantages, and they provide the models for working-class aspirations. They are the backbone of the electoral machine and its semblance of democracy. Their ongoing destruction by shrinking incomes and debts will push the contradiction between labour and capital into the spot light. And, as it did a century ago, capital is reacting by hiring more mercenaries and expressing belligerence. The service economy has the 99% serving the 1% and its hirelings, but precedents show that the levels of violence needed to maintain that imbalance quickly escalate and get out of hand. Capitalism functions most effectively with confident and affluent middle-classes, but its fundamental mechanism of infinite accumulation opposes egalitarian social structures. The middle-classes are the produce of capitalism, of entrepreneurship and social mobility, but capitalism must ultimately swallow them. Expansion, with growing markets and new technology, ends up in concentration and corporate might, in rising debts and middle-class servitude. This concentration phase is only interrupted by a new expansion. Something that might be somewhere over the horizon, but considering the size of today’s concentration, it will be hard put to have a significant global impact. The process seems condemned to continue until it brings about a complete institutional breakdown, and no one can foretell what will happen then.