Trickle up austerity

If you are sitting in the US, UK, Greece, Europe and so on, and you are a member of the middle class, then you are being squeezed.  Indeed the articles are prolific in number that point to a disappearing middle class.  

And they are wrong.  It is not disappearing (well, except in your own back yard) they are in fact expanding exponentially as a global structural shift occurs.  It is expected that the global middle class will have doubled by 2050 as China India and Brazil (etc) middle classes grow.

And of course all that is about polarisation.

Income and wealth polarisation may be the late development stage of unrestrained capitalism.  Unrestrained being the operative word.

For example in the Asian economies it could be argued that as they develop the emerge(d) middle class reflects what occurred in the so called developed economies as they industrialised and the wealth spread more evenly through the economy.    

This late stage polarisation has all sorts of implications.  

Obviously, as has been discussed internationally ad nauseam, the wealth polarisation keeps growing.  As evidence of this graph for the US up to the beginning of the bubble.

And we see a consumption strike occurring by the middle class, which has material impact for retail listed companies.  However, we are also seeing the growth in dollar / euro / pound stores at the one end, and the booming high cost brands at the other.  Which is an extension of the polarisation in incomes and wealth.

So everything is either flipping or polarising; both between economies and within countries.  A disappearing regional middle class, but exploding global middle class.  Within developed economies, a polarisation of wealth at both extremes.  And the resultant polarisation of consumption. 

Now back to the unrestrained part.  The best economic period for the developed economies was when economic equilibrium was achieved as evidenced by the 50’s and 60’.  This is before these countries introduced the “trickle down” policies which we blogged about here. Called "trickle up trickle down and squeeze".

Trickle down policies tax the poor and give to the rich; whilst trickle up policies tax the rich and give to the poor.  “Tax” in one disguise or another. 

We argued that trickle down policies have irrevocably failed and it was time for a trickle up policies to be introduced.  That is, give the money to the poor rather than the rich and the wealth will trickle up through increased consumption.  Proven economic success.

But this blog has introduced another term which we like:  Trickle up austerity.  Using that new term, it can be applied to our trickle up trickly down and (middel class) squeeze theory.  In the developed economies, Trickle up austerity is what you get when you unrestrainedly crush the middle class with trickle down policies and fail to restrain the rich with trickle up policies.  Economic Armageddon.