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Fourth International, January-February 1948

C. Curtis

Decline of the American Middle Class

From Fourth International, Vol.9 No.1, January-February 1948, pp.14-18.
Transcription & mark-up: Einde O’Callaghan for ETOL.

Opponents of Marxism claim that Marx and Engels, at worst, compounded ignorance with malevolence; and at best mixed a laudable desire for social improvement with muddled thinking. They all agree that Marx “went astray,” that Marxism represents “a climax of pessimism and unfulfilled prophecy,” that the “Marxist theory of value is untenable.”

In placing socialism on a scientific basis, Marx and Engels first had to study capitalism, its tendencies and laws. By so doing they made a revolution in political economy. Just as they were pioneers in historical economics, so they were among the pioneers in the application of statistics to economics. In this series of articles, remaining true to the method of Marx and Engels, we propose to study statisticaldata, primarily American, to test Marxist economic theories.

American statistical data is comparatively rich. This is not due to love of knowledge by the corporations, banks, association of capitalists, or the government. Corporations and banks require accurate economic information in order to direct their production, marketing, pricing and credit policies. The government, which willingly or not, is forced constantly to intervene, directly or indirectly, into economic life, demands exact economic data to guide its decisions. Wars require efficient mobilization of all resources and must have planning and control, which in.turn depend on adequate and precise information. As a consequence there is available a mass of information about the American economic structure, production and distribution. Thereby capitalism itself gives us the beginnings of a social bookkeeping, which, developed and extended on a new basis, will be one of the instruments of the planned economy of abundance under socialism.

We first propose to examine the idea of the tendency toward the elimination and proletarianization of the middle class and, later in this article, the reduction of the independence, role and social weight of this class, as a law of capitalism. The Communist Manifesto declared a century ago:

The lower strata of the middle class – the small tradespeople, shopkeepers and retired tradesmen generally, the handicraftsman and peasants – all these sink gradually into the proletariat, partly because theirdiminutive capital does not suffice for the scale on which modern industry is carried on, and is swamped in the competition with the large capitalists, partly because their specialized skill is rendered worthless by new methods of production.

Is this true? Here is a typical denial:

“Much to the disappointment of the Marxists the middle class has shown no obvious tendency to disappear; indeed in the United States it seems to be increasing” (Labor Problems by Gordon S. Watkins and Paul A. Dodd, 1940).

That class which “can live so long as they find work, and who find work only so long as their labor increases capital,” is the modern working class. This class owns none of the means of production and distribution, and sells its labor power for wages or salary. At the opposite pole is the capitalist class, which owns the means of production and distribution, employs the working class to operate them and receives rent, interest and profit. Between these two classes is the middle class; the class of self-employed business men. As in the rest of the world, the middle class was at one time predominant in northern and western United States.
 

Class Alignments in US

Early in the history of the American republic, at first relatively slowly, out of the middle class there arose the modern proletarians and capitalists. With the end of the free land on the frontier, about 1890, this process became definitive. From the following table we can follow this development.

This table shows that the number of middle class, self-employed enterprisers, have remained more or less stationary at between nine and ten millions for the last 25 years, while the working class increased by nearly 20,000,000 or 66%. This trend is brought out even more strikingly in terms of percentages. These show that self-employed enterprises have steadily diminished in relation to the working class.

These figures show both a relative and absolute decrease in the number of middle class elements, and a precipitous relative decrease at that. Yet a Social Democratic “refuter” of Marx, John Kenneth Turner, in his Challenge to Karl Marx, writes:

One must conclude that assertions that this (middle) class is “doomed” finds little support in what has actually happened ... Though the farming population increased, it did not increase as rapidly as the general population. But on the other hand numerous other important middle sections increased more rapidly than the general population and more rapidly than the wage earning sector.

Turner is very disdainful of Marx’s method, yet Marx was able to see far into the future; while the Turners cannot see what is taking place under their very noses. Let us first examine what statistics have to say about the independent farmer in the United States.
 

“A Way of Living”

In a book [1] compiled by the secretary of the National Association of Manufacturers and the chief statistician of the Chrysler Corporation, we find the following declaration: Agricultureis not merely a way of making money; it is a wayof living. It emphasizes and develops family life to its highest degree. The family and the family farm not only become a production unit, but a social center as well. The family farm is a highly integrated unit producing both economic and cultural values. There are tasks for everyone. The child becomes an economic and social asset at an early age; he grows up in a healthy, wholesome environment. The farm is the natural and best place to maintain the population of the nation. Welfare of the nation demands that these things be not overlooked in framing national policies.

This is a highly sentimentalizedand falsified picture of farm life. We doubt that Southern sharecroppers grow up in a “healthy wholesome environment,” for example. But be that as it may, according to this panegyric the preservation of the agricultural section of the middle class should seem a matter of course. Yet statistical data show the opposite: the rapid diminution of the number of farms and farmers; the constant elimination of independent farmers and their conversion into wageworkers. This can be seen from the census reports. In 1870, of all the gainfully occupied, 53.0% were engaged in agriculture; in 1946, 14.4% were engaged in agriculture of whom over 30% were wage workers. Contrary to the “scientific” opinion of Mr. Turner, since 1920 there has been both an absolute and relative decrease in the number of farmers.

It is clear from these figures that the operation of the economic system works contrary to those socially desirable aims to which the NAM pays such glowing tribute.

Along with the elimination of a million and a half farms in the last 26 years, a companion process of centralization has been squeezing out the small farmer. In 1920, farms of 500 acres or more comprised 3.3% of the total and included 33.7% of all farm land; the same sized farm, by 1940, counted 4.3% of the total number of farms with 44.9% of all land (20.5% of all cropland). For farms of this size, agriculture is a largescale capitalist enterprise.

No figures are available as yet pertaining to the growth of centralization since 1940, but the increase in the average size of farms, between 1940 and 1945,from 174 to 190 acres, along with the elimination of 17% of the farms, indicates a rapid growth of the factory-farm at the expense of the family size farm.

Nor does the future promise brighter. According to the Farm Security Administration and the Bureau of Agricultural Economics, “there are 1,500,000 low income farmers with no prospect of expanded production ...” These “would contribute more to he economy by taking jobs on other farms or in industry.” Since this was written the steps advocated by these bureaus have been partially realized, but hundreds of thousands still remain in this position of sub-marginal farmers.

Not shown in the above table, designed to depict the longer range tendencies, is the year 1935. Here a curious development was manifested. There was an increase in the number of farms by nearly 10% over the 1930 figures. This would seem a paradox at first sight: A depression leads to an increase in the number of farms, while war-induced prosperity shows a decrease. The answer to this paradox is that the ruined farmer had no chance to become a worker during the depression, with more than 10,000,000 out of work. On the contrary, hundreds of thousands of jobless workers left the cities and took up deserted farms to keep a roof over their family’s head, and obtain some food. Other millions could not leave the land; the city breadlines held no advantages over the poorest farm. Here we see the law of the elimination of the middle class and the law of its proletarianization operating seemingly out of kilter; the former was active while the latter went into reverse. It took the war boom to provide escape for all these ex-farmers.

For a long time the farmer in this country seemed immune to the laws of his being eliminated from the middle class and proletarianized. An open frontier provided millions with the possibility of becoming independent farmers. The technical nature of farming, its dispersal, its seasonal character all invested this most virile section of the middle class with greater power to survive. But with the closing of the frontier, the economic laws of capitalism began to assert themselves. For a number of decades the farmers increased in absolute numbers, while declining relatively with respect to the growth of the wage workers. This absolute growth ended in 1920 and absolute decreases have been registered ever since, while the large farms have steadily grown larger. Even in this sphere, we find Marx able to foresee, while the Marx-refuters have remained blind.
 

A Business for Oneself

Farming represented 46% of the total number of active unincorporated proprietors in 1946. Second to agriculture, in the number of active unincorporated proprietors, are 2,206,000 engaged in wholesale and retail trade and auto service.

With the growth of modern industry the functions carried out by the middle class became subdivided. For example, the old-fashioned dressmaker didn’t need an outlet, she worked in her customer’s home. But today the garment industry is carried on by factory production and requires special outlets in the shape of stores. If in 1870 well over half the country’s population resided on farms and raised a large part of their own food, today over 80% live in cities and buy their food in stores.

While manufacturing and later farming were marked by a process of elimination of the middle class, a section of that class found a haven in merchandising.

The census bureau gives the following figures on wholesale and retail dealers.

World War II resulted in a sharp diminution of the number of proprietors of wholesale and retail stores, but with the end of the war, they have more than recovered their pre-war numbers. But here too it is necessary to probe below the surface.

If the number of independent business men in merchandising increased by 12% from 1929 to 1946 (from 1,916,000 to 2,206,000) according to the Department of Commerce, the number of wage earners, employed primarily by the chain and larger stores increased by 41%. Thus the independent merchandiser is playing a relatively smaller role.
 

Retail Trade

Large scale corporative and monopoly capital, represented by the department, chain and large stores, is constantly pressing the small retailer to the wall. Again, a table taken from the Census Department shows the actual relation between the small independent and the larger stores.

From the figures it can be seen that 0.7% of the largest stores sell more than do the lowest 75% of all the smaller stores.

Before 1920, the middle class was fairly secure in its control of this field despite department and mail order concerns. But the chain store, tied up with big capital, has since appeared as a major factor. The following table tells the story of this growth of chain stores:

Large scale merchandising has nearly every advantage over the small storekeeper: ability to purchase at favorable terms at advantageous prices, ability to cut down on overhead per dollar sale; ability to advertize.

In steady retreat before the chain and large store, how and why does the middle class manage to hold on?

Only by dint of the most abject victimization of self and family. In 1939, there were 923,878 unpaid part and full time family workers in retailing. Income for the lower group of proprietors was, even so, low. More than half received no set salary, eking out an average of $20 per week for the owner and his family, an amount less than the average worker in industry who was receiving $23.19 for a forty hour week.

Another reason for the persistence of the middle class in this field is much the same as in agriculture: it provides a miserable refuge from unemployment. [2] Often the storekeeper lives in the store. Often it is the old or partially incapacitated who own the tiny stores, eking out a pittance to supplement other income, if any.

And the future? Let the Department of Commerce’s Survey of Current Business answer this question. In its June 1947 number it points out that although “the sharp upward trend in chain store sales was reversed after 1942, with independents obtaining a somewhat larger proportion of sales in the war period, since mid-1945 chain store sales are again showing the upward growth evidenced in immediate prewar years.” The growth of the proletariat in merchandising is the handwriting on the wall for the middle class in this field as well.
 

Construction and Service

Construction is a third sector where the middle class survives. Many crafts marked by the use of comparatively small hand tools still retain a skilled character. There is a great amount of repairs and small construction, that still offers independent contractors an opportunity. Many serve as workers at one period and as “contractors” at another. In 1929 there were 822,000 unincorporated contractor proprietors according to the Department of Commerce; by 1946 this number had decreased to 697,000, or by 15%, while the wage workers increased from 1,219,000 to 1,637,000 or by 34%.

Here, too, the law of elimination of the middle class and the centralization of capital is in full operation. The constant application of ever more expensive machinery and the technical requirements of large-scale building, are relegating the small contractor to the field of petty jobs. Utilizing $25,000 as a line of demarcation in 1939 construction work, it was found by the Census that enterprises over $25,000 accounted for 14% of the contractors, 77% of the value of all construction work, and 82% of the payroll.

“Service” is the fourth major category of the middle class. Here a direct and intimate relation is often established with the customers. In personal service large quantities of capital are not required. But in spite of this the same process of the relative decrease of the middle class is apparent. If we leave aside domestic servants, between 1929 and 1946, there was a 9% increase in active unincorporated proprietors. But the wage earners in this period, in the service industry, increased by 35%. These four categories encompass approximately 90% of the middle class.

In conclusion I cannot forego adding a few words about a subcategory of “service”: the independent professional. The bourgeoisie, says the Communist Manifesto, “has stripped of its halo every occupation hitherto honored and looked up to with reverent awe. It has converted the physician, the lawyer, the priest, the poet, the man of science, into its paid wage workers.”
 

“Independent” Professions

Leaving aside the poet and the priest, let us glance at the other professions:

• Lawyers: “A cross section of the legal profession of the day would show a hierarchy of activities. At the top is the ‘legal factory’ – the great corporation offices of New York and Chicago, having 30 or 40 partners and perhaps 200 or more associated attorneys, and doing a value of business of several millions a year ... These institutions are ... largely adjuncts to the great commercial and investing banks, and they use that connection to divert to themselves a portion of the funds flowing through the banking system. To some extent also their profits are due to the use of cheap labor in the form of lawyers recently graduated,” of whom a new crop is available each year.” (A.A. Berle, Modern Legal Profession, Encyclopedia of Social Sciences.)
   
• Physicians and surgeons: “A noticeable trend in recent years is in the direction of employed or group practice. The effect of this upon new entrants into the profession is marked. Approximately 15% of all physicians are employed full time by business firms or agencies. Their number has increased as each successive class of medical graduates is added to the corps of practicing physicians ... of all physicians and surgeons reported by the census of 1930, the percentage working for pay rather than private practice was 27.” (Recent Occupational Trends in the United States, by H.I. Anderson and P.E. Davidson, 1940.)
   
• Scientists: “Chemists and other research specialists, employed full time by manufacturing concerns ... are now salaried employees.” (Ibid.)
   
• Engineers: “During the 19th century engineers were engaged in private practice, as consultants and advisers, and in independent construction. But the intensive construction and manufacturing era ushered in by mass production methods early in the present century brought about a decided increase in the number of engineers and resulted in their employment as salaried workers for large companies.” (Ibid.)
   
• Inventors: “The number of inventors has decreased steadily ... Many of the inventions now patented which have practical or scientific value come from the scientific and research laboratories manned not by inventors but by scientists and engineers.” (Ibid.)
   

Stock Ownership

There is a second line of defense on which the defenders of capitalism fall back. The middle class survives, and flourishes, they say, not so much in the old form as a farmer or artisan, but as a holder of stock in the corporations. The independent owner has not been eliminated by the corporations; he has become a partner of the corporations.

Professors Watkins and Dodd, authors of the previously cited Labor Problems, tell us there has been a “wider rather than a narrower distribution of ownership” through ownership of stocks and bonds. Mr. Harvey Firestone, head of the Firestone Tire and Rubber Company, informs us in a nationwide advertising release that appeared in West Coast papers early this January:

“They [‘soap box orators, wily subversives and well meaning but misled reformers’] give us the impression that American business is owned by a mere handful of individuals. Actually some fourteen million people own shares in American industry.” (The basis for this figure is nowhere cited.)

Are these assertions true? Or is a statistical sleight of hand being passed off on us?

Suppose a corporation is formed and issues 100,000 shares, divided into two portions, one comprising 1,000 shares and the other 99,000. Suppose each of the thousand shares is sold to 1,000 persons, while the block of 99,000 shares is held by one person. We may be sure that this individual owning 99,000 shares would say: “Soapbox orators, wily subversives and well-meaning but misled reformers assert that one person owns the company; they must face the facts. This company is owned by a large number of people, 1,001 to be precise.” In answer, one may, with obvious justice, joint out that 1,000 persons own together one per cent, or a negligible portion of the company, while one person owns 99% of the firm, controls the corporation and profits most from the dividends and salary he votes himself.

The reality, while not quite so extreme as in the above imaginary case, nevertheless bears a marked resemblance to it. In a study made under the direction of Raymond W. Goldsmith and R.E. Parmelee of the Securities and Exchange Commission, and published as a TNEC (Temporary National Economic Committee) Monogram, we find the following: More than 80% of the recipients of the nation’s income own no corporation stock.

Stockholders comprise between 8 and 9 million people. Of those that hold stock more than 80% received in 1937 not much over 10% of the dividends paid and owned about the same proportion of all the corporate stock issued. Less than 1% of those who held stock owned about 50% of the corporate stock of the country.

Less than 20% of the stockholders owned 90% of the stocks issued by the corporations of the United States. [3]

Elementary arithmetic will tell us that 0.2% of the income receivers in the United States own 50% of the corporate wealth and between 3 and 4% of the receivers of income own 90% of it. Whatever definition Mr. Firestone gives to the word “handful,” if less than 4 per cent of the population own 90% of the corporate wealth of this nation – in all restraint it must be said that the “soapbox orators, wily subversives and misled reformers” are “facing the facts” while Mr. Firestone is trying to obscure them!
 

Subservience to monopolies

Even more important than the numerical decrease of the middle class is its economic subservience. In the center of American economy are those industries which are heavily concentrated.

Here a handful of firms, as few as eight, account for the bulk of production in the entire industry. The more important of these industries embrace railroads, telephone and telegraph companies, power and light companies and other public utilities; auto, meat packing, steel, electrical machinery, cigarettes, rubber, rayon and similar products, agricultural implements, chemicals, petroleum refining. These industries employ tens and hundreds of thousands of workers in each enterprise.

In the outer ring of the economic structure are those industries still marked by large numbers of middle class elements.

Between the two groupings is a category of smaller competitive capitalists such as those in the women’s garment industry, where no single corporation or small group has as much as 5% of the total production.

The heart of American capitalism is to be found in the inner ring. The other two groups are weak, dependent and subservient to the monopolists there.

As an illustration of this dependence, take the hundreds of thousands of tobacco growers who must sell to one of eight cigarette manufacturers, or not sell at all. It is a matter of little concern to a cigarette company whether or not to buy from any single grower. The cigarette companies are in monopoly positions both as buyers of raw material and sellers of the finished product. Cattle raisers stand in the same relation toward the giant packing houses in selling their cattle.

The powerful monopolies dominate not only the purchase of agricultural raw materials but also the retail field, independent contracting and small manufacturing.

They have great financial resources; they are constantly expanding, absorbing old industries and creating new ones. As a rule, new products do not, as in decades past, open for the middle class or smaller capitalists, a new field of endeavor, but are controlled by the large enterprises right from their inception in the corporation laboratory.

Mam and Engels indeed saw far and clear when they wrote 100 years ago:

“The other classes decay and finally disappear in the face of modern industry; the proletariat is its special and essential product.”

Footnotes

1. Fact and Fancy in the TNEC Monograms compiled by John Scoville and Noel Sargent, sponsored by the National Association of Manufacturers, 1942.

2. The Bureau of Foreign and Domestic Commerce: “Comparisons of census data for 1929 with those of 1933 show that as the nation plunged from the 1929 crest to the bottom of the depression, there was a great increase in the number of small stores.”

3. The percentages of economic activity accounted for by corporations in various industries are as follows (1938):

 
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