‘Middle-Out’ Economics

Russell Brand Wealth InequalityHere it is. Here is the wealth inequality narrative progressives have been searching for. Yesterday I wrote about rich wankers and a couple of helpful commenters contributed the following two articles on the subject of wealth inequality:

‘Middle-Out’ Economics: Why the Right’s Supply-Side Dogma Is Wrong

The Pitchforks Are Coming… For Us Plutocrats

Both articles are written and co-written by Nick Hanauer – a member of the 0.01% wealthiest people in the world thanks to his foresight in investing early in Amazon. Hanauer is arguing for a progressive narrative to replace the right’s reliance on ‘trickle down economics’. I would suggest reading both articles, as I really believe Hanauer is spot on. Hanuaer’s 2012 TED talk is also worth watching.

I am currently studying political narrative and framing and through this research, I have become interested in George Lakoff’s work in trying to convince the US Democrats to be smarter about the language they use to argue against Republican and Tea Party policies which widen the gap between rich and poor. Policies like tax breaks for the rich, using the incorrect excuse that the rich are job creators. And policies that aim to make the government smaller and more ineffective in stemming capitalist greed. Hanauer argues that there is no empirical evidence that tax breaks for the rich create jobs. He also argues that the best way to reduce the size of government is to reduce welfare payments by expanding the size of the middle class. Someone needs to show Joe Hockey this suggestion. People don’t want to be on welfare and would support a government who supports them to be trained and prepared for meaningful, well paid work. This is simple, yet powerful stuff.

The crux of Hanauer’s narrative is that middle class spending creates demand in the economy and in turn, creates jobs. As Hanauer explains, from his own experience as a member of the ultra-rich American community, he might earn 3,000 times more than the average worker, but there is no way he consumes, or buys, 3,000 times more than the average worker. His excess money goes into his own savings and investments, which help him to get even richer, widening the gap between his wealth and everyone else’s. Hardly any of Hanauer’s wealth influences the wealth of the middle-class in his community and contributes to job creation. As he simply says, if Walmart employees can’t afford to be Walmart consumers, who is going to ensure the long term sustainability of Walmart’s business model? His arguments are not social ones, although of course they do affect social policies. His arguments are economic. The loss of America’s middle class means the loss of their consumer base.

Here are Hanauer’s suggestions as to how ‘Middle-Out’ economics can become a thing as published in The Atlantic:

  • First, relentlessly frame the choice as a choice. It’s trickle-down and middle-out economics. Not “top-down.” Not “the old ways that got us into this mess.” Trickle-down vs. middle-out. If we don’t have the courage to name our alternative, and repeat it relentlessly, we haven’t given people a clear choice. We will never displace trickle-down ideas if we don’t provide a clear, concise, and compelling alternative. Neither term has inherent force; it’s only in the contrast that we win.

  • Second, propagate the one pivotal meme at the heart of this entire effort: that rich businesspeople don’t create jobs; middle-class customers do. To put it another way, the right’s claim that rich businesspeople are job creators is the critical vulnerability deep in the heart of the Death Star; if we can target our ammunition to obliterate that single claim, the entire Death Star of right-wing ideology will implode and disintegrate. Why? Because without that claim, there is no way for the trickle-down camp to justify the absurd preferential treatment in the tax code and the regulatory regime for the rich and for large corporations. Without that claim, trickle-down economics reduces nakedly to a rent-seeking, self-serving agenda by the very rich to extract wealth from the poor and middle class. In short, we need to pick a fight with the right about the origins of prosperity in a capitalist society. Middle-out economics will prevail.

  • Third, make every economic issue an example of middle-out economics. The Ryan budget fails not because it is unfair or heartless or draconian. It fails because it perpetuates trickle-down thinking and cripples the ability of the middle class to generate national prosperity. Entitlement reform is not about the virtue or vice of running deficits. It is about whether we create enough security for middle-class consumers and workers to participate in the economy. The Affordable Care Act is not about the byzantine bureaucracy of health-care delivery. It’s about whether the middle class can dedicate its purchasing power to productive economic activity instead. And so on with sequestration, fiscal stimulus, and tax reform.

  • Fourth, recommit to capitalism — in a truer and more effective form. Middle-out economic policies aren’t just good because they benefit the middle class or the poor in the near term. They are great for the United States as a whole in the long term because they drive prosperity for all, including the rich. Our agenda is to make capitalism be all it can be for all of us.

  • Fifth, take this case to the people in the form of story. The argument we make here is a conceptual one. But the delivery device for that argument has to be narrative. Perhaps unfortunately, the last 30 years provide a very simple narrative arc — the tale we told at the very start of this article. That kind of storytelling must become second nature to progressives. Indeed, on all these fronts, progressives need dozens of complementary and simultaneous efforts to turn middle-out economics and the job-creator meme into products — media stories, policies, bumper stickers, viral videos, school curricula.

The fifth point is the one that most interests me and my study into political communication and narrative. The left need a new narrative. And ‘Middle-Out’ provides this narrative. As I have previously written, wealth inequality needs to be at the heart of the left’s new narrative. Hanauer’s suggestions provide the left with a way to make this happen.

John Oliver’s recent segment about wealth inequality was both hilarious and depressing. It revealed to me that President Obama knows that he needs a wealth inequality narrative, but so far hasn’t been able to find one. Oliver quotes from this article which explains that when Obama’s historian, Robert Dallek, asked the President during a round table discussion what his administration needed help with, Obama’s response was:

“What you could do for me is to help me find a way to discuss the issue of inequality in our society without being accused of class warfare.”

I believe Hanauer is offering a possible solution to Obama’s problem. Coupled with Senator Elizabeth Warren’s ‘You did not build this on your own’, the Hanauer ‘middle-out not trickle-down’ narrative adds another layer of concrete to this concept. The genius of Hanauer’s argument is that you can’t be accused of class warfare when the advice you are giving helps every class. Every class benefits from a strong, productive, wealthy-enough-to-consume middle class. ‘Middle Out’ economics is the narrative Obama, and all progressives, have been searching for. Is the Australian Labor Party listening?


  1. This makes absolute sense to me, but I’m cynical enough to think that for any politicians in any party to listen, you need to take them by the throat, lock them in a room, and explain everything in simplistic detail, follwed by a 3 (5? 10?) step plan of how to carry it out. Together with detailed points on what’s in it for them.

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