Although neo-liberal economic model is proven to be a complete failure in the first country (the United States) of its full implementation, yet this model of complete misery is applied across the world, including Greece.
The neo-liberal economic model is being represented as more glorified in many countries. In Greece too, the permanent message of the mass media is the glorification of the neo-liberal economic model, which supports the idea that the concentration of wealth in the hands of the rich people will be spread to the lower classes and, thus, create wealth for the whole society.
Is that the case?
The United States (US) is a global superpower and has become the economic model for many countries. However, many are unaware of the consequences of the US’s economic power for its own population, particularly for the middle and working class.
In the US, the winners are the very rich, while the other social classes belong to the losers. In particular, between 1979 and 2006, the working-class income rose only 10% in 27 years and the income of the middle class increased by 21%.
This 21% is not as good as it may seem, taking into account the smallest number of people in American households (i.e. families with one kid compared to families with more kids in the past). Therefore, the income per person seems to be greater than it actually is.
In fact, the middle-class income rose by only 0.7% per year. It’s worth noting that the middle class is working much longer hours nowadays compared to the end of the 1970s. Without these extra hours, the increase in the US household income would be negligible. In contrast, the income of the rich for the same period has increased by 260%.
Regarding pensions, the middle class and working class are in a worse state. Employees are increasingly burdened with the cost of their retirement, and the state-guaranteed pension is only for a few.
Pensions are based on participation patterns like 401(K) plan, which is a retirement savings plan sponsored by an employer. This plan lets the employees save and invest a portion of their paycheck (pay cheque) before taxes are taken out. However, the scope of investment with this 401(K) plan is limited. One can invest money into mutual funds mostly composed of stocks, bonds and money market investments.
These schemes exposes the American employees to, for instance, the adverse affects of a fall of the stock market, such as in 2007 and 2008, as well as the one that is predicted for the near future. As a result, many Americans run the risk of having little or no income in their pensionable years.
Furthermore, medical costs have been squeezing the income of the middle class and the working class, as they have to bear the insurance cost. Employees spend too much on medical coverage ($ 7,290 per person in 2007 and 12,872 in 2018), while the state has less doctors, nurses and hospitals per individual than other wealthy countries. As a result, mortality – due to lack of early care in the US – is very high, and the ones who are over seventy-five years are at greater risk.
There’s the widespread believe of an American dream that one can be born poor, but s/he can become rich in the course and, thus, escape from the aforementioned problems.
However, the figures are disappointing. Only one in seven could rise to the high income class in the 1970s, whereas today the ratio is one in ten. Those who belonged to the high income category of 1% of the American population were in the same category in the 1970s as evidenced by the heredity of wealth. Hence, social mobility has been, and will be, more difficult for the lower classes due to the accumulation of wealth.
The neoliberal economic model is proven to be a complete failure in the first country of its full implementation i.e. the United States of America. Yet this model of complete misery for the middle and working class is applied throughout Europe and across the world, and Greece is no exception.
Fotini Mastroianni is an economist, MBA lecturer, writer, blogger from Athens, Greece. She had taught, among others, at the University of Wales & the University of Glyndwr.