The Vanishing Middle Class: Prejudice and Power in a Dual Economy by Peter Temin (review)

Temin’s latest book shares a proclivity for big ideas with recent block-buster economic tomes like Thomas Piketty’s Capital in the Twenty-First Century (Cambridge, Mass., 2017) or Robert Gordon’s The Rise and Fall of American Growth (Princeton, 2017). But it is vastly shorter and (blessedly) lighter to carry than Piketty’s or Gordon’s.

Following a brief introduction, The Vanishing Middle Class divides into three sections of four chapters each, a fourth section with two chapters, and a tidy appendix contrasting Temin and Piketty on inequality models. All chapters are bite-sized, the arguments illuminated by simple figures or telling anecdotes drawn from today’s headlines.

The first section (“An American Dual Economy”) sets forth Temin’s organizing principle. The original dual-economy model posits a traditional, rural sector with a highly elastic labor supply and a modern, urban one that draws workers from the rural sector. Wages are higher in the urban sector because of migration costs (including “waiting time” to employment) and because of capital augmenting labor productivity in the modern sector. Temin’s version re-labels the rural sector as “low wage” and the modern as “fte” (finance, technology, and electronics), with higher education as the transition path. He lays out the basics in Chapter 1, which the remaining chapters in Section I flesh out. Chapter 2 details the fte sector, representing 20 percent of the labor force; Chapter 3, the low-wage sector, the other 80 percent; and Chapter 4, the transition process, increasingly costly and quixotic.

Section II is about politics. Chapter 5 introduces the concept of racecraft, which the fte sector uses to divide and conquer the low-wage sector. Chapter 6 champions an “investment theory of politics” in which the very rich spend (exorbitant amounts of) money to influence legislation and regulation. Chapter 7 argues that the preferences of the very rich are much different from yours and mine. Chapter 8 asserts that the United States has never been a true democracy and that today it is much closer to oligarchy and even at risk of stumbling into autocracy.

Section III focuses on government programs. Chapter 9 depicts the War on Drugs and the ensuing “mass incarceration” as fte-sector tactics to keep African Americans down and out. Starving public education (Chapter 10) and refusing to invest in crumbling urban infrastructure (Chapter 11) affect a broad swath of the low-wage sector. Private and national (public) debt is the subject of Chapter 12. The low-wage sector is mired in it (private), and the rich use the national debt as an excuse to hold back government spending that would aid the low-wage sector.

Chapter 13, the first of two chapters in Section IV, notes that globalization has allowed uncounted millions of people around the world to escape abject poverty while enabling the dual economy back home in the United States. Chapter 14 summarizes and also makes policy recommendations—spending more on public education, ending mass incarceration, repairing aging infrastructure, expanding voting rights, and embracing diversity.

Temin’s long list of articles and books in economic history, many of which are rightly considered classics in the field, fall squarely within mainstream economics. But The Vanishing Class is far more polemic and social commentary than social science. The dual-economy metaphor is of uncertain value, and many passages may leave readers cold. That said, Temin is tackling a social problem of first-order importance, and he is well aware that his modal reader may be startled (and even offended) by the angry, argumentative tone of the book. Regardless of whether readers are in agreement with his message, however, Temin’s moral courage for taking that step is admirable.