At the end of the century you had the rise of the trusts, cartels, and other forms of monopoly that rapidly increased the size of the working class at the expense of the middle class, but government finally got so outraged that they reined in some of the worst of the excesses and passed the Sherman Anti-Trust Act.

The 1% don’t like being regulated and they are constantly arguing that they have learned their lesson and won’t do it again, so the Congresscritters accept their ‘campaign contributions’ and give them free rein again, and they go back to their customary looting of the economy.

Under capitalism the banks would have gone bankrupt, but the government saved them and, so, the rest of the economy suffers.

Iceland let them go bankrupt, threw the bankers in prison, devalued their currency, and are well into recovery. The rest of us are still struggling, having covered the bad decisions of the financial markets.

A market economy IS demand: if you have demand, you have a viable economy, and if you don’t, you don’t.

If you place extra money in the hands of lower- or middle-class people, they will spend it promptly; there’s your demand.

If you redirect the same money to the upper class, corporations and banks, they’ll sock it away (quite possibly offshore) waiting for better economic conditions instead of employing people to make widgets and gadgets to sell to lower- and middle-class folks.

In a pinch, i.e., in a serious recession/depression, the government, which has the option to print money, can serve as the demand source of last resort, to “prime the pump” as it were: the government spends money it doesn’t (yet) have until the normal cycle of demand is underway again, then in better times, taxes its way back to something resembling a balanced budget. Keynes taught us that.

A balanced budget IS NOT A VIRTUE in times of recession! This is what the conservative idiots have seen fit to hide, because it’s always good for their base… the obscenely wealthy… even in a depression.

For myself, I’ve never been convinced that capitalism is a sustainable system, middle class or no. Note that I also don’t accept that enterprise and capitalism are one and the same, but all that is getting far afield.

Anyway, the point is that there was a lot of psychological groundwork done to make it possible for Reaganism to take hold, and although I can’t prove it, I think there was a lot more going on there than just the erosion of raw demand. The rot goes deeper than that.

The biggest shift occurred when the gamblers… err … financial advisors conned people into using their homes as an extra source of income to hide the drop in their actual income and to take away most people’s one real asset. Almost everyone bought into the fairytale that home prices would always go up, so using the equity in your home to cover monthly expenses was no big deal. That was the equivalent of a goose laying golden eggs, or a perpetual motion machine. The middle class assumed that they could live beyond their income based on the increasing value of their homes. When the bubble burst they were in major trouble and deep debt.

The people at the bottom don’t have the economic power to influence the market, and the people at the top don’t actually buy a lot of stuff – they already own everything.

We are seeing the end game of supply-side economics. Economies need both supply and demand to function, and the supply-siders have destroyed demand.

Is this still true, really? It’s kind of a chicken-and-egg thing, but it seems to me that even before the program to grind employees and destroy the post-WW2 broadened middle class really got rolling, business marketing was on a course to sort consumers into 1. well to do and 2. everybody else. Remember how back in the early 80’s it seemed as if every business in the U.S. was chasing the “upscale market”? Soon enough, middle-class giants started falling to more downscale operations: Sears -> Grants -> K-Mart -> Walmart. You might say that the supply parts of the middle got hollowed out in tandem with demand. Lately, of course, even WalMarts and Dollar Stores are taking a hit from reduced spending. Could be that we are even further along the road back to a Gilded Age class structure than people realize.

Does this have anything to do with your poll results? Maybe what I’m saying is that “aspirational” marketing had something to do with getting us to where we are — middle class just wasn’t good enough any more. Isn’t Romney’s whole campaign basically a re-run of the 1980’s idolatry of rich “entrepreneurs”? Generations have now grown up on that brand of propaganda. It doesn’t surprise me that people’s thinking about class and economics should be deeply confused.

Somehow, it seems meaningful that the roads are full of shiny luxury SUV’s but I don’t see the equivalents of the VW bus or International Scout — functional goods made to last. On the other hand, maybe I’m just suffering from old man’s nostalgia.