Mdthbs

I'm trying to create well-off country, which judging solely by GDP per capita would be considered wealthy with something like 60,000 USD per capita. However the country middle class is very small.

Is such economy possible?

If that helps my story is about failure of the country to democratize, since rich are afraid that populist will take all their wealth. The working class on the other hand could always find job, but has largely given up on trying to improve, unless you are very talented or very lucky.

The story happens in present age.

So far I'm pondering below things:

• Low taxes and little redistribution of income


• Suppression of unions


• Modern sector made of Capital intensive industry which that pays high wages but employs few and high skill services which only hire brightest and best educated


• Unproductive traditional sector which soaks surplus labor (South Korea but many times worse
  


• Expensive private vs low quality public/religious education


• Part of the population works very little due to religious reasons (inspired by Haredim in Israel) and lives off government handouts


• Very few public jobs (small administration, professional army etc)


• mechanized agriculture

Gated Nation

One scenario that comes to mind is Monaco. One in three is a [multi-] millionaire. Most of the working-class do not live in Monaco, but commute from France. The "country" is full of rich people (is that a "rich country"?), but has a small if not non-existent middle class citizenry.

"From Each According to His Ability, To Whatever."

Another scenario that comes to mind is pure State ownership. I know this has not really panned out in real life, but in theory, the "country" can be "rich" if all wealth is owned and distributed by the state. Distribution can be absolutely even, thus rendering everyone in the same class, or it can be uneven such that some get most and the rest get sh*t.

Feudalism / Oil Oligarchies

Another scenario is common in the middle east. Vast wealth is owned by a small ruling class or even a single ruling family. This family has mechanisms to generate vast wealth, and it's up to them to allow or forbid anyone else in their turf to do or own whatever they deem fit.

Of course, prior to the post-war rise of the middle-class, there was no middle-class. So, if we take feudalism as an example, if any king could generate wealth then you would say that that king's country is "rich." Was ancient Egypt "rich" or was it mostly a country of slaves forced to collect gold and bury it with a select few powerful individuals?

You, Robot

I think a lot of this would be easier if there was a large robotic or mechanized work-force. The middle-class are indeed useful for advancing and stabilizing a free society. One option, then, is to not have a free society. You could obtain your skilled labor from robots, thus keeping a lower class relatively unskilled and thus uneducated and unempowered. The resources generated by these robots could then be used to appease (free sandwiches) or control (police) the lower classes. These robots could be designed/owned/manufactured by the ruling class, or, the ruling class could have just purchased them from another country.

What does it mean to be wealthy?

If you'll forgive a Frame Challenge, you're trying to define wealth in terms of money and then you want to level out the playing field. That doesn't work.

Wealth must be defined in terms of luxury, influence, and power. In other words, a wealthy person is one who can secure the services of others in circumstances when the majority cannot do the same. After all, what does it mean if everyone in a nation "owns" the same mount of land or "earns" the same amount of money?

Answer: nothing. To quote from Pixar's The Incredibles, "Everyone's special, Dash. ... Which is another way of saying no one is."

Producers, Consumers, Givers, and Takers

A viable society requires everyone to be some percentage of producer, consumer, giver, and taker. This is where a great many people don't get it. Now, because this isn't the place to write whole books, I'm going to really simplify this.¹ Let's consider five classes of people:

• The institutional poor (e.g., the homeless, the chronically ill) are 0% producers, 5% consumers, 0% givers, and 100% takers.² The amount of consumption they represent is negligible while as takers, they absorb vast amounts of resources. Or, perhaps more accurately, vast amounts of resources are consumed on their behalf — whether they benefit from that consumption is dubious. The institutional poor exist because there are always costs that exceed society's capacity to bear. The only stable means of support beyond frugal taxation is through charitable donation, but because there are always cases where people won't or can't benefit from the assistance to rise above this social class, the class will always exist in every society. Members of this group can rarely be elevated to other social classes.³




• The material poor (e.g., the uneducated, disenfranchised, debilitated, disabled) are 20% producers, 40% consumers, 0% givers, and 80% takers. That might be a particularly harsh summary as individual cases vary widely. Nevertheless, this class tends to hold minimum-wage jobs (low productivity) and yet want the benefits of greater affluence (medium consumption). They rarely contribute charitably due to lack of resources and/or time, but often rely on charity to help them overcome rising costs of living. This class is often better assisted to enter more affluent social classes due to judicious social programs that improve education and life skills.




• The middle class are your workers. This is incredibly important! 80% production, 80% consumption, 50% givers, 5% takers. The wealthy of any society depends pretty much exclusively on the existence of this class. Farmers, miners, loggers, bakers, teachers, shop keepers, tailors, etc., etc., etc. Eliminating this class is always a really bad idea because perceived wealth often results in perceived entitlement. It isn't the wealthy classes that need to be expanded, it's this one. To use a phrase from The Scarlet Pimpernell:

Chauvelin:

We shall execute our king instead, sir, and exalt our tailors.

Sir Percy:

More's the pity. Then your tailors will rule the land, and no one will make the clothes. So much for French fashion, and French politics.

• New Wealth are often industry builders (e.g. Steve Jobs). They became wealthy (and stay that way) by producing. 100% producers, 100% consumers, 80% givers, 0% takers. They build businesses, creat jobs, meet demand, and then continue to fund (both as investors and as philanthropists) production. These wealthy people are usually producers, consumers, and givers on a massive scale.




• Old Wealth are often represented by "old money" heirs and heiresses (e.g., Paris Hilton), but not always. They are often 0% producers, 100% consumers, 40% givers, and 10% takers. I give them that 10% for being takers because these folks are frequently looking for loopholes to keep their wealth rather than opportunities to invest it.⁴

Yeah, yeah... but what has this to do with my question?

Here are your problems:

1. You can't equalize people via money. As Dash said, it's "another way of saying no one is [special]." It doesn't matter if everyone has an equal income of $1,000,000 or just $1. By normalizing society you both devalue the money and remove the incentive for workers to work harder and the new wealthy to invest. Here's a key: it's the movement of money through an economy that makes it strong, not the amount of money in it. If no one is willing to make the clothes because everyone is wealthy, there's nowhere for the money to go, so you might as well equalize everyone at $1.




2. You can't lift people with just money, either. This is the problem most people don't understand about arbitrarily raising (or using at all) minimum wages. It may temporarily lift people from the material poor to the middle class, but it does so by inflating the economy and devaluing the education that made the middle class what it is in the first place because you haven't made the material poor better producers. Production/productivity is the key! Not money.




3. Remember that "wealth" isn't about money, it's about luxury, influence, and power. A shop keeper can be those things, so can an industry mogul. But if you measure those things only by money it's impossible for the shop keeper and the industry mogul to have the same amount of money — or you've reduced the mogul to a shop keeper.

So, the easy answer to your question is "no." You can't reduce or eliminate the middle class because those are the people doing the vast majority of producing in any country. If you try to make them wealthy, what you'll do is devalue the money such that it's not worth anything, thereby reducing the wealthy to the middle or material poor classes.

So, look at wealth another way

It is my recommendation that you stop thinking in terms of money and possibly stop thinking in terms of "fairness" or "equality." What you need is a society that's egalitarian in that everyone has access to opportunities that allow them to make the most of their abilities. What you want is for everyone to be productive. That's what makes everyone "wealthy."

_{¹ The following list is not meant to be offensive, but a simple (and simplistic) set of descriptions. It could be considered brutal by some. I apologize if it offends. However, if you choose to complain, please help me find a way to express the ideas in an accurate way and not simply a more "politically correct" way. Clarity may not be sacrificed on the altar of vicarious affirmation. Thanks.}

_{² I've little doubt my percentages will cause arguments. No, I don't have citations that back them up. They're my "gut feeling" based on years of economic, community, and pastoral experience. If someone can improve the numbers, let me know. You'll note quickly that there isn't a baseline that "adds up to 100%." Maybe I'm wrong, but I've not found inter-social challenges to ever add up to 100% of anything.}

_{³ It's their children who can be elevated. Once an adult enters this social class it is very, very difficult to lift them out again because there's often a systemic reason for them being in the class: untreatable illness or injury, mental limitation, behavioral institutionalization, etc. People have (nobly and justly) been trying to eliminate this class for... well... forever, with little success. A "just" society continues to make that effort anyway despite the cost, and improves socially by learning how to most efficiently balance cost with opportunity. Examples: educating the public such that more charitably donate to reduce the burden of all or improve healthcare efficiency to cover this non-paying class.}

_{⁴ I loathe this class as much as I admire the "new wealth" class. Just in case I didn't make that clear.}

This looks like a common situation with countries becoming quickly rich on natural resources, like Russia or Arabic oil-rich countries. The question is - for how long the country can prosper without a middle class.

If working class conditions aren't improving (i.e. thee is no viable path to financial independence), its discontent would only grow, and government has to become increasingly oppressive. Providing a plenitude of low-paying jobs or government assistance can help, but only a little.

In longer term, because upper class is unrestricted and country's fortunes aren't likely to grow forever, corruption should turn the country to a less affluent place with social unrest and possible revolution in the making.

Probably not, on several fronts.

Mechanized agriculture is going to be a problem. Mechanized agriculture requires a large technically-savvy infrastructure to develop, manufacture, and support the machinery, and a large transportation infrastructure to distribute the produce. Mechanized agriculture would seem to imply mechanized transportation. None of this is likely in the absence of a middle class. Unless you're going to wave your hands very hard, mechanization doesn't occur when the mechanics are blacksmiths. In order to be efficient, you need common standards to make interchangeable parts, and mass production.

Equally, the presence of a large dole population requires significant bureaucratic resources to administer the distribution of wealth, yet you've postulated a very small public jobs force. And the presence of this dole population implies that the economy as a whole is very productive on a per-capita basis. The agricultural practices are likely to need artificial fertilizer to do this, and this requires more physical and intellectual infrastructure.

@Xplodotron, has two potentials.

Another possibility is a high tech society where distribution of goods is automatic. Think of a totally automated Amazon run by an AI. There is no one to make money collecting goods and reselling them. This pretty much does away with the middle class.

The wealth issue can be handled by how evenly the goods are distributed and where the goods come from.

This will work best if the sources of the goods are 3rd world countries. That way, the wealthy nation can retain its wealth by paying as little as possible for the goods. This is generally what Monaco does with it's labor.

Being a conquering nation is good for its citizens so long as the conquered do not become citizens.