Your Parents Were Middle Class Because Of The Soviet Union

I was born on a cold, windy, night in December of 1979.

My father was overwhelmed with joy to bring home his first born son for the holidays, but as with all new parents, he was anxious about the financial obligations of raising a new family.

He had just been hired to teach business classes at a NYC community college, receiving a full-time tenured position right after his first interview.  After he was hired my mother resigned from her job in Manhattan, and she planned on being a stay at home mother until my brother (born in 1982), and I were in grade school.

As my father sat down at the dining room table and started to review his financials, he had to make a tough decision between 3 investment options:

A) 5 year CD in a bank paying 12%

B) Mutual funds (on Jan 2, 1980, the Dow Jones closed at 847 and paid a average dividend of 6%)

C) A large home in Brooklyn with a driveway for $69,000. (NYC median income was @18k)

After some quick deliberation, my 32-year-old father decided on choice (B) AND choice (C). With a stay at home wife and a new-born infant, my father was able to purchase a large home in Brooklyn, a Ford Escort, and his union matched his mutual fund 401k contributions up to 10% annually.

So how was my father and other families like ours able to do it?  How can a  first year college professor purchase a home with two kids, and a stay at home wife?

BECAUSE OF THE SOVIET UNION.

Let’s be honest, my father didn’t have any competition. From the end of WWII to the end of the Cold War, The United States did not have any strong foreign competition, and we can thank the Soviet Union for that.

The Soviet Union, and the Iron Curtain that it cast over Europe, was the best thing that ever could happen to the United States. With little foreign competition, many U.S companies were able to form strong labor unions, the government could apply trade protections, and we also had an embargo with the entire Soviet Bloc including China, Russia, Ukraine, and half of Germany. My father’s main competition was mostly with other European-Americans living in the United States.

So When Did Everything Change?

In late 1989 the Berlin Wall started to come down, and the Soviet Union was disbanded in late 1991. Growing up in Brooklyn there was always some Chinese students in my classes, but in the mid 1990’s is when we started to see a lot of Russians, Ukrainian’s, and Pollack’s immigrate to NYC. My first impression was that they were mostly very poor, but extremely educated, and now almost 20 years later they have been fully integrated into American society.

When your father went for an interview in the late 1970’s or early 80’s, he was competing against “Vinny the Italian”, “Manny the Greek”, and “Frank from Pittsburgh”. Today if you apply for a job teaching business at City University in New York, you are interviewing against 15 Russians with kick ass GPA’s, your IT department at work is run by 35 Indians, and 95 percent of the items you that you own in your house are made in China.

My father had me around the same age that I am now, so let’s look at my 3 investment options:

A) 5 Year CD paying 1.5%

B) Mutual Funds: Dow Jones at 14,000 (will it shoot to 150,000 ? ) with an average dividend of 1.4%

C) Purchase my parent’s house for $890,000 (medium NYC income is$56K)

America has changed.  Job security doesn’t exist,  and a two income household has become a 3 or 4 income household.  That includes either two working adults with two working grandparents, or two working adults with grandma and her social security check. The middle class is gone in America and it isn’t coming back anytime soon. Outside of a major world war, the United States middle class will barely exist for the next several generations.

So what are the children of middle class European-American’s going to do?

A) Work harder

B) Find a middle class society outside of the U.S.

But now we have the American government paying out more in benefits then it collects in revenue. This obviously creates a big economic problem. I’ve always planned to live in the United States for my entire life , but if the living conditions start to quickly deteriorate I will sell my possessions and get on the first boat to Asia.

With two major recessions since 2001, and with the U.S. on the brink of another major one, how much more can the American middle class take?

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