The Challenged U.S. Middle Class: An Opportunity for Latin America’s Youth?

Last week and this week, both the Republican and Democratic parties are using their political conventions to wax poetic on the importance of protecting America’s middle class.  They are right to focus on the middle class and that the challenges it faces in the U.S. are as great as the opportunity that it presents to Latin America.

Following the Second World War, the United States championed free trade and global competition with renewed impetus. It invited the rest of the world to a global order where each country could exploit its own competitive advantages. The U.S. clearly sought to exploit its own unfair advantage: Major Japanese cities had been nuked, Europe was in ruins, and much of the rest of the world was underdeveloped. Meanwhile, although America lost many soldiers, U.S. territories were mostly untouched by the ravages of the war.

Thus, the U.S. knew with reasonable certainty that it could win the economic battles it picked in this new world order. Winning these battles helped to create a legendary middle class that emerged in the 1950’s and 1960’s and helped to fuel a renewed American Dream. This Dream offered anyone (regardless of race, age, religion, etc.) who worked hard and played by the rules the chance to obtain their fair share of the economic opportunities and upward mobility.

The American Middle-Class of the 50’s and 60’s embodied the American Dream.

America helped itself to win these economic battles promoting innovation to become more competitive and efficient. This productivity increase reinforced the economics gain and prosperity of America. During the Cold War, public investments in R&D focused on national goals like defense and the “Space Race,” which spread investments in scientific discoveries and technological innovations across universities, think tanks, and the industrial complex. Universities held the key or spreading this wealth to all levels of the rungs of the socio-economic ladder. Furthermore, the same universities were a de-facto immigration agent for aspiring student-immigrants of the world. These universities selected the world’s best and brightest across the fields of science, engineering, and others, enabling the world’s intellectual elites to become a part of that same American Dream.

However, as is often the case, the hubris of success frequently sows the seeds for future challenges. In the decades that followed at the close of the millennium and at the beginning of the new, two major trends in U.S. became apparent:

(a)  Later generations of Americans were born into unprecedented wealth, distanced from the sacrifices of their parents and grandparents. The sweat and risks borne by their blue collar (and often immigrant) predecessors became a fainting memory. These later generations became increasingly disassociated between cause (hard work) and effect (wealth). As a result, many of them developed a sense of entitlement and increasingly felt a God-given right to become automatically admitted into a life of prosperity and wealth. This sense of entitlement has led to a culture of instant gratification and an attitude of “spending it before earning it.”

(b)  Related to this phenomenon, America’s infrastructure (bridges, highways, etc.) became tired, its politicians lost courage, salaries became stagnant, the cost of college education became unreachable well beyond the means of the middle class[1], and higher education  was no longer a passport to ever-higher pay.

Meanwhile, related to the above, two trends became apparent South of the Border.

(a)  The same technological advances that the U.S. led became the source of democratization of information, knowledge, and access to the global markets enabling other countries to compete ferociously against the U.S. Meanwhile, human capital became the fundamental cornerstone of competitiveness in the new post-knowledge society to produce the innovations that the (developed and developing) world needs. This phenomenon created an unprecedented challenge, and opportunity, for emerging countries to level the playing field and compete.

(b)  Globalization, enabled by nearly free communication and low-cost air travel, has catapulted emerging countries onto the global scene. These countries are benefitting from high commodity prices and their trend towards participating in higher value added economic activities. These countries have accelerated their move to higher value-added goods and services, such as hosting outsourcing companies that previously manufactured goods in America, or hosting offshore firms that provide services or software once built in America; or even further climbing the innovation pyramid to create an entire new products or services (including R&D) that was previously made in the developed world.

Into this mix, America seems to be getting more unequal, the middle class seems to be broadly affected by the outsourcing and offshoring of jobs, and the lower ranks wages are contained by the influx of low-skilled labor from South of the Border. Meanwhile, the same technological advances that brought the aforementioned era of unprecedented prosperity to the United States are now enabling countries of the developing world to create a foundation for prosperity.

A Values-Driven Middle Class Renaissance

Latin America has a youth advantage, at least reflected by the numbers. Latin America represents over 70% of the youth [2] of the Western Hemisphere. But numbers alone do not tell the whole story. Youth have to be grounded in ethical principles/values and develop critical thinking skills that enable them to become change agents and effective risk-takers. Furthermore, they need to have a solid background in science, engineering, technology and/or business to enable them to innovate and compete with others on a global scale.

The opportunity for Latin American youth to accelerate the development of a middle class is threatened by the very technology that makes this new prosperity possible. The Superior General of the Jesuit order, Father Adolfo Nicolás S.J., has labeled one such threat the “globalization of superficiality,”[3] and describes it this way:

“When one is overwhelmed with such a dizzying pluralism of choices and values and beliefs and visions of life, then one can so easily slip into the lazy superficiality of relativism or mere tolerance of others and their views, rather than engaging in the hard work of forming communities of dialogue in the search of truth and understanding.  It is easier to do as one is told than to study, to pray, to risk, or to discern a choice.”

Technology itself appears to be sowing the seeds and undermining the prospects for America’s next great middle class. For example, the global media, enabled by satellites and the Internet to reach every corner of the developing world, communicates values of unreachable consumption aspirations. These aspirations are unattainable for the youth of the developing world, because in the local context: (1) no reasonable amount of work or luck could catapult the aspiring consumers to the required level of wealth, and (2) because many choose to not participate while others may be tempted to engage in unlawful or unethical activities that promise quick money.

However, the “globalization of superficiality” is omnipresent and offers the possibility that this opportunity will be squandered, since Latin American youth have a tendency to want to emulate their counterparts in the U.S.

Until my next posting – Carlos B.


[1] Student loans have surpassed recently the ultimate debt benchmark in America by overtaking credit card debt. However, student loans do not record other loans that the parents or relative may have taken or assist the student to finance the college education, making the student number over conservative.
[2] Defined as those who are 24 years old and under. The youth population of the Western Hemisphere is 460MM.
[3] Nicolás, Adolfo, “Depth, Universality, and Learned Ministry: Challenges to Jesuit Higher Education Today.”  Remarks for “Networking Jesuit Higher Education: Shaping the Future for a Humane, Just, Sustainable Globe.”  Mexico City.  23 April 2010.  Available online: http://www.sjweb.info/documents/ansj/100423_Mexico%20City_Higher%20Education%20Today_ENG.pdf.

About Carlos S. Baradello

Investor, thought leader, and advisor in areas of corporate innovation, born global entrepreneurship and global scaling.
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