Similarly, Wal mart employees are, for the most part, in the non tradeable sector of the economy. So why are their wage stagnating?

One reason is, as non qualified jobs, anybody can do them. So their stagnant wages reflect the fact that there is harsh competition at the bottom. Some of it comes from workers in the tradeable sector losing their jobs to imports and seeking positions where they can find them. Some of it also comes form immigration, which provides another group of people willing to work for pretty low wages. Another group are all the single parents who have become vulnerable and cannot be choosy in what job they take, because they need to feed their kids and put a roof on them.

Lower classes get squeezed from both sides (immigrants, and middle classes dropping down and putting pressure on their now common wage levels).

Middle classes see some amongst them dropping out (those in industries vulnerable to offshoring or imports. It's a minority, but it's a very visible one), and get nervous. Those that are not in jobs where their work can easily be valued (sales, specialised positions, self employed) feel threatened and are not inclined to fight for their rights. The silent majority then intimidates the rest.

So labout gets cheaper, and capital earns more, relatively speaking. And as Greenspan has deluged us with liquidity, the returns on capital are not great, so the returns on labors become even worse. Society fragments - hey, we're all free to pursue our individual dreams, and loses its ability to defend itself collectively.

You get the "winner takes all" logic in more and more sectors; a return to an increasing concentration of wealth (capital goes to those that already have it), and lots of vulnerable people which are easy to exploit, to scare, and to manipulate - and who are keen to find scapegoats. Pick your choice.

In the long run, we're all dead. John Maynard Keynes