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Fear and Loathing in the Global Middle Class
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The lifting of billions of humans out of poverty is one of the great achievements of our age and should be celebrated. However, this shift at times increases the chances of civil strife and other serious problems. My Brookings and Georgetown colleague (a two-fer!), Raj Desai, assesses the rise of a global middle class and the many risks of instability it brings.
Daniel Byman
***
By 2020, members of the global middle class will outnumber either the rich or the poor around the world. This middle-class prosperity promises to unleash opportunity, innovation, and broader economic growth in the developing world. But without a functioning system of social protection on which middle class individuals can rely, the growth in their numbers also carries significant risks of democratic retreat, conflict, and instability.
According to research from the Brookings Institution, more than half of the planet can now be considered “middle class” or “rich.” It is estimated that some 48 percent of the world’s population earns between $11 and $110 per day in PPP-adjusted dollars—a standard definition of the middle class using absolute (rather than relative) cut-offs—while another 2 percent earns more than $110 per day. According to projections and measures, the middle class will reach 4 billion people worldwide by the end of 2020, and 5.3 billion by 2030. This expansion has been driven by two phenomena: a steep decline in poverty around the world since the 1980s and rising household incomes in Asia.
The graph shows the sharp fall in poverty as well as the steady growth of the middle class since 1965, with projections to 2030. Between 1990 and 2015, the share of the population considered by the World Bank among the “extreme poor” (less than $1.90 per day) fell by almost 75 percent, surpassing the first goal of the UN Millennium Development Goals to slash extreme poverty by half. At the same time, the bulk of middle-class growth occurred in the Asia-Pacific region, driven by China and India, along with Indonesia, the Philippines, and Thailand. By 2030, nearly 9 out of 10 new middle-class consumers will be living in East, South, and Southeast Asia.
There should be reasons to cheer this global “tipping” point. For the first time in recorded history, the majority of the world’s population will not consist of impoverished peasants or workers, but of wage-earners who can afford to buy cell phones, washing machines, and televisions, to go out to restaurants and theaters, and to take vacations with their families.
A growing middle class is supposed to be good for society. Their consumerism is supposed to boost global production of durable goods and make businesses more efficient and innovative in targeting these new customers. The global middle class is also committed to the education of their children. The middle class is more entrepreneurial than either the rich or the poor, and demands more transparency from policymakers and tolerates less corruption. Because the middle class does not owe its wealth to privileges granted by the state, its members are more likely to support protections for property rights, as well as greater access and representation in decision-making. The middle class is more politically engaged than either the rich or poor. A middle class is, therefore, a requirement for stable democracy; one of the most famous phrases in social science history is “no bourgeoisie, no democracy” written in 1966 by the political sociologist Barrington Moore, Jr., arguing that the only democratic route to modernity was through the middle class.
For all these benefits, the world has also observed a recent dark side to the growing global middle class. While middle-class individuals may be more entrepreneurial and civic-minded, they also appear to be more prone to support radicalism, authoritarianism, and political violence. Although the middle class played a major role in democratic transitions in Latin America and East Asia in the 1980s, they have also supported military interventions against democratically-elected leaders in Thailand (2006, 2014), Honduras (2009), and Egypt (2013). In Pakistan, Indonesia, Colombia, and several Arab states, the middle classes appear to support political violence to a greater extent than the rich or poor.
How do we reconcile these two views of the global middle class? One possibility is that rising affluence is producing rising expectations. Individuals with more purchasing power, education, and information can place tremendous pressure on governments that may lack the capacity to meet those expectations. And when rising expectations go unfulfilled, the result can be backlash, declining trust in institutions, and conflicts with other groups.
Another explanation has to do with a slow, widening disconnect between middle-class citizens and their governments.
Take a look at the graph again. Notice that, while the fraction of extreme poor has been falling towards 10 percent, the “vulnerable poor” (those earning above $1.90 per day but less than $11 per day) has been relatively constant over that same period. In fact, since the 1990s, it has actually grown! This shows that the dramatic rise in the middle class is because of “churning” among this vulnerable group. Most of the extreme poor have seen their incomes rise, and over time they have become vulnerable—that is, no longer poor, but still not able to join the ranks of the middle class. Meanwhile, some of those that were considered vulnerable have joined the middle class—but not nearly as many as those members of the extreme poor that have become vulnerably poor.
Meanwhile, some who have risen from vulnerable to the middle class may have fallen back into vulnerability.
In other words, being a new member of the global middle class is a precarious thing. An illness, a recession, an ecological or natural disaster can all plunge new middle-class members back into poverty.
In the West, the growth in the middle class occurred alongside an expansion in a universal social safety net. Social “protection”—the collection of policies designed to reduce poverty and vulnerability by limiting people’s exposure to risk—was used to tamp down radicalization and social upheaval among the industrial workforce and its accompanying political movements—socialist parties and revolutionary communes. In the 1880s, with the support of “bourgeois parties” against social democrats, Bismarck’s government crafted the elements of the modern welfare state: healthcare, disability, and pensions. Similarly, France established free medical assistance and assistance programs for workers in the 1890s. Facing trade union mobilization and electoral threats from the newly-formed Labour Party, the governing Liberals in Britain established worker pensions, unemployment, and health insurance between 1906 and 1911.
By contrast, in most developing nations, social protection tends to be fragmented, temporary, or highly targeted towards specific groups of individuals (mostly the extreme poor), and financed from general budget revenues rather than contributions. As a consequence, the growing middle class has little stake in a system of social assistance from which they have been typically excluded. Brazil’s Bolsa Familia program, which provided small cash transfers to poor families, is widely credited with lifting millions out of poverty in that country. But for the tax-paying middle classes, Bolsa Familia provided no cushion against economic shocks (in fact, the current far-right presidential candidate Jair Bolsonaro once declared Bolsa Familia to be a “crime” against the Brazilian people for how it redistributes money to the underprivileged). Meanwhile rich Brazilians have access to pensions and other programs for salaried professionals.
What this comes down to is that, in many countries, the middle class are left out, despite the fact that many individuals in the middle class are one shock away from becoming poor again.
There is evidence that social protection in today’s developing countries is more limited when compared to today’s advanced economies when they were at similar levels of wealth. There are a number of reasons for this. Greater integration into the global economy has caused developing countries to reduce taxes in order to attract highly-mobile foreign capital. Large portions of the labor force in today’s developing countries work in the informal sector. Labor unions in many developing countries lack the political clout they had in richer countries in the late-19th and early-20th centuries.
According to the International Labour Organization, 80 percent of the developing world’s population has no access to social protection. Little wonder then that, across the developing world, the new middle classes send their children to private schools, use private healthcare, dig their own boreholes for water, and buy their own generators. This middle-class “exit” means there are few demands by the middle classes to improve the public provision of services or the functioning of their government.
A new social contract that connects the emerging middle class to their own governments, as well as to the global economy, will be needed to avoid exacerbating tensions between social classes and to remove barriers to social mobility, while preserving the benefits afforded by globalization and technological change.
Part of this new social contract requires resisting the default preference for targeted benefits. In the 1980s and 1990s, many developing countries shifted away from broad social policies that emphasized universal benefits toward an approach that concentrated public resources on the poorest segments of the population, but which gradually alienated the non-poor in these countries. Abetting this transformation in social policy has been a host of multilateral and bilateral donors that emphasized short-term cost-effectiveness over political support from broader segments of citizens in those countries.
Crafting a social contract for the middle class in developing countries when support for globalization is under stress in advanced economies presents an additional challenge. Without efforts by richer nations to extend the benefits of the global economy to poorer countries, there is a strong risk that politicians in both places will stoke conflict between the middle class and the poor, or between the middle class in emerging economies and those in advanced economies.
The United States and Western Europe have seen some of the consequences of a middle-class revolt against political systems that were perceived to be under-delivering. Whether rising incomes in the developing world creates global opportunities for shared economic growth, or unleashes new forces of division and disorder will depend critically on policies that can gain acceptance and buy-in from the middle class.
30 Comments on "Fear and Loathing in the Global Middle Class"
Jef on Mon, 29th Oct 2018 8:11 am
Replace “middle class” with Cancer wherever it appears in this post and it still sounds accurate.
JuanP on Mon, 29th Oct 2018 8:15 am
Surely the main question is when can we start cooking the jew filth again?
LeviLevensteinthehookednosecunt on Mon, 29th Oct 2018 8:20 am
The poor are too fucked and the rich too happy, who would have guessed the middle class are more of a threat to the blue bloods?
That financial crisis came in handy for us zionist globalists too!
Sissyfuss on Mon, 29th Oct 2018 8:59 am
The increase of income is secondary to the access to resources which denotes a middle class lifestyle. The burgeoning population will exacerbate the dwindling resources that make any level of existence possible. Critical components of the natural world are being diminished in concert with rising incomes and human numbers. The disconnect between the human psyche and the 6th Mass Extinction grows more obvious as the necessary denial becomes more strident.
onlooker on Mon, 29th Oct 2018 9:13 am
But without a functioning Environment the global middle class will disappear as fast as it appeared. And will be just a blip, in ongoing fall of humanity. Now that sounds better
Sixth Extinction on Mon, 29th Oct 2018 9:25 am
Fucking weedy humanzees – hand me the RoundUp..
Cloggie on Mon, 29th Oct 2018 1:33 pm
Goodbye, part 1. The most loyal lapdog of the empire in Europe, the despicable dr. Merkel, is retreating from her post as CDU party leader:
http://m.spiegel.de/politik/deutschland/angela-merkel-und-die-cdu-der-abschied-erster-teil-a-1235740.html
Although she flaims she will be chancellor until the end, many wonder when that end will be, possibly soon.
Cloggie on Mon, 29th Oct 2018 1:40 pm
Live in Dresden: German populism, Thousands show up, every week, for three years now, defending the fatherland against the invasion from the South, enabled by the traitors in Berlin, who listen to George Soros rather than their own population:
http://www.pi-news.net/2018/10/ab-18-45-uhr-pegida-vom-dresdner-altmarkt/
But the tide is turning, Anglo-Zionism is walking on its last legs. The liberation of Europe is near.
I AM THE MOB on Mon, 29th Oct 2018 2:06 pm
Benito Mussolini, founder of Italian Fascism, hanging with his mistress and party members after facing the firing squad. April 28, 1945
https://i.redd.it/7cn4wgxwu5v11.jpg
Antius on Mon, 29th Oct 2018 2:23 pm
Bye bye Mrs Puff! It is unfortunate that the lunatic German Greens seem to be outpacing the AfD.
I certainly won’t miss Zionism. The problem is that populism in Europe does not seem to be reaching the critical mass needed to finally push the old corrupt order out of power. And most people do not understand the awful truth about Jewish manipulation of the media and government and you go to prison in most European countries for trying to tell people the truth about that.
Harquebus on Tue, 30th Oct 2018 2:51 am
The author:
“Raj M. Desai is Associate Professor of International Development at Walsh School of Foreign Service and the Department of Government at Georgetown University, and a Nonresident Senior Fellow at the Brookings Institution. His research focuses on the problems of social policy and economic reform, state fragility, foreign aid, and international development. He was previously a private sector development specialist at the World Bank. He received his Ph.D. and M.A. degrees from Harvard University, where he was a National Science Foundation Fellow, and his B.A. from the University of California, Irvine.”
https://www.lawfareblog.com/contributors/rdesaiguest
We are totally fucked.
Darrell Cloud on Tue, 30th Oct 2018 6:41 am
The explosion of the middle class in China I witnessed first hand in China this summer was something to behold. A billion and a half people want a car and an apartment next to the best schools. When energy constraints implode the dream what are they going to do? Throw their I-phone at the army?
Dredd on Tue, 30th Oct 2018 10:00 am
This may give despots the edge they want (Will The Military Become The Police? – 12).
boney joe on Tue, 30th Oct 2018 8:04 pm
Excellent post on the cops/military, Dredd.
I remember a time in the distant past when the police described themselves as “peace officers”. Now it’s them against us, with us being the enemy. Further, the pentagon program to offload surplus tanks, APCs, and other military equipment onto police departments only serves to reinforce the us against them mindset. Finally, te War Against Drugs has corrupted police. Asset Forfeiture Laws allow the cops to seize your assets simply based on a suspicion of drug dealing, and it’s damn near impossible to recover the money. It’s estimated by Drug Policy Alliance that of the $4.7 BILLION confiscated each year under this law, more than half should be returned but isn’t.
makati1 on Wed, 31st Oct 2018 3:49 am
“Clearly, America is being pushed to the brink of a national nervous breakdown….This breakdown—triggered by polarizing circus politics, media-fed mass hysteria, racism, classism, xenophobia, militarization and militainment (the selling of war and violence as entertainment), a sense of hopelessness and powerlessness in the face of growing government corruption and brutality, and a growing economic divide that has much of the population struggling to get by—is manifesting itself in madness, mayhem and an utter disregard for the very principles and liberties that have kept us out of the clutches of totalitarianism for so long.”
https://www.theburningplatform.com/2018/10/30/america-is-on-the-brink-of-a-nervous-breakdown/#more-186014
“We can disassociate from such violence. We can convince ourselves that we are somehow different from the victims of government abuse. We can continue to spout empty campaign rhetoric about how great America is, despite the evidence to the contrary. We can avoid responsibility for holding the government accountable. We can zip our lips and bind our hands and shut our eyes. In other words, we can continue to exist in a state of denial. Whatever we do or don’t do, it won’t change the facts: the nation is imploding, and our republic is being pushed ever closer to martial law….
The empowerment of the Gestapo, Germany’s secret police, tracked with the rise of the Nazi regime in much the same way that the rise of the American police state corresponds to the decline of freedom in America.
Can the Fourth Reich happen here?
Our government is massively in debt.
Our education system is abysmal.
Our homes provide little protection against government intrusions.
We are no longer a representative republic.
We’ve got the most expensive, least effective health care system in the world
Americans know little to nothing about their rights or how the government is supposed to operate.
Nearly one out of every three American children live in poverty,
We’re no longer innocent until proven guilty.
Parents, no longer viewed as having an inherent right to raise their children as they see fit
Americans have no protection against police abuse.”
And on and on. Slip slidin’ into the “Forth Reich” LOL
Davy on Wed, 31st Oct 2018 4:43 am
“Rickards: China’s Debt Bomb Is Ready To Explode”
https://tinyurl.com/yazgr8pj
“The great Chinese growth slowdown has been proceeding in stages for the past two years. The reason is simple. Much of China’s “growth” (about 25% of the total) has consisted of wasted infrastructure investment in ghost cities and white elephant transportation infrastructure. That investment was financed with debt that now cannot be repaid. This was fine for creating short-term jobs and providing business to cement, glass and steel vendors, but it was not a sustainable model since the infrastructure either was not used at all or did not generate sufficient revenue. China’s future success depends on high-value-added technology and increased consumption. But shifting to intellectual property and the consumer means slowing down on infrastructure, which will slow the economy. In turn, that means exposing the bad debt for what it is, which risks a financial and liquidity crisis. China started to do this last year but quickly turned tail when the economy slowed. Now the economy has slowed so much that markets are collapsing. But doesn’t China have over $1 trillion of reserves to prop up its financial system? On paper, that’s true. But in reality, China is “short” U.S. dollars. The Chinese may have $1.4 trillion of U.S. Treasury securities in its reserve position, but they need those assets possibly to bail out their banking system or defend the yuan. Meanwhile, the Chinese banking sector, which in many ways is an extension of the state, owes $318 billion in U.S. dollar-denominated deposits of commercial paper.”
“This is all part of a global “dollar shortage” attributable to Fed tightening, both in the forms of higher rates but also a reduction in base money. A dollar shortage seems implausible in a world where the Fed printed $4.4 trillion. But while the Fed was printing, the world borrowed over $70 trillion (on top of prior loans), so the dollar shortage is real. The math is inescapable. So the Chinese debt bomb that has been a long time in the making is finally getting ready to explode. The economy is slowing, debt is exploding and the trade war with Trump has hurt China’s exports needed to earn dollars to pay the debts. The defaults are beginning to pile up. Several large corporations and regional governments have defaulted recently.”
“With every passing day, a Chinese financial collapse draws closer. The rest of the world will not escape the consequences. When the crisis strikes in full force, possibly in 2019, the rest of the world will not be spared.”
Davy on Wed, 31st Oct 2018 4:50 am
“Venezuela Officially Launches Sale Of Controversial Petro Coin For Fiat, Crypto”
https://tinyurl.com/ycpxzykf
“Venezuela’s controversial state-owned cryptocurrency the Petro is now available for purchase for fiat and crypto, Venezuelan Economy Department announced on Twitter Monday, Oct. 29.”
Davy on Wed, 31st Oct 2018 5:23 am
The 2 posts above are fake. I fully support the Venezuelan people in their heroic struggle against their oppressors and tormentors, the United States of America. I stand with, and beside my Valenzuela brothers and sisters in their hour of need. I urge all my fellow Americans to do the same.
Makati1 on Wed, 31st Oct 2018 5:26 am
JuanP, please stop this childish behavior. When you take an identity this behavior spreads and is ruining time others spend here.
makati1 on Wed, 31st Oct 2018 5:39 am
Above post is by the Davy, the site asshole, as we all know. Not my style. I am now offline until tomorrow. Any new posts in my name is Davy.
JuanP on Wed, 31st Oct 2018 5:47 am
Mak, I will make sure Davy pays for this. I intend to keep this up for however long it takes.
I AM THE MOB on Wed, 31st Oct 2018 5:59 am
Juan you are a stupid wetback pervert from Honduras..Why don’t you leave
Cloggie on Wed, 31st Oct 2018 6:40 am
“Mak, I will make sure Davy pays for this. I intend to keep this up for however long it takes.”
Juan & mak, it is Mob doing this, not davy.
Cloggie on Wed, 31st Oct 2018 6:43 am
The mobster has lost the debate, his ethnic identity exposed, so all that remains for him is to blow up the forum.
It’s his way of admitting defeat.
#SamsomOption
I AM THE MOB on Wed, 31st Oct 2018 7:19 am
Mak, you are offline to change your dirty diaper.
I AM THE MOB on Wed, 31st Oct 2018 7:22 am
Clogg, wetback Juan is doing this because Davy says so. LOL all of you are stupid nutters.
JuanP on Wed, 31st Oct 2018 8:44 am
“Clogg, wetback Juan is doing this because Davy says so”
I am not Hispanic, dumbass. My IQ is very high and enough I was able to get my GED. I am not here to discuss the issues becuse most of this is old news. I am here to fuck with the exceptionalist. I enjoy this and I really don’t care about the collateral damage to those of you interested in the topics. Most of you mean nothing to me anyway but not my enemies. They are my play toys and I will conibue this harassment until the exceptionalist is gone.
GregT on Wed, 31st Oct 2018 9:18 am
Juan and Mak, I am having some personal issues at home now so I am not able to contribute to the effort. I hoping to patch things up soon. I will be back and ready to deal with you know who!
Anonymouse1 on Wed, 31st Oct 2018 9:27 am
That is not Greg. He wouldn’t say that.
Пожалуйста, ударьте антиамериканскую собаку, которую я сделал из гранита on Wed, 31st Oct 2018 10:06 am
gregt did u break up with ur PhD gf? sorry about that bro. best of luck finding a new one. i don’t score so don’t feel bad