Middle Class Trajectories: United States, India and Turkey

By: Alison Hayes, Ranjit Jose, Andrea Peters

For Enrique Delamonica and Alberto Minujin

Practicum in International Affairs Spring 2007

Table of Contents

Introduction…………………………………………………………………Page 2 Theoretical Framework……………………………………………………...Page 4 The United States: Definitions of the Middle Class……………………………………..Page 6 Historical Background of the Middle Class…………………………Page 9 Current Middle Class Trends………………………………………..Page 12 India: Definitions of the Middle Class……………………………………..Page 22 Historical Background of the Middle Class………………………....Page 24 Current Middle Class Trends………………………………………..Page 29 Turkey: Definitions of the Middle Class…………………………………….. Page 33 Historical Background of the Middle Class………………………… Page 35 Current Middle Class Trends……………………………………….. Page 38 Conclusion……………………………………………………………………Page 41 Data/Gini Coefficient Charts…………………………………………………Page 46 Bibliography………………………………………………………………….Page 47 Appendices: Literature Review U.S.A……………………………………………………Page 51 Literature Review India……………………………………………………..Page 56 Literature Review Turkey………………………………………………….. Page 59 Grant Proposal………………………………………………………………Page 62

2 Introduction:

In the age of global market reform and the liberalization of economies in the United States, India and Turkey there is evidence of a rising inequality among the haves and the have-nots in these countries. While the middle class in India is increasing, profiting largely from increased employment options due to greater access to world markets, their counterparts in the United

States appear to be diminishing, partially due to businesses capitalizing on cheaper labor that a world market offers. In contrast, the middle class in Turkey has gone largely unnoticed while the growing disparity between the wealthy and the poor continues at sub-Saharan levels.

Changing employment patterns have profound effects on social structure and attitudes about class and inequality that beg further investigation. As the middle class in India continues to grow, so does the divide between the middle and the lower classes. Since the introduction of neo- liberal economic reforms in the country, the middle class is able to avail of services and employment while the working class continues to struggle with rising prices and fewer opportunities for education and jobs. Access to goods and services on a much wider scale has contributed to the decreased demand for locally produced commodities in an increasingly competitive market. It is interesting to note at this juncture, that the growth of the middle class in

India could potentially be seen as a growth in prosperity as opposed to a demographic growth, however, included in this discussion will be an analysis of population growth.

The changes occurring in employment patterns in the United States have shown to have negative effects on the livelihood of many who comprise the middle sections of society. Previously held jobs such as data-entry and telephone call center operators, and lower skilled jobs such as

3 manufacturing, have now been channeled abroad, leaving a vacuum of opportunity for low to middle skilled American workers and the deterioration of the opportunities available. With social safety nets disappearing, rising costs of living and changing family formation, the middle class is working harder than ever while reaping the fewest rewards.

Employment patterns within Turkey have also undergone tremendous changes over the course of the past few decades. These changes are more closely linked with political changes and economic policy changes intended to reflect a western approach, such as privatization and other neo liberal techniques. Many of the policy changes have aided in the growth of the middle class, but the obstacles of joining the middle class are numerous. As the rural populations migrate to urban centers in pursuit of better living and working conditions, they discover that they are unable to attain the social upward mobility that they had hoped because of a lack of educational opportunities. Additionally, family networks are dissolving due to migration; this, compounded with Islamic beliefs regarding women in the work force, has shown to confine family income.

Our research focuses on employment growth or decline within India, the United States and

Turkey and how these changes affect the way in which the middle class is discussed. First, we situate our analyses in the theoretical frameworks of the class postulated by philosophers

Aristotle and Weber. Since no standard definition of middle class exists, we draw from philosophical theories, academic journals, and economic data to bolster an understanding of middle class characterization, and clarify how that characterization has altered in recent years.

Second, we will explain the similarities and differences, economically and socially, that exemplify the middle classes in India, the United States and Turkey. Our analyses will be

4 conducted through interviews with scholars in the field, oral reports, and a review of the published literature. Lastly, we hope to further the discussion and conclude with questions as to the foreseeable implications of changes to the middle class in India, the United States and

Turkey. Compared to recent U.S. trends, our research leads us to speculate on the sustainability of the middle class in India and ask, “At current economic growth rates, will it too eventually shrink?” In Turkey, will emulating American economic policies lead to a growing and stable middle class or will growth disparities conclude that western economic policies are not the answer.

Theoretical Framework:

The issue of the middle class has long provoked academic inquiry. In constructing a socio historical perspective of how the middle classes have been though of, we look to two of the most prominent thinkers, Aristotle and Max Weber. Aristotle posited that the middle class, with political prowess, legal democratic values and processes would be able t o act as a mediating class between the rich and the poor.1

Given the existence of a middle class in India in the decades preceding colonialism, it is clear that the existence of this significant majority would apply in contemporary political, social and economic arguments. With colonial rule came a merging of the established divisions of society with the upper and middle classes becoming a large middle class with political, social and economic prowess far greater than the lower classes. The existence of a middle class comprised of the merchants, landlords and craftsman entailed significant political control, which led to the

1 Glassman, p.317.

5 formation of a strong democracy as seen in India today. Given the growing numbers of Indians gaining prosperity and ascending to the middle class, political action among this strata of society is also on the rise, spawned by the new means of production available, which resonates with

Aristotle’s speculations postulated decades ago.

More recently, Max Weber, is often referred to when attempting to seek an understanding of the middle class. Type of employment and payment was very important to Weber. A key concept in

Weberian theory is his break with Marx, noting that the middle class relates to the production process not as laborers or owners of capital, but as consumers in the marketplace. Members of this class are usually engaged in “tertiary” labor such as teachers, retail entrepreneurs, professionals, bureaucrats, and independent artisans, all maintaining a step away from the production process.2 For Weber, there was a marked difference in remuneration between the classes. Where as workers earn wages, and capitalists earn dividends, the middle classes earn salaries, and therefore occupy a middle ground and keep a moral distance between laboring and wealth accumulation.3

Another important Weberian insight into the nature of the middle class addresses competition within the middle class. He believed that various lifestyles, cultural formations and status claims compete within the middle class, because of their uncertain relationship to the productive economy. Weber felt that the middle classes lived in a relatively unstable socioeconomic place, and that this instability is reflected in the constantly challenged, highly materialistic, and anxious character of middle-class lives. Always marketing their skills, services, and accomplishments in

2 Leichty, p.20. 3 Ibid, p.21.

6 the capitalist free market, members must ceaselessly promote and justify their self-worth in the face of market competition.4 The prediction Weber provides for the future is bleak. He warned of an “iron cage” of bureaucracy closing around us, he forecasted a future world run by soulless bureaucrats and technocrats, from which we would retreat into our own private world, “without heart”.5

United States: Definitions of the Middle Class

Attitudes about the middle class in the United States are shaped by a myriad of economic, cultural, and social factors, making this class difficult to fixedly define. In the United States this is an especially vexing situation as the idea of a vigorous middle class is as American as apple pie and baseball, moreover, the concept of the American middle class has long shaped a range of things from public policy to political speeches. A modern social theorist, C. Wright Mills, makes a distinction between “old” middle classes in the United States, categorizing them as small businessmen, shopkeepers, farmers who where independent and had survived the depression, and a “new” middle class, which he referred to as “white collar”.6 He saw this class as salaried, conformist, and bureaucratically entrapped, a spectrum with big business and stock market financiers at the top, middle managers, government bureaucrats, technocrats, professionals and service workers in the middle, and office workers at the lower end.7

4 Ibid. 5 Glassman, Ronald (1997), p. 93. 6 Mills, p. 63. 7 Glassman, Ibid, p.73.

7 Writing in the 1950’s he describes white collar as not being adequately defined by any specific skill, function, class, status, or power. This class is generally in the middle ranges of these dimensions and on every descriptive quality.8 According to Mills the defining characteristics of the middle class in the United States is the inability to clearly define any specific characteristics.

He cautions that in the future the middle class may become locked into a status hierarchy of a giant bureaucracy, unable to exert any independent, democratic influence on society.9 According to an article in the weekend section of the financial times, being middle class in the United States is something that almost everyone thinks they are, or at least says they are, even the plutocrats.

Manual laborers can even claim the label, at least those who can rely on company provided benefits.10

When comparing middle class to lower class, certain attitudes become clearer. Viewed in a system, a class is more than systematic information; it is comprised of beliefs, views, and expectations about those occupying that class and in the system. Barbara Ehrenreich, a prominent social critic and author, explains the moral differences that middle classes feel compared to lower classes. She explains that generally, middle class Americans have been brought up on the aged Protestant expectation that hard work will be rewarded with material comfort and financial security. She contends that society has never though this for the working class, or the wageworker. The working class is seen toiling away earning wages disproportionate to the effort required, and now, scholars agree that this is increasingly the case of the educated

8 Mills, p. 75. 9Glassman, (1995), p.317 10 Luce, Edward, Vincent Boland, Jo Johnson, Simon Kuper, and Andrew Ward, “Stuck in the Middle,” Financial Times, Weekend Magazine, p. 18. Dec. 16.

8 middle class.11 She explains the commonly held perception that blue-collar problems can be dismissed as a series of bad choices, of not getting a college degree, not postponing child- bearing, or not having affluent parents.12

“…try investigating people like me who didn’t have babies in high school, who made

good grades, who work hard and don’t kiss a lot of ass and instead of getting promoted

or paid fairly must regress to working for $7/hr, having their student loans in perpetual

deferment, living at home with their parents, and generally exist in debt which they feel

they can never get out of.”13

From descriptions, two central themes become clear. First, the middle class in America is a complex, changing, interpretable, and very interesting group of people who are currently finding themselves in more and more trouble. Second, employment plays a large role in determining class. To explore these issues social aspects of middle class will be examined with an employment focus, comparing the attitudes, roles, and activities of the relatively large and prosperous middle class in the 1950’s to the current situation of the declining middle class today.

For the purpose of the analyses we analyze middle-income earners, single or married individuals that make from $18,500-$88,030, pre-tax, a year.14 These figures were provided by the Center

For American Progress, which is a nonpartisan research and educational institution, and defines this group as the typical American family, located in the middle distribution. How is it that the

American dream is dissolving into current disparities, and can it reappear?

11 Ehrenreich, p. 216. 12 Ehrenreich,p. 2. 13 Ehrenreich,p. 2. 14 Center For American Progress, “New Study: Middle Class In Turmoil” Sept 28, 2006. http://www.americanprogress.org/pressroom/releases/2006/09/middleclassturmoil.html.

9

United States: Historical Background

One can paint a rosy picture of the middle class in America during the early 1950s. Policies formulated during the New Deal and after the Second World War and a powerful organized labor presence raised the rungs of the economic ladder and put them very close together. The idea of the “American Dream” was conceived and was comprised of a few powerful cultural symbols, a stable and long lasting job at a corporation, a home, and a television. Economic historians refer to this period as “The Great Compression”, as the rich got relatively poorer and workers got considerably richer.15 During this time the government subsidized war and civilian industries, and granted veteran benefits like mortgage loans, and educational loans.

One of the veteran benefits that had the most impact on social and economic mobility was the

Serviceman’s Readjustment Act of 1944, or the G.I. Bill. Still in place today but less expansive, the sheer number of vets returning from war, some 7.8 million, were really able to benefit themselves, their families, and the economy overall. Beneficiaries could attend the education institution of their choice, as long as they were admitted under standard procedures as the bill covered tuition, and a monthly stipend for up to four years. 28% of veterans attended colleges and universities, 45 % went to vocational training schools, and the rest were provided on the job training.16 Before the war, higher education had primarily been a privilege of sons of the elite.

Though this bill a large number of Jews, Catholics, African Americans, immigrants and children of immigrants were able to break through traditional class determinants of higher education, and

15 Krugman, Paul, “The Great Wealth Transfer.” Rolling Stone Jan. 2007. 16 Hacker et al, p. 183.

10 obtain the knowledge and skills that they needed. Schools were flooded with veterans, making up around half of the student population.

Big business was able to gain prominence in society. In 1969, GM was the largest corporation, aside from AT&T, which enjoyed a government guaranteed monopoly on phone service. GM paid its shop floor production workers $8,000 dollars then, which would be more than $45,000 today. A typical worker also received excellent health and retirement benefits. Not only was this beneficial to GM employees, but it raised the standard in other industries. GM paid its chief executive a salary of $795,000, approximately $4.2 million adjusted to current inflation, which is quite a bit, but seems small when compared to trends today. If considering an annual income of

$10,000 dollars as middle class, 9% of families fit the definition in the 1940s, by the 1960’s,

30% did.17 The importance of education was growing as the 1960’s was the first time in U.S. history that a majority of high-school aged people graduated from high school.

Big labor contributed to middle class prosperity. The war years saw a heroic effort by factory workers in producing materials, done with full cooperation by the unions. In 1945, one in three non-agriculture workers belonged to a union.18 In return, the government granted union members excellent wages and overtime pay, as there were powerful union leaders who were active in politics and policy formation. During this era, union workers, blue collar wage earners, were living at the same standard as salary earners, or the middle class, buying homes, cars, and

17 Shultz, Stanley, and William Tishler, “American History 102: Civil War to the Present”, Lecture 24, http://history.wisc.edu/hist102/lectures.lecture24.html. 18 Krugman, p. 3.

11 televisions. Many began to move to locations outside of cities normally reserved for the wealthy, the suburbs.

Technology spawned a new segment of the middle class. High technology industrial systems required middle managers, technocrats in the form of engineers, scientists, biologists, mathematicians, and chemists. Some saw these professions as upper middle class, while a lower middle class segment formed made up of white collar workers in the service industry, and a declining number of blue collar workers. There was also an underclass of working poor and unemployed poor.19

In 1947 the term “nuclear family” was coined to describe families in the west. As opposed to extended family, a nuclear family consisted of a mother a father and children. These families were considered more mobile than large extended families, more able to relocate when jobs moved. Usually there was one income earner; a head of household, and fixed costs like a home mortgage and health insurance were low, childcare was almost unnecessary. When families fell on hard times they would borrow, tap into savings, or send another adult into the work force.

Though times were prosperous for many, social inequalities were prevalent during the 1950s.

Since then, great strides have been made in increasing opportunities for minorities and women.

In the last few decades we have seen many of these components weaken, and the rungs in the ladder become much farther apart. Once a strong, optimistic force, the middle class in America is undergoing a dramatic change, losing income, political voice, and government support. What

19 Glassman, (1995).

12 implications does this have on societies that emulated the ideals of the prosperous middle class in the United States?

United States: Current Middle Class Trends

Unfortunately, the picture of the middle class in the United States can no longer be described as rosy. Starting around 1973, income inequality began to rise. Sweeping trends in the work place in the last 30 years like deregulation and deindustrialization have meant a loss of employee benefits and jobs. Increased foreign competition, disbanding of labor unions, and a shift of one breadwinner per household to two, have all pushed Americas workers towards greater financial insecurity, which effects important quality of life factors like health and education. Sometimes referred to as the wealth gap, as the rich get richer and the poor get poorer, many fear a collapse of the middle in American society.

Today, though national economic growth grows steadily, middle class family incomes are not any higher than they were in the 1970s, when adjusted for inflation. However, living costs are much higher in terms of big-ticket items like home mortgages, college educations, and health insurance. Families are facing much more risk of financial ruin as employment becomes more unstable and employer supplied benefits fade. As of 2003, 44.9% of the United States population lived with an income between $25,000 and $75, 000, decreasing 1.2 percentage points since

2000. The percentage of people living with an income of $25,000 was at 29%, up 1.5 percentage

13 points since 2000.20 For the middle sections of society the rungs of the economic ladder are slipping further and further apart.

Beginning in the late 1970s, there was a significant change in the direction of policy. Policy makers feared initiatives like tax breaks and public programs were too excessive and a burden on the economy. Policy makers thought that this inefficiency discouraged higher-income

Americans to work and invest, and encouraged the government to cut back its role in protecting

Americans against economic loss. Businesses began to abandon and restructure private benefits like health insurance and pensions from their balance sheets, onto workers shoulders. New workers were not offered old-style pension plans, but were offered 401(k)s or other define contribution plans that allowed them to save for retirement without any guarantee that these plans would be sufficient in old age.

Workers are simply supported less than they used to be. Once seen as heroic saviors of the economy, they have evolved into a disposable factor of production. Employees became vulnerable to greedy corporate strategies as the government in the late 70s and early 80s supported anti-union policies and practices. Experts point to two main reasons for the decline of unions. First, there was a shift in employment form the South and West, away from the historically heavy unionized North and Midwest, which had the effect of pulling union workers out of their ranks. Second, there was a shift in employment from traditional blue-collar industries into service industries and white-collar jobs had the same effect on unions. These two developments can account for about half of the decline in union membership; in fact the

20 “Update on Kerry’s ‘Shrinking Middle Class’-Still Shrinking in 2003”, Annenberg Public Policy Center of the University of Pensylvania, Sept. 1, 2004.

14 percentage decline of union membership was generally greater in the most unionized sectors, due to workers perception of the effectiveness of unions. Beginning in the 1960s employers began resisting union organizing, and began to engage in unfair labor practices. By the 1980’s overt anti union behavior became socially and politically acceptable, referred to as, “the standard mode of operation in U.S. industry.”21 Today, compared to the almost 30% of the workforce in the

1950s, less than 1 in 11 workers belongs to a union and the importance of a strong, organized, politically active voice for workers is reemerging.

It has been a generation since we have seen big businesses provide white collar workers a job for life, yet the corporation is the dominant unit of the global economy, and the form of business that our lives depend on day to day. Yet, instead of employee friendly GM being the largest in the

United States, it has been replaced by a profits driven Wal-Mart with 1.3 million employees, and the proof is in the salary. On average, a typical full-time, nonsupervisory Wal-Mart employee is paid $9.38 an hour, or $18,000 a year, pre-tax. Adjusted to 1969 terms this would be about

$3,600. The company is notorious for how few employees receive benefits, and the stinginess of the scarce benefits that few receive.22

Cynthia Murray, who has worked at a Wal-Mart store in Laurel, Md., for six years,

suffers from asthma, but goes to see a doctor only when she suffers a bad attack. Murray

is 50 years old, makes $9.47 an hour, and says that the Wal-Mart plan that costs $23 a

month has a $1,000 deductible, which makes it too expensive for her to use. Another plan

subtracts $100 from her paycheck every two weeks. "I don't think anybody working at

21 Strobel, p, 67. 22 Krugman. Wealth Transfer.

15 Wal-Mart has that kind of money," says Murray. "All I'm asking from Wal-Mart is a fair

share."23

Middle class Americans have to weather the storm of globalization. Cross border financial flows have risen dramatically and have encouraged companies to shift operations, and jobs, overseas.

Referred to as downsizing, right sizing, smart sizing, or restructuring, all terms mean outsourcing white and blue-collar work to cheaper labor markets abroad. In the United States manufacturing jobs are in steep decline, replaced by employment in the knowledge and service industries, which have characteristic pay and benefit differentials, and usually, limited job security.24 Though job stability is a hotly debated topic amongst economists, the issue of inequality is not. It is clear that in the last few years, highly educated workers have been able to pull further and further ahead, while the less educated are falling further behind. Adding dimension to the inequality issue is that inequality is rising even among skilled workers, and between the skilled and unskilled.

Moreover, it is the previously most insulated white-collar workers who are seeing the greatest erosion in their workplace.

Barbara Ehrenreich explains that there are deep social effects of deteriorating employment possibilities. When skilled and experienced people routinely find their skills unwanted and their life experience disregarded then something has happened that cuts deeply into the social contract that holds us together. Ehrenreich describes white-collar unemployment as, “a rude finger in the face of the ‘American Dream.’”25 More and more people, from displaced homemakers to

23 Gogio, Palavi, “Wal-Mart Foes Hop a Bandwagon”, Business Week: Top News, Aug. 2, 2006. 24 Hacker, (2006),p. 64. 25 Ehrenreich,p. 2

16 downsized executives and now searching for jobs at mature ages that were once reserved for restful retirements.

Social and cultural norms have adapted to the need for bolstering family income. Since the 1960s women have been flocking into the workforce and now, more than 60% of married couples work equal hours.26 Though median income has grown modestly in the last generation, when adjusted for inflation, married couple families have seen stronger growth. The comparison reveals that rise in income is not due to higher salaries, but that women are working more hours outside the home than they once did. Two income earner households are challenging for families with young children, as it is uncommon to have paid leave to have a child, or time off to care for sick children or elderly parents.27 Divorce rates have also risen with the increase in economic opportunities for women as studies have shown this has happened all over the world, yet the financial effects of divorce on families, especially women, are devastating. Studies show that women see a drop of 30-55% in family income when they divorce mainly because men usually contribute earnings to family incomes, and women usually assume the majority of child rearing.28 Though women tend to work more hours when divorced, though job mobility, and thus income is limited when childrearing is a factor. A startling trend that has emerged in the last ten years is that women that work longer hours are 40% more likely to divorce than women that work shorter hours, or do not work at all. It seems that economic pressures are eroding families.

26 Hacker. 2006, p 88. 27 Ibid, p 89. 28 Ibid, p.106.

17 Job degradation is a term used now when addressing employment concerns in the United States, and embodies a variety of concepts. The term signifies that a once well regarded position in terms of pay and benefits has declined into one with not so great pay or benefits. People have to work harder and longer for less pay, less benefits, and less job satisfaction.

Some times, workers work one or more jobs, called over employment. In 1996, 7.8 million

Americans, or 6.2% of the workforce, held 2 or more jobs; the majority of which held one full- time job and one part-time job. Another trend is underemployment, meaning that part-time work is accepted, when full time work is desired. In 2004 unemployment was 5.8%, while underemployment was 10%.29 There is also an increase in “nonstandard employment”, which means jobs with no benefits and weak leaks to the employers. In 1995, this was 35% of the workforce, who are mainly pink-collar temp workers meaning receptionists, secretaries, and assistants, and blue-collar day laborers, lawn mowers and housecleaners, but also real estate agents and some franchisers.30

The corporate ships that employees are less and less tied to are becoming increasingly unstable.

H. Lee Scott, chairman of Wal-Mart was paid $23 million in 2003, more than 5 times of the 1950 chief executive of GM. In fact, CEO pay has soared since 1965, from less than 26 times the average wage to almost 300 times the typical workers pay.31 Short-term profit increases motivated by stockholders has replaced slower term cash flows, intensifying competitive pressures. Yet, corporations have been able to award their CEOs more handsomely. If the federal minimum wage had risen as quickly as CEO remuneration, it would today be at $15.71 per hour,

29 Ehrenreich, p. 205. 30 Ehrenreich,p. 180. 31 Krugman. Wealth Transfer, p.2

18 and annual salary of $30,163. This figure is more than three times the actual minimum wage of

$5.15 an hour, an annual salary of $9,888, barely above the poverty line.32 (for a single person

$9,800, a family of two $13,200, a family of three $16,600, a family of four $20,000)33

The guarantee that a good high school education could land one a good job has dissipated. A generation ago a high school diploma could land a worker a job lucrative enough to support a family, since then, times have changed. Between 1975 and 2002 the earnings of young male workers with high school diplomas decreased by 15%. While college degree holding male workers earnings increased 10% over the same period, or 1/3 of a percent a year. The earnings of females at all educational levels have risen, probably due to increased work hours. Males with a graduate degree have seen a 40% increase. Experts say that more than half of the growing inequality in the United States involves the growing divergence between workers with the same level of education. A generation ago, a college education meant modest student loans and a part time job, now, the average undergraduate leaves school $20,000 in debt.34

Rising income inequality relates to education inequality in achievement. All else equal, the performance of a student declines as the proportion of his or her classmates who are from poor household increases. Since schools are locally funded, inequalities are related to larger forces of social integration and segregation.35 Furthermore, the cost of living in well funded zip codes has soared, effectively blocking out the non wealthy.36 Universities and colleges are stratified as

32 Nader, Ralph, p.142. 33 Federal Register, Vol. 71, No. 15, January 24, 2006. Pp 3848-3849. 34 Hacker, 2006, p. 74 35 Jacobs, Laurance and Theda Skocpol, p.170. 36 Dugas, Christine, “Middle Class Barely Treads Water.” USA Today 15 Sept. 2003.

19 well, as public funding for higher education has failed to increase with the dramatic rise in tuition. Enrollment in four year colleges has increased in high-income families, grown slower in middle-class families, and declined for students coming from less advantaged backgrounds.

Social mobility is low, when inequality is high. Thinking that hard work and equal opportunity will pull one up by ones bootstraps clashes with the harsh reality that the American society is a lot stickier than most like to imagine, even when compared to other industrialized nations. The idea of the social status of an individual can change throughout the course of his or her life, or intra-generational mobility, or the idea that the offspring of an individual will move up and down the class system may still be alive in the United States, but is virtually impossible. While social mobility remains hobbled, maybe decreasing, income inequality is growing at levels not seen since the1800s.37 One study shows that in the 1970 28% of those who started out in the poorest

20% stayed there, while in the 1980s, 32% stayed, compared with 36% in the 1990s.38 An article in the Economist warns that the United States risks calcifying into a European-style class-based society.39

Most middle class families are now composed of two income earners, and even they are struggling to make ends meet. Essentially, they are at a higher risk for financial instability, as risks of losing a job are doubled. Families today are burdened by credit card debt, 92% of the record 1.6 million filers of bankruptcy, where considered middle class in income, with an estimated 1 in 7 families filing before the year 2010. The average family of four spends 21% less

37 “Faltering Meritocracy in America.” The Economist Jan 1. 2005. 38 Ibid. 39 Ibid.

20 on clothes, and 22% less on food, than a family did a generation ago. The average worker contribution toward health insurance premiums is $2,412, and has risen at least 13% since

2002.40 It is estimated that nearly 47 million people living in the United States cannot afford health insurance, and those considered solidly middle class, are one of the fasted growing subgroups. More than 1/3 of the uninsured have a family income of $40,000 or more, and 2/3 are households with at least one full time worker.41With savings low, it is increasingly difficult for families to handle a bout of unemployment, a long-term illness, or a serious accident.

"Shawn stays home with our kids in the day while I am at work," Christa Harrington,

who teaches special education to prekindergarten students and kindergartners in San

Jose's Franklin McKinley School District, said by e-mail. "I come home, and he goes to

bed so that I can wake him up four to five hours later so that he can go to work. When he

gets home in the morning, I walk out the door to go to work."

The compromises the Harringtons, both 28, have made -- working different shifts to save

on child care, renting a small house from a relative, cutting out vacations and even video

rentals -- have become essential.42

The wealth gap is a problem that even conservatives are beginning to worry about. The

Economic Policy Institute, a Washington think tank, contends that between 1979 and 2000 the real incomes of the lowest fifth, or the bottom 20% of earners grew by 6.4%, while that of households in the top fifth grew by 70%. That leaves medium income households growing at

40 Dugas. Treads. 41 Pear, Robert, “Without Health Benefits, a Good Life Turns Fragile,” The New York Times 5 Mar. 2007. 42 Johnson, Jason, “Making Ends Meet: Struggling in Middle Class” San Francisco Chronicle 16 Oct. 2005

21 rate of 23.6%. Analyzing the top quintile shows that household income of the top 1% grew by

184%, and that the top of the 1% or .01 grew even faster.43 While market based economies, like the United States, tend to display uneven growth patterns; the trends that are apparent are starting to worry even the most conservative economists. Ben Barnanke, chairman of the Federal

Reserve, has pointed to disparities in education and training as the single greatest source of the long-term increase in inequality. He prescribes bolstering education and training programs, instead of erecting trade barriers, to help narrow the gap.44Yet his recommendations do not discourage opportunistic firms from seeking out cheaper labor.

Now that middle class woes are becoming more apparent, who is listening to them? Who will effectively address them? The United States is currently run by a president who speaks to the

“haves and the have mores”, is the middle class worker able to reassert his or her self back into the “American Dream” or have they evolved into the heartless, soulless worker, driven by corporate and government plutocratic machine that Weber envisioned?

India: Definitions of the Middle Class

Historical analysis of class in India reveals that the middle class did not emerge in the country in the same way seen in Western society. Rather, class in India was established by way of the caste system, creating a contention between social and economic strata. Colonialism did have had an impact on class, furthering the establishment of an English speaking majority, for instance, but

43 “Faltering Meritocracy in America,” The Economist 1 Jan. 2005. 44 “Bernanke Suggests How to Narrow the Wage Gap,” The New York Times, 7 Feb. 2007.

22 the middle class itself existed by way of social hierarchy in pre-colonial India. Indian society was once divided into the following groups:

• Kings and courtiers (bureaucratic apparatus of the state)

• Priestly intellectual comprising scholarly and professional categories

• Merchant or business category and

• Agriculturalist: artisans and peasants,

With the advent of British rule the merchant class was expanded with the spread of English language education and a merger between the educated princely families into the merchant classes created for the purpose of assisting the British administration. The revolts that resulted in the 1857 official establishment of British control of India also marked the establishment of this newly emerged middle class45 which was a combination of the princely and priestly classes with the mercantile class.46 It would then be fair to state that class in India “arose out of the enterprising Indians rising to the occasion and responding to the new opportunities of making money and amassing riches thrown up by the Europeans entering into the export trade of this country.47”

Due to the fluctuations in the formation and establishment debate, it is difficult to trace historical definitions by income levels, not least because of the massive concealment of earnings. There have been, however, some attempts; most notably by Prof. Nijman.48 The middle class is vaguely described as the 200-250 million who are engaged in the market at present. According to the

National Council of Applied Economic Research (NCAER), between 1985 and 1999, a quarter

45 Bhatia, p.30 46 ibid 47 Bhatia, p. 22 48 “India Together: ‘Middle class’ palaces show housing disparities in India,” July 2005. www.indiatogether.org/2005/jul/eco-palaces.htm

23 of this class earned between Rs. 35,000 and Rs. 75, 000 ($790-$1400) a year. In the next income category, Rs. 70,000 and Rs. 105,000 ($1600-$2400) the proportion dropped from 36% in 1985 to one-fifth in 1999. Revealingly in the next category, Rs. 105, 000 to Rs. 140,000, ($2400-

$3200) the percentage increased during this period, from 15% to a quarter of the middle class. At above Rs. 140,000 ($ 3200), it went up from 22% to 27% indicating that this consuming class is better off than ever before. 62 % own a car, 78% also have a college degree. The average age of home purchase is 37 and is decreasing sharply.

Therefore, we can establish a definition for purpose of this research that the middle class in India comprises individuals who earn an income above Rs. 70,000, own a home, and/or a car, received schooling and higher education in English, and have a college degree.

24 India: Historical Background of the Middle Class

Class in India existed prior to colonialism. Indeed one could argue that class and caste existed concurrently in Indian society with an individual belonging to a specific class category due to birth in a particular caste group. The four primary categories that stratified society were:

• Kings and their courtiers, the basic bureaucratic apparatus of the state

• The priestly intellectual comprising the scholarly and professional categories

• The merchant comprising individuals who dealt almost exclusively with trade and

commerce

• The peasant comprised of the agriculturalist and the artisan

Much of the published literature has focused on the development of the merchant class and some scholars49 emphasize that despite India’s commercial progress and industrial efficiency over the years prior to the advent of British rule, princely dominance and caste prejudice made impossible the development of large-scale enterprises, with an increasing division of labor which, as in the

West, might otherwise have contributed to social mobility as well as stratification.

Rich merchants in India were not entrepreneurs. They were often money lenders performing banking and other mercantile functions50 and contributed to the stability of the caste order which blocked technological change and occupational mobility. A money economy had developed in

India at an early part of its history, and the merchant class of money lenders had specialized in

49 Misra p. 21 50 Ibid. p. 24

25 coinage and the handling of letters of credit.51 The Indian traders had no charters of liberty, no municipal rights or political rights, but they did belong to guilds which were threatened by the existence of the caste system. The community panchayat (council) had to sanction the activities of the guild. The upper class Brahmans in conjunction with the king played off the superior caste organization against the guild by the threat of punishing recalcitrant members by excommunication.52 The priesthood thus assisted the king and his officials in the preservation of their dominance over the class of merchants. Indeed the traditional segregation of occupational groups, the supremacy of the literary and bureaucratic classes and the hegemony of commercial monopolists were some of the factors which prejudiced the growth of the middle classes.53

The monopoly of the princely caste and the risk of official interference constituted yet another obstacle to private enterprise. These tended to narrow down the area of free trade and to kill the competition necessary for economic prosperity and thus prevent the emergence of new functional groups as elements of a stratified society. 54

The growth of the Indian middle classes in modern times proceeded from certain new conditions which developed under the rule of the East India Company especially after the abolition of its trading monopoly in 1833.55 These new conditions were, for example, the mild and constitutional character of Government and the rule of law, the security of private property and the defined rights of the agricultural classes, a national system of education, a laissez-faire economy and a

51 Misra, p. 8 52 Ibid 53 Ibid, p.27 54 Ibid, p.33 55 Ibid, p.69

26 liberal policy of employment and social reform. With these developments came large scale production, which led to technological progress, an improvement of communications and set in motion, a degree of social mobility that had not been seen in the country before.

Colonialism brought with it a new system of civil administration new land laws and property rights, new types of judiciary and revenue administration and a new language that eventually became the official language of the country.56 These changes created a new class structure that intermediated between the new rulers and the subject Indians.57 Language was one of the important factors in creating a distinct class of individuals as was espoused by Lord Macaulay in his famous Minute of February 1835. Supported by Governor-General Lord William Bentinck, it was decided that an English education would raise a class of persons who would be “Indian in blood and colour, but English in tastes, in opinions, in morals and in intellect: or in short, Indians with modern western minds.”58At the time of Independence, the Indian middle class ad grown in size, strength and stature. It contained a mature and well-advanced political leadership59 and highly developed civil service, administrative and military personnel and an array of professionals. It can be argued that there was a sense of national unity among this class of people with social barriers of religion, caste and ethno-linguistic distinctions being crossed.

With the political roots developed during colonial rule, this ruling middle class contributed to the socialist system through which the country developed. At the departure of the British in 1947, nationalistic fervor was paramount in the country laws were instituted in the country that were

56 Bhatia, p.25 57 Ibid. 58 Ibid, p. 28 59 Ibid. p.35

27 socialist in nature. Equal housing opportunities, education for all students and a general reliance on locally produced products were some of the characteristics seen in the country from the late

1940s. In 1950, the country developed a set of plans that laid out a set of development goals that would establish a set of priorities for a five year period. These goals were based on economic and social development and addressed the needs of the country during its post colonial development.

Started at the behest of late Prime Minister Jawarhalal Nehru, the goals were established by a

Planning Commission headed by the Prime Minister and other cabinet ministers. These plans are established every five years and are socialist in nature with emphasis placed on providing access to education and guaranteed access to food via a ration system. Through this social approach, children were educated in a uniform manner and those in lower caste groups were given access to higher education through the quota system with places reserved for such individuals at universities and colleges nationwide. Schools were typically funded by the state and central governments and tuition fees were low. In rural areas they were free. Although there were privately funded schools, typically affiliated with a church, these schools were accessible to the upper classes. The middle classes received excellent education via locally funded schools and all students in each state received a uniform standard of education. This emphasis on education indicates a clear link between education and class as it was and is believed that education contributed to a better lifestyle.60

In terms of employment patterns seen during the period immediately following colonial rule, there was a division seen among the classes in that the lower classes were typically agriculturalists and produced food while the middle and upper classes were employed in the

60 First hand narrative.

28 government service or in private companies that were owned by families who had established trading roots for decades. Companies such as Britannia, the cookie company and Bata, the shoe manufacturing company, coupled with MRF, the automotive tire company, TATA and Birla, the steel company, were the major employers and many educated middle class Indians were employed with these companies. Stable incomes with guaranteed permanence of employment and pension plans were some of the features of these companies. Other middle class individuals were established in the medical, engineering and education fields. In addition, emphasis was placed on local production. Along with agricultural products, luxury items such as soft-drinks and chocolate were locally produced with no input or subsidy from foreign investment.

In the early 1970s, however, there were significant changes made to the Education Act61 which provided for private funded schools to establish themselves in urban areas. With stability in employment through civil service, many middle class Indians were able to send their children to these private institutions, many of which were funded by religious organizations. “A private school education implies prosperity…that families are doing well. It was a status symbol in the urban areas. Also, private schools are very good in India and with the competition to get into the top universities, middle class parents usually sent their children there,” remarked Payal Banerjee, a professor of migration studies.

Education reforms also brought about social change in the country. In keeping with its social stance, the national government introduced quotas62 according to the caste system (which continues to remain largely tied to class), in order to enable these communities to have equal

61 Conversation with the Knowledge Commission of India, http://www.rediff.com 62 ibid

29 access to education. With the reservations on the increase, more middle class (and higher caste) families have had to incur additional fees when applying for admission through capitation fees and other expenses.63

There were no other changes that significantly altered the direction of the national economy through the 1980s. Socialist policies were generally in place throughout this period with the emphasis on local production and companies with national holding and little, if no, external assistance.

India: Current Trends in the Middle Class

India today is home to multi national corporations, private enterprises owned by local and international stakeholders, and an educated pool of citizens that assist in the functioning of the national, if not global economy. With education and employment options increasing, the country is increasing its economic growth at great speed with greater gains being forecast. World recognition of this emerging South Asian giant is on the increase and it is widely believed to be the next market superpower.

In response to calls from large national businesses to take advantage of alliances with foreign companies, the Indian government loosened its control over the economy and allowed limited access to foreign firms in the early 1990s. These neo-liberal market reforms which began in 1991 have continued gradually over the past decade and have contributed to the rapid expansion of the

63 Capitation fees originated as a result of increased quota reservation system. With an applicant’s caste affiliation needed for application, universities were thus authorized to charge applications of upper castes a higher fee due to their social standing and monetary value.

30 economy. The five year plans, which were, until this period, focused almost exclusively on a socialist system with emphasis on local production and the development of small scale production and equal education for all, shifted focus to reflect market reform.

Among the first to make inlays into the Indian market were automobile companies. Suzuki, which previously worked in collaboration with locally run Maruti-Udyog under tight regulations began selling cars under its own name. In the mid nineties, with wider market liberalization policies, firms such as Korean car manufacturers Daewoo and Hyundai began to enter the market increasing India’s choice of automobiles. Soon, beverage companies Coca-Cola and Pepsi also competed in the Indian market. In the late 1990s, such multi-national firms as General Electric,

Barclays, Citibank and HSBC among others began operations out of Mumbai, the financial capital, and later spread out to New Delhi, Chennai, Calcutta, Hyderabad and Bangalore.

The start of the current decade has seen an emergence of the Information Technology sector with computer manufactures establishing centers nation wide. During this period, British and

American companies began outsourcing production and telephone centers to the country and took advantage of the availability of the English language educated citizenry.

With the growing number of firms present in the country, employment options increased for the middle class, who, with advanced qualifications could compete for employment with these companies. Access to this new job market encouraged more Indians to enroll in universities nationwide, therefore increasing competition for admission. The middle class began to grow in prosperity as a result of higher salaries and increased purchasing power, coupled with greater

31 market choice for goods and services. In addition to the ability to afford elite private schools for their children, many middle class families were able to send their children to universities abroad, a point highlighted by a first-hand report from a recent middle class migrant from India to the

United States.

Increased employment opportunities have also afforded several middle class Indians the ability to move abroad and often settle there. Payal Banerjee, offers an explanation. “While there are several opportunities for educated IT professionals in India, going abroad, especially to the

United States is seen as a status symbol and many young professionals move here via the employment based immigration category.”

Khausalya Rengraj, on the other hand, highlights a specific pattern. “But this is a trend that is seen only among the upper middle class,” she reiterated, shedding light on the division within this class group. She notes that the increased presence of multi-national corporations in India has had a positive impact on the national economy but it is only the upper and upper middle classes who have access to wider choice of goods and services. The upper middle classes constitute the educated professionals while the lower middle classes might include clerks and skilled workers who receive technical education. This class group is distinct from the lower classes who are typically domestic workers and laborers, and are typically uneducated and receive low wages.

Renraj, a 26 year old Indian woman recently moved to the United State. Raised in an upper middle class household she is familiar with the patterns seen over her years in the country.

32 The burgeoning middle class populace64 so widely examined in contemporary economic circles clearly refers only to a select segment of society. Lower middle class families, according to

Rengraj, do have access to education and some job opportunities but not at the same level as the upper middle class. Due to government reservations and quotas in education and employment, these families are able to live a middle class existence but are not able to afford the luxury goods and services as their upper middle class counterparts.

“The upper middle class can purchase a home or apartment, own one or two cars, send their children to private schools, often abroad, and be able to take foreign vacations, which was impossible in previous [decades]. The lower middle class on the other had has to make compromises. Since education is a priority, they choose to use their limited income to send their children to school even if it is only a government school, and they usually live in rented accommodations and do not own vehicles,” she said.

The dramatic liberalization of the domestic markets has indeed given India’s stagnant middle class more opportunities than mere local development could have provided, but this unbridled growth has had serious social consequences. Caught in the rush to liberalize and gain a foothold in world markets are the lower classes especially the farmers who have had to struggle to maintain a basic means of existence. The case of the Indian farmer has been widely reported by newspapers and economists worldwide as an example of the striking inequality brought about by globalization. As Indian cities begin to be aggressively developed, the 600 million65 farmers are

64 The estimated middle class population is 300 million. http://www.thehindu.com Tharoor, May 22, 2005. 65 http://www.southasian.org. July 2005

33 being displaced continuously putting a strain on their ability to compete with foreign goods in this emerging economic giant.

While globalization has catapulted the country to rapid economic growth and international recognition, the effects on certain segments of the population, particularly among the middle class have not been as positive. This apparent, if untoward, consequence may not be entirely impossible to avoid but closer attention to policy might encourage a more balanced process of development.

Turkey: Definitions of the Middle Class

It is generally accepted that Turkey’s middle class emerged at the end of the 19th century, beginning of the 20th century after the demise of the Ottoman empire. It consisted mostly of the intelligentsia, bureaucracy and military factions that were associated with the former empire.

Any growth in wealth for families throughout the 1920’s to the 1940’s was due mostly to associations with the state. But after the revolution in 1960, liberal economic policy initiated by the Democratic party allowed for millions of new jobs and increased the size of a new middle class, more akin to our modern day perceptions of middle class. For example, in the 1960’s the middle class consisted of tradesman, entrepreneurs, and contractors.

More recently, it is apparent that the middle class is larger and more diverse than the upper class.

It includes various types of administrators; middle-level bureaucrats and public employees; engineers; journalists and other writers; managers of industrial enterprises, commercial offices,

34 and social-service centers; owners of small-scale retail establishments and restaurants; technicians; self-employed artisans; professionals; and trades people. This middle class section of the population resides predominantly in the urban centers.

Although by some estimations, the middle class was continuing to expand during the early

1980s, most of its members felt threatened by persistently high inflation rates that had eroded their savings and impeded their upward social mobility. At that time, the middle class was estimated to constitute 20 to 2566 percent of the total urban population.

In recent years, Turkey’s economy has largely been known for the instability it suffered during the 1990’s, and it’s subsequent success in stabilizing the economic climate. Turkey was able to take a deep breath and focus on economic factors other than the constantly fluctuating inflation rates. Income disparity was analyzed and it was revealed that Turkey has income inequality rates

(based on gini-coefficient data) that it actually competes with sub-Saharan Africa and parts of

Latin America for the greatest income disparities.

However, statistics on personal income in Turkey are often considered incomplete and unreliable, and therefore, there is no accurate means of determining the composition of the middle class from a strictly income driven method. The middle class is simply the group that lies between the wealthy minority and the vast overwhelming poverty of the nation.

Income statistics aside, consideration of middle class status is often determined by several factors: the type of employment, education level, living conditions, and an elusive quality of

‘westernness’. To reiterate, education, particularly a college degree, has been the key to joining the middle class in Turkey. Since quality education is not available to all members of society,

66 Altug, (2006), p.27

35 children who grow up in poor families have little chance of joining the middle class.

Additionally, the opportunities to quality jobs and education is often linked to familial ties.

There are also cultural barriers blocking the ethnic Kurd population from joining the ranks of the middle class.

Certainly, economic policies have much to do with the status of the middle class. Turkey has undergone many political and economic upheavals in recent decades. The current attempts to join the European Union have certainly dictated much of the rationale behind recent economic policies, as have International Monetary Fund and World Bank interventions. However, other factors such as family size, literacy rates, long held attitudes toward women in the work force, among other factors contribute to the growth or lack thereof, of the middle class.

Turkey: Historical Background of the Middle Class

The development of the Turkish middle class has been a belated process with respect to the

West. This historical delay flows from the peculiar socio-economic structure upon which Turkish capitalism developed out of a crumbling Ottoman empire as well as a tumultuous history of revolutions, revolts, wars and military and political coups. For this reason, in order to understand the peculiarities of Turkish economy, it is necessary to have an overview of the economic and social history of the Ottoman Empire that forms the historical background of modern Turkey today.

In the period of its founding and further expansion, the Ottoman state conquered many areas, which then became the property of the state, with both the Muslim and non-Muslim populations becoming the taxpayers bonded to the land. A Military bureaucracy was installed to administer

36 these lands.

Ottoman social composition consisted of a state ruling-class at the top and the direct producers at the bottom (agrarians and craftsmen). Both the agrarian communes and the craftsman guilds in towns were under tight control by state.

There was not, and could not be, a matured merchant class of Western type in the social organism of the Ottoman Empire. Almost all of the surplus was concentrated in the hands of the state and was used to satisfy the needs of the state. Thus there were no commodities left for private trade and free exchange. Under such conditions, accumulation of a merchant capital and formation of a merchant class within the system was impossible.

In the western world, a new class was forming (the bourgeoisie) around the 16th and 17th centuries, due to the dissolution of feudal societies and a period of mercantilism. This was accompanied by rampant colonialism.

Yet the situation of the Ottoman Empire was completely different in the same period. Because of its stagnant structure the Ottoman state lost its power before the developing West and entered a period of standstill, beginning from the 17th century.

With the 19th century the Ottoman market was opened to Western capitalism, and land began to become privately owned. At the beginning of the 20th century, “Westernization” and

“modernization” took hold with the materialization of the Young Turk movement. After a long process of struggles and clashes, this wing took power in 1908 and proclaimed a constitutional monarchy. Almost all the cadres who would later lead the establishment of the bourgeois republic came out of this movement.

37 The history of Turkey, as we know it today, begins with the foundation of the republic on

October 29, 1923 (the Republic was declared on January 20, 1921), with Mustafa Kemal

(Atatürk) as its first president. For about the next 10 years, the country saw a steady process of secular Westernization through Atatürk's Reforms, which included the unification of education; the discontinuation of religious and other titles; the closure of Islamic courts and the replacement of Islamic canon law with a secular civil code modeled after Switzerland's and a penal code modeled after the Italian Penal Code; recognition of the equality between the sexes and the granting of full political rights to women on 5 December, 1934; the language reform initiated by the newly founded Turkish Language Association; replacement of the Ottoman Turkish alphabet with the new Turkish alphabet derived from the Latin alphabet; the dress law; the law on family names; and many others.

The establishment of Turkey as a globally recognized nation in 1923 represented an historical turning point pertaining to the beginning of the development of a slightly more stable middle class in Turkey. Although the middle class at this juncture still consisted of the members of society that were in some way connected to the state.

During the first 40 years of the republic, the middle class flourished thanks to the capital accumulation supplied by state capitalism, and it started private industrial investments. The private capitalist industry developed by leaps and bounds in this period. And parallel with this, the working class began to grow rapidly and stir as well. In the 1960’s the whole society showed a tendency to prosper politically and culturally.

But a series of political coups scarred the following decades. There were periods of economic success followed by downturns leaving a fractured political scene and a struggling economy.

38 Additionally, liberalization policies wreaked havoc on an unprepared economy. Most newsworthy were the skyrocketing inflation rates that caused the struggling middle class to lose their savings and their middle class status. Throughout the brief modern history of Turkey, the middle class grows and shrinks marginally, while the wealthy remain wealthy and the poor populations migrate to urban centers in attempts to join the middle class with no success.

Turkey: Current Trends in the Middle Class

Currently, the Turkish middle class worries about the political future of Turkey and their tentative financial security. Most of the Turkish middle class consider themselves part of a

European community, speak English, French or German as well as their native language and are college educated. They generally travel and more specifically have time to vacation on the

Turkish coast. Mostly, the Turkish middle class lives in urban environments and can afford their own apartment and car. The following excerpt from the Financial Times Weekend Magazine67 paints a typical picture of middle class angst in Turkey.

“On the face of it, there is no reason why the Celebi family should feel threatened. Zubeyda and Gokhan have excellent jobs as civil engineers, earning a combined TL10,000 (Pounds 3,600) a month that pays for Iris's private education at a primary school a few minutes' walk from their apartment, as well as her piano lessons.

They own a two-bedroom apartment in a modern block in Bilkent, a well-to-do Ankara suburb that has grown up around Bilkent University, one of Turkey's best. Visitors have to pass a security guard to get into their compound, which contains several apartment blocks. Bilkent is an enclave for the middle class in a city overwhelmed, like others in Turkey, by successive waves of migration.

Both university graduates, Zubeyda and Gokhan bought their apartment outright 10 years ago with help from family, friends and savings (the most common form of housing finance in Turkey). Zubeyda was born in Gallipoli, but her parents, civil servants, moved with her to Erzurum in the mountainous east of Turkey. Gokhan, who was born in Ankara to a university instructor and a housewife, is a supporter of Fenerbahce, every middle-class Turkish man's favourite football club.

67 Financial Times, February 2007

39

Yet the couple, under interrogation, exude angst. It is partly economic. Gokhan and Zubeyda are old enough to recall Turkey's years as an economic basket-case, culminating in the disastrous crisis of 2001 that forced most middle-class Turks to start over. Much as they appreciate the economic turnaround, they feel that it is impermanent. Nor do they any longer believe in their country's ambition to join the European Union. "What they are asking of Turkey is not fair," Gokhan says, referring to issues such as Cyprus, Armenia and the Kurds. "Five years ago I believed in joining, but now I don't feel there will be an honest outcome."

Mostly, though, their insecurity has to do with domestic politics. For the past four years Turkey has been governed by the neo- Islamist administration of Recep Tayyip Erdogan, a socially conservative prime minister who wants to widen the space for religious observance in a country that has an uneasy relationship with its Muslim heritage. However much they might admire Erdogan's liberal reforms, there is something about his Justice and Development Party (AKP) that gives them cause to question much about their own country.

"What we have today is unfamiliar to me," Gokhan says. "They (the AKP) were elected by a majority of the people, and I respect that. But religious factors are their priority. That makes me uneasy."

By the end of the first decade of liberalization, and continuing throughout the 1990s, there were clear indications of worsening economic conditions for most of the old or core middle- class faction, made up primarily of public servants or corporate middle-level managers. This faction found itself in a serious crisis of falling real income, inflated prices, shaky investments, and added tax burdens. In contrast, a combination of old professional, managerial, and business families along with new economy entrepreneurs were situated to take advantage of income and wealth-generating opportunities. Some were able to enrich themselves, moving into the capitalist class. Opportunities were especially good in newly emerging sectors such as financial services and investment banking, insurance, media and entertainment, and tourism and advertising.

People who had the right education and social connections could find their way into those industries that were most closely associated with Turkey’s integration in the emerging global economy.

40 The process of economic global integration was generating new demand for credentials, especially a degree from one of a handful of Turkey’s prestigious universities and/or a degree from a prestigious foreign university. Speaking a foreign language, especially English, became a

“new” middle class necessity in the 1980s. The upper and upper-middle class had absorbed a cosmopolitan culture partly inherited from its blending of late Ottoman and nineteenth century

European elements. Education was a major vehicle for institutionalizing this culture. But global economic integration after 1980 created a culture whereby “foreignness” became the standard of

Turkish elites.

The vast majority of the older core middle class families desired to emulate this “new” middle class but possessed neither the social capital nor knowledge or credentials to compete for the best jobs.

The most current information on class reflects the trajectory of the trend that was established in the 1980’s. The Referans newspaper states that a limited improvement in income distribution took place in Turkey in 2005. According to the Turkish Statistics Institute (TUIK), the gap between the richest and poorest 20 percent is closing. 68However, the reason for this development is not that poverty has decreased but because the income of the middle class has grown. However, according to assistant professor Abuzer Pinar from Ankara University, this improvement does not necessarily reflect the circumstances of the poorest citizens. 69Even if the

Turkish economy is getting better, poverty remains a major problem that will not be solved easily. Because the poorest people are already excluded from mainstream society, an

68 Global News Wire - Asia Africa Intelligence Wire (2006) 69 ibid

41 improvement in the country's economic situation is unlikely to affect them directly.

Ugur Civelek, an economist, told Referans that the ratio of people in debt has increased five-and- a-half times since 2002. In the past six years real wages are down by 50 percent because of inflation. People having less revenue are more likely to become indebted. Under these circumstances it is not possible to have better income distribution, noted Civelek.70

Turkey’s economy will need to continue to grow and the political climate will need to remain stable in order for poverty to decrease and middle class expansion to occur. Given its history, there is cause for cautious optimism.

Conclusions:

In conclusion, it is unrealistic to expect the middle class in the United States to remain bounded in the “American Dream” of the 1950s, as societies evolve, so do their classes. Long gone is the single-family breadwinner, high school diploma on the wall, waving goodbye to his wife and two kids and heading to work in his paid-for Buick. The middle class may be relatively richer, in terms of cell-phones, computers, and TVs, however, it is strikingly clear that solutions have not evolved to address middle class concerns. Incomes are now more volatile, healthcare is less secure, big-ticket items are more costly, pensions are more risky, and the American middle class is working harder than ever. What effect does this have on a society?

70 Ibid

42 What are the larger trends at play? Globalization has shown to move jobs from one place to another, aided by government policy on both ends meaning one labor markets loss, is another markets gain. Inequality is benefiting a very few at the very top, very much so, and while

Americans might see this as normal, and justified by a dynamic economy, social mobility has not risen with the inequality tide. As the wealth gap becomes a striking outlier when compared to other developed economies, so is the need for adequate solutions. Is the middle class a symbol of a healthy functioning democracy, a mark of a healthy society where equality and opportunity prevail for all? And if not, what can be done about it? If the middle class in the United States has struggling to hold tight to the ladder rungs, what implications does this mean for middle classes in other nations?

India’s economy has seen unprecedented growth since the early 1990s. Indians have been afforded greater work opportunities, the ability to save more money and access to higher education abroad. Neo-liberal reforms have altered the course of the national economy with domestic policies (five year plans) reflecting this shift. This nation, once teeming with nationalistic fervor, which extended to a ban on imports and foreign goods, now welcomes the world with open arms. The world in turn has utilized this repository of educated, English- speaking middle class individuals to work in lucrative positions worldwide, especially in the information technology field. Foreign firms have flooded the markets with goods and services and provided much of the livelihood for the middle class. The question now remains as to the sustainability of this growth.

43 As has been demonstrated throughout this section of the report, the middle class has benefited most from economic reform. While the middle class has existed in some form through the years, it was in the decades since the end of colonial rule that a clear middle class (where families lived in a purchased home and had access to higher education) was developed. It is believed that the growth seen in recent years is a growth in prosperity and not so much a growth in the number of middle class families.

At its current stage, India is predicted to continue its accelerated growth. As with any market economy there are speculations as to its volatility and continued success. However, just as it is impossible to quantify this growth rate in the future for developed countries, economists are hesitant to extend such speculation to this nation. If current investment patterns are observed, it is easy to conclude that India will possibly continue expanding and perhaps achieve developed status in the next twenty years.

Turkey is a young nation that has been wrought with political upheaval and economic instability from the onset. The middle class, with its roots still clinging to the Ottoman past, has not been able to gain a secure foothold. The wealthiest members of the nation continue to hold the economic and political power, whereas the middle class exerts little political influence and remains in a constantly precarious position. The country is dominated by a vast class of poverty that has little opportunity to climb into the regions of the middle class. Although the political situation seems stable for the moment, economic forecasters are reluctant to be optimistic about the financial future of Turkey. Coups and instability have reigned supreme to date. The tensions that exist between the ethnic groups as well as the growing Islamic influences, along with a

44 history of economic upheaval frighten foreign investors. Talks over inclusion in the European

Union have slowed and local support has decreased.

However, according to the OECD, over the 2002-05 period, output increased by a third, representing the strongest pace of growth among OECD countries. At the same time, annual inflation fell steadily, reaching single digits in 2004 for the first time in three decades. Thus good progress has been made towards a shift to a stronger and more sustainable growth path. Indeed, the process of real income convergence seems to have begun, following the disappointing periods of the late 1980s and the 1990s. If this path can be maintained, this would represent a significant break from the past decades of short-lived economic booms, followed by sharp downturns or recessions.

The size and strength of the middle class will depend upon this increase in growth and a maintained stability.

45 Gini-Coefficient Data Chart

46 Bibliography

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• Dugas, Christine, “Middle Class Barely Treads Water.” USA Today 15 Sept. 2003

• Ehrenreich, Barbara Bait and Switch: The (Futile) Pursuit of the American Dream Owl Books 2006

• Federal Register, 71 (15), 24 Jan 2006.

• Financial Times Weekend Magazine February 2007

• Glassman, Ronald M. The Middle Class and Democracy In a Socio-Historical Perspective New York: E.J. Brill, 1995

• Global News Wire - Asia Africa Intelligence Wire • Gogio, Palavi, “Wal-Mart Foes Hop a Bandwagon”, Business Week, 2 Aug. 2006.

• Hacker, Jacob S The Great Risk Shift. Oxford University Press, 200

• http://www.southasian.org. July 2005

• http://www.thehindu.com Tharoor, May 22, 2005

• India Together: ‘Middle class’ palaces show housing disparities in India,” July 2005. www.indiatogether.org/2005/jul/eco-palaces.htm

47 • Jacobs, Laurence and Theda Skocpol, Inequality and American Democracy: What We Know and What We Need to Learn New York: Russell Sage Foundation 2005

• Johnson, Jason, “Making Ends Meet: Struggling in Middle Class” San Francisco Chronicle 16 Oct. 2005 • Krugman, Paul, “The Great Wealth Transfer.” Rolling Stone Jan. 2007.

• Luce, Edward, Vincent Boland, Jo Johnson, Simon Kuper, and Andrew Ward, “Stuck in the Middle,” Financial Times, 16 Dec. 200: 18

• Mills, C. Wright and Russell Jacoby White Collar: America Middle Classes New York: Oxford University Press, 2007

• Misra,B.B The Indian Middle Classes London: Oxford University Press 1961

• Nader, Ralph. The Good Fight: Declare Your Independence and Close the Democracy Gap New York: Harper Collins. 2004

• Pear, Robert, “Without Health Benefits, a Good Life Turns Fragile,” The New York Times 5 Mar. 2007.

• Shultz, Stanley, and William Tishler, “American History 102: Civil War to the Present”, Lecture 24, http://history.wisc.edu/hist102/lectures.lecture24.html.

48 49

50 LITERATURE REVIEW/U.S.A. Author Title Relevance Effectiveness Data Includes Notes applies to Case regional Studies case The Bernanke Suggests Essential Very Yes No Published last week, this article evidences that Associated How to Narrow Effective even conservatives are concerned about the Press Wage Gap, The disappearance of the middle class New York Times: Feb 7, 2007 Auerbach, The Inequality Essential Very Yes Yes This book is a compilation of articles that James and Paradox: Growth Effective address the dimensions of the problem of Richard of Income inequality in the US, contributing causes and Belous, Disparity consequences, and a comparative analyses Editors between US and inequality in other nations. Lots of Data. Addresses changes in technology, international trade, family income mobility, and unionism. Ehrenreich, Bait and Switch: Great story about trying to find a middle Barbara The (Futile) Pursuit income job, as women in the US. The reader of the American follows the authors struggles through job fairs, Dream rejections, life coaches, etc. Like Nickel and Dimed, the best part of the book is the characters, the real people that she comes across and the severity of their situations. Ehrenreich, Nickel and Dimed: Barbara On Not Getting By in America Fields, Gary Inequality in Dual Not Not No No Formula riddled, serious economic analysis of Economy Models, Important Effective duel economy models focusing on the elitism The Economic of the rich, and the isolation of the poor. Too Journal, Vol. 103, mathematical, very hard to understand No. 420 (Sept 1993) Glassman, The Middle Class Somewhat Effective No No Theory laden book, drawing from Aristotle and Ronald M. and Democracy In Important Marx. Gives a very detailed historical a Socio-Historical perspective on class emergence and Perspective governmental form. Provides two chapters on technological changes and middle class, and one on the third world and class balance. Goesling, Changing Income Essential Very Provides This study looks at two global trends, the Brian Inequalities within Effective Data decline of inequality between nations, and the and between increase of income inequality with in nations. Nations: New Authors attribute the former to neo liberal Evidence, (Washington Consensus) policies, but state that American since in-country inequality is so high, it offsets Sociologcal any external income convergence. Review, Vol. 66, No. 5 (Oct 2001)

52 Gross, Social Security as Essential Very Provides No Case The author charts the volatility of income since Daniel Dramamine, The Effective Data Studies the 1980’s, tracking up and down trends. He New York Times, points out that while volatility has risen, March 20, 2005 incomes haven’t and they analyze the impact that this has on consumption. They look at high cost/big ticket items as blockages to income flexibility, putting a family, and the economy, in a bind. Hacker, Middle-Class Essential Very No Data No real Hackers short article, published in the Jackob S. Tightrope: It’s Effective case Washington Post analyses the increasingly More Dire Than studies unstable wages of low and mid-skilled the Numbers workers. He places blame, not just on Show, The government policy, but private workplaces, Washington Post, and help from within communities and Aug 10, 2004 families. Hacker, The New Important Very Data on No case Article reviews Hackers book, The Great Risk Jacob S Insecurity: Effective uninsured studies Shift. It describes the economic roller coaster Families are than many families are now on. slipping off the economic ladder, The Boston Globe, April 24, 2005 Krugman, The Great Not very Not Very No Data No case This is simply a collection of Krugman’s Paul Unraveling: Losing Important Effective studies articles, largely critiquing both Clinton era and our way in the New Bush era policies. It seems normative, and not Century very helpful. Krugman, The Great Wealth Essential Very No Data, No case In this article, Krugman viciously debunks Paul Transfer, Rolling Effective Some study myths surrounding tax cuts, poverty, and Stone, Nov statistics education. It is a very cutting article on many 30,2006 of the policies implemented by the current administration. Jacobs, Inequality and Essential Very Good Data No case Five focused chapters on rising inequality, Lawrence, American Effective study inequalities in political voice, and inequality in Theda Democracy: What public policy. Written in 2005 there are Skocpol, we Know and helpful charts and tables. Editors What We Need to Learn Mills, C. White Collar: Very Very Wright America Middle Important Effective Classes Minujin, Squeezed: The Useful Very Provides Contains Published in 1951, this book must be one of the Alberto Middle-Class in Effective some case first, post Weberian books on the middle class Latin America, dated data studies in the US, which many scholars often site. He Environment and puts middle-class in socio historical view, Urbanization, Vol. offering interesting perceptions and insights as 7, No. 2, Oct 1995 to what the middle class really is. Skocpol, The Missing Essential Very Latin Contains This article takes a needs based approach to Theda Middle Effective America case middle class, looking at how access to services Data studies and opportunities changes with decreases of income. The information is region specific, but the ideas, especially how one class relates to another, can be applied elsewhere. Strobel, Upward Dreams, Important Very Provides Contains The author analyses working American Frederick R. Downward effective Data case families and Social Policy. Provides a history Mobility: The studies of social policy and middle class formation, Economic Decline middle class participation in politics. She of the American explains which socio-cultural and economic Middle Class forces combined to place us where we are today, and provides suggestions to improve access to opportunity, and security. Strobel, The Coming Class Somewhat Somewhat Provides No case This book is about the economic condition of Frederick War and How to important effective Data studies the United States, placing Regan influenced and Wallace Avoid It impacts on the middle class in a historical Peterson context. Good background information, a little dated. Tyre, Peg Poor Among Very Very Provides The book seems normative, lacking essential

54 and Plenty, Newsweek Important Effective some statistics. It explains the concentration of Matthew Feb. 12, 2007 Selective wealth, the growth of the lower classes, and the Philips Data sense of hopelessness shared. It gives a clear examination on the reasons why the middle class is not involved in politics, protests, and mobilizations. The book briefly addresses gender issues and intergenerational concerns. Wolfe, Alan One Nation, After Not Very Effective No Data No Case Interesting article about poverty infiltrating a All Important Studies, traditionally prosperous place, the suburbs. examples Wolff, The Rich Get Essential Qualitative Interviews For this book the author conducted extensive Edward Richer, and Why Data interviewing and polling on what middle-class the Poor Don’t, Americans really think about: God, Country, The American Family, Racism, Welfare, Immigration, Prospect Vol 12. Homosexuality, Work, the Right, the Left, and Issue 3 Each Other. It's a fair assessment, I’m not sure how useful. Wolff, How the Pie is Very Very Data, Wolf explains how wealth concentration Edward Sliced, The Important Effective dated happens, offering remedies to help American American Prospect workers alleviate disparities in both income vol. 6 no. 22, June and wealth: Increase EITC, more tax 1995 redistribution, empower labor, wealth tax, and increase savings incentives. Explains the concentration of growth, delineates investments, debt to income ratio and provides policy recommendations for better income distribution Wolff, What Has Essential Very Data Case Compares incomes of 5 quintiles in the US, Edward Happened to the Effective studies effects of education, employee compensation Quality of Life in and GDP, and debt to asset ratios. All of this the Industrialized data illuminates not only inequality issues, but Nations? stability issues as well.

55

INDIA LITERATURE REVIEW Data applies to Includes regional Case Title Relevance Effectiveness case Studies Notes

Author Jhabvala, Renana Informal Economy Yes Effective Yes No The book discusses the Centrestage labor market in India and provides the necessary backdrop to the employment trends in the country both in the informal and formal sectors. Copious statistical data are also provided. Bhatia, B.M. India’s Middle Class: Role in Yes Yes Yes No Essential reading, Nation Building especially in terms of retracing relevant historical junctures in Indian history particularly in reference to the development of the middle class. Bhalla, Surjit S Imagine there’s no country Yes Yes Yes Yes Excellent analysis of statistics. Clear perspectives on the current state of the economy and projections for future growth. Includes comparative information Misra, B.B. Indian Middle Classes Yes Yes Yes No Thorough historical analysis of India and the development of the middle class. Longer, more complex arguments and several cross references and citations. Indiatogether.org India Together: ‘Middle Essential Effective Provides No This article provides current Class’ palaces show housing Data statistics and analyzes the disparities in India. July 2005 situation of the middle class in India today with regard to the housing market. This article is a good source for much needed statistical data. Rediff.com Conversation with the Essential Very No No Candid interview with the Knowledge Commission of Effective knowledge commission of India India who provides historical developments in the transition from a socialist to more capitalist economy. Tharoor, Shashi http://www.shashitharoor.com Essential Very Data No real Prominent commentator /articles/hindu/middleclass.php Effective case Tharoor discusses studies contemporary middle class India and provides statistics.

57 South Asian.org Essential Effective Yes No case Statistic website studies

LITERATURE REVIEW/Turkey Author Title Relevance Effectiveness Data Includes Notes applies to Case regional Studies case Ahmad, The Political Not Not No No Focused on time frame up until 1980, overly Feroz Power of the Important Effective political Turkish Bourgeoisie Ergil, Dogu Class Relations and Essential Very Provides This study looks at two global trends, the the Turkish Effective Data decline of inequality between nations, and the Transformation in Charts economies and focuses on early Historical formation of Turkey and vestiges of Ottoman Perspective empire Karasapan, Turkey’s Super Important Effective Yes No Helps paint the social class structure but does Omer Rich not focus on middle class sufficiently Karpat, Society, Essential Very Yes Yes First reference found that explores middle class Kemal, H. Economics, and Effective Turkey, but is somewhat outdated. Politics in Contemporary Turkey Kushner, Self-Perception Somewhat Effective No No Identity discussions along the lines of religion David and Identity in Important and secular identity but little by way of class Contemporary History Marguiles, Turkey and the Important Effective Yes No This article frames Turkey in the context of Ronnie European Union what is needed in order to join the European Union and thus clearly outlines its economic strengths and weaknesses Pamuk, Political Economy Not Not Yes Discusses elements not pertinent to this Sevket of Industrialization Important Effective research, such as military in Turkey Lewis, Recent Essential Very Provides No Case Economic and political analysis of Bernard Developments in Effective Data Studies contemporary Turkey with little on class Turkey structure

61

GRANT PROPOSAL

May 14, 2007

Ford Foundation Secretary 320 E 43rd St New York, NY 10017

Re: Name of the Grant

We are pleased to submit this request for your review. We look forward to your partnership in our effort to study the middle class around the world.

Our proposal requests $3.5 million to launch our comparative study of the middle class in ten countries.

We intend to conduct a study examining the middle classes of these countries in the hope of determining the characteristics of each nation and drawing parallels between them. Our study focuses on the historical growth of the middle classes of these countries and provides statistical data and extensive research based on first-hand interviews with scholars and individuals from these regions. The use of published data also forms part of our work.

Thank you for your interest in our work. We envision building upon collaborative success by developing our program with you.

Sincerely,

(Enrique Delamonica) Program Director.

63 EXECUTIVE SUMMARY

With the current trends in globalization, there is a sense of immediacy in addressing the disparities in income distribution among the middle classes of both the developing and the developed worlds. Job losses, recession and the middle class divide have become the norm among the developed countries while economic growth and a balanced sense of growth is a trend in the developing world. While there are several books and scholarly articles written about the field, there is a need for a compilation of comprehensive information, including statistical data.

We ask the Ford Foundation to provide us with $3.5 million to conduct our research which will help to support staff, travel and research for the project.

This project seeks to:

• Identify the socio-economic issues of ten developed and developing countries. • Conduct interviews with scholars and research published data. • Publish a comprehensive book on middle class inequalities in these countries.

64 PROJECT DESCRIPTION

Brief statement of problem

The middle class has increasingly become a focus of attention in the current global economic climate. With globalization and liberalization in most of the world, developing countries such as India and Turkey have seen a rise in foreign investment and a subsequent growth in the prosperity and size of the middle class. Traditionally economically developed countries such as the United States, on the other hand, have seen a decrease in the number of the middle class families and a general lack of growth of this segment of the population.

It is clearly this middle strap of society that seems to be most volatile in current global markets, responding according to market reforms.

65 METHODOLOGY

Interviews with scholars in the field who have done research on the middle class: Identifying and discussing the work of these scholars and gathering information from the publications of these scholars.

Interviews with middle class individuals from the countries in this study: Conversations with individuals who have lived in these countries and including their narratives in the work as a means of bringing a first-hand report to the study.

Books and journal articles

66 Research Team

Alberto Minujin: Alberto Minujin is Senior Programme Officer, Policy Analysis, at the Global Policy Section in the Division of Policy and Planning of UNICEF Head Quarters (New York), working on social policy, poverty and human rights issues. He is the former Regional Advisor for Social Policy, Monitoring and Evaluation for Latin America and the Caribbean and Programme Coordinator of UNICEF Argentina. He has spent time as a visiting research fellow at the International Development Centre, Queen Elisabeth House, at the Latin American Centre, St. Anthony College, Oxford, England. He was also a visiting research fellow at the Department de la Demographie, UniversitË de Louvain, BÈlgique and researcher at the Social Science Institute, Universidad Autonoma de Mexico. He has published several books including "The Middle Class, Seduced and Abandoned", EDHASA Pub Co, "Globalization and Human Rights", Santillana Pub Co., "The New Poor," Ed Planeta, "Proposal for Inclusive Societies," Santillana Pub Co. and numerous articles and papers.

Enrique Delamonica: Enrique Delamonica is an economist and political scientist educated at the University of Buenos Aires, Columbia University, and the New School for Social Research. For almost 15 years, as a consultant for UNICEF and UNDP and a policy analyst in UNICEF Headquarters, he has worked on the impact of macroeconomic policies on children, poverty reduction strategies, financing of social services and budget allocations, the analysis of trends in socio-economic disparities, child poverty measurement, and social protection policies. He has published widely, including two co-edited books on issues of social policy, particularly as they affect children. He has also taught economics, international development, policy analysis and research methods at New York University, Columbia University, the University of Buenos Aires, the Institute for Social and Economic Development (Argentina) and the New School. Currently he teaches at Saint Peter’s College in New Jersey.

67