A Service of
Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics
MacLennan, Michael (Ed.); Magalhães, Beatrix Judice (Ed.)
Research Report On the middle class
Poverty in Focus, No. 26
Provided in Cooperation with: International Policy Centre for Inclusive Growth (IPC-IG)
Suggested Citation: MacLennan, Michael (Ed.); Magalhães, Beatrix Judice (Ed.) (2013) : On the middle class, Poverty in Focus, No. 26, International Policy Centre for Inclusive Growth (IPC- IG), Brasilia
This Version is available at: http://hdl.handle.net/10419/146069
Standard-Nutzungsbedingungen: Terms of use:
Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes.
Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen die in der dort Content Licence (especially Creative Commons Licences), you genannten Lizenz gewährten Nutzungsrechte. may exercise further usage rights as specified in the indicated licence. www.econstor.eu Number 26 International Policy Centre for Inclusive Growth Poverty Poverty Practice, Bureau for Development Policy, UNDP 2 International Policy Centre for Inclusive Growth
he ‘Middle class’ as a concept has evolved over time, taking on various meanings at GUEST T different points throughout history, becoming an object to aspire to for poor people, a buzzword for politicians the world over, and the source of new customers for firms, and the EDITORS global economy more broadly. This special issue of Poverty in Focus, exclusively devoted to the exploration of themes related to the middle class is part of a larger endeavour initiated by the International Policy Centre for Inclusive Growth (IPC-IG), in collaboration with the Secretariat for Strategic Affairs of the Office of the Brazilian Presidency, to explore the middle class within a development context at national, regional and international levels.
Contributions to this middle-class-themed issue have come from leading scholars and development practitioners from across the globe who have addressed the phenomenon of the middle class from several different ideological, academic and regional perspectives to explore a variety of issues in relation to the significance of a growing middle class to overall Poverty in Focus is a regular publication of the development achievements. International Policy Centre for Inclusive Growth (IPC-IG). The purpose of this edition is bring together a diverse range of opinions and experts on the subject of the The middle class is a highly contested concept as is evident by the diversity of its many definitions. growing middle class in the developing world. Contributing authors here seek to navigate this unstable terrain; at times utilizing, and at others critiquing the prominent sociological and income-based definitions while being mindful of the Guest Editors middle classes’ historically and culturally specific realities. Michael MacLennan and Beatriz Judice Magalhães, International Policy Centre for Inclusive Growth For policy-guided purposes, although quantitative-based approaches to define the middle class may seem to be directly applicable and appropriate for the context, it is also important to bear Desktop Publishers Roberto Astorino and Rosa Maria Banuth in mind that they sometimes require a further analysis to address definitional or operational aspects otherwise left out of income-based (quantitative) approaches. Income-based approaches Copy Editor in general reflect the middle of an income distribution (i.e., the middle class as the middle third of The Write Effect Ltd., Oxford, UK an income distribution), yet they all too often do not take into account many of the socio-cultural, Front page: The cacophony of voices, perspectives, psychological and, in some cases, political aspects of being a part of the middle class. definitions and interpretations of the middle class is depicted in the word cloud displayed on the cover When speaking about the middle class, one must determine the reason or objective for trying of this edition of Poverty in Focus. The word cloud was to define the concept in the first place. It seems as though the term is quite relative, as income- created using the platform online at
The views expressed in IPC-IG publications are the authors’ and not necessarily those of the United Nations On behalf of all of us here at the IPC-IG, I hope that the following set of articles exploring the Development Programme or the Government of Brazil. different facets of the middle class, will help to inform readers of the complexity of trying to define the middle class as a quantitative grouping as well as a sociological phenomenon, Rights and Permissions – All rights reserved. The text and and that they may also serve as a good introduction to the ongoing debates about the middle data in this publication may be reproduced as long as written permission is obtained from IPC-IG and the source is cited. class within discussions concerning poverty reduction, democracy, civic action, economic Reproductions for commercial purposes are forbidden. growth and development more broadly.
by Michael MacLennan Poverty in Focus 3
by Michael MacLennan, A Complex Universality: International Policy Centre for Inclusive Growth1 The Elusive Middle Class
The middle class in recent years has Whether it be the squeeze on the middle emerged as a subject and object of class experienced in the developed world Whether it be the squeeze on development in new and different ways or the new middle-class growth of the the middle class experienced throughout the globe. Much of the developing world, this seemingly in the developed world or the rapid expansion of the middle class peripheral subject has become more new middle-class growth of in the developing world is due to the and more central to discussions of unprecedented number of people whom development and poverty reduction the developing world, this have risen out of poverty in countries as the size and influence of such seemingly peripheral subject such as Brazil, India, China and South middle classes of developing countries in has become more and more Africa. Elsewhere, a myriad of economic particular have become difficult to ignore. central to discussions of challenges have resulted in austerity development and poverty measures that have placed a damper on In this issue of Poverty in Focus, Surjit Bhalla reduction as the size and the vibrant aspirations and expectations and Homi Kharas introduce the link influence of such middle of the middle classes in Europe between the rapid growth of developing classes of developing and North America. economies and how this is creating a countries in particular have dramatically more equal distribution become difficult to ignore. The growth of the middle class in of global income, and, in the process is developing countries is significant, creating significant middle classes as it represents a group of people, in the developing world The following articles also unprecedented in size, becoming help to shed light on both the more economically secure, or at least less They explain the idea that both the elusive definition of what it vulnerable to economic shocks. In turn, political and material demands of means to be part of the this has led some to assert that this middle-class people across countries middle class in different marks a shift in the parameters of are quite different from those of rich or countries (beyond any development as we have known it in poor people. Bhalla and Kharas indicate academic or semantic our modern age. Not only does the new this to be important as the growth of exercise), as well as its middle class of the developing world the middle class globally can potentially role in development. demand a refined understanding of disrupt the institutional equilibrium what ‘poverty’ means, but at the same characterizing so many governments time it also calls for greater insight into of developing states, whereby these those members of society who are still governments tend to operate within the vulnerable to falling back into poverty, political and economic binary of addressing and thus how the particular lived realities the interests of the rich or poor. of this ‘sub-group’ differ greatly from those of the new middle class The duo demonstrate their understanding that are less vulnerable. of middle-class aspirations that are under threat in advanced and emerging Rapid growth in both the economies, and economies through their discussion of the middle classes, of Brazil, Russia, India, the role of the middle class in various China and South Africa (the BRICS nations) protest movements around the world. over the past decade has duly captured Bhalla and Kharas highlight a growing the attention of policymakers, academics middle-class angst and deconstruct the and development practitioners and concept to determine its causes and its encouraged them to ask questions social, economic and political effects about the potential role of these on society. Bhalla and Kharas argue that growing middle classes in promoting the worldwide growth in the middle class democracy, strengthening institutions, in general and the protest movements in and facilitating more inclusive forms of particular need to be given a featured growth. Accompanying these questions place in development discussions. is the more unsettling issue of how the BRICS nations might in fact be implicated Building on the issues and questions in the apparent amplification of social raised by Bhalla and Kharas, Francis inequalities in the face of ‘economic Fukuyama explores the interests and progress’, or, as some of the articles in this reasons for discontent of such members issue illustrate, their tendency to further of the new global middle class. Linking 1. Middle Class Research Coordinator, polarise already unequal societies. the 2011 Arab Spring, protests in Turkey Intenational Policy Centre for Inclusive Growth (IPC-IG). 4 International Policy Centre for Inclusive Growth
and the recent nationwide demonstrations itself with the interests and values region remain important. His analysis in Brazil as being in part the result of the of the wealthy and elite? highlights the importance of those most new rising global middle class, he reveals vulnerable to falling back into poverty that change instigated by the middle Birdsall builds on this question of within society—that is, the large class really only comes to pass once middle-class values aligning with proportion of people who have the middle class engages in building or against established norms and emerged out of poverty yet are still not coalitions with other segments of society institutions, or acting against them as economically secure or stable as part of (as they rarely make up more than a an agent of change that is raised in the the middle class, while simultaneously minority of the population in developing articles of Bhalla and Kharas as well as remain outside the target group of poor countries and are often quite internally Fukuyama, who illustrate the relevance people who receive the lion’s share of divided). Fukuyama subsequently of such a question today, within the the benefits from social programmes. examines this necessary building present-day protests occurring in both of coalitions with other groups in the the developing and developed worlds. Further narrowing the regional protest movements of Egypt and Tunisia, discussion about the middle class and the success or failure of doing so in Andrés Solimano adds to the complex introduced by Lopez-Calva, Marcelo Neri relation to the current ongoing protests discussion of defining the middle class explains the concept of the ‘new middle and rapid middle-class growth occurring introduced by Birdsall, and demonstrates class’ in Brazil using the socio-economic in Turkey, Brazil and China, among others. how this further complicates the effects classes developed by the Centre for that economic and social policies have Social Policies of the Getúlio Vargas Nancy Birdsall examines ‘The Middle had on this segment of the population. Foundation (CPS/FGV) that sees Brazilian Class in Developing Countries—Who society divided into classes A, B, C, D and They Are and Why They Matter’ first Solimano examines the impacts of the E, where A is considered to be the by dissecting the various approaches neoliberal era and globalisation on the wealthiest class, and E the poorest one. to defining the middle class within a social structure of countries as being: Neri explores in detail the growth of this national and global context as well as ‘Class C’ (interpreted as the growth of a the advantages and disadvantages to the sharp concentration of income and new middle class) to show how different using such definitions. She notes that wealth among few economic elites; and unique the recent economic describing the ‘middle class’ in developing the movement of millions of growth experienced and social policies countries in regards to absolute income people out of poverty and into implemented in Brazil have helped lift allows for analysis of the middle class the ‘middle class’; many out of poverty, or what Neri refers across different countries and time the increasing internal differentiation to as the ‘bright side of the poor’. periods. This in turn provides a footing within the ‘middle class’; and to engage in an examination of the outsourcing of firms and He explains in detail the character the economic and political causes activities to countries with lower of such a ‘new’ middle class and its and consequences of the size and costs of production and wages, significance for Brazilian society, not characteristics of the middle class, whilst increasing import competition of necessarily as a new consumer class but, providing some insight into understanding low-cost manufacturing, and rather, as a new Brazilian productive class. the larger development picture. increasing rates of immigration Neri characterizes this ‘new’ middle class and de-unionisation. as one that has experienced income Furthermore, Birdsall raises some growth by way of real wage increases very poignant questions about the In his article, Solimano hones in on through channels of formal employment, middle class as an agent of change analytical and policy issues worth and who are some of the most optimistic or support for existing structures considering when analysing the impact of members of Brazilian society. He outlines and institutions such as: these developments on the middle class. the methodology used in his definition of the new Brazilian middle class and Will the new middle class rising in Luis F. Lopez-Calva then engages in a what types of analyses it allows for both emerging economies be more likely regional examination of the middle class as a description and as an operational to support market-oriented economic in Latin America based on the past and analytical definition. policies? Will this group be more decade of economic growth and some likely to demand transparent and governments’ dramatic policy efforts to Ricardo Paes de Barros and Diana effective government and reduce inequality through state Grosner then present their evaluation governance? interventions. He introduces his new of income distributions and trends that Does the quality of public services approach to analysing the middle class affect the size of the middle class. They matter to such a new middle class? based on the concept of vulnerability to explore various states of development Or, rather, will this rising middle class falling into poverty—or, rather, a degree as characterized by different levels of in many developing countries opt out of economic security. By applying such a income inequality and demonstrate the of public options, for private options definition of the middle class in Latin usefulness of their model in exploring such as private health care, gated America, Lopez-Calva is able to classify societal transitions from one state to communities and private schools different economic groups throughout another as overall societal income (once they attain a certain the region. Moreover, he makes clear the increases. They illustrate that monitoring level of income)? role of the middle class within the evolution of the relative size of Will this rising middle class see development as well as the case that for income classes, namely the lower class, its interests aligned with the poor those still in poverty, in addition to those the middle class and the upper class, and vulnerable populations? who have not yet secured a place in the can be an important tool to describe and Or conversely, will this group align middle class, social policies within the understand the future trends and/or Poverty in Focus 5
transformations of national income middle class used in their article is The last two articles round off an analysis distribution. They conclude that within the one developed by the Brazilian of the middle classes within the BRICS societies characterized by very high Secretariat of Strategic Affairs (SAE), countries by shifting the focus to the income inequality, continuous growth which shares similar elements to that middle class of South Africa. Justin will not lead, on its own, to the introduced by Lopez-Calva based on the Visagie examines the multitude of ways emergence of a middle class majority. concept of economic security and the to express the South African middle low probability of falling into poverty. class, and those that he sees as most Marilena Chaui continues with a In exploring the conception of the appropriate. In his exploration of the critique of the term ‘middle class’ used middle class and the degree of components of the South African middle to describe the increase in the number vulnerability to economic shocks, they class during and after apartheid, he also of wage-earning employees in Brazil, and present their own unique methodology demonstrates how the concept fits considers it to be a term that has been to verify the robustness of this concept within development discussions and wrongly and far too hastily adopted. of vulnerability in relation to the its implications for policymaking. She does not consider such a group middle class in Brazil. to constitute a growing middle class Adding to the discussion, Mosidi S. but, rather, sees it as a new and Thomas F. Remington brings the middle Nhlapo and Barbara A. Anderson explore heterogeneous working class, defined class discussion to Russia as he explores the composition of the South African by differences in education and by other Russian income distribution to examine middle class and how it has evolved over skills and competencies. economic development, inequality as the past 15 years. They show that even well as the prospects of middle-class though the size of the middle class in She considers that the actual middle class growth in post-Communist Russia. South Africa has grown, differences feeds into the maintenance of order and He demonstrates that the Russian in the proportion of households with a stability because of its very fragmented economic dependence on the natural middle-class standard of living still mirror nature that sees its interests torn resource sector for economic growth has differences between the four officially between the aspirations of continuing to increased the incomes of the already recognised racial groups of the apartheid climb the socio-economic ladder, and its extremely small wealthy segments of era. Nevertheless, the South African fear of sliding back down. Here is where the Russian population, while furthering middle class has become increasingly her issue with the term ‘middle class’ is inequality and also stifling the growth more reflective of the majority of revealed to be much more than one of the middle class. South African society in terms of semantics, as she sees the use of the of its composition. term ‘new middle class’ in Brazil (instead Zoya Hasan adds to the discussion of ‘new working class’) as risking its introduced by Solimano about the This changing racial composition of the ideological absorption by the ruling effects of globalisation and neoliberalism South African middle class has shifted economic elite class. In this sense, Chaui on the middle class, as well as responds South African product development and provides a response to Nancy Birdsall’s to Nancy Birdsall’s questions of middle- advertising campaigns in attempts to question about the character of the class character, defining the new middle target this growing new consumer middle class, as she considers their class(es) in India as lacking any interest segment of society and its increasing emphasis on security to constitute a in public programmes to narrow the levels of disposable income. Although group that is extremely conservative inequality gap or ensure basic goods the composition of the middle class and reactionary in Brazil, that helps and services for the majority of Indians. has become more inclusive in South to contribute to the maintenance and Africa, Nhlapo and Anderson show that ideological status quo of the Hasan also discusses the growing in South Africa inequality between racial minority elite ruling class. political importance of India’s middle groups remains in regards to middle classes and how they are re-shaping the class entry, welfare and opportunities. Like Chaui, Jesse Souza critiques the political landscape. She argues that the manner in which the middle class in growth of the middle classes are forcing This special issue of Poverty in Focus Brazil has been defined. He adds to political parties to reconcile the need to brings together an extremely diverse the critiques made by Chaui and appeal to these significant and growing range of conceptions of the middle demonstrates that the middle class in groups and their lack of desire for social class, and a variety of perspectives Brazil has been incorrectly named and spending, with the traditional political of its significance within several considers such a group to form a new support bases: the poorest segments different discourses. working class of individuals who have of Indian society. not ‘emerged’ or entered a new The following articles also help to shed socio-economic class but, rather, have Moving the focal point further East, light on both the elusive definition of struggled and overwhelmingly ‘fought’ Natalie Chun of the Asian Development what it means to be part of the middle their way into better socio-economic Bank examines the opportunities and class in different countries (beyond any positions. Souza sees such a group as challenges of the rising middle class academic or semantic exercise), as well as characterised by discipline and self- in Asia. She demonstrates that the its role in development. In the years control—attributes which have helped increasing economic growth rates which to come, as such a group within many them to succeed socio-economically. have helped to develop a stronger and developing economies continues to more stable middle class in Asia will not grow in size and significance, Miguel Foguel and Rudi Rocha continue only continue to be vital for the further the response to such questions the examination of the Brazilian middle generation of growth within the Asia- is also set to become increasingly class by exploring its vulnerability to Pacific region but will also serve as a important in parallel. economic fluctuations. The definition of significant driver of the global economy. 6 International Policy Centre for Inclusive Growth
by Surjit Bhalla, Oxus Research and Investments Middle-class Angst and Homi Kharas, The Brookings Institution1 Spills Over
The concept of the ‘middle class’ has concentrated in North America, Europe Brazil, India and China were roots that go back millennia, originating and Japan to a more balanced world once dismissed as primarily as a concept in the writings of Aristotle, economy with several major regional being home to large numbers who defined it as owners of property markets. In addition to changes between of the world’s poor people and thus the people best positioned countries that have started to reverse the but are now recognised to rule the state. ‘Great Divergence’ of the 20th century, as major sources of an there will be significant transformations emerging global middle class. According to him, they were a within countries as their populations moderating force with both the shift from poverty to a more Signs of middle-class angst capability and incentive for sober affluent existence. are evident throughout governance, but through its long the world: the middle class history, the middle class has been The political and material demands joined in the ‘99 per cent’ linked to a wide range of concepts of middle-class people differ greatly movements in advanced from thriftiness to democratic spirit from those of rich and poor people, economies and the recent to unchecked consumerism. potentially disturbing the institutional anti-government protests equilibrium in many nations. in emerging ones as In more recent years, this group of diverse as Brazil, India, people has been increasingly recognised Signs of middle-class angst are evident Turkey, Egypt and Russia. as a key driver of the global economy. throughout the world: the middle class Unlike poor people, they have meaningful joined in the ‘99 per cent’ movements amounts of disposable time and income. in advanced economies and the recent Unlike rich people, their numbers are anti-government protests in emerging great enough to establish global trends. ones as diverse as Brazil, India, Turkey, Egypt and Russia. The rise of the middle class is undoubtedly one of the most important The transformative potential of the developments of the modern world, and middle class underlines the imperative the term’s use rose steadily over much of for understanding possible future the 19th and 20th centuries.2 Countries scenarios of global growth and such as Brazil, India and China were once income distributions. dismissed as primarily being home to large numbers of the world’s poor people The size of the world’s middle class but are now recognised as major sources has grown rapidly in the past 15 years, of an emerging global middle class.3 spurred by the economic rise of populous developing countries. Rapid growth in these and other The ladder to the middle class —hard economies is fundamentally reshaping work, savings, higher education, urban the distribution of world income and opportunities and decent jobs—is now making it dramatically more equal. a real possibility in many countries. 1. Surjit Bhalla is Managing Director of Oxus Research Several authors have attempted to and Investments and has previously held posts at define and measure this important One consequence of this trend is a large, both the Brookings Institution and the World Bank; Homi Kharas is Senior Fellow and Deputy Director phenomenon; our estimates range from youthful population accustomed to for the Global Economy and Development Program about 2 billion (Kharas, 2010) to around relatively high rates of income growth at the Brookings Institute and previously worked with the World Bank. 3.5 billion people (Bhalla, 2007). which they hope to retain in their adult lives. 2. Google Ngrams, available online:
China, for instance, has increased its Values Survey in Peru showed that poor [When] The standard average years of education to just above and middle-class people had roughly the Portugal’s, and many of its new college same support for democratic governance channels through which graduates are finding it hard to obtain (Cárdenas, Kharas and Henao, 2011). to push for reform, whether appropriate employment.4 Even under democratic or not, no longer a best-case scenario for technological Many middle-class people, of course, growth, the growing numbers of the prefer democratic systems, but not function... The only recourse educated middle class will face necessarily as their first priority. is to march in the streets. considerable competition for high-skilled work. The ‘middle-class values’ at the heart of some of these protests may be far such strategies. About twice as many It is then easy to understand why so simpler than is often believed. While referenda are held today than 50 years many feel that middle-class aspirations there are many poor people resigned ago, and many countries have are under threat in advanced and to neglect from central authorities, and implemented some form of direct emerging economies alike. While the most rich people have the means to care democracy (The Economist, 2011). middle class generally pays the bulk for themselves, the relative well-being of taxes, what they receive in return of a middle-class person can very much The recent budget troubles of California, are often poorly delivered services depend on the government’s efficiency. however, illustrate that direct voting is no whose quality is attenuated by panacea. It remains an open problem for corruption and waste. Improving public service delivery governments of how best to structure and reducing corruption were indeed themselves to maintain predictable As they and their children face the key demands of the recent protests. policies while nonetheless providing prospect of a job-market crunch Notably, the dissent now faced by Dilma channels through which to actualise and government resistance to reform, Rousseff in Brazil was sparked by the middle-class desires for a better future. many have become increasingly vocal seemingly mundane issue of fares for But governments that neglect this advocates for change, setting the public transportation. group should beware. stage for the recent middle-class, anti- government demonstrations. Anna Hazare’s movement in India The middle class is unlikely to be docile similarly focused on corruption rather and satisfied with generally good The sudden surge in these protests than an idealistic call for improved economic performance but, instead, reflects both a decreased cost of and democratic processes. Other recent holds the public sector to an increasingly demand for political action. New social protests, such as those against Turkey’s high standard of accomplishment. media technology has greatly simplified Erdoðan or Russia’s Putin, have featured the task of organising and energising politics more centrally, but balancing political movements. them out are those protesters in Egypt Ali, S. and U. Dadush (2012). In Search who called for the removal of both of the Global Middle Class: A New Index. Washington, DC, Carnegie Endowment At the same time, protesters also feel that the authoritarian Mubarak and a for International Peace. the standard channels through which to democratically elected Morsi. push for reform, whether democratic Bhalla, S.S. (2007). Second Among Equals: The Middle Class Kingdoms of India and or not, no longer function. The only How can governments be more China. Washington, DC, Peterson Institute recourse is to march in the streets. accountable to the middle class for International Economics,
by Francis Fukuyama, Stanford University 1 The Middle-class Revolution
There is a common theme But all regions of the world will In Tunisia, Egypt, Turkey and running through the 2011 Arab Spring, participate in this trend. This includes Brazil, political protest has the protests in Turkey’s Taksim Square Africa, which the African Development been led not by poor people, and the recent demonstrations that have Bank estimates already has a middle class but by young people with shaken Brazil. It is the rise of a new of over 300 million people. higher-than-average levels global middle class. of education and income. Middle-class status is best defined not by In Tunisia, Egypt, Turkey and Brazil, simple income levels, but by education, Middle-class status is best political protest has been led not occupation and ownership of assets, defined not by simple income by poor people, but by young people which are far more consequential in levels, but by education, with higher-than-average levels of predicting political behaviour. occupation and ownership education and income. of assets, which are far more Any number of cross-national studies, consequential in predicting They are technology-savvy and use social including recent Pew surveys and data political behaviour. media such as Facebook and Twitter to from the World Values Survey at the broadcast information and mobilise University of Michigan, show that higher demonstrations. Even when they live in education levels correlate with increased countries that hold regular democratic value placed on democracy, individual elections such as Turkey and Brazil, they freedom and tolerance for alternative feel alienated from the ruling political elite. lifestyles. Middle-class people want not just security for their families, but choices In the case of Turkey, they objected to and opportunities for themselves. Prime Minister Recep Tayyip Erdoðan’s development-at-all-cost policies and Those who have completed high authoritarian manner. school or have some years of university education are far more likely to be aware In Brazil, the protesters are objecting of events in other parts of the world, and to an entrenched and highly corrupt to be connected to people of a similar political elite that has showcased social class abroad through technology. glamour projects such as the World Cup and the Rio Olympics while failing to Most importantly, newly arrived middle- provide basic services such as health class individuals are often most likely and education to the general public. to experience what the late political scientist Samuel Huntington called The business world has been buzzing “The Gap”: that is, the failure of society about the rising ‘global middle class’ for to meet their rapidly rising expectations at least a decade now. A Goldman Sachs for economic and social advancement. report projected that spending by the world’s middle three income quintiles The latter phenomenon was clearly will rise from the current 31 per cent evident in the Arab Spring, where of total income to 57 per cent in 2050. regime-changing uprisings were led by tens of thousands of relatively Another report by the European Union well-educated young people. Institute for Security Studies predicted that the number of middle-class people will Both Tunisia and Egypt had produced 1. Senior Fellow at Stanford’s Freeman Spogli Institute grow from 1.8 billion in 2009 to 3.2 billion large numbers of college graduates for International Studies, and author of The Origins of Political Order: From Prehuman Times to in 2020, and 4.9 billion in 2030 (out of a over the past generation, but the the French Revolution. projected global population of 8.3 billion). authoritarian governments of Ben Ali Please note that this is a redacted version and Mubarak were classic crony capitalist of the Saturday Essay of the same title originally published in the June 29, 2013 U.S. edition of The bulk of this growth is forecast to regimes, in which economic opportunities the Wall Street Journal (page C1). occur in Asia, particularly China and India. depended heavily on political Poverty in Focus 9
connections. Neither country in any The situation in Brazil is rather different. event grew fast enough economically to The protesters there will not face tough While protests, uprisings and, provide jobs for ever-larger cohorts repression from President Rousseff’s occasionally, revolutions are of young people. The result was administration. Rather, the challenge will typically led by newly arrived political revolution. be to avoid co-optation over the long term by the system’s entrenched and middle-class individuals, the While protests, uprisings and, corrupt incumbents. latter rarely succeed on their occasionally, revolutions are typically led own in bringing about by newly arrived middle-class individuals, Middle-class status does not the latter rarely succeed on their own automatically mean that an individual long-term political change. in bringing about long-term will automatically support democracy political change. or clean government. Middle classes Economic growth has there, and in Asian countries such as produced a middle class in This is because the middle class seldom Thailand and China, have thrown China that now numbers represents more than a minority of the their support behind authoritarian society in developing countries, and is governments when it seemed like that in the hundreds of millions itself internally divided. Unless they can was the best means of securing their and constitutes perhaps a form a coalition with other parts of economic futures. third of the total population. society, their movements will not produce enduring political change. Today’s urban middle class could The technologically dissipate its energies in distractions Thus the young protesters in Tunis such as identity politics, or else get empowered middle class or in Cairo’s Tahrir Square, having individually bought off by a system will be highly demanding brought about the fall of their respective that offers great rewards to people of their politicians dictators, failed to follow up by organising who learn to play the insiders’ game. political parties that were capable across the board. of contesting nationwide elections. Economic growth has produced Students in particular are clueless about a middle class in China that now how to reach out to peasants and the numbers in the hundreds of millions each year, whose job prospects are working class to create a broad and constitutes perhaps a third dimmer than those of their working-class political coalition. of the total population. parents. If ever there was a brewing ‘Gap’ between rapidly rising expectations and By contrast, the Islamist parties— These are the people who communicate a disappointing reality, it will emerge in Ennahda in Tunisia, and the Muslim by Sina Weibo—the Chinese version of China over the next few years, with vast Brotherhood in Egypt—had a social Twitter—and have grown accustomed implications for the country’s stability. base in the rural population. Through to exposing and complaining about years of political persecution they had the arrogance and duplicity of the The new middle class is not just a become adept at organising their government and Party elite. challenge for authoritarian regimes less-educated followers. or new democracies. No established They want a freer society, though it is not democracy should believe it can rest The result was their triumph clear if they necessarily want one-man on its laurels, simply because it holds in the first elections held after the one-vote democracy in the near term. elections and has leaders who fall of the authoritarian regimes. do well in opinion polls. This group will come under particular A similar fate potentially awaits the stress in the upcoming decade as China The technologically empowered middle protesters in Turkey. Prime Minister struggles to move from middle- to high- class will be highly demanding of their Erdoðan remains popular outside the income status. Economic growth rates politicians across the board. The USA and country’s urban areas, and has shown have already started to slow over the Europe are experiencing sluggish growth little reluctance to mobilise members of past two years, and will inevitably and persistently high unemployment, his own Justice and Development Party revert to a more modest level as which for young people in countries (AKP) to confront his opponents. the country modernises. such as Spain reaches 50 per cent.
Not only does this group face tough The industrial job machine that the The older generation in the rich world repression from a prime minister with regime has created since 1978 will has failed the young by bequeathing authoritarian instincts, it faces the same no longer serve the aspirations them crushing debts. No democratic difficulties in forging linkages with other of this population. politician in the USA or Europe should social classes that have bedevilled similar look complacently down on the events movements in Russia, Ukraine It is already the case that China produces in Istanbul or São Paulo, and think and elsewhere. some 6–7 million new college graduates “it can’t happen here”. 10 International Policy Centre for Inclusive Growth
by Nancy Birdsall, Center for Global Development1 The Middle Class in Developing Countries – Who They are and Why They Matter
With rapid growth in emerging $10 per capita per day, or around $15,000 By 2030 perhaps market economies over the last decades, per year for a family of four—thresholds 30 per cent, or 2 billion millions of people have left poverty and which put the resulting ‘middle class’ people (out of a projected entered the new global middle class. above the middle of the distribution developing-country Using household income of US$10 per even in upper middle-income Brazil population of almost capita per day (at 2005 purchasing power (Figure 2b)? And why absolute income 8 billion), will be parity) as a minimum and $50 as a thresholds in the first place, rather than middle class... [yet] maximum (more on that below), about the more obvious and conventional ...there is no consensus 15 per cent of people in the developing identification of middle class as those among development world could be said to be middle class. in the ‘middle’ of a country’s or the economists on how to world’s distribution? identify let alone define Relatively conservative country-specific the middle class. projections of growth suggest that by First, on the $10 threshold. In the 2030 perhaps 30 per cent, or 2 billion relatively open economies of most people (out of a projected developing- developing countries today, households country population of almost 8 billion), at lower levels of income, though no will be middle class (Figure 1). By that longer poor, are still highly vulnerable to time, the number of middle-class people external and internal idiosyncratic risks, in today’s developing countries will be such as an economy-wide recession or a 1. Founding President of the Center for Global slightly larger than the number in today’s personal health problem. Lopez-Calva Development, Email: [email protected]. Address: Center for Global Development, developed countries. and Ortiz-Juarez (2011), using panel data Third Floor, 1800 Massachusetts Ave NW, on households in Latin America in the Washington, DC. There is no consensus among 1990s, show that below $10 per person, This article is based largely on Birdsall (2010) and development economists on how to households have more than a 10 per cent Birdsall, Lustig and Meyer (2013). I thank profusely identify let alone define the middle class probability of falling into poverty over Christian Meyer for his help on the ideas and his sole authorship of the figures. (Figure 2a). Why a minimum threshold of five years. Their finding is fully consistent with evidence that at low levels of income, household income is volatile, and in many countries more people spend time as ‘poor’ over several years than the rate of poverty in any one year implies. To be middle class implies sufficient income (about $10 per person per day, at least in Latin America) for a household to be reasonably secure in a material sense—able to save, invest and plan for the future (with a low discount rate in economic terms).
Second, in opinion and value surveys, again in Latin America, self-reported class status seems to confirm the $10 threshold (Ferreira et al., 2013). This may be a coincidence, or it may be that people in several Latin American countries intuitively associate the Note: Scaled to global population using UN DESA population forecasts (medium variant). economic security of being above Source: Birdsall, Lustig and Meyer (2013). $10 with middle-class status. Poverty in Focus 11
taxpayers and beneficiaries of the social system and as active citizens and voters —and how or whether they will support growth that is inclusive and reduces poverty. Will the new middle class be more likely to support market-friendly economic policies, more likely to demand a level playing field in their economies, with transparent and effective government and governance, and more likely to support sensible pricing of power, water, higher education, social insurance and the exchange rate?
To what extent does that and will that depend on the quality of public services, the size and quality of government and confidence in its effectiveness at any one time?
There is no question that the rising middle class in developing countries is the outcome of recent healthy rates of growth.
Perhaps in a virtuous cycle, recent growth in India, Africa, China and much of Latin America—whether driven by ‘luck’ (high commodity prices, natural resource windfalls), ‘globalisation’ (trade, capital and labour movements), good policy (sound macroeconomic fundamentals, more democratic and accountable governments) or the Source: Author’s elaboration. intangible benefits of the information revolution or of changing global norms (consider the Millennium At the top, $50 turns out to be a sensible questions about the dynamics of Development Goals) that have put proxy for excluding rich households. development and poverty reduction— more girls in school—will be more likely Only about 2 per cent of households in including the fundamental question: to be sustained and institutionalised Latin America report daily income per why nations grow or fail to grow. because an independent middle class person above $50—or about $75,000 for In an increasingly integrated global has become big enough and politically a family of four. (There is good evidence market economy, with better household powerful enough to be a force for of substantial underreporting of income data and such analytic advances as good government and equal- in household surveys; therefore, an purchasing power parity pricing, opportunity growth. alternative to $50 is to simply assign the absolute thresholds are more possible top 2 per cent of households in the and defensible than in the past. That would imply that the demands income distribution in every developing of the new middle class in developing country to the category of ‘rich’.) The global growth of the middle class countries will involve little trade-off over the next decades will bring with with social programmes, redistributive The identification of ‘middle class’ it significant shifts in global production tax and expenditure policies, and in developing countries by absolute and consumption patterns that have poverty-reducing growth overall. income has the great advantage of been widely remarked. allowing analysis across countries and Or perhaps not. Perhaps the rising over time of the economic and political Perhaps more important from a middle class in many developing causes and consequences of the size and development perspective is the question countries will opt out, into gated characteristics (schooling, employment) of of how members of an income-secure communities and private schools, the middle class, and the lessons and independent middle class will matter and see its interests aligned not with for understanding some of the big in their relationship with the state—as the poor and vulnerable populations 12 International Policy Centre for Inclusive Growth
(in almost all developing countries still Birdsall, N. (2010). ‘The (Indispensable) Ferreira, F.H.G., J. Messina, J. Rigolini, Middle Class in Developing Countries’ in L.-F. Lopez-Calva, M.A. Lugos and R. Vakis a larger proportion of the population for R. Kanbur and M. Spence (eds), Equity and (2013). Economic Mobility and the Rise of the the next several decades) but with a new Growth in a Globalizing World. Washington, Latin American Middle Class. Washington, rich class that is also benefiting from DC, World Bank: 157–188. DC, World Bank. growth and globalisation, and also and Birdsall, N., L. Lustig and C.J. Meyer (2013). Lopez-Calva, L.-F. and E. Ortiz-Juarez more so able to punch above its weight ‘The New Poor in Latin America: Challenges (2011). ‘A vulnerability approach to the at home and in global settings. and Risks’, CGD Working Paper Series, definition of the middle class’, World Bank forthcoming. Washington, DC, Policy Research Working Paper Series, Center for Global Development. No. 5902. Washington, DC, World Bank.
by Andrés Solimano, International Center for Neoliberalism, Globalisation Globalization and Development1 and the Middle Class
At least four main impacts of the Fourth, the salaries and employment of These trends have polarised neoliberal era and globalisation on the working class have been affected by the structure of societies, the social structure of countries delocalisation of firms and outsourcing creating large differences in can be distinguished. of activities to low-wage countries, income and wealth between increased import competition of the very rich, the middle class First, there has been a sharp low-cost manufacturing, and increased and the working class, concentration of income and wealth in immigration and de-unionisation. contributing to social small economic elites. This phenomenon anxiety, despair, discontent is known as the ‘rise of the top 1 per cent’. These trends have polarised the structure and a propensity to protest. In countries that were pioneers in of societies, creating large differences embracing the neoliberal model, such as in income and wealth between A shortcoming of income– the USA, the income share of the richest the very rich, the middle class and the based definitions of the 1 per cent of the population is about 22 working class, contributing to social middle class is the reduced per cent. In the UK it is 15 per cent, and in anxiety, despair, discontent and a informational power to infer Chile it reached a record 30 per cent. propensity to protest. the effects of policies on social rights of the middle class, the Second, in the last two decades or so, This article focuses on analytical degree of their economic due to rapid growth in China, India and and policy issues worth considering security, their voice and some Latin American countries, millions when analysing the impact of these sense of empowerment. of people have left poverty and joined developments on the middle class. the ranks of the ‘middle class’, at least These refer to the elusive concept of when measured statistically in terms middle class, its alleged roles as source of the number of people living above of consumer power and entrepreneurship, the poverty line. and its contribution to the stability of democracy. Third, there has been a process of internal differentiation within the middle Issues of the definition of the middle class class. Individuals working in public Analysis of the middle class has devoted schools, public hospitals, ministries substantial effort to reach a workable and public enterprises have suffered definition of this segment of the the adverse effects of fiscal retrenchment, population. Economists tend to use austerity policies and privatisation. income-based (or consumption-based) definitions, which can be absolute On the other hand, an ‘emerging’ middle- (for example, dollars of income per day class segment formed by financial or month) or relative, such as deciles or experts, lawyers, economists and percentage of median income. business administrators has seen its income rise and has joined the A shortcoming of income–based definitions of the middle class is the 1. President, International Center for Globalization ranks of the technocracy of the and Development, CIGLOB. large corporations. reduced informational power to infer Poverty in Focus 13
the effects of policies on social rights from before the industrial revolution in frightened by the economic insecurity, of the middle class, the degree of their England when an emerging capitalist class unemployment and crises and the rise economic security, their voice and emerged from the urban middle class. of left-wing political movements.3 sense of empowerment. International The new entrepreneurs—unlike the organisations have applauded the rise of landlords, the story goes—were more Tracing the effects of neoliberalism a ‘new global middle class’ that basically oriented towards savings and tolerated and globalisation on the middle class emulates consumer patterns of advanced ‘delayed gratification’ to accumulate is a complex process. Issues of definition capitalist countries, but they probably capital, earn profit and ascend in the social make it difficult to gauge the actual size of pay less attention to these hierarchy. However, the middle class is a the middle class and map the effects other dimensions. heterogeneous group comprising also of economic and social policies on this of middle-class bureaucrats, small shop segment of the population. However, it is Sociologists prefer to define the middle owners, professionals and intellectuals apparent that the concentration of class in terms of patterns of occupations, besides entrepreneurs. incomes among rich economic elites, the asset ownership, values, attitudes toward higher cost of education, the fragility of risk, and aspirations of upward social In addition, the entrepreneurial segment traditional middle-class jobs and the rise mobility. In this framework the middle of the middle-class is itself highly of indebtedness have adversely affected class is defined in terms of its insertion differentiated, with both ‘entrepreneurs the middle class throughout this into the productive structure of the of opportunity’ and ‘entrepreneurs by neoliberal period. economy and its attitudes. Some authors necessity’ (owners of small shops and such as Gilbert (2008) identify the middle firms that earn a modest rate of return Moreover, idealisations of the middle class as a “majority class”; according to his that provide an income for living).2 class as a source of entrepreneurship calculation, around 60 per cent of the and a model of democratic behaviour population of the USA would be A third channel focuses on the middle need to be evaluated with caution in middle (majority) class. class as a stabilising and democratic light of historical and contemporary segment of society. The argument is that evidence on the subject. The contributions of the middle a moderate political centre would come class to development and democracy along with a large and consolidated Banerjee, A.V. and E. Duflo (2008). ‘What is Middle Class about the Middle Class The new literature on the middle class middle class, and this would reinforce around the World?’, The Journal of Economic stresses positive contributions of having economic and political stability. Perspectives, Spring, Vol. 22, No. 2: 3–28. a large and solid middle class on the In contrast, unequal, polarised Frieden, J. (2006). Global Capitalism. Its fall economy. Solimano (2009) examines societies may provide a milieu prone to and Rise in the Twentieth Century. New York three channels: (a) the impact of the authoritarianism and populism, which and London, W.W. Norton and Company. middle class on consumer demand; are inimical for a stable democracy. Gilbert, D. (2008). The American Class (b) the middle class as a source of The historical record of crises of Structure in an Age of Growing Inequality, entrepreneurship; and (c) the links democracy in Latin America and Europe 7th Edition. Los Angeles, London, between the middle class and in the 20th century suggests a more New Delhi and Singapore, Pine Forge Press. the stability of democracy. nuanced story of the relationship Hobsbawm, E. (2002). Interesting Times, A between the middle class and democracy. Twentieth Century Life. London, Allen Lane. These three channels need to be Solimano, A. (2009). ‘Stylized Facts on the evaluated critically in terms of their Authoritarian experiences in Latin Middle Class and the development Process’, merits and limits. The argument that American during the 1960s, 1970s and in A. Estache and D. Leipziger (eds), Stuck in a larger middle class stimulates 1980s do not offer convincing support the Middle. Is Fiscal Policy Failing the Middle Class?. Washington DC, consumption and aggregate demand for the hypothesis that the middle class Brookings Institution Press. needs some qualification. Certainly, is always and everywhere a staunch middle-class families demand consumer guardian of democracy. In fact, 2. In an empirical study of 13 low- to middle-income durables, education services, travel, authoritarian regimes in Brazil, Argentina, countries, Banerjee and Duflo (2008) provide evidence housing and other services. However, Chile and Uruguay had different degrees of the pervasiveness of the entrepreneur by necessity middle-class people and families also of support from the middle classes, in the developing world. rely, largely, on debt to finance these apparently pleased that military rule was The typical middle-class entrepreneur in their sample has one employee (in some cases a maximum of three outlays. This makes them vulnerable ‘restoring order’ in societies affected by employees), their stores or ‘firms’ have minimal to financial shocks and instability in the social movements pushing for a productive assets such as machinery and equipment, and the activities engaged in display very low levels of labour market such as the crises triggered redistribution of economic power and technological intensity. The findings of this study are in 2008 with job losses, record youth democratisation of society. In turn, the hard to generalise as a depiction of middle-class entrepreneurship in the world economy. Low-income unemployment rates (in Greece and Spain, rise of fascism in Europe in the 1920s countries with large informal sectors dominate the above 50 per cent) and lack of credit. and 1930s teaches a similar lesson. sample; in turn, the low range definition of middle- class individuals (those earning U$2–10 per day) is highly likely to include people in poverty and, therefore, A second channel is the middle class The regimes of Mussolini in Italy capture mostly entrepreneurs by necessity. as a source of entrepreneurship. This and Hitler in Germany were apparently 3. See Hobsbawm (2002) and Frieden (2006) for good identification has historical roots dating popular among the middle classes historical accounts of those periods in Europe. 14 International Policy Centre for Inclusive Growth
by Luis F. Lopez-Calva, The World Bank 1 A New Economic Framework to Analyse the Middle Classes in Latin America
As Latin America experienced the concept of exploitation and property Not being poor does not a decade of economic growth and relations. The middle class is identified as graduate people immediately reductions in inequality, which resulted small independent businessmen and into the middle class. in an unambiguous improvement in professionals, who— along the same There is a group, which terms of economic mobility, the question lines as in the Weberian view—acquire actually represents the arises: Has the region become a ‘middle- skills, knowledge or education, relying majority in Latin America, class society’? Such a question entails a only on themselves and their resources who are not poor but not more specific conceptual discussion— to achieve a better economic position. middle class yet: namely, what lies between no longer the vulnerable. being poor and being a middle-class John Goldthorpe would later propose an citizen? Recently, a new way to think empirically well-defined way to analyse Ideally, one would want about middle classes, from an economic social stratification, referring to the .to anchor the concept perspective, has been proposed and middle class as those who look towards of middle class to a applied to regional comparisons in Latin the future and thus see savings and non-arbitrary, welfare-based America and the Caribbean (Lopez-Calva education as essential. principle, a particular feature and Ortiz-Juarez, 2012; Ferreira et al., 2013). that differentiates this According to this framework, an A common feature is that the middle situation from others— individual becomes middle class when class is associated with the accumulation much like the measurement s/he is no longer vulnerable to poverty. of human capital and savings. of poverty is linked to nutritional status. Economic security is thus the main In economics, however, the middle functioning that lies behind being class is usually defined in terms of middle class.2 As a result of the income, either in relative or absolute classification of income groups under terms. In the first case, economists look 1. This article draws from joint work with Eduardo this notion, not being poor does not at the individuals in a certain range Ortiz-Juarez, Jamele Rigolini and Florencia Torche, graduate people immediately into the of a society’s income distribution—for as background research for the Regional World Bank Flagship entitled Economic Mobility and the Rise of middle class. There is a group, which example, around the median of the the Latin American Middle Class, written with Francisco actually represents the majority in Latin income distribution.3 When comparing Ferreira, Julian Messina, Jamele Rigolini, Maria Ana Lugo America, who are not poor but not middle classes across countries, however, and Renos Vakis (see Ferreira et al., 2013). Samantha Lach provided assistance in the preparation middle class yet: the vulnerable. these statistical definitions face the of this article. problem of different median incomes 2. We are referring here to an ‘absolute’ notion of middle What is ‘middle’ about being in each country, and, therefore, class (think of the analogy with the concept of poverty). A ‘relative’ measure, based on the concept of middle class: an economic perspective different middle classes. polarisation, is in Cruces et al. (2011). The best-known modern literature 3. For instance, Blackburn and Bloom (1985) identify the about middle class is in Sociology. One can also employ a ‘pure income middle class as households with per capita income in The two giants on whose shoulders definition’ to measure the middle class, the range of 0.60 to 2.25 times the median income. In a different study, Davis and Huston (1992) use a we stand are Karl Marx and Max Weber. simply as a certain share of the income narrower range, between 0.50 and 1.50 times Weber conceived class as individuals with distribution—say, the middle quintile. the median. Birdsall et al. (2000) use a range between 0.75 and 1.25. common ‘life chances’ which determine The size of the middle class will be always 4. ‘Functionings’, commonly used in development their opportunities for income in the fixed in this case; however, the relevance economics, denote the set of activities and market. The middle class is then defined of these measures is that they allow the achievements (‘beings and doings’) that a person is as those individuals owning skills share of total income appropriated by capable of, following Amartya Sen. See Basu and Lopez-Calva (2011). and education. this group to be quantified. 5. The arbitrariness of this threshold and the robustness analysis is discussed in Lopez-Calva The Marxist tradition viewed class in Absolute economic definitions identify and Ortiz-Juarez (2012). terms of common structural positions the middle class as those households 6. For the upper threshold, the line is established at $50 dollars a day, leaving as ‘upper class’ around within the organisation of production, with income or consumption in a specific 2 per cent of the income distribution at the top. where class stratification was based on and comparable range (i.e. purchasing Poverty in Focus 15
power parity international dollars). The fundamental question is, of course, how to define such an absolute level. Well-known examples are the papers by Banerjee and Duflo (2008), who define the middle class as those households living with a per capita expenditure of $2–10 a day, or Ravallion (2010), who proposed the concept of the ‘developing world’s middle class’, defined as those households with per capita consumption at or above the median poverty line for 70 developing countries ($2 a day per person), and at or below the US poverty line ($13 a day per person). These papers use poverty lines as lower thresholds to define the middle class, which lacks any serious conceptual foundation.
Ideally, one would want to anchor Source: World Bank (2013). the concept of middle class to a non-arbitrary, welfare-based principle, a particular feature that differentiates In addition to anchoring the concept to a Is Latin America a middle-class society? this situation from others—much like solid conceptual basis, a characterisation Applying the concept described above, the measurement of poverty is linked of the middle class must satisfy the the research suggests that being middle to nutritional status. When economists following important conditions to be class in Latin America consists of living measure extreme poverty, such a economically relevant. On the one hand, with a per capita income of $10–50 a day, notion is based on the definition of such a definition must clearly define the at 2005 in purchasing power parity a functioning—namely, ‘being protected direction of changes. That is to say, it terms.6 Using this approach, Ferreira et al. from undernourishment’.4 must be able to establish whether there (2012) and World Bank (2013) analyse the is upward or downward mobility with evolution and characteristics of the The extreme poverty line is defined respect to a welfare-related index. middle class in Latin America and the by the amount of income that ensures On the other, a useful characterisation of Caribbean in the last 15 years (see Figure 1). such functioning for all individuals in the middle class should be able to provide a household. Along these lines, Lopez- relevant insights for policymaking. For the first time, in 2011 the number Calva and Ortiz-Juarez (2012) propose a To make this concept operational, of middle-class people exceeded the threshold based on absolute income to the method follows three steps: number of poor people. Yet, before letting define the middle class in Latin America, banners fly, some important caveats are by exploring the link between income 1. Construct actual transition matrices in order. Being a member of the middle and vulnerability to poverty. The basis for poverty status and mobility in class in the region continues to be, in of the concept is straightforward. and out, for countries where relative terms, a privileged position. Analogous to the case in measuring panel data are available; extreme poverty, the ‘middle-class 2. Run a probability model for falling The poor and vulnerable classes functioning’ here refers to ‘being into or remaining in poverty over comprise approximately two thirds protected from falling into poverty’. time, assigning each household an of the region’s population. Moreover, estimated probability, which becomes notwithstanding the positive trends, The proposed concept thus defines its vulnerability index, as a function Latin America as a region has not yet economic security as the condition of its characteristics; and become a ‘middle-class society’. While a that defines a person as middle 3. Estimate an income model, using the large share of people have emerged from class. Individuals who are above same characteristics as in the previous poverty, they have not yet joined the poverty line and who have a low step, to assign an estimated income (or the middle class. risk of falling into poverty may have potential income) to each household. characteristics in terms of risk-taking Indeed, the proportion of the population capabilities, investment decisions, Finally, the estimated probabilities are that is vulnerable is so substantial that it consumption patterns and the like that mapped to income, and a threshold of calls to attention the degree to which differ from the characteristics of those 10 per cent probability is defined as these individuals are effectively individuals who are just above the level below which people are not protected by social protection policies. the poverty line. vulnerable to poverty.5 Living above the poverty line, these 16 International Policy Centre for Inclusive Growth
It may be the case that households are not eligible for social Lopez-Calva, Rigolini and Torche (2012) assistance programmes that look at the associations between middle middle classes—in their target poor households. class and values, using data from the pursuit of maintaining Ecosocial survey. Aggregating values economic security—simply At the same time, not yet in the middle, questions into categories such as they may not be able to take full ‘support for democracy’, ‘justification of support policies that benefit advantage of the fiscal instruments violence’, ‘trust’ and ‘political participation’ them, while opting out of designed for the middle class. Given both (11 categories in total), results show that, the social contract and the magnitude of the vulnerable and the while income matters, there is no strong high risk of falling back into poverty evidence of a middle-class particularism. demanding social services faced by these households, it is clear that The relationship between income and in privatised markets active policies must continue to play an political orientations remains, for the whenever they can afford it. important role in the region’s agenda, most part, monotonic. with particular emphasis on asset accumulation—including human The authors find little evidence of It could, alternatively, very capital—and income generation specific middle-class values that mediate well be that pragmatism, (productive inclusion). The quality of between the more extreme values of the service provision thus becomes crucial. lower and upper classes. As discussed in rather than a specific value Ferreira et al. (2012), this pragmatism may structure, characterises The middle class and democratic values lead to a trap of weak (or fragmented) the middle classes. There are well-known theories social contracts. It may be the case that suggesting that middle classes play a middle classes—in their pursuit of stabilising role in the social system. maintaining economic security—simply A widely cited quote from Aristotle’s support policies that benefit them, while Politics refers exactly to that function, opting out of the social contract and stating that the middle class stands, demanding social services in privatised and mediates, between the rich and the markets whenever they can afford it poor, thus establishing the foundations (some examples could be security, for democratic development. Following education, health or energy). Such this line of thinking, recent economic dynamics could weaken the social literature has bestowed on the middle contract even further without classes the title of ‘the backbone compensating for the lack of voice of of democracy’. poorer segments of the population— left by themselves with low-quality There are different elements to the public services. discussion that link middle classes to democratic development. The one The distribution of income in the Latin derived from the Aristotelian view is America has improved in the last decade. that they are conservative, tend to This has resulted in an impressive avoid abrupt change and reject conflict. movement of people out of poverty, But that is not enough to sustain that which represents a positive trend. middle classes are necessarily good for democracy. A second, fundamental issue However, vulnerability to poverty is whether ‘being middle class’ is per se remains a serious concern for the associated with the adoption of a value majority. This article has referred to a structure that is conducive to new economic approach to analysing political development. middle class, based on the notion of vulnerability to poverty (or, in positive The middle classes are supposed to terms, economic security). Using this create conditions for social change, but definition to classify economic groups change that takes place through the in the region, it is clear that for those in existing institutional structure, respecting poverty and for those not yet securely democratic rules and refraining from in the middle class, social policies will violent means. continue to play an important role in the foreseeable future. It could, alternatively, very well be that pragmatism, rather than a specific value The fact that such a large proportion of structure, characterises the middle classes people who escaped poverty did not join in their pursuit of economic security. the ranks of the middle class points to a Poverty in Focus 17
central policy question: how well vulnerability and strengthen the middle A Polarization-based Approach to the Definition of the Middle Class’, protected are the vulnerable? Indeed, class will be fundamental in the years Research for Public Policy Working Paper: reversals can result from unexpected to come, but so will the policies that Inclusive Development, ID-03-2010, UNDP, change in conditions, and, even more improve the quality of service provision, Regional Bureau for Latin America and the Caribbean, New York. important, specific households can go which will attract the middle classes and back into poverty due to health- or create the positive dynamics Aristotle Davis, J.C. and J.H. Huston (1992). employment-related shocks, in the referred to a few centuries ago. ‘The Shrinking Middle-Income Class: A Multivariate Analysis’, Eastern Economic absence of safety nets and well- Basu, K. and L.F. Lopez-Calva (2011). Journal, 18(3): 277–285. developed insurance and credit markets. ‘Functionings and Capabilities’ in K.J. Arrow, A.K. Sen and K. Suzumura (eds.), Handbook Ferreira, F.H.G., J. Messina, J. Rigolini, L.F. López-Calva, M.A. Lugo and R. Vakis (2013). Most policy action should focus precisely of Social Choice and Welfare, Edition 1, Volume 2, Chapter 16: 153–187. Elsevier. Economic Mobility and the Rise of the Latin on how to bring those vulnerable groups American Middle Class. Washington, DC, to a more resilient state so they can Blackburn, M.L. and D.E. Bloom (1985). World Bank, doi: 10.1596/978-0-8213-9634-6,
The New Brazilian Middle Class and the by Marcelo Neri, Secretariat of Strategic Affairs (SAE) and Bright Side of the Poor Institute for Applied Economic Research (IPEA)1
The ‘new middle class’ was the new standard of living. More important nickname given to the Brazilian than where you have come from—or Members of the new middle economic class C, when the Centre for are—is where you plan to go. Members class are not defined by their Social Policies of the Getúlio Vargas of the new middle class are not defined possessions but, rather, by Foundation (CPS/FGV) started by their possessions but, rather, by their their will (determination), monitoring the evolution of Brazilian will (determination), character and character and decisions economic classes (A, B, C, D and E), where decisions associated with their future. associated with their future. A is considered to be the richest class, and E the poorest one. Previously, More than an increased capacity The ‘new middle class’ referring to someone as class C was and propensity to consume, what evokes positive feelings considered somewhat derogatory, characterises the Brazilian new middle about people who have and implying that someone was far worse-off class is its productive capacity. are continuing to advance than those of class A and B, for example. socio-economically as well as The new middle class strives to build its have achieved a new The term ‘new middle class’ also differs in future on solid foundations that sustain standard of living. spirit from the term ‘nouveau riche’, which its new standard of living, not just as a is sometimes used to refer to such a class new consumer class but, rather, as 1. Acting Minister of SAE, President of IPEA and but which above all discriminates against individuals who are fully (formally) Professor at EPGE/FGV. people’s origin. employed and whom have experienced This article is based on Neri (2011). income growth via higher wages. It is, 2. This expression was created in the 1970’s The ‘new middle class’ evokes positive however, important to stress that such by Edmar Bacha, a Brazilian economist, to illustrate Brazil’s inequalities and polarization as a country feelings about people who have and are growth has not occurred through that has a Belgium side and an Indian side. continuing to advance socio- entrepreneurship but through 3. Another approach uses longitudinal data to detail economically as well as have achieved a channels of formal employment. individual income dynamics with regard to shocks. 18 International Policy Centre for Inclusive Growth
There is a chronic deficiency in the public sizes—the purpose being to capture the The permanent income approach is policies that support productive activities number of people crossing different then applied by converting stocks of in Brazil, from professional training income brackets over time. assets into income flows. The current courses to popular productive credit. versus permanent income dichotomy The key instrument to release the Owning two cars and two dogs is allows sustainability aspects of income productive potential of Brazilian workers not the idea of the Brazilian middle class distribution to be gauged. After classifying would be regular education, which, addressed here. If the definition of the people into income brackets, different albeit still at a low levels, has improved American middle class were applied, perceptions, attitudes and expectations in quantity, quality (54th among 67 based on the distribution converted to must be incorporated into the analysis. countries which apply the Programme the Brazilian cost of living, much higher for International Student Assessment— income brackets would emerge as Consumers versus producers PISA—but among the top five with relevant. Brazilian income distribution is Concrete relations between income highest growth) and priority both relatively close to the world income flows and asset stocks opened on two of the population (rising from seventh to distribution. The Brazilian GDP per capita major fronts: those of the producer second in the list of Brazilians’ concerns) (in purchasing power parity) is 91 per and the consumer. The producer side and of the elites. cent of the global average, and the is based on labour market dynamics— Brazilian Gini Index is also close to the namely, employment, including Measurement global Gini figure. As a result of the entrepreneurship. The other side is Heuristically, we can borrow the idea of resemblance between Brazilian and informed by the literature on both a Belindia,2 a fictitious country formed world income distributions, the search consumption and savings. by the merger of Belgium and India, to for an income-based Brazilian middle better illustrate the location of the new class also delivers the capability to begin The wealth of data available from the middle class (Class C). It would be bound to explore a world middle class. Brazilian household surveys on asset by the borders with India (the poorest ownership was organized under two economic classes: E and D) and Belgium The new middle class builds perspectives—that of the consumer and (richest economic classes: A and B). the producer. Furthermore, the income its future on solid foundations generation capacity of Brazilians The focus of this analysis is the flow that will sustain its newly was witnessed to have increased of migration between these two sides of acquired living standards. This by 31.2 per cent from 2003 to 2009— Brazil. In this sense, this middle class is 38 per cent faster than their potential to middle or the mean class in statistical is what can be considered to consume, which increased by 22.59 per cent terms. Thus, the ‘new middle class’ be the bright side of the poor. over the same time period, according to comprises initially those above the synthetic indices designed to evaluate poorer half of the income distribution such indicators. and a little below the richest 10 per cent Between 2003 and 2011, 40 million after the turn of the century. people (the population of Argentina) It is also possible to investigate the joined the middle class in Brazil. importance of different income sources This definition of income brackets is Southern Brazilian cities have the highest for the advancement of social indicators derived from a choice grid that minimises relative membership of classes A, B and C. in the country. Between 2003 and 2009 income inequality, as measured by the Niterói is found to be the city with the there was a significant increase in Theil-T index, within groups. It is consistent highest percentages of class A and B. average income from social programmes with the polarisation approach proposed and pensions linked to the minimum by Esteban, Gradin and Ray (2007) that These newcomers to both classes A and B wage received by Brazilians. Throughout endogenously creates income brackets —namely, people who have ascended to this period, the average wage increased from the income distribution found in the elite—will attract attention in the by 4.61 per cent per year, which is similar practice. The chosen cut-off points are next few years similar to that given to to the growth of 4.72 per cent per year those that best distinguish the groups, the new middle class as of late. of the average total income. to minimise internal differences within income groups and, as a result, maximise An income-based view of the new middle In terms of contribution to the growth differences between these groups. class is only the beginning. Combined of average total income, wages were with a subjective approach to measure responsible for 75.3 per cent of the Following Esteban et al., income people’s expectations and attitudes, a increase, since they correspond to 76 per group brackets are calculated for three structural approach that takes into cent of the average income of Brazilians. segments that maximise the extended account the roles played by human, polarisation criterion adopted. Income physical and social assets is also of This provides the basis for sustainability cut-off points of the different economic importance. In all cases, income is the of a certain quality of life, in addition classes are calculated for a specific year choice of numeraire, and is central to social assistance/security transfers.3 and their real values kept constant to in regards to where all dimensions The new middle class builds its future measure absolute changes of the class are analysed and projected. on solid foundations that will sustain Poverty in Focus 19
its newly acquired living standards. World Polls, Brazil ranked as the nation Esteban, J., C. Gradín and D. Ray (2007). This is what can be considered with the highest future life satisfaction ‘An extension of a measure of polarization to be the bright side of the poor. seven times in a row. More than the gold, with an application to the income distribution of five OECD countries’, The Journal of forests and wood that have provided the Economic Inequality, Vol. 5, No 1, April. The Brazilian belief that life will get better country with its national colours and its helps to explain what databases and name, the greatest national wealth is Neri, M. (2011). A Nova Classe Média: field visits have shown about these new the sparkle reflected in the eyes O Lado Brilhante da base da Pirâmide. emerging classes. According to Gallup of the Brazilian people. São Paulo, Editora Saraiva.
Middle Class Expansion and the Stages of the Transformation Process of by Ricardo Paes de Barros and Diana Grosner, Income Distribution Secretariat of Strategic Affairs (SAE)
Finding ways to document the That means that there is rarely a situation evolution of income distributions has been in which M of the population (over 50 per cent), but the Lower class remains the largest, and the Upper class, the smallest. In this case, we still witness A State III: With another round of economic growth, the reduction of the Lower class and the expansion of the Middle class continue. In the third stage, so many people migrate from the Lower class to the Middle class that the size of the Middle class exceeds the Lower class. The Lower class remains larger than the Upper class, and, while the Middle class has become the largest of the three, it does not contain most of the population. In this case, we witness A State IV: The growth process continues, taking more people from the Lower Source: Author’s elaboration. class to the Middle class, until the majority of the population finally belongs to the Middle class. State V: In this stage, the movements at point forth brings with it an increase the upper end of the income distribution in the Upper class, to a greater extent Due to the cumulative expansion of the begin to gain prominence. As the growth than the rate of reduction of the Lower Middle class in all previous stages, the process continues to reduce the Lower class. That means there would be more majority of the population now belongs class and expand the Upper class, for the people leaving than entering the Middle to this class. In this stage, as in all first time the Upper class becomes larger class, which marks the beginning of the previous stages, the Upper class than the Lower class. At this stage, the contraction of the Middle class. In this continues to grow, remaining, however, Middle class includes the majority of the case, we have B State VII: If the growth process continues, the decline of the Middle class, accompanied by a continued expansion of the Upper class, leads to the Upper class becoming the largest of the three classes, without amassing the majority of the population. In this case, we have B State VIII: Finally, the continued expansion of the Upper class, with a retraction of the Middle and Lower classes, leads to a configuration where most of the Source: Author’s elaboration. population has joined the Upper class. Poverty in Focus 21 In this case, we still have B On Social Classes by Marilena Chaui, A New Brazilian Working Class University of Sao Paulo Surprises Europe under the guidance of Keynesian If a person who had witnessed the economic policy, after organised labour There has been a profound terrible living and working conditions struggles had led to the election of change in the make-up of the Brazilian lower-income classes in leaders of the political left or centre, as of Brazilian society. the 1950s and 1960s were to spend some well as the emergence of the social time in Europe, that person would most welfare state, towards which a likely be surprised. He or she would see considerable amount of public funding workers driving small cars, going on was allocated to promote the social vacations with their families, shopping at rights claimed for—and conquered by— 1. Main references: Republic of Brazil (2012a). low-price department stores, sending the working class. However, in this ‘A nova classe média brasileira: desafios que representa their children to day-care centres, then to context, no one would dream of saying para a formulação de políticas públicas’, Boletim da Secretaria de Assuntos Estratégicos da Presidência da public primary and secondary schools, that those European workers had crossed República. Brasília, Secretaria de Assuntos Estratégicos; technical schools and even universities; over into the middle class. Interestingly Republic of Brazil (2012b). ‘Comissão para a definição da classe média no Brasil’, Boletim da Secretaria de Assuntos he or she would also see workers and however, this is what is said today of Estratégicos da Presidência da República. Brasília, their families entitled to free hospitals Brazilian workers, after 10 years Secretaria de Assuntos Estratégicos; Republic of Brazil (2011). ‘Indicadores de Iniqüidade no Sistema Tributário and medication, and, of course, they of counter-neoliberal policies. Nacional’, Relatório de Observação, No. 2. Brasília, would also be surprised at their Conselho de Desenvolvimento Econômico e Social; ability to own a home. A new Brazilian working class Republic of Brazil (2009). ‘Indicadores da Equidade do Sistema Tributário Nacional’, Relatório de Observação, Studies, research and analyses1 show that No. 1. Brasília, Conselho de Desenvolvimento That was Europe during the Fordist there has been a profound change in Econômico e Social; Souza, A. and B. Lamounier (2010). A classe média brasileira. Ambições, valores e projetos de period of industrial capitalism, with the make-up of Brazilian society, due to: sociedade. Rio de Janeiro, Elsevier; Souza, J. (2010). assembly lines and mass production of Government programmes in the areas Batalhadores brasileiros. Nova classe média ou nova classe trabalhadora?. Belo Horizonte, Editora da UFMG; products at low costs, enabling mass of income transfers, social inclusion Souza, J. (2009). A ralé brasileira: quem é e como vive. consumption. More specifically, that was and poverty eradication; Belo Horizonte, Editora da UFMG. 22 International Policy Centre for Inclusive Growth Economic policies focusing workforce that produced capital; it neoliberal economy—when on full employment and raising spanned the so-called liberal professions, dismantling the Fordist model the minimum wage; the state and business bureaucracies, and outsourcing and fragmenting The upholding of some of the small land holdings and business. productive work into thousands social rights of the working classes; of micro-businesses dependent on Coordination among these If such sociological descriptions are transnational capital—has turned programmes and the principle abandoned, if the social classes of the these small entrepreneurs into a of sustainable development; and capitalist mode of production (despite productive force, which, together The first steps taken towards agrarian the use of the term ‘middle class’) are with individual service providers, reform that will enable rural retained, and if the studies drawn upon is managed and dominated by populations to remain in the fields, for this article, and the figures they multinational oligopolies. rather than having to resort to represent vis-à-vis changes in the size of migration to urban centres for the three social classes are considered, What remains for the middle class, economic opportunities. a few conclusions can be drawn: therefore, are state and corporate bureaucracies, public services, small land In general, when utilising the Projects and programmes that holdings and businesses not affiliated classification schemes of market research transfer income and ensure social and with any of the major transnational institutes and sociology, it is customary economic rights show that it was the oligopolies. In Brazil, the middle class to organise Brazilian society as a working class that expanded in has benefited from the economic pyramid, sectioned into classes Brazil—its composition is complex, policies of the last 10 years; it has designated as A, B, C, D and E, using heterogeneous and not limited to grown and prospered. the criteria of income, ownership agricultural and industrial workers. of real estate and other assets, level Thus, returning to the example of the of education and type of occupation. The use of the services criterion in Brazilian traveller in Europe in the 1950s defining the middle class does not and 1960s, it could be said that the new According to these criteria, it was remain the same in the current form Brazilian working class is finally starting concluded that, between 2003 and 2011, of capitalism, for two reasons: to gain access to social rights and the number of people in classes D and E become an active participant in mass diminished considerably, from 96.2 a) As that production model consumption. The immediate claim made million people down to 63.5 million; at was disabled, services were about the emergence of a new middle the top of the pyramid there was also an outsourced—these, in turn, are class is less dangerous to the established expansion of classes A and B, from 13.3 tied to industrial production order than a socially and politically million to 22.5 million people; and finally, and also a branch of it; and protagonistic working class. the most remarkable event was a truly spectacular expansion in class C, from b) The increase in the number of At the same time, however, when it is 65.8 million to 105.4 million people. wage-earning employees in the referred to as a ‘new’ working class, the This expansion has led to the assertion services sector does not constitute novelty lies not only in the effects of that the Brazilian middle class has a growing middle class, but a new social and economic policies but also grown—or rather, that a new middle and heterogeneous working class, in the elements brought about by class has emerged in the country. defined by differences in neoliberalism. Little is known, thus far, education and by skills and about this new working class. However, there is another way to analyse competencies determined the division of social classes—by using by technoscience. Middle class: how to untie the knot? form of ownership as a criterion. In a A social class is not a fixed capitalist mode of production, the ruling The liberal profession criterion is also datum, defined only by economic class holds private ownership over the problematic in defining the middle determinations; rather, it is a social, social means of production; the working class, since the new form of capital political, moral and cultural subject that class is excluded from such means of led to the advent of companies acts, constitutes and interprets itself and production, participating in them as a operating in the fields of health, law, is transformed through class struggles. productive force, as owners of labour. education, communication, food etc., in such a way that its components It is praxis, as English working Marx spoke of a petite bourgeoisie when can be categorised as private owners class historian E. P. Thompson wrote: referring to a social class that did not and wage-earning employees and as a historical construct. Now, if therein lies reside at one of the two ends of the such should be categorised as part of the transforming possibilities of the social divide at the core of the capitalist the working class. working class, therein also lies the mode of production. In other words, it possibility of concealment of its own self, stood outside the core of capitalism: it Small family holdings are also not and the risk of ideological absorption by did not own capital or the social means a valid criterion for defining the the ruling class. The first sign of such a of production, nor did it constitute the Brazilian middle class, because the risk is, indeed, the spreading of the Poverty in Focus 23 notion that there is a new middle class in This sharp polarisation is reinforced by Brazil. Referring to the middle class also the adoption of neoliberal economics. Standing outside the raises a very important political issue. Since neediness is always private, it is economic core that defines distinguished from interest, which may capitalism, the middle class Standing outside the economic core be common, and from rights, which are that defines capitalism, the middle class always universal. Since privilege is always is also left outside the core is also left outside the core of political private, it cannot be bundled into a of political power. That puts power. That puts it in a position where common interest and can never become it in a position where it is it is defined less by its economic a right, because, if it did, it would no standing and more by its ideological longer be a privilege. defined less by its economic position, which tends to be contradictory. standing and more by its One can understand, therefore, how ideological position, which Due to its position within the social difficult it is to establish a democracy, system, the middle class tends to be defined by the creation of new rights tends to be contradictory. fragmented, rarely possessing a common by society and its assurance by the State. unifying interest. However, certain sectors Its imagination is populated tend towards the left—as a rule, towards A constitutive part of Brazilian society, the extreme left and voluntarism. the ideology of the middle class not by both a dream and by a only embodies and propagates the nightmare: the dream is to This configuration is counterbalanced authoritarian forms of social relations become a part of the ruling by another, in its stark opposition. but also embodies and propagates the Devoid of a solid and clear economic naturalisation and positive valuation class; the nightmare is to and social framework, the middle class of socio-economic fragmentation and become the proletariat. tends to feed into the idea of order and dispersion, brought about by neoliberal Security is needed to ensure security because, due to fragmentation economics and ideologically defended and instability, its imagination is by the encouragement of aggressive that the dream comes populated by both a dream and by a competitive individualism and success true and that the nightmare: the dream is to become a part at any cost, by astutely handling nightmare does not. of the ruling class; the nightmare is to market procedures. become the proletariat. Security is needed to ensure that the dream comes Well, as much as Brazilian economic true and that the nightmare does not. and social policies may have advanced democracy, the conditions imposed by This makes the middle class ideologically neoliberal economics have led to the conservative and reactionary, and in dissemination, throughout society, practice making its social and political of the ideology of market rationality role to ensure the ideological hegemony and competence as competition and of the ruling class. promise of success. It should also be noted that the Brazilian Since the new Brazilian working class was middle class, in addition to possessing formed within that particular moment in the aforementioned features, is also capitalism—marked by the fragmentation determined by the authoritarian and dispersal of productive labour, structure of Brazilian society. In fact, outsourcing, precarious and informal retaining the marks of a colonial employment, perceived as services slavery-based society, Brazilian society provided by independent individuals is characterised by the predominance of that interact with other independent the private over the public sphere—it is individuals in the goods and services centred on family hierarchy and strongly market—it becomes prone to adhere hierarchical in all its aspects. to the competitive and aggressive individualism spread by the middle class. Differences and asymmetries are always And it also tends to believe it is part turned into inequalities that reinforce the of a new Brazilian middle class. command–obedience relationship, and inequalities are naturalised. The social This belief is reinforced by its new-found division of classes is over-determined access to mass consumerism. In fact, from by the polarisation between neediness a symbolic perspective, the middle class (of lower-income classes) and privilege replaces the lack of economic and political (of the ruling class). power that defines it with a lurch towards 24 International Policy Centre for Inclusive Growth either leftist voluntarism or towards current reality of its composition, the welfare state as a state policy, not the right, through the pursuit of how can this knot be untied? just a government programme; and prestige and prestige symbols, such as cultural enfranchisement policy capable diplomas and titles in liberal professions Whereas democratic politics corresponds of dismantling authoritarian ideas and and the consumption of services and to a democratic society, and whereas breaking the monopoly of the ruling objects that convey authority, wealth, society in Brazil is authoritarian, class over symbolic goods and their abundance, social ascension—large hierarchical, vertical, oligarchic, polarised distribution to—and retention by— homes in ‘upscale neighbourhoods’, between neediness and privilege, the middle class. foreign cars, designer clothes etc. democratic politics can only be advanced if this social structure is challenged. But state action can only go so far. In other words, consumption is seen The remainder of what it takes to build a as a social ascent towards the ruling The idea of social inclusion is not democratic society can only be the praxis class, and as an unbridgeable gap enough to undo this polarisation. of the working class; as such, it is critical between it and the working class. When It can only be addressed if privilege —like so many times throughout history the working class, in turn, gains access to is confronted by four major political and more specifically in Brazil (from mass consumption, it tends to take this actions: tax reform, to rectify unjust 1970–1990)—for the working class itself idea as a fact—and adhere to it. income concentrations and to encourage to find, despite the adversities imposed the state to move from income transfer by the capitalist mode of production, If the new Brazilian working class is policies to income distribution and new ways to organise and create forms surrounded on all sides by neoliberal redistribution policies; political reform, both of resistance and autonomous values and symbols disseminated to add a republican dimension to public expression—to be the master by the middle class, due to the institutions; social reform, to consolidate of its own destiny. The ‘New Middle Class’ or the ‘New Working Class’? Who are These New Brazilian ‘Fighters’? by Jessé Souza, Federal University of Juiz de Fora1 Brazil’s most important social Unlike economic capital, cultural capital The core of this concept phenomenon in recent decades has been needs to ‘incorporate’ its main dimension suffers from all the ‘economic’ named incorrectly, both by universities —not limited to what school titles limitations, as it only takes and by the media, as the ‘new middle objectify—meaning, literally, that it should ‘economic capital’ into class’. To define this group, the ‘average ‘take corporal shape’, an automatic reflex account and believes it is income’ was used as an indicator of what and set of psychological, emotional and sufficient to fully describe we call class C, our ‘new middle class’. cognitive dispositions for behaviour. and understand social The core of this concept suffers from reality. Nothing could be all the ‘economic’ limitations, as it only This learning process takes place at an more misleading. takes ‘economic capital’ into account and early age in one’s household. Since it is believes it is sufficient to fully describe not necessarily mediated by words but, It is cultural capital —not and understand social reality. Nothing rather, by affective stimuli and examples economic capital considered could be more misleading. set by parents or significant others, this unilaterally—that forms fundamental learning process is ‘invisible’ the basis of the differential Why are analyses superficial, and and naturalised. But it is cultural capital construction of individuals why do they mistakenly focus solely —not economic capital considered through family socialisations on economic aspects? Mostly, this unilaterally—that forms the basis of the specific to each social class. stems from ignoring the fact that, differential construction of individuals when reproducing, capitalism requires through family socialisations specific to both economic capital and ‘knowledge’. each social class. Thus, without a ‘prior Without these, its role in the market socialisation’ study to explain the and in the State would be negligible. incorporation of a certain specific type of cultural capital, one must necessarily The type of capital required to assume that everyone is ‘the same’, 1. Professor of the Sociology Department of the Federal University of Juiz de Fora, Brazil and Director of the incorporate knowledge is what Pierre a ‘homo economicus’ who always reacts Centre of Inequality Research (CEPEDES). Bourdieu (1973) calls “cultural capital”. in the same manner, a ‘generic subject’— Poverty in Focus 25 the typical subject of classical liberalism— of free time to incorporate any in productive labour in a competitive with no past, no prior socialisation and, form of valuable technical, scientific market. Without discipline and self- therefore, no class. As such, economism or philosophical-literary knowledge. control, it is impossible to ‘focus’ on is politically conservative and In the overwhelming majority of cases, academic activities. The ‘plebs’ analysed scientifically superficial, since it the ‘fighters’ need to start working at an in previous work on this class repeatedly covers the entire social process early age and often attend low-quality reported ‘staring’ at the blackboard for that produces differently equipped public schools. As the fighters lack both hours on end and not learning anything. individuals for social competition. the highly valued cultural capital of the middle class and the economic capital of This ‘virtue’ is not natural, as is held by Having empirically studied the social the upper classes, they make up for it by the common economic thinking that class labelled ‘the fighters’ in various making extraordinary personal efforts, makes class socialisation invisible and Brazilian regions for 18 months, between working double shifts and enduring inappropriately assigns the virtues and 2008 and 2009, the conclusion emerged all kinds of labour exploitation. privileges of the middle class to other that it was, in fact, a “new and precarious classes, only to later blame the victims of working class” (Souza et al., 2010). This is the typical life of the working social abandonment—as if abandonment classes—hence the working hypothesis and destitution were a choice. On the other In Brazil’s contemporary social context, developed, which denies and criticises hand, without forward thinking—i.e. the this is considered to be an intermediate the concept of a ‘new middle class’. view that the future is more important class: there would be a class ‘above’ it than the present—it is impossible to live the ‘true middle class’ (i.e. a pervasively The main difference with respect to the one’s life rationally (in economic terms), privileged class)—and another class socially excluded and abandoned is, in due to the impossibility of calculating ‘below’ it—the ‘socially excluded’, which turn, the establishment of ‘coordinated and planning ahead and by being are provocatively referred to as the hard work ethics’. After all, simply imprisoned by the ‘here and now’. ‘Brazilian plebs’ (ralé brasileira) in another ‘wanting’ to work is not enough—in any empirical study (Souza et al., 2009), to draw walk of life. One must also ‘be able’ to In the case of these ‘fighters’, the attention to their state of abandonment. work—i.e. one must ‘incorporate’ (literally incorporation of a minimum level of Therefore, the actual social slot occupied ‘take corporal shape’, pre-reflexively and emotional and moral economy is hard- by this class can be best understood automatically) the emotional and moral won—sometimes it may be acquired by comparing it to its ‘upper’ and assumptions of productive labour in a through family learning experiences or ‘lower’ constraints. competitive market. even belated events, such as various forms of religious socialisation. The ‘new precarious working class’ is not As it stands, capitalism sees the truly a middle class, as it does not enjoy increasing incorporation of different Therefore, although this class lacks access privileged access to a scarce resource types of knowledge and cultural capital as to valued forms of cultural capital— of utmost importance: cultural capital, the ‘entryway’ into any of its competitive a monopoly held by the ‘true’ middle highly valued in its many forms. sectors. For a host of different reasons, classes—they do not lack willpower, Be it in the form of ‘technical’ cultural the ‘plebs’ lack the object of the perseverance and confidence in the capital—made up, for example, of the aforementioned assumptions. As such, future, despite all the difficulties they vast number of lawyers, engineers, they are condemned to physical and face. In a less favourable context, as we administrators and economists—or in menial jobs, providing cheap labour have seen thus far, this ‘army of fighters’ the form of the ‘literary’ cultural capital for any type of difficult, unappreciated is available and attentive to the slightest consisting of teachers, journalists and and heavy activity. possibility of engaging in profitable advertisers, this kind of knowledge is work and improving their living essential to reproduce and legitimise This is not on the horizon for the conditions through, for example, the both the market and the state. ‘fighters’. Although they may have consumption of previously unattainable come from poor households, they are, durable goods. Consequently, both the wages and the nonetheless, comparatively better off social prestige linked to these types of than the socially abandoned—the roles work—and the living conditions they of parents and children are mutually Bourdieu, P. (1973). ‘Cultural Reproduction enable—are considerable. understood, and there are concrete and Social Reproduction’ in R. Brown (ed.), examples of perseverance in the family, Knowledge, Education and Social Change: Papers in the Sociology of Education. The ‘fighters’ lead quite different lives. as well as continuing encouragement Tavisock, Tavistock Publications: 71–112. Their lives lack the ‘birth privileges’ that to study and work. characterise the middle and upper Souza, J. et al. (2010). Os batalhadores brasileiros: nova classe média ou nova classes. ‘Birth privileges’ do not just refer This kind of class family socialisation classe trabalhadora?. Belo Horizonte, to inherited family money in the upper enables the effective incorporation of Universidade Federal de Minas Gerais. classes; such privileges also include the discipline, self-control and prospective Souza, J. et al. (2009). A ralé brasileira: most valuable resource available to the thinking, which are all inherent parts of quem é e como vive. Belo Horizonte, middle class: ‘time’. After all, it takes a lot any learning process, both in school and Universidade Federal de Minas Gerais. 26 International Policy Centre for Inclusive Growth by Miguel Foguel, Institute for Applied Economic Research and Rudi Rocha, The Brazilian Middle Class Federal University of Rio de Janeiro and its Vulnerability to Economic Fluctuations Over the last decade, Latin America household moving between the The middle class definition has experienced significant reductions middle class and poverty is affected used in this article is based on in inequality and poverty, as well as by changes in economic activity the concept of vulnerability. a significant expansion of the middle as measured by the per capita class (Lopez-Calva and Lustig, 2010 and Gross Domestic Product (GDP). Belonging to the middle Ferreira et al., 2013). These changes have class entails some degree of given rise to a number of new issues The middle class definition used economic security or stability. referring to poverty, inequality and in this article is based on the concept development in the region. In regards of vulnerability. This concept has been to public policy implications, it becomes widely used within the existing literature fundamental to understand the extent to (eg, Lopez-Calva and Ortiz-Juarez, 2011, which such changes are sustainable or, SAE 2012 and Ferreira et al., 2013) and is alternatively, susceptible to a reversal, based on the idea that belonging to the in the case of adverse economic shocks. middle class entails some degree of economic security or stability. This article aims to investigate the 1. It is worth pointing out that, as mentioned in the box extent to which idiosyncratic economic One way of identifying this type note, these estimates refer to the probability of having fluctuations affect the size of Brazil’s of security—which will be used as per capita income above the lower threshold of R$271. Hence, strictly speaking, they measure the probability middle class. More specifically, it assesses the basis for the income cut-off points of being in the middle or upper class. the extent to which the probability of a used to define the middle class—is when Note: Robust standard errors in parentheses, clustered at the state level. PCFI = Per Capita Family Income, set at current 2011 amounts. Poverty in Focus 27 individuals have a low probability of being in—or returning to—poverty, from an income perspective. The concept of vulnerability is able to capture the ability of families to withstand income shocks. In this sense, this exercise not only identifies this resilience, but also tests the very definition of the middle class, based on the concept of vulnerability used in literature—which will be compromised if the middle class, as defined, is highly susceptible to shocks. Table 1 presents the estimates for the coefficients of the variables of interest as per the methodology described in Box 1, along with their respective standard errors. The first column shows that idiosyncratic shocks are positively related to belonging to the middle class. The other columns report the results of models where the binary dependent variable is 1 for individuals not just in middle class, but also in higher classes. In general, these regressions reveal three important pieces of information. First, in columns 1 and 2 we see that the relationship of interest, namely, transitions from poverty to the middle class, is positive: the (net) probability of individuals transitioning into the middle class increases (decreases) when idiosyncratic shocks from aggregate sources are positive (negative). Note: The methodology used to define who belongs to the middle distributes per capita family income Second, in columns 3 to 6 we identify (PCFI) into four major ordered groups: the poor, the vulnerable, the middle class and the upper class heterogeneities: the cycle seems to have (for details, see SAE, 2012). More precisely, we are considering those who move between the two lowest and the two highest segments. It should be noted that transitions might occur among individuals a greater impact on households headed in the two lowest segments and the upper class (i.e., among those with PCFIs lower than R$ 271 by men, by less educated and non- and those with PCFIs higher than R$ 971) and, in this sense, we are not only focusing on the metropolitan heads of household; transition to the middle class. Column 7 reveals that the sign of the shocks (i.e., whether the variation in economy and are reflected on the between two consecutive years, i.e. the state per capita GDP was positive income of individuals. GDPst > GDPst-1; and (iii) compare the two or negative) does not significantly affect estimates.1 As the last column of Table 2 the probability of interest. To capture this sensitivity, the following shows, the negative shocks do not exercise was implemented and reported seem able to significantly reduce the Third, but just as important, the in Table 2: (i) the size of the middle class probability of belonging to the middle magnitude of the impact of shocks was estimated based on the model in class, in any of the years in the period on the transition probability is small. column 2 of Table 1 (Column A in Table 2); under study. Therefore, these results One of our interests here is to identify (ii) the size of the middle class is show that the concept of vulnerability not only whether the middle class is estimated using the same model, but implicitly used here is, indeed, robust. susceptible to adverse shocks, but imposing the absence of positive also to assess the sensitivity of the income shocks (Column B in Table 2). The exercise conducted in this paper vulnerability-based concept of middle This is done by replacing GDPst with leads to two conclusions. First, economic class to fluctuations that occur in the GDPst-1, whenever there is growth fluctuations that affect the income of 28 International Policy Centre for Inclusive Growth individuals are positively related to belonging to the middle class. Second, the magnitude of this effect is small. As a result, the concept of vulnerability used as the basis for defining the middle class in many studies on this subject seems to adequately capture the idea that belonging to the middle class requires that individuals’ incomes be highly resilient to economic shocks. Ferreira, F., Messina, J., Rigolini, J., Lopez- Calva, L.F., Lugo, M. e Vakis, R. (2013): Economic Mobility and the Rise of the Latin American Middle Class, Washington, DC, World Bank. Lopez-Calva, L. F. e Lustig, N., eds. (2010): Declining Inequality in Latin America: A Decade of Progress? Washington, DC, Brookings Institution e United Nations Development Programme. Lopez-Calva, LF and Ortiz-Juarez, E. (2011) “A Vulnerability Approach to the Definition of the Middle Class”, Policy Research Working Paper 5902, World Bank. Secretária de Assuntos Estratégicos— SAE (2012): “Relatório da Comissão para Definição da Classe Média no Brasil”, Brasília, DF, Governo Federal do Brasil. Source: Author’s elaboration. Growth, Inequality and the Middle Class by Thomas F. Remington, in Post-communist Russia Emory University 1 Rising income inequality in Russia has concentration of income in the top strata The actual growth of the been the subject of high-level attention has been rapid. Although there has been middle class in Russia has in recent years. “The differentiation growth among some middle-income been quite slow, while the of incomes,” Vladimir Putin wrote in strata, these are groups who are tied concentration of income in Komsomol’skaia Pravda in February 2012, to the state for their livelihoods. By one the top strata has been rapid. “is unacceptable, outrageously high. estimate, the share of families belonging ...Therefore, the most important task is to the middle class (using a loose to reduce material inequality.” Putin has definition of middle class)2 has risen stated that the solution to the problem to almost 19 per cent (Kuvshinova, 2013). of inequality, as well as of excessive economic dependence on resource rents, This share has grown about 1 per cent on is to expand the middle class. average per year. The fastest growth of 1. Thomas F. Remington is the Goodrich C. White this stratum, however, came from among Professor of Political Science at Emory University, Atlanta, GA, USA. However, Putin’s regime is unwilling or state officials, including military and law unable to take the steps that would reduce enforcement officials, who represent 20 2. Meeting any two of three criteria qualifies a household as middle class: income or assets above income inequality in fact and increase per cent of the middle class. Highly a certain threshold; higher education or high-skill the share of the middle class in society. educated public-sector workers, such as occupation; or autonomy over life choices. doctors, teachers, scientific personnel and 3. About a quarter of corporate profits in 2010 in the USA were realised in the financial sector. The actual growth of the middle class in social service workers, are also middle See Tomaskovic-Devey and Ken-Hou (2011). Russia has been quite slow, while the class by this definition. Poverty in Focus 29 To be sure, average incomes have risen significantly since 1999. However, in Russia, as in the USA and China, the rise in mean incomes masks widening inequality. The Gini index and the decile ratio, which is the income at the 90th percentile of the income distribution divided by the income at the 10th percentile, have both increased, as Figure 1 shows. It is difficult to measure the actual distribution of income in a society. Household income surveys typically underestimate the number of extremely high-income households, especially in societies where a large share of income is illegal or unreported. It is likely that, as in China, most unreported income in Russia Source: Author’s elaboration. goes to the highest strata. Therefore, including hidden incomes incomes is associated with lower that individuals from lower-income would increase aggregate measures of provision of public goods. Better-off strata will rise in the next generation. inequality. It goes without saying that strata regard public goods as inherently both the concentration of incomes in the redistributive (Alesina, Baqir and Easterly, Inequality in developed economies is highest decile and the illicit nature of 1999; Easterly, 2001; 2002; Easterly and increasing both as a result of changes the income run counter to the goal Levine, 1997). Second, high inequality in the labour structure—particularly the of forming a middle-class society. blocks social mobility, due to the decline in the number of middle-income, cumulation of advantage over time. middle-skill jobs due to technological Inequality is a different problem change and globalisation—as well as from that of poverty. Poverty can fall Families in strata with greater changes in institutions and values and inequality rise at the same time. access to education, health care, (Goldin and Katz, 2007; 2008). In the This has been the case in both Russia security and government services USA, the financial sector accounts and China in recent decades. Inequality transmit their advantages to their for a growing share of corporate profits also matters in itself. Polarisation of offspring, reducing the likelihood and hence of income concentration.3 Poverty can fall and inequality rise at the same time. This has been the case in both Russia and China in recent decades. Inequality in developed economies is increasing both as a result of changes in the labour structure— particularly the decline in the number of middle- income, middle-skill jobs due to technological change and globalisation. Source: Author’s elaboration. 30 International Policy Centre for Inclusive Growth The main driver of inequality in Russia, however, is the dominance of the natural resource sector in the economy. On average, incomes in regions where at least half of economic output comes from the extractive industry are a third higher than in other regions. Source: Author’s elaboration. Similarly, soaring compensation for top- centres of oil and gas production, and Atkinson, A.B., T. Piketty and E. Saez (2011). level corporate executives, like that of the fifth is Moscow. Moreover, regions ‘Top Incomes in the Long Run of History’, Journal of Economic Literature, 49(1): 3–71. celebrity athletes and performers, reflects with the highest incomes also have a premium for celebrity (Frank and Cook, the highest interpersonal income Easterly, W. (2002). The Elusive Quest 2010; Atkinson, Piketty and Saez, 2011). inequality (Figure 3). for Growth: Economists’ Adventures Both of these effects are evident in and Misadventures in the Tropics. Cambridge, MA, MIT Press. Russia. For example, although financial Although Russian leaders have services account for only a small part of expressed concern over the growth Easterly, W. (2001). ‘The Middle Class value added in the economy, earnings in of income inequality in their society Consensus and Economic Development’, Journal of Economic Growth, 6(4): 317–335. the financial sector are now higher than and have called for measures that in any other, including oil and gas. would concentrate income gains in Easterly, W. and R. Levine (1997). the middle strata, so far they have ‘Africa’s Growth Tragedy: Policies and Ethnic The main driver of inequality in Russia, failed to reduce the economy’s Divisions’, Quarterly Journal of Economics, 112(4): 1203–1250. however, is the dominance of the natural dependence on natural resources. resource sector in the economy. Frank, R.H. and P.J. Cook (2010). Rising incomes from mineral extraction The Winner-Take-All Society: Why the Few at the Top Get so Much More than the Rest of This affects income distribution in two have made a few people extremely Us. New York, Random House. ways. It drives the rapid rise in incomes wealthy and allowed a few regions to in the mineral extraction sector and in enjoy extremely high average incomes. Goldin, C. and L.F. Katz (2008). The Race between Education and Technology. the financial sector servicing it. It also Revenues from resource exports have Cambridge, MA, Harvard University Press. explains the extremely high levels of also fuelled high incomes in the incomes in the resource-rich regions. financial sector. Goldin, C. and L.F. Katz (2007). ‘Long-Run Changes in the Wage Structure: Narrowing, Widening, Polarizing’, Brookings Papers on On average, incomes in regions where The growth in mean incomes does not Economic Activity, 2: 135–165. at least half of economic output comes reflect growth in entrepreneurship or from the extractive industry are a third innovation though. The inequality in Kuvshinova, O. (2013). ‘Srednii klass v Rossii the distribution of incomes reflects the uvelichivaetsia za schet chinovnikov i higher than in other regions. The gap silovikov’, Vedomosti, 4 April 2013. between incomes in those regions and economy’s dependence on rents from those of other regions has steadily resource extraction, which has increased Putin, V. (2013). ‘Spravedlivoe ustroistvo widened as a result of the high wages incomes in the highest income brackets obshchestva, ekonomiki—glavnoe uslovie nashego ustoichivogo razvitiia v eti gody’, in such regions. and hindered the expansion of the Komsomol’skaia pravda, 13 February 2012. middle class. Figure 2 shows that the richest Russian Tomaskovic-Devey, D. and L. Ken-Hou regions have seen far more rapid income Alesina, A., R. Baqir and W. Easterly (1999). (2011). ‘Income Dynamics, Economic Rents, ‘Public Goods and Ethnic Divisions’, and the Financialization of the U.S. gains than the poorest regions; four Quarterly Journal of Economics, Economy’, American Sociological Review, of the five highest-income regions are 114(4): 1243–1284. 76: 538–559. Poverty in Focus 31 by Zoya Hasan, Expanding Middle Classes Jawaharlal Nehru University1 and the Power Shift in India In recent years there has been a values and discourses of a range of constant stream of international public institutions. They dominate the Despite all the attention given attention towards the Indian middle bureaucracy and the corporate world; to India’s middle classes, it is classes. Thanks to the expansion of the newspaper editors, judges, NGO activists important to note that it is a middle class, India’s image has changed and academics also largely come from such relatively small segment dramatically since the 1990s. Instead of privileged and middle class backgrounds. of the population. stories about grinding poverty, India is now seen as the heart of new capitalism Despite the expansion of the middle The middle class has vast associated with high rates of growth as classes, the oppressed and exploited economic clout, but it remains well as the new consumerist elite lower classes are numerically much larger, politically marginalised and middle classes. and the majority of which live without in a huge democracy where economic and social security. the rural masses still dictate The changing landscape of cities is election outcomes. dotted with shopping malls, multiplexes, At the same time, a deepening of apartment buildings, restaurants and democracy and a political churning luxury cars, even as poor people are from below has greatly changed the driven to a dismal existence consciousness of oppressed groups and at the peripheries. produced a new sense of dignity and self-esteem. Despite all the attention given to India’s middle classes, it is important to note It has made them much more politically that it is a relatively small segment aware of their entitlements and the of the population. benefits of development denied to them. The middle classes in India are not The middle classes feel insecure and a median or near-median category; resentful in response to this sense of they are not economically situated challenge from below. This has given somewhere in the approximate middle a sharper edge to the long-standing of the population and do not constitute fracture between the ‘Two Indias’. a majority of the population. There is now the ‘thriving’ India, mainly However, a broader definition urban, skilled and entrepreneurial, with suggests that the middle class in India close links to the globalised world, and is approximately a fifth of its 1.2 billion the ‘other’ India, mainly rural but also people. The absolute numbers are growing in urban centres, which has still very sizeable. But relative to been left behind in the development the whole population, it is small and process as they lack assets and skills. lacks what most developed societies have, which is that they constitute a However, this ‘other’ India is also more substantial proportion of the population, demanding and aspires to access thus making it a median category. opportunities available to the new More than half of the current middle middle classes in urban centres. class is privately employed. The middle class has vast economic clout, A generation ago, it was centred on but it remains politically marginalised public employment, the civil service, in a huge democracy where the rural universities and government schools. masses still dictate election outcomes. 1. Zoya Hasan is a Professor at the Centre for Political Science of the School of Social Sciences at Jawaharlal Nehru University, India. The middle class has had very The situation has nevertheless started 2. For an account of the middle classes and considerable influence in shaping to change, and the middle classes are intelligentsia before Prime Minister Manmohan Singh government policies as well as the now more assertive and a vocal and came to power, see Seabrook (2012). 32 International Policy Centre for Inclusive Growth Aided by social media, the influential political force. An expanding between the State and civil society and wave of middle-class activism across the latter’s influence on the political burgeoning middle class India has catapulted them to the centre decision-making process. is increasingly able to stage of political discourse. mobilise as a coherent Within civil society it has led to a shift Rapid growth has led the middle classes away from those who are willing to work group, as demonstrated to expect continuing improvements within the existing political framework by the crucial role it played in their standard of living. But in the towards those who are keen to challenge in the anti-corruption aftermath of the economic slump and it (Patnaik, 2011). the slowing down of India’s growth, campaign led by the these classes have become disgruntled Corruption has increased enormously, Gandhian Anna Hazare as they fear erosion of their income but in middle-class thinking it is the throughout 2011 and 2012. gains and wealth by inflation, which has corruption in politics that matters been relatively high in the last three years. the most and is perceived to be the vestige of an overextended state. Whereas the earlier middle Recent grievances have also arisen from class saw some politicians political dissatisfaction relating primarily Whereas the earlier middle class saw to poor governance, unprecedented some politicians as heroes, idolising as heroes, idolising corruption scandals and the lack of Mahatma Gandhi and Jawaharlal Nehru, Mahatma Gandhi public safety for women. the new middle class mostly regards and Jawaharlal Nehru, politicians with absolute contempt, Unlike the protesters of the earlier social placing greater faith in business the new middle class movements who were mostly Left and leaders or, in some cases, mostly regards politicians Gandhian and stood for a vision of non-governmental organisations.2 with absolute contempt, systemic social transformation, the new middle-class activists have no social Politicians are typically villified by placing greater faith in vision, no ideology and no overarching the media, television channels and business leaders or, in some ideas that define their activism. Bollywood movies portrayed as: cases, non-governmental totally corrupt and habitually insincere. They abhor traditional political organisations. organisations and party politics. Anti-corruption campaigns focused They are very angry with politicians narrowly on government, politicians and particularly critical of the state, and bureaucracy as the chief source yet they continue to make demands of corruption, while ignoring the of the very state they despise. complicity of the private sector in corruption associated with Aided by social media, the burgeoning the privatisation of state property middle class is increasingly able to and the transfer of resources such as mobilise as a coherent group, as land, minerals and natural gas, among demonstrated by the crucial role it others, to private players. played in the anti-corruption campaign led by the Gandhian Anna Hazare The labelling of corruption as something throughout 2011 and 2012. that belongs to the political domain means that corruption is never about Throughout such a time, thousands of the middle classes (even though they people took to the streets to demand a are usually the biggest beneficiaries of strong anti-corruption law. The campaign corruption because they dominate the drew people from all classes but was government), but always about others— dominated by the urban middle class i.e. ministers, legislators and bureaucrats whose assertiveness and political weight (Chatterjee, 2013). have, consequently, increased. A spotlight on corruption appeals This campaign marked an organisational to everyone and keeps other triumph, which precipitated the emergence pressing questions of inequality of middle classes as a politically and injustice at bay. active force. India has not done enough for its poor This protest signals a shift towards civil population, something that should be society in terms of the changing balance morally and economically unacceptable. Poverty in Focus 33 However, the middle class is not as middle class, the compulsions of electoral interested in the nation’s innumerable politics meant that their influence had social issues; instead, the public discourse to be balanced against that of the is all about the falling rate of GDP numerically stronger classes inside growth and India’s economic troubles. political parties. Economic growth and human Middle-class political influence fell far development are inextricably linked, but short of its economic weight, and this the middle classes are less supportive of contradiction only grew after public policies that promote economic economic liberalisation. inclusion and redistribution. But this has changed with the greater In fact, they judge the political system assertiveness of the middle classes, who solely in terms of the standards of began to exercise influence even without governance and are critical of rights- an active participation in the electoral based legislation—i.e. the right to process (Patnaik, 2011). information (2005), to employment (2006), to education (2009) and to food (2013)— Now it seems that the middle classes introduced during the two terms of the are poised to play a major role in the United Progressive Alliance government political narratives of the general (2004–14) led by the Congress party. election set for 2014. Government investment in key social For some time now, the ruling sectors is crucial, yet the middle class has Congress party has been wondering an utter lack of interest in public schemes how to reconcile attempts at appealing to ensure access to basic goods and to India’s powerful (and growing) middle services for the majority of people. class with its focus on its traditional Far from supporting welfare spending support base of poor people. which can help poor people, the middle classes urge the government to intensify Rahul Gandhi, the party’s Vice-President, economic reforms irrespective of the has been, in some ways, a lightning widening disparities and deeply rod for that conflict. His political entrenched social inequality, and curtail sympathies may privately lean towards public expenditure, on the premise that a pro-poor platform, but fear of The middle class is not such spending will impede growth. middle-class opposition to social welfare policies has meant that he as interested in the nation’s Numbers matter in electoral politics, remains non-committal in public. innumerable social issues; yet the ruling Congress party and the His party is worried about instead, the public discourse principal opposition party the Bhartiya the potential loss of the middle-class Janata Party are going all out to woo the support, which helped it to win a large is all about the falling rate upwardly mobile middle classes at a time number of urban constituencies in of GDP growth and India’s when the economy has witnessed a loss the 2009 general elections. economic troubles. of economic momentum, causing both a political crisis and policy paralysis. To repeat this feat, it is crucial to reach out to the disenchanted middle classes Although it is hard to Although it is hard to harness popular who seem to have little faith in the party, harness popular support support for economic reforms in a deeply in government institutions and unequal society, political parties are still associated public policies. for economic reforms in trying to do so because of a power shift a deeply unequal society, towards the urban middle classes and political parties are still away from other classes in terms of Chatterjee, P. (2013). ‘Against Corruption = trying to do so because socio-political influence. Against Politics’, kafila.org, 28 August 2011, Opportunities and Challenges from by Natalie Chun, the Rise of Asia’s Middle Class Asian Development Bank1 The next few decades will see the This is, in part, because members of this Beyond increasing rise in a new Asian middle class that will middle class are greater proponents of consumption demands, contribute to the shift in economic gender equality, are more optimistic a transformation in power away from the West. Assuming about prospects for upward mobility, perceptions and values that similar rates of poverty reduction and place a larger emphasis on technology lead to more productive economic growth to those of the past use, and believe more in market investments and potentially two decades, the middle class and upper competition than those in greater decreases in poverty class in developing Asia, defined on an the lower class. will accompany this emerging absolute scale of, respectively, US$2–20 middle class. and $20+ (using purchasing power parity The middle class is also more involved adjustments), are expected to grow in politics and tends to have greater The rise of Asia’s middle by 300 million and 1.1 billion, trust in government than both the class provides a significant respectively (Figure 1). lower and upper classes. Many of these opportunity that countries aspects set the basis for the middle class and the private sector can This growth will drive consumption to serve an important role in getting exploit by supplying goods demand in Asia from an estimated $4.5 governments to pay attention to and services that address the trillion in 2009 to close to $44 trillion by social issues and ensuring that public growing and diverse set of 2030—accounting for nearly half of investments in infrastructure and consumption preferences. global demand and about 1.6 times education are supplied which can the demand predicted for OECD benefit the broader population. countries (Figure 2). While the middle class may be a political Beyond increasing consumption force necessary for long-term stability, demands, a transformation in it also serves as a strong stimulus for perceptions and values that lead to more change, creating significant short-term productive investments and potentially economic and social disruptions when 1. Natalie Chun, Economics and Research Department, greater decreases in poverty will governing parties have not done enough Asian Development Bank. accompany this emerging middle class. to accommodate its values and concerns. Compared to other regions, the classes in Asia are generally more trusting and less Figure 1 politically active, with a higher degree Population by Region, 1990, 2009 and 2030 of market orientation and perceived upward mobility. These aspects are potentially conducive to strong economic growth continuing in the Asia region over the longer term. The rise of Asia’s middle class provides a significant opportunity that countries and the private sector can exploit by supplying goods and services that address the growing and diverse set of consumption preferences. The countries and firms that can achieve significant penetration into middle-class Asian markets will have a good chance of securing a source of demand that may ultimately provide economic stability and even growth for suppliers well into the Source: Chun (2012). future. While the optimism surrounding Poverty in Focus 35 the rise of the Asian middle class is justified, there are challenges that may cause middle-class growth in the region to fall well short of its potential. First, consumption growth is largely predicted to be driven by progress in China, while other countries continue to lag. Even in 2030, more than two thirds of the estimated 4.2 billion people in developing Asia reside outside China and are predicted to account for the large majority of the 780 million making below $2 per day and 1.7 billion making $2–10 per day. Second, the rising consumption power of the middle class increases the demand for energy-intensive items such as cars, washing machines and air conditioners that may stretch energy demands and Source: Chun (2012). pollution levels to their limits. Already Note: Mideast/Africa region estimates only cover less than half of the total population in the region. some Asian cities have experienced massive increases in pollution that have adversely affected health and caused predictions of the rise of the Asian vulnerable Asian middle class. Broad losses in labour productivity, while other middle class may be too optimistic policy prescriptions may do little to help, cities have faced significant disruptions without undertaking active interventions. and there needs to be a more micro- in energy supply which have constrained based understanding of middle-class economic growth. These issues are likely To mitigate the possible consequences dynamics and the impacts that different to grow without finding new sources that may arise requires innovative policy and programme design have on of energy supply or developing more developments in technology and different population sets. energy-efficient and cleaner technologies programme and policy design. This that can be supplied at a reasonable price. presents significant opportunities for Growing wealth in Asia which builds a innovative companies to help build and stronger and more stable middle class Third, a disconcerting global trend grow the Asian middle class, rather than will be integral to developing and toward greater job informality has becoming suppliers only for conspicuous generating greater growth, not occurred over the last 20 years. While consumption. With greater regional only within the region but globally. developing Asia saw increased job integration, lower-income countries However, there is a need to remain aware of the challenges that are faced by the formalization over this period, it was with a cheaper labour supply and low middle class and to develop the right relatively moderate, with signs of production costs can become suppliers tools to meet those challenges so increasing informal employment in to some of the emerging middle class that their growth will not just meet higher value-added non-agricultural in more well-off countries, which in turn expectations but exceed it. sectors. Given the uncertainty that can foster greater economic growth arises from having an informal job, some and growth of their own countries. potential consumption expenditures may ADB (2011). Special Chapter: Toward Higher be eroded, as the need to save money However, this may require fundamental Quality Employment in Asia. Key Indicators for Asia and the Pacific, 42nd Edition. Manila, rather than spend it will probably changes in how countries operate to Asian Development Bank. increase due to greater fluctuations ensure that this opportunity is not lost and uncertainty regarding income flow. and some of the large disparities among ADB (2010). Special Chapter: The Rise of Asia’s Middle Class. Key Indicators for Asia Asian countries can be closed. In particular, and the Pacific, 41st Edition. Manila, Asian Fourth, Asia is not immune to the it may require strengthening institutions, Development Bank. middle-class dissatisfaction that has improving the investment climate and Amoranto, G., N. Chun and A. Deolalikar arisen in other regions and caused relaxing protectionist trade policies (2010). ‘Who are the Middle Class and What significant economic disruptions. which can ensure that firms can compete Values Do they Hold? Evidence from the World Values Survey’, ADB Economics The Asian middle class has become on fair terms to ensure maximal entry Working Paper Series, No. 229. Manila, increasingly more vocal about issues and the growth of innovative firms. Asian Development Bank. of the environment, transparency In general, much more needs to be Chun, N. (2012). ‘The Middle Class in and freedom of speech. All of these understood about how to help and Developing Asia’, Journal of Asian Business, challenges may mean that current support the growing but still very 25(1): 27–47. 36 International Policy Centre for Inclusive Growth by Justin Visagie, Department of Economic Development, Who are the Middle Class in Environmental Affairs and Tourism of the Eastern Cape1 South Africa? What are the Implications for Policy? Rapid growth of the middle class discussions. Such ambiguity needs ... the desirability of holds promise of a brighter future for to be more carefully considered and growth of the middle class developing countries. The middle class acknowledged, particularly in light of the may hide fairly obvious is commonly attributed with a range of implications for income inequality and contradictions in the way in positive outcomes including: providing ‘inclusivity’ in developing economies. which this group is used and a base of growing human capital How do you define ‘middle class’, defined in policy discussions. (Sokoloff and Engerman, 2000); through particularly when contextualising this attitudes and behaviours specific to question within developing countries the middle class (such as savings and with high income inequalities? entrepreneurship) (Landes, 1998); as the Who really are in the ‘middle’, and primary driver of domestic consumption what does it mean for economic policy? (Pressman, 2007; Kharas and Gertz, 2010); achieving political stability (cf. Barro, 1999; Economists typically measure the 1. Justin Visagie is the Director of Economic Research Easterly, 2001); and holding governments middle class very pragmatically using per of the Department of Economic Development, Environmental Affairs and Tourism, accountable (Kharas and Gertz, 2010). capita household income. This requires Government of the Eastern Cape, South Africa. providing an appropriate boundary for The author wishes to acknowledge However, for developing countries, the ‘middle class’ (as understood in everyday usage) is not in the middle of the income distribution. And those who are in the middle are not ‘middle class’ (in the sense of being above some minimum standard of living). South Africa is a case in point.2 Figure 1 shows the spread of incomes in South Africa in relation to the two abovementioned definitions of the ‘middle class’. The middle class defined by the ‘actual middle’ (here using an interval of 50–150 per cent of the median per Source: National Income Dynamics Survey 2008; own estimates. capita income) receives between $3 Note: The horizontal axis has been truncated between $40 and $70 to fit the entire income distribution on one figure. and $9 per person per day (which is Incomes above $80, in the right-hand tail of the distribution, have been aggregated. bordering on poverty). Defining the Poverty in Focus 37 middle class by ‘relative affluence’, emancipation, and the Black middle class involve these households in growing however (here using a modest lower more than doubled in size, from 2.2 million economic activity and earnings—to bound of $10 per person per day), people in 1993 to 5.4 million in 2008. succeed in moving a struggling middle captures households in the top 35 per The racial composition of the middle away from the periphery of income growth. cent of income earners—and would class actually switched from majority exclude only a small 4 per cent of White to majority African over this period. This analysis of South Africa clearly households in the ‘upper class’ if an However, in spite of strong growth of the illustrates the importance of paying upper threshold of $80 is applied. Black middle class, the total size of the attention to what is meant by ‘middle middle class in South Africa showed only class’. Certainly, both the actual middle The clear contrast in the nature of the modest growth (in step with increases income group and the affluent middle ‘middle’ across these two approaches has in population size). class are important pieces of the important ramifications for policy. If the development puzzle. The middle class middle class is conceptualised in terms This can be explained by falling numbers contains key elements for economic of relative affluence, growing the relative of middle-class Whites, largely due to progress and development—however, size of the middle class would amount emigration, but also due to movement up in developing countries the discussion to supporting economic policies which the class ladder into the very exclusive around what is ‘middle class’ and the would favour the relatively affluent and ‘upper class’ income category (in excess implications for policy are more leave the majority of households behind, of $80 per capita per day). Income and nuanced than we often admit. thereby increasing income inequality and wealth become much more concentrated income polarisation. at the very top—the result being that Barro, R. (1999). ‘Determinants of South Africa’s income inequality (already Democracy’, Journal of Political Economy, Nevertheless, this would have economic one of the highest in the world) has 107(6): 158–183. benefits such as growing the pool of continued to rise post-1994 (Hoogeveen Birdsall, N. (2010). ‘The (Indispensable) people with skilled occupations and and Özler, 2006; Leibbrandt et al., 2010). Middle Class in Developing Countries’ in raising consumer demand within the R. Kanbur and M. Spence (eds), Equity and domestic economy, which could lead What about those in the ‘actual middle’? Growth in a Globalizing World. Washington, DC, World Bank. to higher economic growth. Households in the literal middle of the distribution of income (between 50 per Easterly, W. (2001). ‘The Middle Class Consensus and Economic Development’, By contrast, if the middle class is cent and 150 per cent of the median Journal of Economic Growth, 6: 317–335. defined as the actual middle group, then per capita income) in South Africa increasing the relative size of the middle experienced very slow income growth Hoogeveen, J. and B. Özler (2006). ‘Not Separate, Not Equal: Poverty and class—many of whom are quite poor— over the first 15 years of democracy. Inequality in Post-Apartheid South Africa’ would imply supporting economic Indeed, the middle of the income in H. Bhorat and R. Kanbur (eds), Poverty policies that favour the poor and distribution experienced the slowest level and Policy in Post-Apartheid South Africa. Cape Town, HSRC Press. nonaffluent population and thus of growth of all income groups—at less decrease the polarisation and inequality than 0.5 per cent per annum on average Kharas, H. and G. Gertz (2010). ‘The New of income. This may promote greater between 1993 and 2008. Households at Global Middle Class: A Cross-over from West to East’ in C. Li (ed.), China’s social and political stability and the very bottom were propped up by Emerging Middle Class: Beyond Economic contribute to better educational and a large expansion in social welfare Transformation. Washington, DC, Brookings health outcomes in the longer term spending (through social grant income), Institute Press. through fairer public investments, and while those at the top benefited from Landes, D. (1998). The Wealth and Poverty thus promote economic and human market-driven growth. of Nations. New York, Norton. development as well as social justice. Leibbrandt, M., I. Woolard, A. Finn and J. The middle income group did benefit Argent (2010). ‘Trends in South African Taking both approaches together to some extent from increases in state Income Distribution and Poverty since the helps to better assess the nature of welfare, but this was offset by a fall in Fall of Apartheid’, OECD Social, Employment and Migration Working Paper Series, development and keeps in focus the total labour market earnings—caused No. 101. Paris, Organisation for Economic need for balanced income growth. by rising unemployment. Such a lack of Co-operation and Development. South Africa again illustrates the point absorption in mainstream economic Pressman, S. (2007). ‘The Decline of the and shows a very interesting pattern of activity and absence of income growth Middle Class: An International Perspective’, income growth over the first 15 years for the ‘average’ household over a long Journal of Economic Issues, 41(1): 181–200. of democracy (1993–2008). period is a reason for concern. Rising Sokoloff, K. and S. Engerman (2000). political unrest and social instability in ‘Institutions, Factor Endowments, and Path In terms of relative affluence (measured South Africa may be a symptom of such of Development in the New World’, Journal of Economic Perspectives, 14(3): 217–232. by $10–80 per capita per day), South slow income progress in the middle Africa experienced a large increase in the group, which constitutes more than Visagie, J and D. Posel (2013). size of the ‘Black middle class’ between 30 per cent of households. South Africa’s ‘A Reconsideration of What and Who is Middle Class in South Africa’, Development 1993 and 2008. Political liberation has economic development path needs to Southern Africa, DOI: 10.1080/ evidently effected economic become more inclusive—to actually 0376835X.2013.797224. 38 International Policy Centre for Inclusive Growth by Mosidi S. Nhlapo, Statistics South Africa, The Rise of the African Middle and Barbara A. Anderson, University of Michigan Class and Continued Racial Inequality in South Africa South Africa has the largest households form other racial groups, With the removal of legal economy in sub-Saharan Africa and has and even among middle-class persons, barriers to social mobility been lauded for the success of its macro- Africans are far less likely to hold middle- along the lines of race, economic growth policies. Much of the class jobs. Thus, despite substantial there has been an increase attention of the new South African state progress since the end of apartheid, to in the size of the South since 1994 has been to equalise the some extent the level of racial inequality African middle class, situation under apartheid in which still mirrors the situation during apartheid. especially among the population was divided into four urban Africans. officially recognised groups: Whites, Across the world there have been many Asians, Coloured Persons and Africans. approaches to defining middle-class Our definition of the households. Some have used education middle class is based on All non-Whites suffered from legalised or occupation as a defining characteristic, indicators of the material discrimination, which differed to the and others have used household standard of living, which extent that opportunities for such possessions, items purchased or income. implies a secure and groups were quite limited with Asians We look at middle-class households desirable living situation. being the least restricted, Coloured based on nationally representative persons slightly more restricted and surveys conducted annually in Africans, being the most heavily restricted. South Africa between 1998 and 2006 (Statistics South Africa, 2010a; 2010b). With the removal of legal barriers to social mobility along the lines of race, We do not use household possessions to there has been an increase in the size of identify households with a middle-class the South African middle class, especially standard of living, partly because the list among urban Africans. However, the of household possessions collected is proportion of Africans in the middle class not consistent across surveys taken in remains far below that of Whites and different years. Also, whether a household other groups. African middle-class possesses an item such as a television households have substantially lower reflects not only the purchasing power expenditures than middle-class of that household but also lifestyle preferences and other influences that could have little to do with whether the household is middle class. For example, it is known that consumption patterns of African and of White households in South Africa differ, even for households at the same income levels. Our definition of the middle class is based on indicators of the material standard of living, which implies a secure and desirable living situation. We identify a household as having a middle-class standard of living if it: resides in formal housing; has a water tap in the residence; has a flush toilet in the residence; has electricity as the main Source: Author’s elaboration. lighting source; Poverty in Focus 39 has electricity or gas as the main cooking source; and . has a landline or a household member has a mobile phone. As shown in Figure 1, the percentage of all South African households that experience a middle-class standard of living changed very little from the period of 1998–2000 to the period of 2004–2006, rising only from 23 per cent to 26 per cent. Differences in the proportion of households with a middle-class standard of living mirror differences between the four different officially recognised racial groups of the apartheid era. The results are shown separately for urban African and rural African Source: Author’s elaboration. households. This is because in 2006, while over 80 per cent of each non- African group resided in urban areas, increasingly become comprised of than a matric (secondary school diploma) only 57 per cent of Africans lived in African households. By 2006, there were is still more likely to hold a managerial urban areas. Nearly all (96 per cent) of as many African middle-class job than is an African young adult with the residents of rural areas were Africans. households as White middle-class a university Bachelor’s degree. It does Although the percentage of urban African households, and by 2010 the majority not seem reasonable that a difference households in the middle class increased of all middle-class households were this large is due to differences in the rapidly, almost no rural African households expected to be African. The changing quality of schooling. were considered to be middle class. racial composition of the South African middle class has influenced South The middle class in South Africa grew Among middle-class households, the African product development and between 1998 and 2006, especially for prosperity of each population group advertising decisions. urban African and Coloured households. followed the racial hierarchy present However, White and Asian households under apartheid. As shown in Figure 2, The occupational fate of young adults remained much more likely to have a White households were much better off in middle-class households also differs middle-class standard of living, and, than middle-class households from other by race. If one looks at young adults among middle-class households, African population groups. In 2006, 73 per cent aged 25–39 who live in middle-class households tended to have lower monthly of White households with a middle-class households, one can compare the expenditures. Also, among young standard of living reported monthly returns to schooling of Whites middle-class adults, Whites were expenditures of more than R2500 and Africans. much more likely than Africans to (US$313 at R8 = US$1), and 45 per cent hold a managerial job at every level of White households had monthly White young adults in middle-class of educational attainment. Thus South expenditures of more than R5000. households are much more likely to Africa has a substantial distance to go This was the case for only 32 per cent hold professional or managerial jobs before entry into the middle class and and 14 per cent of middle-class African than are African young adults in the welfare and opportunities of those households, respectively, with Asian middle-class households, even after in the middle class are equalised and Coloured households filling differences between Whites and across racial groups. a middle position. Africans in educational attainment are taken into account. Statistics South Africa (2010a). Changes Figure 2. Percentage of households with in Standard of Living among Population a middle-class standard of living with Differences between Whites and Africans Groups in South Africa: 1998–2006. Pretoria, Statistics South Africa, monthly expenditures greater than R2500 in holding managerial jobs are much Poli c y C entre f URL: or I n c www.ipc-undp.org lu s i v e G ro w t h (I P C -IG) Poverty in Focus No. 26 - October 2013.