Anxieties of the middle class — II

Mahmoud Mohieldin
Tuesday 5 Mar 2024

Mahmoud Mohieldin continues his analysis of changes in the fortunes of the world’s middle classes by pointing to their growth in India and China


Picking up on my discussion of the transformations of the middle class in Al-Ahram Weekly last month, the Arab Association for Economic Research (ASFER) and the Middle East Economic Association (MEEA) hosted a lecture by the Brookings Institution’s Senior Fellow for Sustainable Development and distinguished economist Homi Kharas.  

The Washington-based economist recently published the widely-acclaimed The Rise of the Global Middle Class, which follows its growth from its Western European origins to its current total of four billion people, or around half the population of the world.

It took from 1825 to 1975 for the first billion members of the middle class to accumulate. This growth occurred in conjunction with the First Industrial Revolution and was concentrated in Western Europe, the US, Japan, and the Oceania. The spurt to the second billion occurred in a much shorter period, from 1975 to 2008, as the middle class spread geographically. Since 2008, the rapid economic growth of China and India has added the next two billion to the middle class as well as to the other wealthier classes.

Currently, the size, wealth, and influence of the middle classes in Asia are growing as the centre of world economic gravity shifts eastward, while the middle classes in the US, Europe, and Japan are facing challenges to maintain their relative size and influence.

Meanwhile, the middle classes in the Global South are being pulled in different directions. Some are growing thanks to their governments’ efforts to stimulate the economy, lift their people out of poverty, and propel them toward higher economic and living standards; others are reeling beneath the economic straits that have hit their countries, precipitating rising rates of inflation and unemployment and shackling their governments’ development efforts.

Perhaps the centrality of the middle class to public policy decisions is best illustrated by a couple of quotations. One was cited by Kharas, in the above-mentioned lecture, when he alluded to a book written by James Carville and Stan Greenberg, election campaign strategy advisers to former US president Bill Clinton who defeated George H. W. Bush in the 1992 elections in the US with the slogan “It’s the economy, stupid!”

Carville and Greenberg chose a more targeted title for the book mentioned by Kharas in “It’s the middle class, stupid!” This title captures the causal relationships between growth, employment, higher income levels, and other factors that have enabled the middle class to achieve stability and prosperity, thereby opening opportunities for it to support the policies of the decision-makers who made these opportunities possible.

The second quotation comes from Indian Minister of Home Affairs Amit Shah, who was cited by the Indian newspaper The Economic Times as saying that since coming to power nine years ago Indian Prime Minister Narendra Modi has “fulfilled the dreams of the middle class” by opening new high-quality educational institutions, providing subsidised housing, and creating hundreds of thousands of jobs.

Shah said Modi had “supported the middle class financially all along” through generous tax rebates, affordable medicines and insurance, and cheap travel.

Lending weight to Shah’s remarks, a study co-authored by economist Surjit Bhalla, who served as executive director for India at the International Monetary Fund (IMF), has reported that India has achieved a breakthrough in eradicating extreme poverty, as measured by global standards.

It attributes this success to the Indian government’s income-redistribution policies that have increased the consumption capacities of lower-income groups that are more concentrated in rural areas. The study does not factor in other types of government support for health, education, improved drinking water and sanitation services, or rural electrification.

The world’s two most-populous countries, China and India, have now proclaimed victories in eradicating extreme poverty. China even preceded India, announcing that it had reached this goal in 2020. Extreme poverty is the foremost obstacle to sustainable development, which is why it tops the list of the UN’s Sustainable Development Goals (SDGs) for realisation by 2030.

Unfortunately, many developed and developing countries are lagging behind in their performance in reaching the SDGs. Taken together, they are on track towards meeting only 15 per cent of the SDGs and are behind target to varying degrees on 55 of them and are worse off than they were in 2015 in 35 per cent of them.

The Chinese and Indian cases show that efforts to improve the middle class’s prospects for stability and progress do not conflict with but support policies aimed at the eradication of extreme poverty.

A study conducted by the economist Branko Melanovic reflecting a shape of elephant curve and has relevance to the developments of the middle class from 1988 to 2008, i.e., from the eve of the fall of the Berlin Wall to the 2008 world financial crisis, affords us a clearer perspective on the rise of the Asian middle class in contrast to the mounting challenges facing its Western counterpart and the vicissitudes of the middle classes elsewhere.

There is hardly a dull moment for the observer of change in our rapidly moving and fluctuating world, in which China and India are claiming a growing share of the global middle class.

In the developed countries, income distribution is moving in a different direction. The lower-middle class is shrinking, while the wealth in the top one per cent is growing, and more and more people are gravitating to the lowest 10 per cent of the income distribution. As a result, one should not be surprised by the growth of far-right currents in the West, the waves of racism and xenophobia, since the global financial crisis.

I believe that this crisis marked the beginning of the relative decline of the established economic powers that have occupied the forefront of economic progress and political hegemony since the First Industrial Revolution.

Probably you are now wondering about the state of the middle class in the Arab and African regions. I will turn to that in a forthcoming article, having taken this necessary excursion on the state of this class in the East and West.

But as a final note here, the key to understanding the fate of the middle class and, indeed, of society as a whole, was expressed by the Egyptian poets Hafez Ibrahim and Khalil Mutran in a book on political economy that they translated from the French in 1913.

“In the economy rests our lives,” they wrote. “And fate, despite our proud wiles, / The fields, stores, and factories that arise, / Nurtures us and helps us to thrive.”


This article also appears in Arabic in Wednasday’s edition of Asharq Al-Awsat.

* A version of this article appears in print in the 7 March, 2024 edition of Al-Ahram Weekly

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