Middle-class World

CATO – For the first time in the history of humanity, a little more than 50% of the world population can be considered of the middle-class or rich. This also means that it is the first time in history that the poor and those close to being poor don’t form the majority of the people in the world.

That drastic social change is documented by Brookings Institution in its new report.

According to this, the middle class covers those households that spend between $11 USD and $110 USD a day per person. On the other side, extreme poverty includes those who spend less than $1.90 USD per day. Those between the middle class and extreme poverty are considered vulnerable to being poor.

About 3.6 billion people now belong to the middle class. For the authors of the study, who are here have income that can be allocated, for example, to goods such as washing machines, motorcycles, and refrigerators; or Holidays and entertainment.

This notice is enormously positive and its consequences are politically and economically powerful. Results point to an impressive reduction in global poverty in recent decades. The World Bank reports that, at the beginning of the 80s, global poverty was 42.2%. This year estimates are at 8.6%.

Progress has followed an even faster pace over the middle class. According to the study, “about one person per second escapes extreme poverty, but five people per second are entering the middle class. The number of wealthy is also growing, but at a much less accelerated pace (one person every two seconds)”.

Since two-thirds of household consumption originates in the middle-class, which in turn is the fastest growing class, the demand of the middle-class will determine more than ever the overall demand and decisions of companies around the world.

Similarly, a more rich majority will affect the policy of developing countries. In many cases, it will improve governance and the quality of democracy, but- the authors observe- it could also complicate governance depending on the political demands of the growing middle class.

That globalization has benefited in such magnitude the developing world deserves to be celebrated. However, it has been a source of political discontent in the developed world. It is said, for example, that because of greater global competition, the middle class of the US and other rich countries are shrinking or stagnating.

Both the right and left populism blame free trade for punishing the middle-class and working-class. President Donald Trump promised during his campaign trade barriers and is fulfilling his protectionist agenda.

Is it true that globalization has benefited the global middle-class, but not the middle-class in rich countries? Economist Mark Perry studied the new data for the US census and confirmed that the American middle class is shrinking. The percentage of households with US middle-class income (between $35,000 USD and $100,000
USD) has diminished from 54% to 41% in 50 years.

But that’s because middle-class members are getting richer- the percentage of those with income above $100,000 USD has grown from 9% to 29%- while declining lower-income classes. Globalization has benefited the middle class and poor in the US, among other reasons, because it has generated more products at lower costs and
much higher quality.

We must highlight the tremendous progress that humanity is experiencing before the policies based on false narratives begin to reverse it.

Published at El Comercio (Peru)