Global middle class is fine, but in the West it faces extinction
Capitalism has succeeded in homogenising prosperity, but it is alienating its Western, lower middle-class support base
We are at a global tipping point, according to new research by the American think tank Brookings, with more than half the world’s population now officially “middle class”.
The problem with such claims is always one of definition. What does it mean to be middle class, or indeed working class?
Let us take the Brookings definition at face value: being middle class means “having some discretionary income that can be used to buy consumer durables like motorcycles, refrigerators, or washing machines. The middle classes can afford to go to movies or indulge in other forms of entertainment. They may take vacations. And they are reasonably confident they and their family can weather an economic shock – like illness or a spell of unemployment – without falling into extreme poverty.”
Assuming Brookings is correct in its data, this is obviously great news. Global capitalism has worked as it should in lifting great swathes of the world’s population out of poverty. But where have these gains arisen? As you might expect, it is substantially in the main centres of population, China, India and, to a lesser extent, Latin America.
It is not such good news, however, if already a member of the existing, Western middle class, as neatly illustrated by Branko Milanovic’s “elephant graph”.
This shows growth in real incomes globally according to income distribution over a 20-year period of hyper-globalisation from the fall of the Berlin Wall to the collapse of Lehman Brothers. Those in the bottom half of the income distribution, and those at the very top, are shown to have done exceptionally well out of a fast globalising economy, but those who started relatively well off – the Western middle class – have seen their real incomes badly depressed, squeezed between a rising Asia and a globe-trotting international elite.
Trump, Brexit, populism – all apparently explained in one simple image.
The problem with this chart, as has been repeatedly pointed out, is that it assumes a static world in which everyone remains stuck in the same income bracket. This is rarely the case; people tend to move up the income ladder over a working lifetime.
Nonetheless, it remains undeniably the case that the developing world has done well from globalisation, but beyond the plutocrats and the highly skilled, the West not so well. Capitalism has succeeded in homogenising prosperity, and in reducing inequality between nations. But at the same time it is alienating its core, Western, lower middle-class support base.
It could scarcely find itself in a more perilous position, apparently unable to satisfy its greatest creation – Western democracy.
- © Telegraph Media group Limited (2018)