Emerging Middleclasses

 

 

EMERGING MIDDLECLASSES

by Joakim Larsen

November 2015

 

 

Rather than a divided World, optimistic voices state that middle classes are emerging in countries formerly designated as poor. These new middle classes consist of modern people, financially capable and well educated. They follow new patterns of smaller families with higher life expectancy and improved living standards.

 

In terms of distribution of wealth, the former country based inequality in the distribution of wealth with sharp financial borders as we know them from only 2-3 decades ago, are in the process of being washed out.

 

A historic economic development is gaining momentum in many countries traditionally categorized as poor. And it must eventually change our entire perception of the World.

 

A growing number of countries are successfully implementing essential social and economic initiatives. And in the countries that have recently undergone the most positive change, the social action is generally preceding the economic change.

 

Socially, higher quality and more accessible health services, improved housing and easier access to clean water have lead to an increase in life expectancy; governments, educational and religious institutions have been promoting family planning that is successfully leveling out the population growth. And finally obligatory schooling has been introduced and quality education is becoming widely available, rising human ressources and capabilities to a higher level.

 

Hard and dirty work. But the street cleaners of Addis Ababa are organized in unions and they are supported by the government. So the payment is not in the very lowest end and their prospects are not bad. Churchill Avenue, Addis Ababa, Ethiopia.

 

Financially, public and private sectors are growing and in some places are boosting the agricultural and the industrial production for both the home market and for export. Finally governments are working to improve the environment for international investments.

 

So what seemed like a Sisyphean task only 3-4 decades ago is becoming a reality in many places. And in the light of the implementation of these pivotal initiatives we see one tremendous and positive change: the emergence of middle classes.

 

 

 

Prosperity doesn’t affect all

 

Certainly the social changes and the economic prosperity, do not reach all groups of the population. Far from it. For despite the positive changes, a large group of under-privileged people are entirely excluded from partaking of the economic upsurges.

 

In 1997, 37.1% of the World’s population was living in extreme poverty. As of October 5, 2015, the World Bank is expecting 9.6% of the worlds population to be living in extreme poverty by the end of 2015. (Source: BBC NEWS: World Bank)

 

Meanwhile the World Bank’s definition of extreme poverty is being upgraded from $1.25 to $1.9 per day - an amount that no where near gives access basic social services such as health care and schooling.

 

 

Sub-Saharan Poverty is increasing

 

Furthermore a growing number of people living in global poverty in the Sub-Saharan Africa is a cause for concern and should also be a reason for moderation in the optimistic projections of the coming years. Today it is estimated that as much as 35.2% of the World’s poor population live in the Sub-Saharan Africa.

 

In the lower end of the income scale a group as large as 20% of the World’s population may still be designated as poor. And they have access to as little as 2% of the World’s wealth. (Source: GapMinder.org)

 

The Sub-Saharan countries are holding the majority of the World's poor people. A cause for concern... Source: WorldBank.org

 

The extreme rich are getting richer

 

Meanwhile at the very top end of the income scale the richest 1% of the World's population is expected by 2016 to hold over 50% of the World's wealth, more than the remaining 99% of the World’s population combined. (Source: Oxfarm)

 

Consequently the shift we are witnessing is in no way a positive indication of the abolishment of extremes in rich and poor - on the contrary. And it remains to be seen how reliable the projections are for the remaining part of the population.

 

 

The importance of middle classes

 

We are however witnessing a historic emergence of middle classes. And this should be viewed as an important and fundamental prerequisite for the alleviation of the entire population out of poverty.

 

HappyBirthday - a birthday party in Italy Sefar, Piassa, Addis Ababa, Ethiopia.

 

birthday party in Italy Terra in Piassa, central Addis Ababa.

 

 

Generally the emerging middle classes consist of modern, well-educated people, that live in small families and have long life expectancy. They bear indeed witness to positive economic changes in the wake of the improved social conditions.

 

According to Hans Rosling, the middle classes now make out 60% of the World’s population. And they hold 24% of the World’s wealth. (Source: GapMinder.org)

 

And so we do indeed live in a New World. But we must strive in every way possible to include the remaining 20% in the social changes and economic development, that are taking place at a mind-blowing pace around the World.

 

 

First time chance to eradicate extreme poverty

 

We are the first generation in human history that can end extreme poverty," World Bank President Jim Yong Kim said. But he warned that continuing the progress would be "extraordinarily hard, especially in a period of slower global growth, volatile financial markets, conflicts, high youth unemployment, and the growing impact of climate change". And the World Bank warned that poverty is "becoming deeper and more entrenched in countries that are either conflict ridden or overly dependent on commodity exports.” (Source: BBC.com)

 

 

Critical post script

 

So it is stated, that middle classes now make out between 50% and 70% of the World’s total population. Especially in Asia, formerly designated the continent with most poor people, the rise of middle classes during the last decades is having a profound effect on some national economies. Globally the number of people having stepped from poverty into the middle class is estimated to be around 1 billion people. Critical voices, however claim that this is more promise than reality.

 

Predictions on middle class growth. Source: BBC.com

 

Middle class is often defined by income alone. The UN and OECD categorize it as people earning and/or spending between 10$ - 100$ per day. The World Bank sets it to 10$ - 50$.

 

A US family of four living on 10$ to 20$ is barely reaching above the official US poverty marker. Furthermore middle class in the state of New York is defined by a monthly household income of:

 

Lower bound middle class: $3,187

Upper bound middle class: $9,562

 

This means that a middle class household income can vary with as much as $6,374 per month. (Source: BusinessInsider.com)

 

Given the factors above, a fair definition of global middle class would need considerably more contextualization. Parameters that need be taken into consideration are GDP, inflation, financial stability, general distribution of wealth, and family size. Furthermore it would be relevant to include employment/unemployment rates, level of trust, bureaucracy, peace and political stability and consequently the ability to attract foreign investments.

 

In fact, how can we even suppose to apply the same definition for cities as different as Copenhagen in Denmark and Addis Ababa in Ethiopia, two cities that in many respects are located in opposite ends of the economic barometer? Hardly applicable.

 

Stonestep.ch Middle Class Charts: Another prediction on middle class growth - more optimistic. Source: Stonestep.ch

The difference between earning and/or spending 50$ and 10$ daily is huge in both cities, not to mention the difference between 10$ and 100$. Furthermore social and economic economic differences in the two countries, make the actual effect of such varying income levels in the two cities even more distinct.

 

For a normal family living in Addis Ababa, the difference between 50$ and 10$ a day would mean the possibility to live in your own house or condominium versus having to stay in your parents home, even for married sons at the age of 40-45 with their wife and children or living in an over-crowded, rat-infested slum area with bad shelter houses. It would mean having your own toilet and bathroom versus sharing with ten other house holds. It would mean access to clean water, access to healthcare and higher education, versus not…

 

Furthermore the vulnerability rate needs be taken into consideration. In Copenhagen, while the job turnover rate is relatively high, private insurance or the national social safety net will kick in, if people get sick or lose their job.

 

Citizens in Addis Ababa, however, are more vulnerable to losing their job. They may very well need to leave their house and depend on the financial support of their family if they get sick or lose their job. There is no social safety net in Ethiopia, the unemployment rate is relatively high and the rate of job turnover correspondingly low. This makes finding another job difficult.

 

The question, therefore, is how to define and measure middle class. And certainly the challenge extends to measuring poverty. How globally applicable is a generic lower financial boundary? In a complex World, how dare we assume that using a pre-set non-contextualized definition can ever be justified? Due to lack of a better alternative only?

 

"Reducing poverty has become an international concern,

yet there is no international consensus on guidelines for measuring poverty."

(Source: UNESCO)

 

 

 

This article is a predecessor to an upcoming article/photo essay: Is a Middle Class Emerging in Addis Ababa?

 

 

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