The Coming Clash of the Middle Classes

The Coming Clash of the Middle Classes
Q&A
Summary
The middle class is shrinking in developed countries and swelling in poor ones, feeding social and political instability as governments struggle to ensure that living standards continue to meet expectations.
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In coming years, clashes between cultures or religions will be a far less important source of international friction than the changes in living standards of the global middle classes. In a video Q&A, Moisés Naím discusses how the economic slowdown in rich countries and the continuing growth of emerging markets will intersect to fuel domestic political conflicts and reduce the ability of governments to cooperate internationally with each other.

The middle class is shrinking in rich, developed countries hurt by the economic crisis, while in poor nations it is swelling. The situation for the middle class in rich nations is going from bad to worse as declining living standards nurture frustration and anger. Paradoxically, the same reaction is happening in emerging markets, where income levels are growing. These changes lead to thwarted and unfulfilled expectations—and feed social and political instability.

What will be the main cause of future conflicts in the world?

The clash of the middle classes is the result of two global trends. One is that in poor countries, the middle class is rapidly expanding. At the same time, in rich countries, the middle class is shrinking, feeling embattled, insecure, and incapable of keeping and defending the standards of living that have characterized a middle-class lifestyle for centuries. That explains, in part, the street demonstrations and riots that we have seen in countries ranging from England to Spain, even Israel, in which people take to the streets fighting and protesting against a variety of issues: inequality, the cost of housing, insecurity, public rage against governments, and all that.

While that is happening, in poor countries, like India, China, Vietnam, Brazil, Colombia, and Turkey, people who used to be poor are no longer poor; they continue to be poor by standards of advanced countries, but now they have disposable income. In many ways they can be classified as middle class, if one understands middle class not as the middle class in advanced countries but the middle class in these poorer economies.

This is one of the most rapidly expanding groups in humanity today. By that I mean the poor who are evolving toward the middle class. They have suffered a setback with the global financial crisis that in some countries has led some of these newly acquired members of the middle class to fall back into poverty, but still the numbers are staggering. Between India and China and developing Asia, 1.3 billion people joined the middle class between 1990 and 2008. Three-quarters of all Latin Americans today are members of the middle class; in sub-Saharan Africa, the number of members of the middle class doubled in that period. So we are looking at a great expansion of these middle classes.

Ironically and paradoxically, in the same way that the decline of the middle class is creating political tensions and frictions in rich countries, the expansion of the middle class is also a source of political conflict. That may be paradoxical, but the reality is that these middle classes created expansion and rapid progress, which lead to expectations that very few governments can fulfill at the speed at which they are created. So demands for public services are soaring, and the capacity of the government to respond to these demands is expanding, too, but at a slower rate.
 

Where do we see clashes between economic classes today?

Chile is one of the world’s most successful examples of how a poor, small, remote country goes from being a very poor country to being almost a developed country. It has had decades of very high economic growth, it has become an international player, and it has a very competitive economy. It ranks at the top in almost any ranking in terms of competitiveness, lack of corruption, and performance on a wide variety of indicators.

So Chile is a great example of success, yet for the last several months, every day in the streets there are massive protests against the government by students and others. These students are demanding more access to high-quality, inexpensive education—higher education in Chile is quite expensive, it is mostly private.

This tells you that it is not enough to have more access, and in fact the truth is that far more people in Chile now have access to higher education and university-level education than ever before. But these people are no longer satisfied by having access to education. They want cheaper education and better education, which is much harder to deliver.

Building schools is quite easy. Providing education that is high quality is very hard. Similarly, building hospitals in China or in Turkey or in any of these rapidly growing countries is easier than ensuring that that hospital provides quality healthcare. So providing public services is always a very challenging task for any government. Building infrastructure is easy; providing the quality services that the middle classes demand is far more complicated, and that is a source of friction, conflicts, and political upheaval.
 

Can poor countries contain the political explosiveness of growing middle classes?

Development was always understood as lifting people out of poverty—which continues to be a priority, as the great majority of people in these poor countries are poor—but that should not be done at the expense of totally ignoring the needs, aspirations, and requirements of the middle class.

These countries are starting to have a middle class, and therefore having public policies that are only geared to the poor ignores the needs of the middle class and leads them to the streets to protest against the government. The central message is that for the first time in history we have poor countries that have a very large middle class. That is not normal in the historical evolution of these economies.
 

How can economic discontent be alleviated in rich countries?

One of the realities of the new normal in the world economy is that the peaceful coexistence with inequality has ended. The 1990s and beyond created a tolerance for inequality that is no longer there. A lot of the protests and the demonstrations that we’re seeing in rich countries are in fact a reflection of the notion that the middle and working classes have been carrying too much of the burden of the economic crisis and that there has been a shift in wealth and income from the working and middle classes to the wealthier groups of society that is no longer acceptable.
 

What are the international implications of the clash of the middle classes?

The international implications of the clash of the middle classes are huge because by definition we have a growing list of problems that no country can tackle alone. So you need international coordination, you need multilateral activities, and synchronization.

It is very hard for governments to synchronize their activities if they are pulled in different directions. If the middle class in developing countries is requesting all sorts of efforts in one direction from their governments and the same is happening in the rich countries, one of the immediate consequences is that there are no resources for multilateral activities. Both rich countries and poor countries are going to be far more limited in channeling resources for activities and goals that are not directly related to satisfying the needs of these protesting middle classes.
 

Where will conflicts likely occur in the future?

The conflicts are not going to be defined by civilizations or religions; we are not talking about different religions going to war with each other. We are not even talking about the normal form, the traditional form of conflicts in which one army in one country goes to war against the army of another country. We have seen that the number of international conflicts between two nation states has gone down, whereas the frequency of civil war, insurrections, and internal conflict is increasing.

The clash of the middle classes is going to fuel that trend and therefore one need not look at geography, one need not look at religion, in trying to identify where the conflicts are, but look at demography, income distribution, and access to resources. That is going to be far more telling in terms of where conflicts are most likely to occur.

End of document

About the International Economics Program

The Carnegie International Economics Program monitors and analyzes short- and long-term trends in the global economy, including macroeconomic developments, trade, commodities, and capital flows, drawing out their policy implications. The current focus of the program is the global financial crisis and its related policy issues. The program also examines the ramifications of the rising weight of developing countries in the global economy among other areas of research.

 

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Source http://carnegieendowment.org/2011/09/19/coming-clash-of-middle-classes/8kgb

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