Middle classes will surge in China and India but will be shrinking in the U.S. and Europe
The divergent fortunes of the middle classes in the developed world and the emerging markets will be a defining economic and political reality in 2030 and beyond. The Joneses will indeed have trouble keeping up with the Singhs and the Wangs in more ways than one. “Depending on who and where you ask, the middle class is either growing or shrinking, optimistic or anxious, getting richer or getting poorer, politically engaged or opting out,” argues Clive Crook, a columnist for Bloomberg News. Do the middle classes across the world compete for jobs and prosperity with one another? If they do, and there’s unfair competition, then extraordinary measures — like protectionism — gain traction among the electorate.
In 2015, the Pew Research Center announced that the combined numbers of poor and rich households in the United States had, for the first time in two generations, exceeded the number of middle-class households. In 1971, there were 80 million middle-class households, compared to 52 million either above or below. By 2015, there were 120.8 million middle-class families and 121.3 million in the two other groups combined. The sluggish, if not declining, living standards of the American and European middle classes have been recklessly blamed, by politicians and pundits, on immigration, unfair competition from emerging markets, and elite indifference to the dark sides of globalization. The global economic and geopolitical order that emerged after World War II is under heavy fire from both sides of the political spectrum.
The clash is also taking place among companies. Those from emerging markets are growing bigger and bigger by the day, while those from Europe and the United States are downsizing — with some notable exceptions, such as tech. But even in the tech sector, Chinese and Indian companies are growing not only because of the sizes of the populations they serve but also because more people in those populations are online and using digital services. China and India both have more broadband, social media, and mobile payment users than does the United States. This gap will only continue to widen.
How will European and American companies fare as the center of gravity of global middle-class consumption shifts to Asia? Can they compete for market share alongside their foreign counterparts? Alibaba has more users than Amazon. Didi just purchased Uber’s Chinese operations, and India has more technicians and engineers employed in the information technology sector than does the United States. Strong companies are important to the middle class because they create good-paying jobs and offer careers and paths to professional advancement. This post-global economy is a tough competitive landscape for everyone, and especially so for the old middle class, precisely because companies like General Motors and Sears are on the decline.
In order to gain and to hold the esteem of men it is not sufficient merely to possess wealth or power. The wealth or power must be put in evidence, for esteem is awarded only on evidence. And not only does the evidence of wealth serve to impress one's importance on others and to keep their sense of importance alive and alert but it is scarcely less use in building up and preserving one's self-complacency.… Abstention from labor is the conventional evidence of wealth and is therefore the conventional mark of social standing; and this insistence on the meritoriousness of wealth leads to a more strenuous insistence on leisure.[...] According to well-established laws of human nature, prescription presently seizes upon this conventional evidence of wealth and fixes it in men's habits of thoughts as something that is itself substantially meritorious and ennobling.
It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest. We address ourselves not to their humanity but to their self-love, and never talk to them of our own necessities, but of their advantages.
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