Sunday, July 12, 2015

A Global Middle Class is More Promise than Reality

A report on global incomes published this week by the Pew Research Center, entitled “A Global Middle Class is More Promise than Reality,” classifies 71 percent of the world population as either poor or low-income, subsisting on less than $10 per day. The report concludes that 84 percent lives on less than $20 per day, or $7,300 per year, an income level associated with “deep poverty” in developed countries.

Only seven percent of the world population lives on what the report calls a “high” income level of more than $50 per day, or $18,000 per year. The great majority of these people live in Europe or America.

“The global middle class is smaller than we think, it is less well off than we think, and it is more regionally concentrated than we think,” Rakesh Kochhar, the study’s lead author, told the Financial Times.

The report covers 111 countriesand spans the years 2001 through 2011. Over that period, the share of the world’s population classified as “upper-middle income,” making between $20 and $50 per day, grew from 7 percent to 9 percent. This was significantly less than the growth of the share of the population making between $10 and $20 per day, which increased from 7 percent to 13 percent between 2001 and 2011.

China alone accounted for more than one in two additions to the global middle-income population from 2001 to 2011. In contrast to China, most other Asian countries had relatively little growth in their middle classes.

 India is a case in point. Although the poverty rate in India fell from 35 percent in 2001 to 20 percent in 2011, the share of the Indian population that could be considered middle income increased from 1 percent to just 3 percent. Instead of a burgeoning middle class, India’s ranks of low-income earners swelled.

Africa fared little better. Ethiopia, for example, experienced a decline of 27 percentage points in the share of people who could be considered poor. This translated into an increase of 26 percentage points in the country’s share of low-income earners and only a 1-point increase in middle-income earners. In Nigeria the share of the poor fell 18 percentage points from 2001 to 2011, resulting in a 17 percentage point increase in low-income earners and just a 1-point boost in the share of the population that could be considered middle income.

the great majority of high-income people continued to reside in the developed countries in North America and Europe. In 2011, 87 percent of “high-income” people—those subsisting on at least $50 per day, or $18,250 per year—lived in these countries.

Despite modest improvements in living standards in some parts of the world, incomes dropped in the United States. As the report states, “The US economy stumbled through the decade from 2001 to 2011, growing at less than 1 percent annually on average. Even these slight gains did not make their way to American families, whose median income actually decreased from 2001 to 2011.”

Last year, the wealth of the world’s billionaires hit $7 trillion, having more than doubled in the time covered in the Pew report which underscores the basic fact that the capitalist system has proven incapable of providing a decent standard of living for the vast majority of the world’s people.