middle class

Growth in Central Asia hinges on creating more jobs with higher wages

Jobs and wage growth have been the most important driver of poverty reduction globally, and Central Asia. In Tajikistan, for example, it has cut poverty by about two-thirds since 2003. In Kazakhstan, it accounted for more than three-quarters of income growth over the past decade — even among the poorest 20 percent. The other Central Asian nations have also achieved significant economic growth and poverty reduction in the past two decades due to income growth.

But poverty-reduction rates have slowed. In Kyrgyzstan, they began slowing during the global recession of 2008, as income growth faltered. Poverty reduction in Tajikistan leveled off in 2015, when wage growth slackened and remittances from Tajiks working overseas fell.

In Uzbekistan, more than 90 percent of the poorest households have identified lack of jobs as their most urgent priority. For these families, the prospect of increasing their income is slim, while the likelihood of transmitting poverty to their children is high.

So what should countries in Central Asian do to build on their past achievements and prepare their citizens for the jobs of the future?

Can the middle class really guarantee good governance?

When social scientists and historians look back on the transformation in the quality of governance that took place in, first, Great Britain and, later, much of Europe in the course of the long 19^th century, one explanatory factor often stands out: the rise of a large enough middle class. What is large enough is, of course, a question of fact, and varies depending on the particular country context. This explanation is often contested, but it has stuck. People refer, for instance, to the revolts against monarchies that occurred across Europe around 1848 as the middle class revolutions. The sense that this explanation makes sense is so strong that when you attend seminars on improving governance in developing countries at some point or the other someone is bound to say: “Let’s be patient folks. Once these countries have a large enough middle class the pressure for improved governance will be unstoppable.”

I write about this now because I have just read an essay by Nancy Birdsall of the Center for Global Development that restates the view with some sophistication. Please see: “Middle –Class Heroes: The Best Guarantee of Good Governance.” The essay is worth reading in full. I am going to focus only on her core case. Key quote:

Having a large middle class is also critical for fostering good governance. Middle-class citizens want the stability and predictability that come from a political system that promotes fair competition, in which the very rich cannot rely on insider privileges to accumulate unearned wealth. Middle-class people are less vulnerable than the poor to pressure to pay into patronage networks and are more likely to support governments that protect private property and encourage private investment. When the middle class reaches a certain size – perhaps 30 percent of the population is enough – its members can start to identify with one another and to use their collective power to demand that the state spend their taxes to finance public services, security, and other critical public goods. Finally, members of a prospering middle class are unlikely to be drawn into the kinds of ethnic and religious rivalries that spur political instability. (Italics mine.)

Weekly wire: The global forum

These are some of the views and reports relevant to our readers that caught our attention this week.

Middle-Class Heroes: The Best Guarantee of Good Governance
Foreign Affairs
The two economic developments that have garnered the most attention in recent years are the concentration of massive wealth in the richest one percent of the world’s population and the tremendous, growth-driven decline in extreme poverty in the developing world, especially in China. But just as important has been the emergence of large middle classes in developing countries around the planet. This phenomenon—the result of more than two decades of nearly continuous fast-paced global economic growth—has been good not only for economies but also for governance. After all, history suggests that a large and secure middle class is a solid foundation on which to build and sustain an effective, democratic state. Middle classes not only have the wherewithal to finance vital services such as roads and public education through taxes; they also demand regulations, the fair enforcement of contracts, and the rule of law more generally—public goods that create a level social and economic playing field on which all can prosper.

Humanitarian reform: What's on - and off - the table
IRIN News
As pressure mounts to come up with concrete proposals for the future of humanitarian aid, horse-trading and negotiations have begun in earnest behind the scenes in the lead-up to the first ever World Humanitarian Summit (WHS), to be held in Istanbul in May. The release this week of the UN secretary-general’s vision for humanitarian reforms marks one of the last stages in a multi-year process that has seen consultations with some 23,000 people around the world on how to improve crisis response. (See: Editor’s Take: The UN Secretary General’s vision for humanitarian reform) Hundreds of ideas are floating around. Which are now rising to the top? And which are being pushed to the side? Here’s our take on the emerging trends:

On the road to middle class: A look back and a look ahead for Ghana

I have vivid memories of my first trip to Ghana. It was in July 2006 and I was in the country to do a research on Ghanaian farmers. It was in Accra, where I watched my team, Italy, win the FIFA World Cup final against France. Other than being a lucky charm to me, I thought Accra was a nice and safe town but,I felt that it had the potential to grow.

When I came back seven years later, I was pleasantly surprised by the changes. The city was dotted with new buildings, new roads, and had a really buoyant atmosphere. Of course, Accra is not representative of the whole country, but according to a recent report that Pierella Paci and I presented in October, growth and poverty reduction have been widespread in the country.

Now you may ask as to how Ghana was able to achieve this. In our report, Poverty Reduction in Ghana: Progress and Challenges, we show that sustained and inclusive growth in the last twenty years has allowed Ghana to more than halve its poverty rate, from 52.6% to 21.4% between 1991 and 2012.( Note: For comparing 1991 and 2012 poverty rates for both absolute and extreme poverty, the study used the 1999 poverty line. Official poverty rates use the new poverty line re-based in 2013.) The impact of rapid growth on poverty has been far stronger in Ghana than elsewhere in Sub-Saharan Africa. Indeed, until 2005 for every 1% increase in GDP in Ghana, the incidence of poverty fell by 2.5% — far above the Sub-Saharan average of 1.6%.

Weekly wire: The global forum

World of News These are some of the views and reports relevant to our readers that caught our attention this week.

A Global Middle Class Is More Promise than Reality
Pew Global Research
The first decade of this century witnessed an historic reduction in global poverty and a near doubling of the number of people who could be considered middle income. But the emergence of a truly global middle class is still more promise than reality. In 2011, a majority of the world’s population (56%) continued to live a low-income existence, compared with just 13% that could be considered middle income by a global standard, according to a new Pew Research Center analysis of the most recently available data. And though there was growth in the middle-income population from 2001 to 2011, the rise in prosperity was concentrated in certain regions of the globe, namely China, South America and Eastern Europe. The middle class barely expanded in India and Southeast Asia, Africa, and Central America.

Global Internet Report 2015: Mobile Evolution and Development of the Internet
Internet Society
While there's no question that the mobile Internet is changing everything, there are still big reasons why people aren't logging on. The 2015 Global Internet Report presents data that shows it's not always a question of if it's available, but rather how cost and a lack of useful content are core to why people are not opting in. While things need to change, together we have the power to find new solutions so everyone is able to seize the potential of the mobile Internet. Read the 2015 Global Internet Report and together we can start closing the digital divide.

How to narrow the gap between the rich and poor in Malaysia?

If you could make one New Year’s wish for your country, what would it be?

For many Malaysians, Prime Minister Najib Razak’s wish for “a safer, more prosperous, and more equal society” likely resonated with their hopes for 2015.

Malaysians appear to be increasingly concerned about income inequality. According to a 2014 Pew Global survey, 77% of Malaysians think that the gap between the rich and poor is a big problem. The government has acknowledged that inequality remains high, and that tackling these disparities will be Malaysia’s “biggest challenge” in becoming a high-income nation.

How can Malaysia narrow the gap between the rich and poor? Global experience suggests two possible levers to achieve a more equitable income distribution.

The High-Risk, Low-Risk Scenarios for Russia’s Economic Future

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I discussed our most recent Russia growth outlook at a roundtable at the Higher School of Economics Conference on Apr. 2 with a number of Russian and international experts. This conference is one of the most important and prestigious economic conferences in Russia, and traditionally, the World Bank co-sponsors it as part of its outreach to other stakeholders.

The room was packed...

Brazil’s protests: The bursting of a complacency bubble

Here was an exemplary developing country – nay, emerging market! In the 2000s, Brazil’s economic growth, albeit not stellar, was certainly steady. Inequality fell continuously and markedly throughout the decade and, as a result of those two things, poverty fell from 43% of the population in 2003 to around 25% by the end of decade (using a $4/day poverty line). By the World Bank’s definition – which is considerably more demanding than the government’s – the middle class grew in size by more than 50%, to over 60 million people in 2010. Infant mortality fell. Life expectancy rose. We were going to host the World Cup and the Olympics – the only country ever to do so back-to-back with the exception of the United States. The sun was shining... What could possibly go wrong?

Then, on June 13, a relatively small demonstration against a hike in bus fares in the city of São Paulo was violently repressed by police. The following two weeks saw a remarkable eruption of street protests across hundreds of Brazilian cities, with hundreds of thousands in the streets at certain times. In a soccer-loving country, Brazil’s successes at the Confederations Cup did nothing to mitigate popular anger. On the contrary, one of the protesters’ multiple banners was indignation at the scale of spending on (and corruption from) football stadia for next year’s World Cup, while schools, hospitals and public transport are allowed to languish.

Longreads: Rise of Middle Class Jobs, ‘Real’ Birth of the Solar Industry, Ecosystem Modeling, Stranded on the Roof of the World

Find a good longread on development? Tweet it to @worldbank with the hashtag #longreads.

Middle class gained on Twitter, with many people taking note of Thomas Friedman’s The Virtual Middle Class Rises. Friedman’s op-ed is about how cheaper computing is enabling people who earn only a few dollars a day to access the “kind of technologies and learning previously associated solely with the middle class.” Such access is driving social change and social protest, he says. It’s a trend also observed by sociologist and author Saskia Sassen in an interview with The Hindu, Why the Middle Class is Revolting, though Sassen’s vision is more pessimistic. Another trend—a sharp, decade-long rise in “middle class” jobs in developing countries—is enlarging the middle class in the developing world and promises ultimately to drive global growth, says the International Labour Organization in a new study. ILO says nearly 1.1 billion workers (42%) earn between $4 and $13 a day, which is middle class wages in the developing world. The number of middle class workers in developing countries is expected to grow by 390 million to reach 51.9% by 2017. The report notes, however, that “progress in poverty reduction has slowed” and the number of “near poor” is growing. Also check out the Guardian’s datablog on the report.

Source: International Labour Organization

Growing the middle class

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Shoppers in Chile

Since the Great Recession of 2008, there has been a widespread sense of malaise among the American middle class. Their incomes are close to stagnant, employment has not recovered, and the gap between them and the famously rich top 1% continues to grow. Look south of the Rio Grande, though, and it is quite a different picture. In the last decade, moderate poverty (under U$ 4 a day) in Latin America and the Caribbean fell from over 40% to 28%.

middle class

These are some of the views and reports relevant to our readers that caught our attention this week.

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