November 3, 2008
Those who fear increasing inequality should take to heart a new study that finds that the middle class is expanding, gaining about 70 million people a year in an unprecedented worldwide boom. Better yet, the trend is likely to continue for at least 20 years, with the global middle class making annual gains of 90 million people a year by 2030, say researchers.
The study, conducted by Goldman Sachs, defined membership in the middle class as having an income of between $6,000 and $30,000 a year in purchasing power parity terms (in current U.S. dollars and prices). Researchers found that:
- India and China are growth powerhouses, but even without those 2 giants the expansion of the middle class would still total about 20 million a year.
- That includes millions of new middle-class members in other Asian countries, Eastern Europe, Latin America and the Middle East.
- Meanwhile, the number of people living on incomes of less than $1,000 a year (in 2008 dollars) has fallen from 50 percent of the world's population in the 1970s to 17 percent in 2000.
- Probably no more than 5 percent of the world's population now lives on less than a dollar a day, the World Bank's definition of poverty.
It is important for everyone in the so-called developed world to be constantly aware that these powerful shifts in global wealth are good not only for the developing world, but for them too. For example, U.S. exports are growing at close to 20 percent and it is this that is stopping the housing and credit crunch from driving the United States into a deep recession. Aspects of the same phenomenon can be seen in Japan, Germany and even the United Kingdom.
The new middle-class explosion is going to remain the market opportunity for us all, or certainly for those of us who are prepared to respond to the new realities, say researchers.
Source: Katherine Mangu-Ward, "Bourgeois Boom," Reason Magazine, November 2008; based upon: Jim O'Neill, "The Expanding Middle: The Exploding World Middle Class and Falling Global Inequality," Goldman Sachs, 2008.
Browse more articles on International Issues