The Myth of the Middle Class
The world's most pandered-to demographic is no more economically productive or civic-minded than anyone else.
A little more than 160 years ago, a powerful analysis of the role of the middle class in economic development was unleashed on the Victorian public. It described how monopolistic guilds had been "pushed on one side by the manufacturing middle class" which "developed [and] increased its capital" as it reformed economies and polities. The middle class had "created more massive and more colossal productive forces than have all preceding generations together," the text suggested.
A century and a half later, few subscribe to the political doctrines of that analysis, Karl Marx and Friedrich Engels’s Communist Manifesto. Yet the idea of the middle class as central to economic growth and democratization is still very popular. Indeed, the view that "bourgeois" values — seen by Marx as an important stepping stone on the way to revolution and utopia — are a vital part of progress to the end of history is almost universally held among middle-class historians and middle-class political scientists. Why did Britain lead the world in the 19th century? Because of "the great English middle class," answers Harvard University economic historian David Landes in his magisterial book, The Wealth and Poverty of Nations.
For the future, continuing worldwide growth through closer integration in the 21st century will "depend on what can be done for the great global middle," suggests U.S. President Barack Obama’s former economic advisor Larry Summers. It is hard to think of any greater shibboleth in American politics; in January 2010 Obama convened a task force dedicated entirely to its needs. But this isn’t just an American mania; it is worldwide. Indian Prime Minister Manmohan Singh, for example, has called for "thinking people … from enlightened middle classes" to play a larger role in public life.
But is there any evidence to support the argument that the middle class is so vital to prospects for stability and economic growth? In fact, the middle class exhibits little more of the entrepreneurship or social progressiveness that is typically ascribed to it than do poor people.
And who, exactly, is in the middle class? That is a matter of some confusion. In their paper, "What Is Middle Class About the Middle Classes Around the World?" MIT economists Abhijit Banerjee and Esther Duflo use a historical estimate based on the British middle class, which is often thought to be critical to Britain’s rise as a world power. They suggest that income for a family living off the wages of a clerk in his 30s in Britain in 1825 would be about $10 per person per day in today’s U.S. dollars. They define a middle class as people with incomes between that level and the global poverty line of $2 a day. Economist Homi Kharas at the Brookings Institution, meanwhile, uses a definition stretching the other direction from the $10 mark, between $10 and $100 a day. Nobody is middle class according to both definitions.
And that terminological inexactitude illustrates the fact that, regardless of where the line delineating the middle class is drawn, there is not much evidence of the politicians’ well-worn claim that people on one side of it are more productive, creative, risk-taking, and public-spirited than those on the other side. Take the entrepreneurialism for which they are so often celebrated. Banerjee and Duflo suggest that the majority of enterprises owned by people earning between $2 and $10 a day worldwide are shops. Many of those shops sell the same small stock of goods as the ones just down the road: basic foodstuffs, sweets, soap, and a few other products. They make a few sales a day; in India, surveys suggest their average profit is somewhere around $133 a year. These are not enterprises that are going to become the next Infosys. The same lack of potential — and ambition — holds true in the United States. According to survey evidence from economists Erik Hurst and Ben Pugsley of the University of Chicago, "most small businesses have little desire to grow big or to innovate in any observable way." They just want to provide an existing service to an existing customer base.
What the worldwide evidence suggests is that becoming middle class doesn’t suddenly turn you into an entrepreneur or an innovator. Indeed, quite the opposite is true: The reason that most in the middle classes are richer is because more of them have stable 9-to-5 jobs, with weekly or monthly paychecks. By contrast, poor people are more likely to work in casual labor, usually paid by the hour, often going stretches without employment. We may talk about every new graduate into the middle class as a potential next Bill Gates, but the fact is that most more realistically aspire to be the next Walmart associate.
Conversely, if an income below $10 a day condemned people to listless apathy, then nobody would be rich today. A hundred years ago, the great majority of people in even the richest countries earned less than that in current dollars. In fact, the World Bank’s study Moving Out of Poverty, which interviewed 60,000 poor and near-poor people across 15 countries, demonstrates that the idea of a "culture of poverty" is considerably at odds with the activities and attitudes of most poor people themselves. They are confident about the future despite often having to run multiple microenterprises to get by.
It is true that middle class people do have somewhat different attitudes than poorer people. A Pew Research Center study of the attitudes of the global middle class — there defined as people who had incomes greater than $4,268 per year — found them less likely to prioritize freedom from poverty on a list of freedoms that also included freedom from crime and violence and freedom of speech and religion. No surprise there — you’re surely less likely to care about the problem of poverty if you aren’t poor.
But the values traditionally thought of as "middle class" — the value of investing in education or of political rights, for example — are widely held by people who are out of that class by whatever definition you chose. Everyone values education, enough so that primary-school enrollments are reaching universal levels in even the world’s poorest countries. If 80 percent of the majority-poor population of Africa thinks that democracy is the best system of government, then it isn’t a middle-class value in any traditional sense of the word. The democracy protests of the Arab Spring, meanwhile, were set off by a Tunisian man forced into life as a harried street vendor for lack of other opportunities. It was sustained by a reserve army of the young unemployed — not by middle-class Tunisians safely ensconced in the few large government-favored firms.
If, rather than looking at the confused economic literature on the subject, you just ask people what class they are, then large proportions everywhere plump for the middle. Ninety-one percent of Americans self-identify as upper-middle, middle, or lower-middle class. And even in much poorer India, 48 percent of people self-identify as middle class according to the World Values Survey — a proportion about 10 times higher than that suggested by a definition based on an income of $10 a day or more.
Given that so many people consider themselves middle class even in the world’s poorer countries, politicians worldwide are surely wise to praise the wonders of middle-class values as a result. But the rest of us should know better. Instead, let’s celebrate the fact that people are not waiting to reach an income of $10 or even $2 a day before they play a role in upholding democratic values, ensuring their children go to school, or helping to sustain economic development — which helps to explain why political rights, education, and growth are spreading even to the world’s poorest countries and communities.