The growing middle class in OECD countries, particularly in EU, US and Japan, was a major driver for the global economy during the last 50 years or so. Global financial crisis affected the middle class in developed countries pretty much, leaving millions of people with no jobs, bad debts, and little hope for better future.
While governments in developed world are still struggling to overcome consequences of the financial crisis, expert community is discussing the prospects for shifts in global wealth and how emerging middle class in Asia can boost global demand in the future. No doubts that remarkable economic growth in Asia over the last decades has been accompanied by significant reduction in poverty and increase of the middle class. But, who are those considered as a middle class in Asia?
According to the ADB, 56% of the population of developing Asia (or 1.9 billion people) belongs to the middle class, based on an absolute definition of per capita consumption of USD 2-20 per day in 2008. However, a majority of Asia’s middle class (so called “lower-middle class”) still falls in the USD 2-4 range, leaving them vulnerable to economic shocks. The upper-middle class consumes 10-20 dollars per day, or 300-600 dollars per month, which is still low comparing to pre-crisis levels of spending in OECD countries.
Making middle class in Asia the driving force for the global economy would require dramatic shift in the growth patterns in Asian countries – moving away from export-led growth towards more balanced and diversified growth. But this is only part of the story.
Middle class is not just about higher income levels and different consumption patterns. Rising middle class also brings social transformation, change the demand for political institutions. So, it goes far beyond the economy.
Are governments in Asian countries ready to deal with the rising middle class?
Author: Ildus Kamilov, Center for Economic Research