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the growing middle classes in the B(R?)IC countries

Thursday 9 June, 2011

The University of Chicago hosted a conference focused on the BRIC (Brazil, Russia, India, China) countries called BRIC in 2020 which I was only able to attend for the 1st day, which focused on the emerging middle classes in those countries.  You’ll find many of the presentations on the website.  Dipesh Chakrabarty of UC’s dept. of history opened with a quick summary of today’s global middle class, in families cut across borders.  As the older middle class rode a wave of prosperity, today’s growth brings environmental & inequality problems along with it.  As there is more economic growth & “globility”, there is also more conflict.

Marcelo Neri’s presentation on Brazil is here or here:  brazilsmiddleclass

Harley Balzer of the dept. of government @ Georgetown addressed the middle class in China & Russia by 1st acknowledging that Russia really doesn’t share the growth characteristics of the other BRIC countries.  It doesn’t have the historical links or geographical proximity that the others do.  It’s not a member of the WTO & hasn’t diversified it’s economy off of oil, plus Russia is losing it’s educational & science/technology role.  Russia’s middle class is richer, but a smaller % of the population, the same as in 1995.  There are mostly private, & very few public goods.  There are also big security & mobility issues there.

In both Russia & China, higher education enrollment is increasing, but neither is expanding faculty.  The political role of the middle class is ambiguous because a sizable middle class is necessary but not sufficient for democracy.  Typically the professionals provide leadership & lead revolutions & they’re just not doing that.  Their welfare states are under pressure & demographics & income disparities are becoming problems.  The middle class is vulnerable to housing bubbles & food & energy price shocks, while governments are cutting services & jobs.

The number & wealth of China’s middle class is growing, but more education is not leading to better prospects, so China might not be changing fast enough.  It’s growth curve is leveling off.  Western companies have experienced consumer market failures like Best Buy Home Depot because of intense price competition & the focus on consumption is pernicious.

Devesh Kapur of the Center for the Advanced Study of India @ Penn addressed 4 topics:

  1. fractured coherence/cohesiveness-15-20% of the Indian population still lives on $2/day while the number of taxpayers has risen to 30M households, 1/6 of the population.  50M or 15% of the population, have college degrees but their incomes are still less than in the west.
  2. characteristics-in the 1990’s, jobs were linked to state employment, which is now flat.  The middle class has grown from self-employment & entrepreneurship, although less Anglicized & moving from major metropolitan areas to smaller cities.
  3. attitudes-Pew global surveys indicate India is an outlier in that middle class attitudes are similar to those of the poor with no gap, & rate their past lives low & are optimistic & not nostalgic.  That they’ve become consumerists is no surprise.  The professions won’t play the same role as in the past.  They can be crusaders against corruption, but many self-governing bodies are corrupt themselves.  The media is corrupt too, so they don’t report on corruption.  Ultimately there is no vanguard for change.
  4. political roles-the middle class is the base of power but are disenfranchised & dislike the democratic process.  The Right to Information Act was a result of middle class activism.  Whereas the old left looked to the state, the new left is skeptical of everything, the state, markets, etc.  2M non-governmental organizations (ngo’s), of which many are great & many are crooks, have substituted for the state, which parallel the for-profit sector.

Panel Q&A highlights

Brazil’s universal health care & public services provide poor quality, but it’s population wants a big state role.  Brazil’s diverse but integrated culture helps so they can take a middle path.  It has a relatively closed economy, but that has internal advantages.  Brazil is targeting OECD levels of education by 2020, which is the #2 priority now, up from #7.  They are learning from the Chinese in “working the plan.”

Russia’s Putin closed their 1990’s trajectory & discredited democracy where corruption has blocked globalization, which will all take a generation to change.  As they view the outside world, they may demand changes.  A Russian bubble would be tied to oil, but a petro-carbon-based economy can’t last.  Their future now depends on the price of oil & their budgets are in trouble.

India’s middle class is exiting from the state’s education & health sectors because they paid taxes but got little in return, but there is rapid growth in taxpayers.  The fastest rising asset class is student loans, debt & mortgages are rising, leading to supply & demand imbalances.  The poor still favor democracy as a fundamental right, while it’s extremely heterogeneous population has both positives & negatives.  Despite many communists losing elections recently, there are still photos of Stalin in every office.

China has reestablished the intrusion of the state into life.  Housing & food price bubbles could pop up because their economic history dictates that their current growth rates are not sustainable.  Their large & integrated domestic market leads them to be optimistic, similar to the US in the 19th century.  Chinese savings are a result of a lack of valid pension schemes, so the government is concerned about inflation.

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