Our new dossier on the Middle Class is the third in a series. The first, on Inequality, was produced at the end of 2012, followed last year by the second, on Employment. There were also a number of related dossiers on issues like Social Protection and Social Entrepreneurship. The decline of the middle class is the other side of the coin of growing inequality. It is closely related not only to a decrease in middle-class jobs, but also to falling or stagnating incomes for a substantial section of the middle class. In this dossier, we will look more closely at the deeper causes of these trends and at their political consequences.
Read the full series of related blog posts: Part 1: A new foundation for the European project, Part 2: Shifts in the political landscape of Europe, Part 3: The squeezed-out middle and Part 4: The middle class and job polarization.
We invite you to respond to the articles and blog posts by submitting an expert opinion or short comments.
The Squeezed-out middle class and inequality, two sides of the same coin
‘The squeezed-out middle’ – a concept that mainly appears in American debates but which, as The Broker’s dossier shows, applies increasingly to Europe – is in fact the flipside of inequality.
Since we published our dossier on Inequality at the end of 2012, a lot of new research has been conducted on the issue. The considerable attention attracted by Thomas Piketty’s book Capital in the Twenty-First Century has extended the focus from income inequality to capital inequality.
A major stimulus for me to devote attention to discussions on inequality in 2012 was my dissatisfaction about the choice of ‘poverty reduction’ as the main objective of Dutch and European development cooperation policy. Not that it is wrong to choose the poor as the main target group of that policy (rather than, for example, the Dutch private sector, as is now the case). The problem is that the underlying issues were addressed far too simplistically. Policy was reduced to the achievement of a series of quantitative goals. Such as the idea that you were on the right track if you could ensure that the world’s poor had more than 1.25 or two dollars a day to live on.
Such approaches neglect the inequality, livelihood insecurity and other risks that people face in a large part of the world. They also fail to account of the power relations – international, within countries and between different groups – that keep poverty and wealth in place and ensure that countries – and more and more groups within them – remain firmly in subordinate positions. That is also a good reason why some influential actors do not use the term ‘inequality’ in the discussion, as that would also call into question their own powerful positions. The World Bank, for example, prefers to speak of ‘shared prosperity’ while, in her speech marking the tenth anniversary of the Prince Claus Chair, Princess (now Queen) Máxima used the term ‘equity’ rather than the more politically charged ‘equality’ (see my article).
It is also relevant in this respect to look back at the article by Andy Sumner, The New Bottom Billion, which The Broker published in the autumn of 2010. Sumner’s research showed that 70% of the poor worldwide do not live in the poorest countries, but in middle-income countries (MICs) – which can be roughly equated to the ‘emerging powers’. The editing process for that article inspired me to produce The Broker dossier on inequality, as Sumner’s research conclusions had important implications for policy: that, if you wanted to do something about worldwide poverty, you would also have to focus on those countries. Official development assistance (ODA) does not apply to MICs, as it is only given to low-income countries. Yet MICs, the emerging powers, also have a rapidly growing upper class and an expanding middle class, making issues of distribution and inequality more relevant (see The Broker’s report on the EADI 2014 conference and for example, the interviews we held at that conference with inequality expert Branko Milanovic and Nancy Birdsall of the Centre for Global Development.
Thirdly, a focus on absolute poverty ignores the fact that inequality is not limited to the South. One of the main propositions in the Middle Class dossier is that inequality is increasingly becoming a serious problem in Europe. After the Second World War, and certainly until the late 1970s, Europe experienced a period of upward mobility. Those on lower incomes and with less education had the opportunity to rise into the middle class, and to move upward within it. Although that upward mobility is still assumed to be possible, as our Middle Class dossier shows, it is coming under increasing pressure. At the same time, the promise on which the neoliberal economic model is based – that economic growth, the benefits of which are enjoyed by the owners and shareholders of large companies, trickles down to the rest of society – is proving less and less tenable. Furthermore, ‘poverty reduction’ in Europe – the welfare state and the services it provides – is being increasingly eroded, increasing the vulnerability of the lower middle classes in particular. For the first time in many decades, it is highly uncertain whether new generations will be better off than their forebears.
The increasing impoverishment of especially the lower middle classes, and the threat to the middle and higher segments posed by automation, together with the general sense of insecurity experienced by almost the whole middle class, are leading to a shift in society that can have far-reaching political implications. The division of the middle class into an upper and lower layer is also reinforcing the trend towards greater inequality.
The resistance in many countries to the ‘1%’ – the symbol of the growing wealth at the top of the income and capital pyramid in discussions on inequality – therefore comes largely from the middle classes. But it is by no means certain what this will lead to: it might strengthen demands for a different, more just Europe, but may also add fuel to demands to exclude minorities of all kinds. In short, a coherent alternative European project that offers an answer to the erosion of the middle class, is urgently needed.
Another Perspective is The Broker’s new blog. The title reflects The Broker’s ambition to look at globalization issues in different ways. Through this blog, we also keep our followers up to date on matters that concern us.
Photo credit main picture: By Chris (via Flickr)