Global middle class is shrinking

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  Global middle class is shrinking

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• Globalisation's success story: A big trend of the past few decades has been the emergence of a global middle class, a cohort of consumers that was expected to continue to grow relentlessly, as rising incomes in developing countries lifted millions out of poverty each year. Global economic planning was based on this core assumption.
• Pandemic changed it all: Sadly, the 2020 pandemic, raging well into its 2021 phase, has destroyed that assumption. For the first time since the 1990s, the global middle class shrank. This is according to Pew Research Center estimates. About 15 crore people — a number equal to the populations of the UK and Germany combined — tumbled down the socioeconomic ladder in 2020, with South Asia and sub-Saharan Africa seeing the biggest declines.
• Developing world hit hard: Defining the global middle class is tough, but Pew Research labels as middle income those making from $10.01 to $20 a day, using data that smooth out differences in purchasing power across countries. 

1. In Pew’s analysis, there’s a separate upper-middle-income band made up of those earning $20.01 to $50 a day. (Note that $50 per day falls shy of what a minimum wage worker in the U.S. takes home pretax for an eight-hour day.) Others, such as the Brookings Institution, have opted for a more expansive $10 to $100 a day definition.
2. Taken together, Pew’s middle-income and upper-middle-income brackets encompass roughly 2.5 billion people (a third of the world’s population). 

• China and India: It is home to one-third of the world’s middle class, and appears to be recovering quickly. India will end 2021 with a gross domestic product that’s 5.2% smaller than it would have been otherwise. Indonesia’s output will be 9.2 per cent smaller than its pre-crisis trend foretold. The US will be just 1.6 per cent smaller. 

1. Overall, the drop in percentage terms in middle and upper-middle classes in China, India and South Asia in 2020 was approx. 4%, 32% and 25%, respectively.
2. The second-order economic effects of the pandemic are only now being understood, and that a rebound in growth rates is being mistaken for a lasting recovery. The ripple effects of the pandemic have been particularly visible in India’s automobile sector, which is the world’s fourth-largest and accounts for half of the country’s entire manufacturing output. It saw a fall in vehicle sales of more than 18 per cent in the 12 months through February 2021.

• Brazil's story: Data show that residents of Brazil, the world’s No. 1 exporter of beef, are eating less of it. Per capita, beef consumption fell 5%, to 29.3 kilograms (64.6 pounds) in 2020, its lowest level since 1996. At the same time, consumption of eggs rose 3.8 per cent, hitting a new high. 
• South Africa's story: Many South Africans now find themselves without a job. Nationwide, the vacancy rate rose to a record 13.3 per cent in the first quarter of 2021 from 7.5 per cent a year earlier. Most of the pressure has been on units that rent for about $475 a month or less, which account for two-thirds of the formal market.
• Summary: The world economy stands structurall redefined now.

Read more on - Polity | Economy | Schemes | S&T | Environment

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