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I N C O M E

D I S T R I B U T I O N ,

I N E Q U A L I T Y ,

A N D

T H O S E

L E F T

B E H I N D

Figure 3.1 Middle-class expansion is sensitive to growth assumptions 40

Middle-class income range Global income distribution in 2000

30

Global income distribution in 2030 (high growth)

20 Global income distribution in 2030 (baseline)

10

Rich (84% OECD)

0 0

7

55

400

3,000

22,000

Monthly household per capita income (1993 PPP) Source: Authors’ calculations.

ability of the global middle class (together with the rich) to influence policy in many low- and middle-income countries is initially limited by its small size, this group is likely to become a much stronger political force at both the global and national levels by 2030. The increase in developing-country nationals in the global middle class may also strengthen developing countries in the global policy arena. It is important to emphasize that the projected expansion in the global middle class is not a formal forecast. Alternative assumptions about income and population growth, as well as effects of policy interventions, can have a significant impact on the estimates of table 3.1. Figure 3.1 illustrates some of these possibilities by plotting the income distribution of the world in 2000 and in 2030 under different growth assumptions.17 The size of the global middle class is represented by the area under the distribution curve between the two middleclass boundaries. Faster growth shifts the peak of the distribution closer to the middle-class threshold, although even the optimistic scenario here—which increases growth to 1.6 percent above the baseline growth rates—falls short of moving the thickest part of the distribution into middle-class territory. Still, under the high-growth scenario the global population share of the middle class rises to 19.4 percent,

allowing an additional 235 million people to gain access to middle-class standards of living. In addition to growth assumptions, policy intervention at the global and national levels—such as trade liberalization—can also affect the rate of middle-class expansion. The effects of policy reforms are considered in the policy section at the end of this chapter.

The growth of the global middle class may have far-reaching consequences The ascent of hundreds of millions of developing-country nationals into the global middle class will produce a large group of people in the developing world who can afford, and will demand access to, the standards of living that were previously reserved mainly for the residents of high-income countries. This has two major implications: the demand for international goods and services will rise, and pressures for policies that favor global integration will increase. Goods and services. Much of the effect of the middle-class expansion on the world economy will be realized through a changing demand for goods. The fact that the middle class will be growing twice as fast as the overall population implies that multinational enterprises will be able to market their products to a much larger audience in 2030 than they do today.

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Global Economic Prospects 2007  

Managing the Next Wave of Globalization

Global Economic Prospects 2007  

Managing the Next Wave of Globalization

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