Sunday, January 27, 2013

Middle Class Values and Political Economy: The New Middle Class


The reforms of the 1990s, accelerated the growth of income and poverty reduction, demonstrating the virtues of a competitive market economy powered by Indian Entrepreneurship.  Consequently India has moved over the last decade from low income to lower middle income.  The stirrings observed in Delhi during the past two years are a precursor of the emerging middle class and political demands for better governance are likely to follow. The middle class has historically grown in every country along with income and has demanded and got better governance in every (now) developed country. This process has been accelerated in India by the early establishment of democracy and a flourishing media.


 The anti-corruption agitation of 2011 and the public outpouring of support for it was perhaps the first indication of the emergence of this "new middle class.".  The common Delhi resident’s passionate outrage was less about the specific scam allegations relating to CWG and Telecom and more about the basic mistreatment of citizens by the government service providers (water, power, police, MCD).  The new middle class, which has had a taste of freedom and equality in the market place, was fed up with the arrogance of local government functionaries and the humiliating treatment meted out by corrupt and self-serving officials, while their bureaucratic and political bosses hypocritically claimed to be ‘servants of the people.’  The protests were an expression of outrage against the inequality between the government as service provider on one side and the general public on the other side of the counter.  Though both events would have been damp squibs without media attention, underlying these is a cry for attention to citizen’s personal security and equal treatment to all female and male, political rulers and the ruled.
Twenty three year old "Nirbhay" and her parents reportedly migrated to Delhi from a village in Ballia district in Eastern UP, a region that is often equated with Bihar.  She was training to be a physiotherapist, acquiring a skill that would earn her a decent income.  She represented the dream, of numerous families, including those who protested on the streets: women of all ages, income classes, castes and professional-work categories, who saw something of themselves in her.  She was the child of the new era of economic opportunity.

The Middle Class


                From the many definitions of middle class I would emphasize the two most common shared elements: A level of income that is above the level needed for survival  (including savings for emergencies) and a level of education and skills necessary to earn the posited level of income.  The education has to be at a quality-level to make the individual aware of the world beyond his/hers immediate day to day environment.  This awareness is essential for making an empathetic connection between one’s own selfish concerns and the concerns of other similarly placed individuals.  Thus the third element is usually a set of shared values that to varying degrees are common to the ‘middle class.’   
However, 'educated' does not necessarily mean intellectual: To be a part of the (lower) middle class you have to have sufficient education to be aware of issues and elements that are outside the ambit of the skills needed for your job and to navigate the space that you inhabit, but not necessarily educated to a level that makes one capable of participating in debates about these issue or deriving solutions to social or economic problems.  That is a criterion for classification into the middle class intelligentsia.


Is there a key “middle class value?’ In my view there are two values that support each other.   One, that as a human being one has a fundamental right to, “life liberty and the pursuit of happiness.”  Second is an understanding and appreciation of true equality, that it is universal and indivisible. That is, if I have this right, then all individuals must have this right and that the only way I can truly have and preserve this right is for all others to have the same right.  Practically this translates into a demand for equality of opportunity and equality of treatment.  The competitive market economy embodies these ideals to a much greater degree than the hierarchical and segmented Indian society or the self-centered politico-bureaucratic system that now constitutes the ruling class.  The fast growth unleashed by the 1991 reforms has created demand for education and skills with which to earn income.  It has also shown the current and potential members of the middle class that a market economy cares primarily about skills and competence when it is seeking to get a job done and about the money you want to spend on its products as a consumer, and much less if at all about your caste, class or family background.  Therefore this demand for equal treatment is focused on the services that government provides, both the public goods and services such as personal security, that only Government can provide, as well as private goods and services that it has deliberately chosen to monopolize or control such as higher education and electricity.

Political Economy of Welfare

Simple welfare theory teaches that there are three elements of Social Welfare.  (1) Private income and consumption, (2) Public Goods and Services (legal, police, roads, public transport, public health-sewage, sanitation)  (3) The distribution of income, poverty, inclusion.   Taxes and transfers can be used to change, within limits, the distribution of income and thus improve social welfare. To the extent there is a gap between the claims and reality (wastage, corruption) these are rightly called populist measures.  Much of Indian political discourse since the sixties has focused on this third element.  India under Mrs. Indira Gandhi was the first country in the world to raise “poverty alleviation” to a national objective under the rubric of “Garibi Hatao.” 
The economic reforms of the 1990s raised public awareness of the role of faster growth in raising the incomes and Welfare of the people (item (1)), but the balance shifted back to (3) from 2004.  The dramatic fall in the national growth rate and the threat of junk status coupled with the recent prominence of the ‘Gujarat model’  have restored some of the importance of income growth.  The maintenance of a sufficiently high average per capita growth - between 6%  and 7% ( about  8% GDP), which generates income opportunity for the emerging middle class will soon become de rigor.  The rise of the middle class also promises to bring Public goods and services (item 2) along with governance into the public discourse within this decade. This will for the first time establish a balance between the three elements of Social Welfare that should be part of the political debate.


Though this new middle class is still relatively small and concentrated in the Urban and semi-urban areas, it is projected to grow rapidly in the next two decades if our average per capita GDP grows at its full potential of  7% (~ 8.25% GDP).  The political party that finds the right policy balance between these three objectives, and convinces both the emerging middle class and the lower income groups, will be the winners. 
A shorter version of this post appeared as an article in the Indian Express Op ed on Monday 28th January 2013, under the banner, "What the Middle Class Wants," 

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