3 years ago

Bangladesh's rising middle class: Myths and realities

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According to one Brookings study, the world witnessed an important 'global tipping point' for the first time in the history of human civilisation in September 2018 when the numbers of the people living in poverty or vulnerable to poverty were no longer a majority. According to these calculations, just over half of the world's population lived in households which were considered as 'middle class' (using an income based classification of households spending $11-110 per day per person in 2011 PPP) and 'rich' in 2018. The number of global extreme poor (households spending below $1.90 per person per day) was estimated at 630 million whereas 3.16 billion were vulnerable to extreme poverty. On the other hand, 3.59 billion were considered as belonging to the global middle class while 200 million were rich. A key feature of the global middle class revolves around the fact that these people have some discretionary income which they can use in buying consumer durables, in enjoying entertainments and vacations, and in weathering against economic shocks without falling back into poverty. The important question is: how does this rapidly growing global middle class matter for the global economy?

In this respect, there are two major forces to reckon with-first, the middle class would drive the pattern of demand in the coming days; and second, the middle class characterises rapidly rising aspirations and they are far more 'demanding' than other social classes. Meeting the demands of the middle class is not an easy job. More than two-thirds of the total household consumption expenditure comes from the middle class globally. Further, the preference pattern of the middle class is highly complex-their tastes vary significantly and they like differentiated products. Moreover, with almost nine out of ten new middle class people emerging from Asia, there will be significant changes in demand patterns along with the dominance of Asian domestic brands in the global economy. The burgeoning middle class will also put lot of pressure on the governments to perform better and provide good governance and quality public services such as quality education, improved healthcare facilities, affordable housing, and universal social protection. These factors will no doubt complicate the political landscape of the transitional middle-income countries forcing them to reach a new social compact to satisfy the rapidly rising middle-class majority in their societies.

As a rapidly transforming developing country, Bangladesh also needs to be aware of the implications of a potential 'explosion' of the middle class in the country. Although the traditional concept of the middle class is a social and cultural construct in Bangladesh, but economic characteristics are increasingly becoming prominent in defining the middle class. A simple definition is to consider the people who earn between USD 2 and USD 20 per day as belonging to the middle class which gives a size between 37 to 40 million people - 22 per cent of the total population of Bangladesh.  The share of the middle class in total population is likely to reach 25 per cent by 2025 and 33 per cent by 2030.

This rapid expansion of the country's middle class is an obvious sign of development, bringing in economic prosperity and social progress. Their preference for product differentiation will contribute to value added in branding; they culture 'middle class values' such as hard work, meritocracy, savings, and education; their impetus to growth will be more sustainable than export-led growth; and there will be a lower risk of falling into the 'middle income trap'. A growing middle class would also influence consumption and overall growth through higher levels of human capital accumulation.

Moreover, the middle class is unlikely to remain satisfied with simply having access to public services; they will increasingly be concerned with the quality of services. This, in turn, will have implications on poverty especially for the rural inhabitants. Obviously, providing quality services that the middle class will demand are far more complex than providing access to services only. And, this may turn out to be a source of friction and conflicts in institutional and governance culture unless effectively resolved. With soaring demand for quality public services, enhancing the government and institutional capacity will no doubt emerge as a major challenge.

As evidence tells us, the rapidly growing middle class will vigorously accumulate capital, both physical and human, which will contribute to its stability and growth along with a solid foundation for the country's socioeconomic progress. It is likely that, with supportive policies, a rapidly rising middle class will help the country to progressively shift away from export-led growth and more towards domestic demand-led growth and structural transformation, a key factor in overcoming economic vulnerability and avoiding development traps. The successful shift of South Korea originating from a high share of the middle class in society as opposed to Brazil's failure to make similar shifts shows the critical role of middle class dynamism. 

Further, one should not sidetrack the social role of the middle class in the context of Bangladesh. The middle class perception is usually progressive which supports democracy and moderate political philosophy. In the presence of supportive political platform, a strong middle class will favour inclusive development through active participation in inclusive political programmes and electoral platforms.

The emerging middle class, on the other hand, will inevitably accumulate rising expectations in a rapidly transforming middle-income country such as Bangladesh, much in line with what Albert Hirschman describes as the 'tunnel effect'. The tunnel effect highlights initial tolerance of increased inequality resulting from uneven economic growth processes on the part of relatively disadvantaged members of society,  who,  expecting  to  catch  up  and  benefit  in  the  near  future,  draw  satisfaction  from  the improved  income  situation  of  others.  However, if the moment of catching up does not arrive or faces inordinate delays, initial tolerance may be short-lived, giving way to feelings of frustration of falling behind, which may lead to socio-political upheavals. Further, the government's role has to be multifaceted to fight the vulnerabilities of the middle class and benefit from the middle class dynamism. The keys are to ensure meaningful political participation and quality service delivery and installing a well-conceived and comprehensive social protection system for all to absorb and adapt to unexpected shocks and stresses.

In practice, the concept of middle class in Bangladesh covers different occupational groups with highly differentiated lifestyles along with, in many cases, conflicting internal dynamics and self-interests. It is therefore hard to imagine as to how this heterogeneous and internal-conflict ridden group would position itself as a unique social class in society. Moreover, the middle class is socially considered as highly self-centred with pursuit of self-interest as the primary goal. As such, they are considered highly unwilling to compromise their own interests and privileges. Further, one must also keep in view the consequences of catastrophes like the Covid-19 pandemic which can create deep scars even in the most dynamic segments of the middle class creating adverse effects on income, expenditure and the financial portfolio of these households.

The realities in Bangladesh highlight the need for elimination of all sources of vulnerability of the country's middle class, specifically the challenges of the vulnerable middle class. The key is to create a more 'learning' middle class: that is, a dynamic middle class that would be ready to exploit the opportunities of the 'new normal' after any upheaval like the Covid-19 pandemic.

The priority will be to identify and focus on the drivers of change of the country's middle class and explore and understand the complexities of basic needs and aspirations of the middle class to ensure sustained expansion of positive dynamics focusing on productive thrusts and reducing competency gaps. Despite many structural limitations, the middle class will have to emerge as progressive drivers of social transformation in Bangladesh that can bring benefits to the majority in society. Bangladesh needs to devise innovative ways and social policies to transform the expanding middle class to become equitable and inclusive socioeconomic change agents in Bangladesh.

Mustafa K Mujeri is Executive Director, Institute for Inclusive Finance and Development (InM).

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