Middle Class in Africa: Its Impact on Social and Economic Dynamics

Morocco have the largest middle classes in Africa, while Liberia and Burundi have the smallest middle classes. The rise of the middle class is being fueled by a combination of increased investment in the services sector, the exploitation of natural resources, and better economic policies over the last two decades. Africa's middle class is fueling private sector growth and increasing demand for goods and services. Africa's middle class is driving private sector growth and increasing demand for goods and services, which are almost always supplied by the private sector.

The East African newspaper quoted Lawrence Bategeka, a principal researcher at the Uganda-based Economic Policy Research Centre, as saying, 'The liberalisation of African economies has resulted in improved efficiencies and contributed to a rapid growth in the service sector, which has spurred the growth of the middle class.' In the cases of Brazil and South Korea, the importance of the middle class in rising consumption levels can be seen. In the 1960s, both countries had comparable income levels and development rates, according to the OECD. However, by the 1980s, Brazil's middle class had shrunk to just 29% of the population due to high income inequality. In the 1980s, the middle class in South Korea accounted for 53% of the population. With a larger middle class, South Korea was able to shift its growth strategy away from exports and toward domestic consumption. Though Brazil was unable to do this at the time, it has since made significant progress in reducing poverty, dropping from 40% of the population in 2001 to 25% in 2009. As a result, the middle class has increased to 52% of the population, boosting domestic consumption. While the rise of the global South's middle class is good news for human development and living standards, the OECD found that most of the new middle class is vulnerable and could easily fall out of it. They also lacked the financial means to buy more costly long-term items such as cars.

How well the global economy performs in the coming years will be determined by the progress of this fragile yet rising middle class. According to a new report from the UN's International Labour Organization (ILO), the global South's rising middle classes are just what the world economy needs to develop. 'Over time, this emerging middle class could provide a much-needed boost to more sustainable global growth by boosting consumption, especially in poorer parts of the developing world'. The booming life insurance industry in Indonesia is an example of the economic influence of the middle class trend in motion. Hendrisman Rahim, chairman of the Association of Indonesian Life Insurance Companies (AAJI), claims that the country's booming life insurance industry will benefit from the rising middle class. They are those who have a desire for insurance and can afford to buy a policy. Extremely wealthy people can afford to buy, but they do not have the need. 'Extremely poor people have a need for insurance, but they need financial help to get it', he told the Jakarta Post. The life insurance industry in Indonesia is expected to grow as the Indonesian middle class grows by 30 percent.

Current Scenarios in Context With Covid-19

The global economy is being impacted by the COVID-19 pandemic. The World Bank predicted that the global economy would grow by 2.5 percent in 2020, as reports of the novel coronavirus began to emerge. The World Bank predicted that the global economy will contract by 4.3 percent in 2020, a 6.8 percentage point turnaround, in January 2021, with the pandemic still gripping most of the world. The global economic downturn is expected to lower living standards, forcing millions of people out of the global middle class and increasing the ranks of the poor. At the same time, the road to recovery is fraught with ambiguity. According to a recent Pew Research Center report, the global middle class numbered 54 million fewer people in 2020 than was predicted prior to the outbreak of the pandemic. Meanwhile, the recession is thought to have increased the number of poor by 131 million people. The global middle-class decline was concentrated in South Asia, East Asia, and the Pacific, and it halted the expansion seen in the years leading up to the pandemic. The majority of the rise in poverty was accounted for by South Asia, specifically India, and Sub-Saharan Africa, reversing years of development on this front.

Middle-class families live on $10.01-$20 a day, equating to an annual income of $14,600 to $29,200 for a family of four. By advanced economy standards, this is a small amount. In reality, it straddles the official poverty line in the United States, with a family of four earning around $23,000 in 2020 (expressed in 2011 prices). The poor survive on $2 or less a day, or $2,920 a year for a family of four, according to global norms. The number of people in the global high-income tier (those earning more than $50 per day) is expected to fall by 62 million in 2020, wiping out roughly half of the gains made since 2011, with advanced economies accounting for the majority of the transition. Meanwhile, the population of upper-middle income people ($20.01-$50 per day) decreased by 36 million, while the population of low-income people ($2.01-$10 per day) increased by 21 million.

These figures are based on the Center's study of World Bank data on the distribution of people in seven major global regions based on their income or consumption levels. The most recent income projections for each country, such as for 2018 in Europe and Central Asia and 2015 in the Middle East and North Africa, are extrapolated to 2020 using two sets of growth estimates: the World Bank's forecasts released in January 2020, prior to the pandemic, and the estimates issued in January 2021, with the pandemic's economic effect more obvious. The difference between these two indicators is used to describe the effect of the COVID-19 decline on people's living standards around the world. Prior to the introduction of COVID-19, the global middle class was projected to number 1.38 billion people in 2020. However, the pandemic is thought to have reduced this figure to 1.32 billion people. In 2020, 17.1 percent of the world's population is expected to be in the middle class, rather than the potential 17.8 percent. If China, which is home to more than one-third of the global middle class, had not avoided an economic recession despite slower-than-expected growth, the loss of the middle class would have been much worse.

On the other hand, the global high-income population is forecast to drop to 531 million in 2020, down from 593 million previously predicted. As a result, rather than 7.6%, the estimated share in the high-income tier is 6.8%. The advanced economies, which house the vast majority of the world's high-income population, have experienced a sharp slowdown in 2020. Ironically, this boosted the global middle-class population as people in developing economies fell from higher income tiers to lower ones. The global living standards reversal in 2020 follows significant progress earlier in the decade. Between 2011 and 2019, the global middle-class population grew by 54 million people each year, from 899 million to 1.34 billion. According to estimates, the pandemic wiped out a year of growth, leaving the global middle-class population virtually unchanged between 2019 and 2020.

Before the global recession, a vast majority of the world's high-income population '489 million out of 593 million' lived in advanced economies. The population of advanced economies has shrunk by 47 million people, or 10%, accounting for the majority of the global high-income tier's shrinkage.In terms of proportions, the decline in the high-income tier is also noticeable in Latin America and the Caribbean (15%), Europe and Central Asia (12%), and East Asia and the Pacific (12%). The losses in the Middle East and North Africa, South Asia, and Sub-Saharan Africa are minor in comparison, but they account for double-digit percentages of the high-income populations in those areas. Since it experienced the sharpest decline in economic growth during the pandemic, South Asia played a disproportionately large role in the contraction of the global middle class and the expansion of poverty. In January 2020, the World Bank predicted that South Asia's gross domestic product (GDP) per capita will rise by 4.3 percent in 2020. However, in January 2021, South Asia's production was projected to have decreased by 7.8% in 2020, a 12.1 percentage point decline from its capacity. Other areas have seen a smaller slowdown in economic development, ranging from 4.7 percentage points in East Asia and the Pacific to 8.6 percentage points in Latin America and the Caribbean. The only area in which growth is expected to remain positive in 2020 is East Asia and the Pacific, with GDP per capita rising by 0.4 percent even after the outbreak. Aside from that, recent projections of the shift in production per capita in 2020 ranged from -3.2 percent in Europe and Central Asia to -7.8 percent in Latin America and the Caribbean.

The Social and Environmental Consequences of a Middle-Class Society

The consequences for carbon emissions and national politics in a world with more middle-class people must be considered. If the consequences of these are not managed, a backlash of anti-growth or nationalist policies that hurt the middle class could occur. A society dominated by the middle class could have significant implications for carbon emissions and climate change. A major concern is that a global economy dependent on consumer demand will be incompatible with an environment where temperature fluctuations are limited to less than 2 degrees Celsius above pre-industrial levels. Based on data presented by Minx et al., one example of this statement can be found. They calculate the carbon footprint of various lifestyles based on consumption habits. Their research makes use of a multi-regional input-output model to measure direct and indirect carbon emissions the input-output portion of the model allows for estimates of carbon emissions due to intermediaries like transportation. The carbon footprint of a middle-class household in the United Kingdom is 50 percent higher than that of a borderline poor household, according to the report. The authors discover that the carbon footprint and weekly household disposable income have a clear positive relationship. Housing, transportation, and food consumption are the three main carbon hotspots. Other reports, including one on India, come to the same conclusion: higher incomes and consumption levels result in higher carbon emissions. According to Grunewald et al., India's income elasticity of carbon emissions is well above unity.

These results, however, are weakened by two factors. Rural households have a higher carbon footprint than urban households, even though income levels are stable, owing to the fact that transportation (which is relatively carbon intensive) accounts for a greater share of spending in rural households. The income impact on carbon emissions is marginally mitigated to the degree that entering the middle class is correlated with urbanisation, which is the case for much of the developing world. The effect of the middle class on population growth is the second mitigating factor, which is commonly considered as exogenous in most modelling exercises to date. Nonetheless, population patterns play a significant role in global carbon emissions. Middle-class families have higher incomes than poor families, as well as more female labour force participation, as well as becoming more urbanised and educated. The completion of secondary education for girls, as well as income levels, has been shown to be a significant determinant of fertility rates. India, Pakistan, Indonesia, and Nigeria, are the countries contributing the most to global population development, as well as the countries with the fastest-growing middle classes. However, if these countries are active in establishing a middle class, they might be able to reduce fertility more quickly as well.

Politics and Governance

There was a strong connection between democratisation and government support for the middle class in the heyday of middle-class development in the United States, Europe, and Japan. Government policy enhanced urban conditions by providing inner-city and intra-city transportation, supporting state-funded mass education for boys and girls, even at the tertiary level, and providing affordable housing and other social assistance services like health care and pensions. In comparison to these efforts, public support for the middle class in most developed countries today lags behind. 'India today is still wealthier than Germany was when it launched social security for all jobs in the late 1880s'. In 1935, when the Social Security Act was passed, Indonesia was wealthier than the United States. China is also wealthier than the United Kingdom was in 1948, when the National Health Service was established. His argument is that none of these developing countries have a social assistance package nearly as well established as today's industrialised countries did at a comparable stage of growth.

Conclusion

In industrialised economies, supporting the middle class has become a critical component of democratic governance. Between 1932 and 1937, New Deal projects such as the Works Progress Administration and the Social Security Act in the United States helped to create an unparalleled rebound in the American middle class, adding 20 million people. However, there is no longer a correlation between various democratic governance metrics and the size of the middle class. The middle class in Egypt and Thailand, for example, sponsored military action against democratically elected regimes in order to restore stability. In Brazil, Indonesia, the Philippines, and Tunisia, the middle class overthrew strongman rule.

References

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