The middle classes of all countries have been the key drivers of the global economy in the last century. During the past several decades, world economic growth has occurred, mostly because of increased consumption in the middle classes of the United States, Europe, and other advanced countries. This class has been considered a thriving and vibrant catalyst for economic growth. It provides a strong base that drives productive investment and is a critical factor in encouraging other social developments that also stimulate growth and foster expansion of elements that contribute to a healthy society.
The middle classes constitute a critical market for most goods and services. A sizable portion of any nation’s tax revenue is collected either directly or indirectly from this group, and they also have an important role in any relative political stability that a country experiences. The significance of this class was best elucidated by the late Lester Thurow, the eminent MIT economist: “A healthy middle class is necessary to have a healthy political democracy. A society made up of rich and poor has no mediating group either politically or economically.”
In this essay, various definitions of the middle class are offered, followed by a depiction of the status of this class in India from its independence in 1947 through the expansion of the private sector in India through liberalization, a policy change that created substantial economic growth that continues today. The future growth of this class in the next three decades and its implications for global businesses and world order are also discussed.
The middle class falls in the middle of the social hierarchy and occupies a socioeconomic position between the working and upper classes. The measures of what constitutes members of this class differ significantly among nations because of international cultural and economic variations. Examples of what constitute the “middle class” in a given nation are dependent upon purchasing power, educational levels, perceptions of who constitute “the wealthy,” and levels of social services, as well as other factors. According to most organizations, like the World Bank and the Organization for the Economic Cooperation and Development (OECD), people living on less than US $2 a day are considered poor. For those in the middle classes, the earnings typically lie in the range of US $10 to $100 per day, as expressed in the 2015 purchasing power parities.3
The US $10 lower threshold is preferred because it is five times the poverty line and individuals are less likely to fall back to poverty from this level of income. According to the World Bank, in 2015, 15 percent of the global population was considered poor, 56 percent in the low-middle income category, 13 percent in the middle income, 9 percent in the upper-middle income, and the remaining 7 percent in the high income categories. Earlier, in February 2009, The Economist declared that over 50 percent of the world’s population had entered the middle class, primarily because of explosive growth in emerging markets. This was mostly because of access by foreign (and some domestic) companies to cheaper labor in these countries as a result of liberal international trade laws. Many countries also experienced rapid urbanization when subsistence farmers left their farms to work in factories for guaranteed wages
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