About the Global Middle Class Initiative
Building a large and sustainable global middle class is the key to both international political stability and world economic growth in the decades ahead. Thanks to increasing global integration and the spread of industrialization to much of the developing world, more than 60 developing countries have now reached a level of development similar to that of the United States and Western Europe when they moved to become affluent, middle class societies. With the right economic policies and international economic conditions, most of these countries could evolve into successful middle class economies over the next decade or two. And as successful middle class societies, these countries would not only provide expanded markets for world goods and services but also strengthen the foundations for a peaceful and stable world order.
Building a Global Middle Class in Emerging Economies
The Global Middle Class Initiative seeks to identify the main elements of a middle-class-oriented international economic strategy that would enable emerging economies to evolve into successful middle class societies. More specifically, it seeks to show how the American and European models of building a middle class in the 20th century could be adapted for use in many emerging economies. Rather than relying principally on the export of manufactured goods and their component parts, emerging economies can develop larger middle classes by expanding domestic consumption and the start-up of small- and medium-size businesses, by promoting home ownership through the introduction of 30-year mortgage markets, and by investing in public infrastructure. Since the specific elements of a middle class development strategy would differ from country to country and region to region -- reflecting the level of development and the existing economic structure -- the Program is undertaking region-specific studies focusing on the Middle East, Mexico, Central America, and the Caribbean.
Accomodating China and India in the World Economy
Because of their size and growing economic success, China and India pose a challenge as well as an opportunity for the goal of a middle-class-oriented world economy. The combination of China’s success as a low-wage manufacturer and India’s success as a low-wage services provider, threatens to put more downward pressure on world wages and to crowd out other developing economies from world markets in manufacturing and services. The solution to this problem is for China and India to expand domestic-led growth and to develop into continental-size middle class economies, much as the United States did in the last century. The Global Middle Class Initiative explores how to accommodate China and India into a middle-class-oriented world economy by promoting an international system of finance and trade that places more emphasis on balanced economic growth and rising living standards in large emerging economies.
Toward a Global Macroeconomic Policy
Enlarging the middle class both at home and abroad requires sustained world economic growth, which in turn depends upon the effective management of macroeconomic policy and of global trade and investment flows. The United States continues to act as the principal engine for the world economy, but only by running current account deficits that are leading to a buildup of an unsustainable level of international debt. The Global Middle Class Initiative explores ways to reduce the world economy’s dependence on American consumption and to create a better balance of consumption and investment among the advanced industrialized countries and between the developed and developing worlds. As part of this effort, it seeks ways to reform the international monetary system to share the burden of macroeconomic policy and to support a middle-class-oriented world economy. In particular, it is examining how to create more reliable financing mechanisms to channel excess savings in mature economies into investment and consumption in the developing world.
