MIDDLE CLASS: THE BACKBONE OF THE ECONOMY
Apr 16 - 22, 2012
The middle class is generally defined as 'poorer than the rich, but richer than the poor'. The simplest definition of the middle class is a group of people in a society who are neither rich nor poor. The middle class has always been considered vital to a country's political stability and economic growth. The rich and the poor simply distrust each other too much to let the other govern.
A growing middle class is typically associated with brighter growth and economic prospects for a country and has significant economic as well social and political implications. Asian middle class growth is a development with global significance and has been described as once in a generation investment opportunity.
Nations with large middle class populations find it easier to reach consensus on sustaining good, democratic governance. The middle class is supposed to be good for a country, at least the economists agree on that. In terms of absolute numbers in millions of people, China and India are naturally the biggest contributors to the rising population of Asia's middle class that is driving increasing consumption. They are followed by Indonesia and Pakistan vying for the third place.
Unfortunately for Pakistan, the size of the middle class was very small when it came into existence, and the country was dominated by a small powerful feudal elite created by the British rulers to sustain their colonial rule. And, the urban middle class remained small for decades. The situation has, however, finally begun to change in the last decade of 2001-11 with a combination of increasing urbanization and faster economic expansion that fueled significant job creation in the industrial and services sectors to enable middle class growth.
A test of the middle class now is how it responds to the current crises ranging from political instability, poor governance, rising corruption, economic stagnation and the massive flooding that is taking its toll on the nation. At this moment, the greatest need of the hour in Pakistan is greater social activism by the middle class to help their unfortunate fellow citizens devastated by the unprecedented floods sweeping the nation's rural landscape.
Early media reports are encouraging, indicating that some Pakistani middle class networks are mobilizing to provide assistance to the flood victims. As the support efforts move from rescue and relief to reconstruction and rehabilitation, the hope is that Pakistan's middle class will be engaged in helping their fellow citizens for the long haul. Such sustained engagement will be a part of Pakistan's defense against religious extremism and radicalization of some in its alienated young population.
Pakistan needs to take leapfrog from large-scale industrialization and focus on services sector as participation of middle class is contributing much more towards country's growth. Countries with larger proportion of middle class have achieved exceptional economic growth despite the recent global recession in national economies throughout the world.
For any country in the world, middle class is the driving force of change and growth and in Pakistan's case middle class is playing a pivotal role in progress of the country. Trend and ratio of acquiring higher education in middle class of the country is much higher as compared to India and Bangladesh and in order to tap this advantage private sector of Pakistan can play its role.
Policy makers in Pakistan should also focus on the presence of Pakistan's Diaspora residing outside the country and their role in changing trends and growth of their homeland.
Middle class is supposed to be the driver of change and growth in any country. Major chunk of this middle class is residing in urban areas as size of middle class in Pakistan ranges between 32 million to 80 million depending upon various methods of calculation. If middle class was not provided with venues for channeling human capital and savings, then tendency of consumption expenditure will put sustainability of growth in danger.
Middle class is mostly employed in civil and military services, and this class provides the major chunk in professional cadres such as engineering and medicine.
Furthermore, micro and macro barriers to entrepreneurship are holding back middle class from moving from wage to self-employment. Middle class is predominantly an urban phenomenon who lives and works in cities.
Pakistan Institute of Development Economics (PIDE) study explained that middle class is predominantly an urban phenomenon who lives and works in cities.
Recent global trends that indicate that middle income countries are now drivers of global growth such as India and China, who have grown at a very faster pace. Higher income has led to higher household consumption in these countries where one sees a relative shift away from necessity items and towards choice-driven consumption.
Declining growth rate in Pakistan is resulting into unemployment whereas no physical and intellectual space is available to middle class.
Measures are needed for infrastructure and social sector governance, legal and judicial reforms for inclusive markets, and efficiency of public expenditure through result-based management. Middle class is the largest tax payee in the country and proving backbone of the country in growth. The government should provide sound base and do structural legislation for more opportunities for middle class.