Arrival City_ How the Largest Migration in History Is Reshaping Our World - Doug Saunders [142]
The middle class should have grown a lot more in the two decades after the economic crises of the 1980s and the liberalization of the world’s economies. Based on the extraordinary economic growth of that time, along with the increases in per capita incomes and boosts in living standards that occurred in those years, there should have been far more social mobility. In 2006, economists working for MasterCard predicted a “deluge” of a billion new middle-class consumers, with family incomes of more than $5,000 annually, emerging from Asia, with 650 million such consumers appearing in China and 350 million in India by 2020. At the time, there were exactly 12 million people with such incomes in India and 79 million in China, so the projected growth was exponential, with equivalent rewards to industry: “As soon as income exceeds the $5,000 threshold, marginal expenditures shift quickly to discretionary spending such as dining out, personal travel, auto purchases, etc., and these have a huge business and economic impact,” the MasterCard report claimed. The estimate has been echoed in similar studies.11
Something went wrong, though. While living standards did improve, especially for the very poor, many who had sat on the brink of the middle class at the beginning of the long boom ended it, 20 years later, still sitting on the brink, unable to get in. These frustrated people were, overwhelmingly, the children of rural arrivals.
In one of the most important studies of the middle class in the developing world, three economists from prominent U.S. think tanks examined large banks of income statistics from around the world and found that the turn to market economics had been generally positive for income groups on the extremes—the poor and the very rich saw their fortunes rise dramatically in the 1990s and early 2000s (the poor, in large part, because of urbanization). But they concluded that “the middle has had very mixed rewards: increased upward mobility for some sectors … but increased uncertainty and downward mobility for others.” In Latin America, for example, liberalization brought income gains for most people but “increasing economic insecurity for middle-income households.” It described large segments of the middle class—broadly those without post-secondary education or family connections (that is, the arrival-city second generation) as “stalled in the jam.”12
In too many places, this “stalled” condition has left a large part of a generation out of the middle class. In his study of social mobility in Mumbai, the geographer Jan Nijman found that “the upper-middle income classes have grown relative to the total, the lower-middle income classes have shrunk, and that the ranks of the poor have expanded slightly” during the 1990s—that is, the numbers entering the middle class in that decade were smaller than the numbers of poor people entering the city every year. His detailed examination of new home buyers found “little upward mobility”—in other words, the majority of home buyers were children of homeowners, not children of migrants. People who should have been stepping into the middle class, those earning $5,000 to $8,000 a year, were finding themselves barred from home ownership.13 Entry to the middle class, in India and elsewhere, had become difficult in a time when other forms of growth were widespread.
The problem had little to do with markets and much to do with the way governments responded. At the precise moment when governments should have been stepping in to help the newly secure poor find entry points to middle-class success, many governments seemed to vanish from the scene. It was