Sunday, May 20, 2012

The Global Middle Class is 50% Bigger Than We Thought, Using a New Measure: Car Ownership

From Foreign Policy, an article highlights an interesting new measure of middle-class prosperity: passenger car ownership:  

"The swelling middle class in emerging economies is transforming the economic balance of power across the globe. Measuring it, however, is no easy task. There is no widely accepted definition of what constitutes the middle class, and the most common ways of measuring its growth -- through looking at rises in income -- suffer from a number of flaws.

 There's an easier way. In the developing world, buying a car is virtually synonymous with entry into the middle class. In these countries, car ownership separates those with the ability to purchase many other nonessentials from those within the wider population. Car statistics, moreover, are generally reliable and frequently updated, and they include data by automobile type that can be used to further segment the middle class. For this reason, the number of passenger cars in circulation serves as the most reliable gauge we have about the size of a country's middle class. While one can define the middle class in many ways, car ownership is an unambiguous indication of the ability to purchase other luxury goods.

Applying this measure significantly alters our understanding of the middle class in the developing world. It shows that there are many more affluent people in developing countries than had previously been thought and that about 70 developing countries with a combined population of about 4 billion are near or above the point where car ownership rises very rapidly. This suggests that very large numbers of people will enter the middle class in the coming years, transforming the economies and political systems of the countries they inhabit.

Measuring the global middle class isn't just an academic exercise -- its growth carries real-world implications. Political scientists are interested in the topic because a large middle class is associated with greater political awareness, desire for more accountable and representative government, and even demand for free markets. Economists and market analysts are mainly interested in the size of the middle class as an indicator of a population's ability to rise from poverty and purchase items that go beyond bare necessities.

The most widely used measure was proposed in 2002 by World Bank economist Branko Milanovic and Hebrew University professor Shlomo Yitzhaki, who counted people with daily incomes between roughly $10 and $50 a day, after adjusted for purchasing-power parity, as middle class. If one uses this definition, there are an estimated 369 million people in the developing G-20 economies -- Argentina, Brazil, China, India, Indonesia, Mexico, Russia, South Africa, and Turkey -- who qualify as "middle class."

After correcting for household size, measuring car ownership suggests that the middle class in developing G-20 countries is in the range of 550 million to 600 million people -- about 50 percent larger than the number arrived at using the Milanovic-Yitzhaki definition."

50 Comments:

At 5/20/2012 10:02 PM, Blogger Jon Murphy said...

Well, this is good news. It really goes to show how the liberalization and globalization of trade is helping to alleviate world poverty.

Of course, we've still a long way to go, but these are certainly leaps in the right direction.

 
At 5/21/2012 12:32 AM, Blogger kmg said...

This metric is flawed, since cars like the Tata Nano cost just $2500.

Why not go all the way and say that in 1970, even the very wealthiest did not own cellphones, but by 2012, even many $2/day earners do.

Quite a few wealthy people in New York, Hong Kong, and London do not own cars.

 
At 5/21/2012 6:21 AM, Blogger Jon Murphy said...

This metric is flawed, since cars like the Tata Nano cost just $2500.

Why not go all the way and say that in 1970, even the very wealthiest did not own cellphones, but by 2012, even many $2/day earners do.


Well, that's kinda the point, kmg. These things were once the playthings of the wealthy. Not any more.

 
At 5/21/2012 6:30 AM, Blogger Jon Murphy said...

I mean, capitalism is characterized by falling costs. What we are seeing is the cost of items that are typically considered middle class (in this case, cars) is falling. This is allowing those who were not able to afford these luxuries a generation (or even a decade) ago to purchase these goods now. That is an expanding middle class. Or, at the very least, the elevation of the poor.

So, what you are calling a flaw is actually a benefit.

 
At 5/21/2012 6:41 AM, Blogger VangelV said...

Of course, we've still a long way to go, but these are certainly leaps in the right direction.

We? Let me remind you that the middle classes in the EU countries and the US are in huge trouble as labour market weakness and rising tax burdens put huge pressures on them. While the rise of a middle class in countries that have begun to liberalize markets is a good thing it has little to do with us other than to add demand for commodities and to offer an alternate source of manufactured goods to Western consumers.

 
At 5/21/2012 6:43 AM, Blogger VangelV said...

Well, that's kinda the point, kmg. These things were once the playthings of the wealthy. Not any more.

But that was kmg's point. If the very poor people can afford something than owning it does not make you rich or middle class. It is a questionable metric.

 
At 5/21/2012 6:45 AM, Blogger VangelV said...

I mean, capitalism is characterized by falling costs. What we are seeing is the cost of items that are typically considered middle class (in this case, cars) is falling. This is allowing those who were not able to afford these luxuries a generation (or even a decade) ago to purchase these goods now. That is an expanding middle class. Or, at the very least, the elevation of the poor.

So, what you are calling a flaw is actually a benefit.


It seems that kmg's point is sinking in. When a $2/day worker can afford a cell phone ownership is not a sign of middle class membership. When someone on welfare purchases a vehicle it does not mean that he just went into the middle class.

 
At 5/21/2012 7:25 AM, Blogger Jon Murphy said...

When someone on welfare purchases a vehicle it does not mean that he just went into the middle class.

It means his lot in life has improved. It means he is no longer as poor as he once was. These things are luxuries. The "lower classes" cannot focus on luxuries the way the "upper classes" can. More of their income needs to be devoted to the necessities of life. If the "lower class" can now achieve a quality of life that is consistent with the "middle class", things such as owning a car, owning a cell phone, things like that, I'd call that an improvement. If the "middle class" quality of life is expanding to the lower classes, I'd consider that an expansion of the middle class.

 
At 5/21/2012 7:39 AM, Blogger VangelV said...

It means his lot in life has improved. It means he is no longer as poor as he once was. These things are luxuries.

No, when luxuries become so affordable that they can be owned by the poor they become commodities. The market is good at producing things for lower and lower costs after they are first introduced. The fact that you can own them after a while does not make you rich.

The "lower classes" cannot focus on luxuries the way the "upper classes" can. More of their income needs to be devoted to the necessities of life. If the "lower class" can now achieve a quality of life that is consistent with the "middle class", things such as owning a car, owning a cell phone, things like that, I'd call that an improvement.

I would call it an improvement too. But buying stuff cheap because producers got so good at making it does not now make you middle class.

If the "middle class" quality of life is expanding to the lower classes, I'd consider that an expansion of the middle class.

Ahh, we have now moved the pea. Sorry but I still don't buy it. If you still can't afford to buy your own home, can't afford insurance and tuition fees you are not middle class. By that metric many people in the US that you think of as middle class do not fit the definition.

 
At 5/21/2012 8:09 AM, Blogger Jet Beagle said...

vangeiv: "No, when luxuries become so affordable that they can be owned by the poor they become commodities"

It doesn't matter whether the good is now a commodity. The alleged "poor" can afford so many goods which were unavailable to them just a couple of decades ago. These "poor" have been elevated to the world of the middle class. Trying to redefine what is "middle class" to maintain a fixed level of poverty is a liberal trick. I'm surprised you would employ such a tactic.

 
At 5/21/2012 8:13 AM, Blogger Jet Beagle said...

vangeiv: "If you still can't afford to buy your own home, can't afford insurance and tuition fees you are not middle class."

The middle class has for all of my life included people who cannot buy their own home, purchase health insurance, and pay for attend college.

Please note that this post is about the Global Middle Class. You seem to be applying the definition used by U.S. liberals - a definition which is bigus even for the U.S.

 
At 5/21/2012 8:57 AM, Blogger VangelV said...

The middle class has for all of my life included people who cannot buy their own home, purchase health insurance, and pay for attend college.

That would be the poor. The way I remember it, the middle class had homes, employment, and health care. Middle class kids went to university and found jobs after they graduated. They could look to a lifestyle that exceeded that of their parents.

Please note that this post is about the Global Middle Class. You seem to be applying the definition used by U.S. liberals - a definition which is bigus even for the U.S.

I pointed out that the developing world has had an expansion of middle classes because of economic liberalization. And I am not using a 'liberal' definition. It is very clear that for many countries liberalization has worked out very well and that workers and investors have thrived. But that does not mean that we can turn a blind eye to what has been happening in most Western countries. The EU governments are collapsing and many Europeans that used to be in the middle class are now facing a life of turmoil and poverty. In the US the housing bubble has destroyed the equity of many families and a loss of insurance coverage and jobs have created hardships that are hard to overcome in a reasonable time frame. Kids are graduating with massive amounts of debt but cannot get jobs. The labour participation rate is collapsing. There is no way to spin that as a positive no matter how many of the poor can afford cell phones or cars.

 
At 5/21/2012 9:01 AM, Blogger Jet Beagle said...

vangeiv: "That would be the poor."

Uh, no, it would not.

 
At 5/21/2012 9:03 AM, Blogger VangelV said...


It doesn't matter whether the good is now a commodity. The alleged "poor" can afford so many goods which were unavailable to them just a couple of decades ago. These "poor" have been elevated to the world of the middle class. Trying to redefine what is "middle class" to maintain a fixed level of poverty is a liberal trick. I'm surprised you would employ such a tactic.


By your definition those Chinese farmers that line up to sell their baskets of vegetables in front of my hotel are middle class. After all, they have cell phones that only used to be available to the rich only a decade or so before. By that definition some of the beggars must be members of the middle class too.

And I employ no trick. I point out that progress will make many things cheaper so that the poor can afford them. But the fact that they do does not make them rich or middle class because there are things like housing, food, clothing, and health care that matter far more than trifles. We cannot use natural progress to pretend that things are better than they actually are, particularly in the countries in which we live and know so well.

 
At 5/21/2012 9:10 AM, Blogger Jet Beagle said...

vangeiv: "The way I remember it, the middle class had homes, employment, and health care. Middle class kids went to university and found jobs after they graduated. "

You remember it incorrectly.

First, your argument was that anyone who cannot afford health insurance was not middle class. Almost everyone could afford health insurance if they truly wanted it. Through group insurance, of course, almost everyone in the U.S. who wants health insurance has health insurance.

In 2008, only 63% of high school graduates went to college. For most of my life, that percentage was even smaller.

I have no idea what your argument is about employment. There are brief periods when high school graduates cannot find employment, but those periods are very brief. In the U.S., for the past six decades of my life, young people of all classes could find jobs if they wanted to find jobs.

 
At 5/21/2012 9:13 AM, Blogger Jet Beagle said...

vangeiv: " I point out that progress will make many things cheaper so that the poor can afford them. But the fact that they do does not make them rich or middle class because there are things like housing, food, clothing, and health care that matter far more than trifles. "

The definition was car ownership, not cell phone ownership. Anyone who cannot provide food or shelter but buys a car is not rational. I doubt whether those 369 million people who can afford cars are without food and shelter.

 
At 5/21/2012 10:03 AM, Blogger VangelV said...

Uh, no, it would not.

The statement made was, "The middle class has for all of my life included people who cannot buy their own home, purchase health insurance, and pay for attend college."

I argue that if you can't afford a home, health care coverage, or tuition for your kids you are not really middle class. I see nothing in your arguments to convince me otherwise.

 
At 5/21/2012 10:05 AM, Blogger Jon Murphy said...

I argue that if you can't afford a home, health care coverage, or tuition for your kids you are not really middle class. I see nothing in your arguments to convince me otherwise.

I can't afford a home and I am solidly middle class.

Well, let me rephrase, I can't afford a "middle class" home. Rather, I rent an apartment in a solidly middle class neighborhood in a solidly middle class city-town.

 
At 5/21/2012 10:06 AM, Blogger VangelV said...

First, your argument was that anyone who cannot afford health insurance was not middle class. Almost everyone could afford health insurance if they truly wanted it. Through group insurance, of course, almost everyone in the U.S. who wants health insurance has health insurance.

In 2008, only 63% of high school graduates went to college. For most of my life, that percentage was even smaller.

I have no idea what your argument is about employment. There are brief periods when high school graduates cannot find employment, but those periods are very brief. In the U.S., for the past six decades of my life, young people of all classes could find jobs if they wanted to find jobs.


I thought that I was clear. If you are an adult and can't afford to buy a home, don't have a job, can't afford to pay for health care, or can't send your kids to college then you are not middle class. I have no problem with a kid becoming a plumber or appliance repairman and still earning middle class wages. But that kid could get a job and could afford a home or health care for his family.

My argument is that the American middle class is under attack from rising costs, unstable job markets, and high taxes.

 
At 5/21/2012 10:07 AM, Blogger VangelV said...


The definition was car ownership, not cell phone ownership. Anyone who cannot provide food or shelter but buys a car is not rational. I doubt whether those 369 million people who can afford cars are without food and shelter.


People on welfare can purchase cars. That does not make them middle class.

 
At 5/21/2012 10:08 AM, Blogger Che is dead said...

"If the very poor people can afford something than owning it does not make you rich or middle class. It is a questionable metric." -- Vag

Ahh, why didn't we see it? By increasing efficiency and reducing costs, making goods like automobiles, cell phones, etc. available to greater numbers of people, capitalism and free markets are not lifting people out of poverty and into the "middle class", they are actually increasing poverty. Greater equality, with regard to access to "luxuries", means that the "middle class" is no longer middle class, they are now no better off than the poor.

Wow. Why are you wasting your time with all of us? With a mind like yours, you should be working for Noam Chomsky or Michael Moore.

 
At 5/21/2012 10:09 AM, Blogger Jon Murphy said...

I think we should probably hit the reset button on this conversation before it gets too out of hand.

One thing I believe we can all agree on is that the standard of living for folks all around the globe is improving, yes?

 
At 5/21/2012 10:18 AM, Blogger Jet Beagle said...

Jon Murphy: "we can all agree on is that the standard of living for folks all around the globe is improving, yes?"

I agree, and I understand your willingness to reach agreement. But, for me, that's way too weak a representation of the standard of living changes which resulted from globalization.

I do get bored discussing world economy with pessimists. But I'm not going to compromise my opinion in order to get them to shut up.

 
At 5/21/2012 10:21 AM, Blogger Jon Murphy said...

But I'm not going to compromise my opinion in order to get them to shut up.

I'm not trying to reach a compromise. The conversation was starting to get off track. I'm hoping to steer it back on track so we can discuss a growing global middle class, rather than attacks on the American middle class, real or imaginary.

 
At 5/21/2012 10:22 AM, Blogger VangelV said...

Ahh, why didn't we see it? By increasing efficiency and reducing costs, making goods like automobiles, cell phones, etc. available to greater numbers of people, capitalism and free markets are not lifting people out of poverty and into the "middle class", they are actually increasing poverty. Greater equality, with regard to access to "luxuries", means that the "middle class" is no longer middle class, they are now no better off than the poor.

The poor are better off. But they are still the poor. When your food costs are 45% of your income the fact that you can buy a cheap phone does not make you rich or middle class.

Wow. Why are you wasting your time with all of us? With a mind like yours, you should be working for Noam Chomsky or Michael Moore.

From what I can see you guys are just as ideologically idiotic as Noam Chomsky or Michael Moore.

 
At 5/21/2012 10:24 AM, Blogger VangelV said...


One thing I believe we can all agree on is that the standard of living for folks all around the globe is improving, yes?


We can agree that the markets provide more and more cheap goods for many people around the globe. But unless those improvement make up for the losses to regulators and government tax collectors it is hard to argue that the Western middle classes are becoming better off.

 
At 5/21/2012 10:27 AM, Blogger VangelV said...

I'm not trying to reach a compromise. The conversation was starting to get off track. I'm hoping to steer it back on track so we can discuss a growing global middle class, rather than attacks on the American middle class, real or imaginary.

I agree that the middle class in the developing world is much better off. I simply point out that if you look at the facts the middle classes in the EU and US are not doing that well. While developing world governments tend to be incompetent and corrupt their liberalization is providing more opportunities for more people. Our middle classes are suffering because they are facing more regulation and higher taxes.

 
At 5/21/2012 10:35 AM, Blogger Jet Beagle said...

vangeiv: "But unless those improvement make up for the losses to regulators and government tax collectors it is hard to argue that the Western middle classes are becoming better off."

Sorry, but it is not hard for me to argue that. Yes, regulators and tax collectors have been a drag on progress. But despite that drag, standards of living throughout almost all the world have continued to rise.

Are you arguing against future progress or against past progress? This post is about what has happened, not about what is going to happen.

Also, you did notice that Mark's post does not say that 50% of the globe is middle class. It says that the middle class is 50% larger than previously estimated. It doesn't say that all the 3 billion people in Argentina, Brazil, China, India, Indonesia, Mexico, Russia, South Africa, and Turkey are middle class. Rather, it says that 600 million of them are.

 
At 5/21/2012 10:44 AM, Blogger Jon Murphy said...

It doesn't say that all the 3 billion people in Argentina, Brazil, China, India, Indonesia, Mexico, Russia, South Africa, and Turkey are middle class. Rather, it says that 600 million of them are.

Right, which gets back to my point at the beginning that we've still a long way to go, but these are leaps in the right direction.

So, what we have is a population double the size of the US who own vehicles. It's no wonder why gas prices are high.

 
At 5/21/2012 10:58 AM, Blogger Jet Beagle said...

vangeiv: "I simply point out that if you look at the facts the middle classes in the EU and US are not doing that well."

Not doing that well compared to what? Earlier you said:

"The way I remember it, the middle class had homes, employment, and health care."

The middle class in the U.S. still do. More people have jobs in the U.S. than did 20 years ago:

U.S. nonfarm employment
Apr-1992 ...... 108 million
Apr-2012 ...... 133 million


More people in the U.S. have homes than did 20 years ago:

Owner occupied housing
1989 ..... 59.9 million
2009* .... 76.4 million

*latest year available

More people have health insurance in the U.S. than did 20 years ago.

Covered by private or government insurance
1990 ...... 214 million
2010 ...... 256 million

What are the facts you have to show that the middle class in the U.S. is not doing that well?

 
At 5/21/2012 11:15 AM, Blogger Jet Beagle said...

This comment has been removed by the author.

 
At 5/21/2012 11:19 AM, Blogger Jet Beagle said...

Jon Murphy: "which gets back to my point at the beginning that we've still a long way to go"

By "we've still a long way to go", I assume you mean the human race has a long way to go. But I'm sure you'll agree with what I'm about to say.

The 2.4 billion people not in the middle class in those developing nations are themselves responsible for their own welfare. "We" in the developed countries are not responsible for improving their living standards.

 
At 5/21/2012 11:24 AM, Blogger Jon Murphy said...

By "we've still a long way to go", I assume you mean the human race has a long way to go.

Absolutely, Jet. I'd like to see every one of those 3 billion people driving a car. And the only way, the only way, we can accomplish that goal is through the expansion and liberalization of trade worldwide.

 
At 5/21/2012 12:31 PM, Blogger Ken said...

VangeIV,

The fact that you can own them after a while does not make you rich.

If being able to consume ever more isn't a sign of getting richer, how do you define getting richer?

The rest of your comments saying that "if you can't by X, you can't be in the middle class" is ridiculous. First and foremost, Americans who haven't bought X in any of your example haven't done so not because they can't afford to, but because they would rather buy something else. For the amount the typical American pays for alcohol, the typical American can buy health insurance. Americans are the richest people to ever exist. Almost everything we consume is a luxury. As an example, to be in the global 1%, all you need to make is $34K/year. That's about what a high school graduate, with no college, earns in the US.

To call anyone in the US "poor" is simply non-sensical.

 
At 5/21/2012 12:38 PM, Blogger Jon Murphy said...

To call anyone in the US "poor" is simply non-sensical.

To build off your point, Ken, the poorest 5% of Americans still live better than 80% of the world's population. That, sir, is a mild-blowing statistic. It demonstrates both how wealthy Americans are and how poor some of the world's population is.

 
At 5/21/2012 2:57 PM, Blogger VangelV said...

Sorry, but it is not hard for me to argue that. Yes, regulators and tax collectors have been a drag on progress. But despite that drag, standards of living throughout almost all the world have continued to rise.

Not for a normal working stiff who used to be able to support a stay at home wife and two kids on an average 40 hour a week job. For the record, he has cell phones and many cheap toys but needs the wife to work to pay for them and still can't afford to send his kids to college after the government has fleeced him.

Are you arguing against future progress or against past progress?

Neither. I am pointing out that a nation that taxes its citizens too much will not prosper even if those citizens get a few cheap and useful toys. Progress demands that government step out of the way.

This post is about what has happened, not about what is going to happen.

Yes it is. And I have pointed out that while developing country middle classes have boomed those in the West are facing huge problems as their pensions are in trouble, they have lost equity in their homes, and are looking at a currency devaluation that will destroy their savings.

Also, you did notice that Mark's post does not say that 50% of the globe is middle class. It says that the middle class is 50% larger than previously estimated. It doesn't say that all the 3 billion people in Argentina, Brazil, China, India, Indonesia, Mexico, Russia, South Africa, and Turkey are middle class. Rather, it says that 600 million of them are.

I do not dispute that point. I dispute the point that having a car makes you a middle class member here or in Europe. As you yourself has pointed out, many things are cheap enough that the poor can afford them. It does not make them middle class.

The people in the developing world are doing fine and will do fine after they ride out the usual disruptions. But I am not all that optimistic about the middle classes in Europe or the US because they have been raped far too long by worthless politicians who quest for power but are not concerned about the people that they rule.

 
At 5/21/2012 3:42 PM, Blogger Jet Beagle said...

vange iv,

I'll repeat what Ken has already told you:

"To call anyone in the US "poor" is simply non-sensical."

I don't think anyone here believes your mind can be changed, vangeiv. My hope is that other readers will look at the facts I provided above rather than believe this statement:

vangeiv: "I simply point out that if you look at the facts the middle classes in the EU and US are not doing that well."

I've used your definitions - home ownership, insurance coverage, and employment - to show that the middle class in the U.S. has not deteriorated. What facts have you provided to show otherwise? None that I see.

Please note: I definitely do not agree with your very restrictive definition of middle class.

 
At 5/21/2012 5:29 PM, Blogger VangelV said...

I'll repeat what Ken has already told you:


"To call anyone in the US "poor" is simply non-sensical."


Wonderful. You have reached that great socialist dream where all of you are middle class. Congratulations for eliminating your underclass.

vangeiv: "I simply point out that if you look at the facts the middle classes in the EU and US are not doing that well."

I've used your definitions - home ownership, insurance coverage, and employment - to show that the middle class in the U.S. has not deteriorated. What facts have you provided to show otherwise? None that I see.


Many people do not see what is obvious so you may not be an exception.

Most people missed the tech stock bubble. They were telling me that I did not "GET IT" and that technology would make us all rich. Some of them owned stocks in Pets.com, Webvan, Flooz.com or high flying companies like Nortel without ever bothering to ask how it was that in such a booming period none of them managed to make a profit.

After the tech bubble broke few could see the housing bubble that was developing as people with bad credit were given no-doc loans and everyone pretended that hoses could go up forever. When some of us spoke out and pointed to Fannie, Freddie and the CDO paper games we were told that we did not "GET IT" and were missing out on a good thing. When the bubble burst many of the people hyping it wound up losing most of their net worth.

As we debate this many people are missing the huge bond bubble that is destroying what is left of most savings. Our banks are technically insolvent and use leverage that would make some hedge fund managers blush. Job growth is pathetic and people are heading towards retirement in record numbers while the SS system holds IOUs in the 'trust fund', total unfunded liabilities are more than $100 trillion and GAAP deficits are running north of 35% of GDP.

I am betting that my vision is just as clear today as it was during the tech bubble and the housing bubble. Frankly, I don't need to identify many bubbles in order to make a good living. The sad part is that what is good for my own net worth is terrible for those naive fools who refuse to see things as they are and prefer narrative to observation and logic.

 
At 5/21/2012 6:03 PM, Blogger Jet Beagle said...

vangeiv: "Most people missed the tech stock bubble. ...

Few could see the housing bubble that was developing"


Oh, please! The tech bubble and the housing bubble were identified very early by many, many economists and analysts. Stop congratulating yourself.

 
At 5/21/2012 9:18 PM, Blogger Hydra said...

How many of them can afford a million dollar parking space?

 
At 5/21/2012 9:38 PM, Blogger Hydra said...

Vange: who in their right mind owns bonds today? They pay squat and their value will fall when rates climb.

 
At 5/21/2012 10:31 PM, Blogger VangelV said...

Vange: who in their right mind owns bonds today? They pay squat and their value will fall when rates climb.

Banks do. Pension plans do. Central banks do. Some companies and wealthy people do. Think of what happens to the currency that those bonds are backing when rates climb.

 
At 5/22/2012 6:43 AM, Blogger Jon Murphy said...

Wonderful. You have reached that great socialist dream where all of you are middle class. Congratulations for eliminating your underclass.

Well, except for the poorest of the poor, no one in America is the global middle class. You have to understand, America is the 1%. By applying our standard of "middle class" to the rest of the world makes about as much sense as saying the middle class in America isn't as big as we think because not everyone owns at least two homes and a fleet of cars.

This idea of using car ownership speaks to one of the characteristics of the middle class: the ability to afford luxuries. A car is a luxury. In America, we tend to think of it as a necessity, but that's because we're the 1%. The vast majority of the world doesn't see a car as a necessity.

 
At 5/22/2012 7:15 AM, Blogger VangelV said...

You need a dose of reality. Your average middle class individual is struggling month to month and would be bankrupt if there were even a short disruption in employment. The average middle class family has little in the way of savings and has a net worth that is close to zero. That is not true of the developing world middle class family, which can survive months of unemployment and has far less in the way of debt.

And let me point out that you are moving the pea again. While an obese man sitting home and collecting welfare cheques from the government may be considered middle class in some countries he isn't in the US. As I pointed out above, the developing world middle class is doing better than the American world class because they are moving in opposite directions.

This idea of using car ownership speaks to one of the characteristics of the middle class: the ability to afford luxuries. A car is a luxury. In America, we tend to think of it as a necessity, but that's because we're the 1%. The vast majority of the world doesn't see a car as a necessity.

I don't have much of a problem with the argument except for the fact that in some regions status drives people who could not afford a car to buy one. And when you can get a car for $3,500 owning one does not necessarily mean that you are firmly entrenched in the middle class.

 
At 5/22/2012 8:05 AM, Blogger juandos said...

"To call anyone in the US "poor" is simply non-sensical...

Well as a blanket statement one could find a flaw or two in it but I think ken has absolutely nailed here...

Yes compared to the rest of the world (yes there are spots even in the poorest countries that have extreme wealth) we in the US are indeed at the top of the heap especially considering there's what, some 300 million plus people here?

 
At 5/22/2012 8:10 AM, Blogger Jet Beagle said...

vangeiv: "While an obese man sitting home and collecting welfare cheques from the government may be considered middle class in some countries he isn't in the US."

Unfortunately, such a man can live a middle class lifestyle - by either global standards or even the higher U.S. standards.

vangeiv: "status drives people who could not afford a car to buy one."

That makes little sense to me. If a person cannot afford a car, he will not have one for long.

It is you who needs a dose of reality, vangeiv. What you consider middle class is apparently what the rest of us would call upper middle class. Levittown is classic middle class, and it doesn't take a very large income to live in Levittown like suburbs all over the U.S.

 
At 5/22/2012 8:56 AM, Blogger VangelV said...

Yes compared to the rest of the world (yes there are spots even in the poorest countries that have extreme wealth) we in the US are indeed at the top of the heap especially considering there's what, some 300 million plus people here?

Reality check please.

1. The US runs massive deficits year in and year out. It cannot finance its government operations out of tax revenue.

2. The GAAP deficit runs around a third of GDP.

3. Unfunded liabilities stand at more than $100 trillion and rising. They can never be paid back with money that has the same purchasing power as when the promises were made.

4. The US looks a lot like Greece to me. Huge spending. No fiscal discipline. A population that believes in free lunches.

 
At 5/22/2012 9:29 AM, Blogger VangelV said...

vangeiv: "While an obese man sitting home and collecting welfare cheques from the government may be considered middle class in some countries he isn't in the US."

Unfortunately, such a man can live a middle class lifestyle - by either global standards or even the higher U.S. standards.


Is that what the definition of middle class is for you guys? Sitting on your couch without savings or any net worth and hoping that those unfunded liabilities will be made good on by a government that has to rape actual wage earners and savers as it pursues a high tax and money printing strategy?

Have you ever considered what that means for all citizens?

vangeiv: "status drives people who could not afford a car to buy one."

That makes little sense to me. If a person cannot afford a car, he will not have one for long.


First, there are many people in the developing world who do things to gain face rather than look to the most prudent path. I have friends who live in company provided housing located right next to the plant that employs them. They have little in the way of expenses and have no need for a vehicle. Yet they own cars and pay a fee to keep them parked because they want to appear successful. My brother-in-law, who has no need for a vehicle owns an expensive one. He can't really drive it into the city because of the parking fees and congestion. He walks to work so does not need it. It gets used once or twice a month on excursions with the family to the same old places he used to go before by taking a cab. Usually, the cabs cost about as much as the parking.

It is you who needs a dose of reality, vangeiv. What you consider middle class is apparently what the rest of us would call upper middle class. Levittown is classic middle class, and it doesn't take a very large income to live in Levittown like suburbs all over the U.S.

You mean that having more than a few weeks of savings is upper-middle class? Since when? And do you understand that I am looking at the national balance sheet when I come to my conclusions? Those SS and Medicare contributions that are supposedly due to your 'middle class' fifty year old are not enough to pay off the current recipients. The total debt plus unfunded liabilities stands at more than $100 trillion and the GAAP budget deficit is running around a third of GDP each and every year. Neither Obama nor Romney would change the deficits being run and both are hoping to have inflation bail out the government. But that requires that someone get ripped off. And that is your middle class.

 
At 5/22/2012 9:34 AM, Blogger Jet Beagle said...

vangeiv,

No one here would argue that government deficits are not a problem.

No one here would argue that the U.S. is not facing severe short-term and long-term challenges.

But that's not what we've been talking about on this post. This post is primarily about estimates of the global middle class. It's also about whether there are poor people in America.

If you want to argue that there will soon be poor people in America - poor by global standards - that's fine. But don't try to use the future situation as evidence that the middle class in the U.S. has already deteriorated. Which is what you have argued:

VANGE IV: " If you still can't afford to buy your own home, can't afford insurance and tuition fees you are not middle class.

...

The way I remember it, the middle class had homes, employment, and health care. Middle class kids went to university and found jobs after they graduated. They could look to a lifestyle that exceeded that of their parents. "

 
At 5/22/2012 1:47 PM, Blogger VangelV said...

No one here would argue that government deficits are not a problem.

No one here would argue that the U.S. is not facing severe short-term and long-term challenges.

But that's not what we've been talking about on this post. This post is primarily about estimates of the global middle class. It's also about whether there are poor people in America.


I made it clear that I agreed that the developing world was doing fine so far. And while I expect some major disruptions in that growth it is still likely to do better in the future.

My response was to the people who seemed to argue that the American middle class was doing well because poor people could buy cheap trinkets that we all love and find useful. My point was that the American middle class has problems with savings and affording the essentials.

If you want to argue that there will soon be poor people in America - poor by global standards - that's fine. But don't try to use the future situation as evidence that the middle class in the U.S. has already deteriorated.

I have not argued just about the future. I am looking at the current situation. Those unfunded liabilities will be paid for by middle class taxes. The middle class household has little in the way of net worth and next to nothing in savings.

Which is what you have argued:
VANGE IV: " If you still can't afford to buy your own home, can't afford insurance and tuition fees you are not middle class.

...

The way I remember it, the middle class had homes, employment, and health care. Middle class kids went to university and found jobs after they graduated. They could look to a lifestyle that exceeded that of their parents. "


The argument is valid. In the past the middle class had more opportunities than today. Look at college graduate job availability and at youth unemployment in the past compared to the present. Look at debt and savings levels. Sorry but not liking reality is not an excuse for ignoring it.

 

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