Christine Lagarde and the 'missing link' in Arab economies: the middle class
Despite the upbeat tone that generally speaking Arab economies are moving forward, the gist of the recent talk of Chrstine Lagarde, managing director of the International Monetary Fund (IMF), in Morocco, raises alarm on the need to know more about our societies to be able to provide solutions to ever present challenges.
One of these challenges that represent an explosive destabilizing factor is the growing unemployment and the millions getting into the work market looking for jobs.
According to Lagarde, unemployment rate averages around 13 percent and that is more than doubling for youth unemployment, which is estimated to be around 29 percent.
In the last three years alone, the volume of those out of work jumped by 1.5 million, while every year three million people knock on the door looking for jobs.
She went on to add that in many Arab countries naming Egypt, Morocco and Jordan they saw a decline in the welfare of their middle class compared to their share of the societal wealth in the 1960s.
The importance of this class stems from the main belief that it drives modernization and acts to a large extent as the mover and shaker of socio, politico and economic change.
Greek philosopher Aristotle is believed to be the first to highlight the issue of the middle class.
“Those states are likely to be well-administered in which the middle class is large. . . there are least likely to be factions and dissensions.”
But what is the middle class and how to define it and paint a clear picture showing its true features?
Economists adopt some measurable criteria argue and differ whether earning $2 a day or $10 is the entry point for the middle class. Criteria vary of course from one country to other given the different standard of living from one place to another.
Others point to their role in the society that those in the state organs represent the bulk of the middle class given their education, the influence they garner given their presence in the executive branch of the government and ability to propose and enact policies.
In the Arab countries, the middle class is generally connected with the government and its public sector in terms of various institutions, but whenever governments scale back on their spending due to pressing economic conditions, the burden falls on this middle class.
However, that seems to be part of a general process.
The impression is that the plight of the middle class worldwide is deteriorating. According to a recent survey by the London-based paper the Financial Times around one billion people are slipping from the ranks of the middle class back to the poor at the bottom of the social ladder.
Such a move, the paper commented, raises serious questions about the durability of various programs carried out over decades to combat poverty and empower people.
Moreover, the paper made some analysis of a World Bank income distribution in 122 developing countries since 1970s and found out that the bulk of millions, who have risen out of poverty are in fact in a fragile state, where they could easily slip back into poverty. And that 40 percent of the world population or 2.8 billion people live on a $2-8 a day.
Still the missing link is to have more detailed information on various aspects of the economic performance including those related to the middle class.
General interests and surveys concentrate on macro level of rate of growth, population, this or that sector and even household surveys that give indications on the movement of inflation, but misses detailed information on the micro level and in specific levels related to the middle class.
Such information is not only needed to explain what is going on, but more important to enable for future planning under better light.
It is interesting that Lagarde, in her speech, emphasized the need to adopt the middle road on everything: in economy as well as in the general policies in the society.
She commented: “We must nurture the middle of the economy. The same is true with society. What do I mean by that? I mean a strong middle class.”
The emphasis on the middle class because it drives the economy given its push toward more consumption and investment. And that is why it is of vital importance to get as much information as possible on various aspects of this middle class.
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