Jim O'Neill, chief economist for Goldman Sachs, tells those of us "in the west" not to fret about economic gloom and doom. Globally speaking, he says, the outlook is rosy.
Specifically, the "global middle class" is growing at a rapid rate. Citing data from a recently published Goldman Sachs paper, "The Expanding Middle: The Exploding World Middle Class and Falling Global Inequality," O'Neill says about 70 million people a year are joining the middle class, "as defined by those on incomes of between $6,000 and $30,000."
The phenomenon may continue for the next 20 years, with this global middle accelerating to 90m a year by 2030. If this happens, an astonishing 2bn people will have joined the ranks of the middle class. This demonstrates that, contrary to widespread opinion, global inequality is declining significantly, not increasing.
I do not doubt that this is true -- China and India alone are pumping up the global middle class volume to an extraordinary extent. This is a good thing, and it augurs well for the future, if we can figure out how to ensure that the earth can sustainably support these upwardly mobile millions. The problem, however, is that ordinary people do not seem to be comforted by global economic progress or globally declining inequality. Localism always prevails. Working class voters in Ohio, for example, are unlikely to care that the world is getting richer, when in their own country, the concentration of wealth is progressively skewed towards the top end of the spectrum. For global inequality trends to make any kind of psychological difference to the psyche of those "in the west" a sense of a shared global identity is required. But we don't have that. We are riven by nationalist, cultural, and racial identity politics. We do not see ourselves as one world.
It is important for everyone in the so-called developed world to be constantly aware that these powerful shifts in global wealth are good not only for the developing world, but for them too. If you take a look at a chart of recent US export growth, you may well think you are looking at the wrong data series. But you are not. US exports are indeed growing at close to 20 per cent and it is this that is stopping the housing and credit crunch from driving the US into a deep recession. Aspects of the same phenomenon can be seen in Japan, Germany and even the UK.
Again, this is undoubtedly true, and again, it is unlikely to convince skeptics of "free trade" so long as the benefits of that increased trade are inequally distributed among the population. It is entirely possible for trade to boom and global income inequality to be fall, while within individual nations, inequality rises. And as long as that latter fact holds, O'Neill's remonstrations will fall on deaf ears.
Indeed, I would argue that it is important for everyone in the so-called developed world whose own income places them in the top one percent of the population -- a niche that I suspect Jim O'Neill belongs to -- to be constantly aware that while the burgeoning global middle class may be great for them, they may ultimately have to accept a little redistribution of their own income if they want other residents of "the west" to further support expanded trade and economic opportunity in the developing world.
How about it Jim? Why not, just for fun, a hike in the capital gains tax, the proceeds from which would be used to fund an expanded safety net for the Americans competing directly with the newly emergent middle classes of the world? Goldman-Sachs is going to do very, very well in a world that gets richer and richer. But if the company wants to inspire a sense of shared global solidarity, it may have to accept the responsibility to share some of the wealth.