The mass middle are the foundation of the industrial economy. They are neither rich nor poor, but they have sufficient wealth or income security to create a stable consumer market, which underpins economic growth.
The mass middle has three key attributes. The first is magnitude. A market economy requires consumers in large numbers, because without certainty about the market size, it would be foolhardy to make the necessary financial and technological investments. Second, these potential customers need purchasing power—the ability to consume. Without discretionary income or certainty that their future income will support their purchases, they do not constitute a sustainable market. Third comes desire. The mass market has to want to consume the products and services on offer. This is where marketing and advertising play a key role—and also inbuilt obsolescence.
No hungry man, who is also sober, can be persuaded to use his last dollar for anything but food. But a well-fed, well-clad, well-sheltered and otherwise well-tended person can be persuaded as between an electric razor and an electric toothbrush.Galbraith, K (1967) The New Industrial State. Princeton University Press, p. 6
The mass middle first emerged at the time of the Industrial Revolution, located in the ‘old-rich’ countries of the industrialised West. While initially comprising a new ‘middling’ group within society, wedged between the rich and poor, its scale and scope gradually extended. Mass middle consumption drove mass production and economic growth, increasing tax revenues. These revenues enabled governments to extend the market in two disparate ways. It led to redistribution of income to both the poor and elderly, enlarging the size of the mass middle market of the private sector. It also led to growing investment in public infrastructure, such as public sanitation systems and roads, as well as public services, such as security, education and health, which created a public sector mass middle market and simultaneously extended the role of the state. As markets expanded, so too did the range of novel innovations, stoking further desire and providing ever more complex goods and services.
Technological change and globalisation have created a fundamental shift, which has been accelerating over the past four decades. The mass middle of the West has substantially reduced both in size and economic power. However, the full implications of this corseting effect have not yet materialised, masked by growing private and public indebtedness.
A new global mass middle has emerged, located in the emerging economies, primarily in Asia. It has been supplanting the original mass middle of the West, as companies expand to these markets in search of growth. This global mass middle is perceived by many to be a replacement mass middle market—one of gigantic size and immaturity, which is excellent news for global economic growth prospects. A word of caution. There are certain assumptions that need to be considered.
This global mass middle, which is sometimes referred to the ‘global middle class’, is not synonymous with its predecessor. There is no consensus about definition or magnitude. Despite its growth, the vast majority of this global mass middle cannot afford or aspire to the levels of mass consumption in the West. While living costs are typically lower, in purchasing power parity terms, many lie below the poverty line in terms of industrialised world definitions. The global mass middle also has proportionately less discretionary income. The reason for this is that in many cases they pay separately for a range of public services, such as education, healthcare, security and energy generation that are publicly funded in the industrialised world. As such, income security is a critical issue, with a substantial number of ‘floaters’ that could easily sink back into poverty, as there is a limited social safety net.
Our interest is the corseting of the economy. The billion-dollar question is whether emerging global mass middle are subject to the same corset laces.