The World Order in 2050: Global Convergence toward the Middle Class Society

By Steven Hill, Social Europe Journal, May 17, 2011

Since World War II, it is plain to see that a high degree of convergence has occurred all over the world around the institutions and practices of political democracy and economy. Country after country has followed the American lead, which offered to the world a development model based on the rise of the middle class.  This convergence does not result from some “end of history” triumphalism, but it does mark a relentless, centuries-old march toward the types of institutions and policies that best provide “life, liberty and the pursuit of happiness” for modern mass societies. Even China in its own way is being drawn inexorably into this convergence vortex. And there is no reason to believe that this convergence will cease in the future.

America is the inventor of the middle class, the attractive idea that the vast majority of people can – and should — enjoy a decent standard of living and a high quality of life. Each nation has tried to adopt this ethos, with Europe — once the land of monarchs and dictators — fully embracing this middle class society that America originated and taking it another step further. Europe’s brand of “social capitalism” has put the middle class on a more solid footing by creating a more broadly shared prosperity and providing more support and security for families and workers than the American brand of “Wall Street capitalism” is capable of.

Now we see China, India, Brazil, Russia and other countries around the world also looking to adopt their own version of this middle class development model. China alone has added 200 million people to the middle class, a remarkable achievement, though China still remains very much a poor and developing country, with most of their 1.3 billion people still living in difficult conditions. Traveling from the rural areas to the cities in China today is like a form of time travel, with peasants still plowing the fields with water buffalo and most homes lacking in modern conveniences.

Similarly with India and Brazil, their developing economies are passing through the familiar pattern that leads to the middle class society: wealth creation via entrepreneurship and private industry, followed by wealth accumulation, followed by a slow but steady redistribution of that wealth. Some nations are following this path more quickly and adroitly than others, some have adapted better institutions that foster both wealth creation/entrepreneurship and a broadly shared prosperity in a way that is slowly growing the macroeconomy, boosting consumer spending, automatic stabilizers and standards of living. In this process, effective governance has been an essential ingredient, in many ways the sin qua non that determines success or failure. But this process takes decades and in truth we best measure success or failure in hindsight, not in real time.

So the question for 2050 becomes: will these countries be successful in fostering this middle class model? And can the planetary environment handle this explosive growth of adding approximately 5 billion people to the middle class?

I believe the answer to the first question is an emphatic yes. The middle-class lifestyle, to a large extent, responds to some of the most basic urges of the human being. Those urges include a passion for life, liberty, opportunity and the pursuit of happiness, including the enjoyment of fun and pleasure. That’s true of people in China, India, Brazil, Egypt and Iran as much as it is of people in France, Germany, Sweden, Greece, the Czech Republic, Poland, Canada, Japan and the United States. The lesson of the Arab Spring, just as the Velvet Revolution before it, is that most countries around the world aspire to their own version of the middle class dream and will continue to try and create it for their people; people will demand it, despite the political obstacles, because that demand is as persistent as green grass growing up through the cracks of the sidewalk.

Of course this convergence will look different in different nations, but it will share some things in common. The challenge for the poorer countries of the world will be to foster a political economy that allows not only wealth creation but also a degree of representative democracy, since the latter is an essential step towards redistribution, reducing corruption and growing the middle class. Some have said that China is creating a new development model, of economic development without political democracy, what some have called an “enlightened despotism” or “consultative dictatorship.” I think this is erroneous and premature. That’s because, at the end of the day, only nations that have faith in the individual can truly offer their citizens the pursuit of life, liberty and happiness, which is the yearning of nearly every person. Individuals nearly everywhere desire freedom, and the political expression of freedom is some degree of representative democracy.

Even in China today, there is more democratic activity than is commonly recognized. China in fact has more elections than any other country in the world; these elections take place at the local level, and not all of them are legitimate since in many cases the Communist Party selects all the candidates. But increasingly more of these elections have independent candidates, and research is showing that they are leading to less corruption and a bit more popular sovereignty at the local level.

Moreover, both of China’s president and premier have made pro-democracy statements recently. In September 2010, President Hu Jintao gave a speech in Hong Kong in which he called for new thinking about Chinese democracy. Said Hu, “There is a need to…hold democratic elections according to the law; have democratic decision-making, democratic management as well as democratic supervision; safeguard people’s right to know, to participate, to express and to supervise.” His remarks elaborated on similar comments from Chinese Premier Wen Jiaboa, delivered the previous month in Shenzhen, the coastal free enterprise zone at the forefront of China’s economic revolution.  China also has been experimenting with exercises in what is known as “deliberative democracy” and internal Communist Party democracy. Revered Chinese leader Deng Xiaoping once said that China will have national elections within 50 years, by 2037, and China may be ahead of that schedule. But Chinese democracy likely will not be a carbon copy of the western version, it may comprise a unique hybrid:  some influential scholars, for example, have proposed combining elements of representative democracy with a Confucian-style meritocracy.

Europe will continue down its own path of internal convergence and harmonization, though to what extent is not completely clearly at this moment. The challenge for Europe, as well as the United States, Japan, Canada, Australia and other developed nations, is how do the wealthy countries maintain their standard of living without drowning in public and private debt? The wealthier countries are trying to figure out how to foster a new development model that is not so dependent on asset bubbles that crash, or out-of-control consumerism and excessive public and private debt as a stimulus to the macroeconomy (And in the case of the United States, how does it stop depending so centrally on out of control military spending as an ongoing jobs program and fiscal stimulus to the economy, since military spending is a very inefficient method of stimulating the economy?).

In response to these economic challenges, and as a reaction to the failure of the economics profession and its orthodoxies to foresee the collapse of 2008, German Chancellor Angela Merkel made a game changing statement at the Group of 20 meeting last fall. “It is essential to return to a sustainable growth path,” she said. Advancing her own theory for the economic meltdown beyond global trade imbalances, she said that a primary cause was that “we did not have sustainable growth. In many countries growth was built on debt and [speculative] bubbles.”

What Merkel was saying is that the era of U.S.-style, trickle-down economics is over. The world needs to figure out how developed economies can provide for their people without having roaring growth rates, asset bubbles and hyper consumption, and also how to develop in a way that is ecologically sustainable (unlike the Obama administration, European leaders have not shelved completely their global warming interventions in the midst of this economic crisis). European leaders seem to believe they are pushing reset on this Wall Street capitalist development model and offering a necessary corrective for a renewed 21st century capitalism. Already they are much further along than the Obama administration in redesigning their financial regulatory system, including the creation of four new agencies mandated to intervene if necessary to prevent another collapse (though European banks remain wobbly, and hedge funds and derivates under-regulated).

This process of redesigning capitalism along the lines of the “social capitalism” model will take many years, but I am cautiously optimistic that we will get this right. I believe these efforts will be successful because there really is no other choice. What are the alternatives? Europe already has tried centuries of destructive and bitter warfare, and that didn’t work out very well. No, the path forward is toward expanding the middle class in the developing nations, and maintaining the middle class and evolving ecological as well as economically sustainable practices and policies in the developed nations. In the ‘intelligent society’ that will emerge, the best practices in terms of fulcrum institutions and policies will be spurred on by the convergence process that is resulting from globalization.

Adapted from the author’s address to the Goethe Institute in Prague at their recent conference “American Dream – Escape from Old Europe?”