Wednesday, February 20, 2008

More on Distribution

The ongoing discussion about income/wealth/spending disparity has been the subject of several recent posts to this blog. But that conversation exists largely because of a debate about the nature of the "middle-class" in the U.S. Some hold that's shrinking, others contend that it's not shrinking but dynamic because people are constantly moving in and out of it. And who moves and which direction frequently boils down to whether you're measuring income, wealth or spending. (I won't go into the logic of how moving everyone up only shifts the middle without eliminating the bottom.)

But it begs a more fundamental question, "What is middle class?" And while I wouldn't pretend to have the answer to that, it's still interesting.

An article in a recent issue of The Economist magazine focused on The In-Betweeners (premium content) - the middle class in emerging economies. The idea is particularly interesting because, if we really want to eliminate poverty, what we are aiming for is moving more of the people in the lowest economic group into a higher group. The article highlights a paper by two MIT economists that provides some interesting insights. It examines common and disparate characteristics of the middle class in various economies around the world. And it is perhaps as interesting in defining the view of what constitutes "middle class" in this country as it is about defining that term for other parts of the developing world.

While I've only read the article, I have skimmed the paper. I intend to read it all because it was very readable and very interesting. I recommend it if only to help provide students in economics and personal finance courses a sense of relativity and an understanding of how we differ as well as how we're the same. After all, according to Globalization, "This process has effects on the environment, on culture, on political systems, on economic development and prosperity, and on human physical well-being in societies around the world." It seems to me the better we understand each other, the more we have to gain, economically and culturally, from the process.

I look forward to your comments.

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