No. 58, Sept. 2014

No. 58
(Sept. 2014):

A Middle-Class India?
Introduction

I. Behind the Sudden Interest in India’s Middle Class

II. The Problem of Defining the Middle Class

III. The Reality: Gaping Inequality

IV. The Reality: A Deformed Structure of Employment

V. India’s Middle Class

VI. Conclusion

Appendix: Putting ‘Middle Class’ Consumption in Perspective: Some Figures

VI. Conclusion

To sum up the above discussion:

(i) Behind the talk of a giant middle class in India is a systematic ideological agenda, to project certain ideas. These are that class polarization is diminishing; that the economic policies of the ruling classes are benefiting the majority of the people; that those who have benefited from these policies in turn are imparting dynamism to the whole economy; that those left behind by development are a minority, who have their own apathy and lack of aspirations to blame for their poverty; and that, in place of old-fashioned attempts at removing poverty through redistributive and welfare measures, what really is needed is more aggressive neoliberal ‘development’. 

(ii) Recent studies on India’s middle class generally base themselves only on income/consumption levels. If we use such measures to define the middle class in relative terms, we find that those in the middle of the income/consumption expenditure range are clearly poor, and do not resemble any plausible definition of the ‘middle class.’

(iii) Others define the middle class in absolute terms, in terms of per capita consumption expenditure in PPP terms. Among them, some extend the lower bound as low as $2 PPP, and hence find that India has a large middle class. However, they also tie themselves in knots trying to distinguish this class from the poor or the working class.

Some other studies place the lower bound at around $10 PPP, and find that only a small section, say 5 per cent of the population, qualify as middle class. However, the more ideologically committed among them nevertheless bravely project that this small section will expand greatly, to the point of constituting the bulk of Indian society.

(iv) In fact we find that class polarization, far from disappearing, appears to be increasing. There is a rapid expansion in the number of billionaires and their collective wealth. One study estimates that 49 per cent of wealth is concentrated in the top 1 per cent. If we were to take into account the black economy, particularly illicit foreign assets, an even starker picture would emerge.

(v) Development is taking a perverse path, in which the 92 per cent of the workforce is kept in the twilight of informal employment, largely without security or decent income. Vast numbers are crowding into low-productivity work, owing to lack of jobs in organized industry. This persisting, indeed growing, dominance of the subsistence mode contradicts the picture of a modernising economy. Indeed, the workforce is still segmented not only by gender and location, but also the hoary institution of caste.

This hidden (officially ‘employed’) reserve army of labour not only depresses the wages of all workers (by competing for the scarce formal jobs), and forms part of the supply chain of  the organized sector; it also keeps down the costs of reproduction of labour by producing cheap goods and services consumed by workers and employees in even formal employment. In this way, it provides a double benefit to global Capital.

Despite this bleak reality, we are bombarded with claims of middle class prosperity. This bombardment has an impact on people, for lack of an alternative, materially-based, view of social reality. Where trade unions and other people’s organizations have been destroyed or weakened, and when alternative, collectively organized social orders worldwide have disappeared from view, people’s collective aspirations get dimmed, at least temporarily. Their view of reality itself changes, gets atomized. Their hopes become individual ambitions, which they are willing to achieve at the cost of their neighbours, and if necessary even their grandchildren. This view of reality gets in the way of their actually improving their lives through collective struggle. No doubt, the actual experience of working people keeps thrusting them back into collective struggle; and this provides scope to revive the political legacy of past struggles. But, for that revival to take place, it is essential to have a clear view of the nature of present social reality, as well as the alternative.

In the present circumstances, the reigning propaganda influences the intermediate sections most of all. Those at the top of the class hierarchy are anyway a small number; and those at the bottom have less scope for illusions about their future. The intermediate strata are influenced by dreams of rising further, and fears of sinking to the bottom. At the same time, under certain circumstances, they are capable of grasping a scientific understanding of society, and being inspired by high ideals.
 
In Chapter I, we mentioned Mao’s scheme, which grouped the intermediate sections under three heads – a minority ‘right wing’ who are relatively prosperous and dream of becoming part of the bourgeoisie, a middle segment who run faster to stay in the same place, and a ‘left wing’ whose standard of living is declining. If we attempted such a grouping in India’s circumstances, the ‘right wing’ would be largely drawn from the high-income sections of managerial and white collar staff, and high-income professionals. The middle and ‘left wing’ would be drawn from other employee sections (i.e., lower-level Government staff) and the petty bourgeoisie. The conditions of the majority of the petty bourgeoisie merge with those of the workers and peasants.

The ranks of the ‘right wing’ of the intermediate sections have indeed grown rapidly, but on a very low base. It appears from the discussion in the previous chapter that they fall within the top 5 per cent of the population.

“Reserve army of the ruling class”

More importantly, the new entrants play a political role for the ruling classes. They help legitimize the wealth of the ruling class as a whole, by providing seeming evidence that it takes only hard work and intelligence to become a member of that elite club. This phenomenon helps foster, among a broader section, aspirations of getting rich, and blurs their consciousness of the class to which they actually belong.

Further, as Nirmal Chandra noted, one implication of the sudden prosperity of a section of the middle class is that it depletes the intellectual resources available to the oppressed classes in their struggles:

What is new is that a wide cross-section of educated young Indians, often from a humble background, have benefited from globalization. Some of the brightest among them go abroad for study or work; others get absorbed as junior- and middle-ranking executives and professionals within the country, at a much higher salary than in pre-1991 years, and with prospects of quick promotion. It is true that these young groups constitute a very small percentage of their cohorts in the country as a whole. If one recalls the role of the “elite” students in the struggle against colonialism during the British raj, and against imperialism in the post-colonialism phase, one must grant that tasks on the ideological plane for today’s radicals are much tougher.¹⁰⁸

Any observer of social movements will not fail to observe the decline of the student movement in the last two decades, or the relative paucity of fresh cadre from those social sections among the activists of people’s organizations.

Influencing the intermediate strata
Influencing the intermediate sections helps the ruling class influence broader sections, and stabilize the existing inequitous order. Because the intermediate sections are more volatile and vocal, it may appear that they shape the course of events. Indeed, there are many instances of broader social movements being triggered by their activity, the best known example being the student movements worldwide during the 1960s and 1970s. An important factor in those developments was the vision of an alternative society; in the absence of such a vision, mere narrowly defined economic interests do not provide a reason for the intermediate sections to side with the working class and other downtrodden classes (what immediate gains would they enjoy by siding with factory workers and poor peasants?).

The intermediate sections have been identified with reactionary movements too, such as fascism in Europe in the 1930s. As we noted at the outset, in many relatively backward countries, where the ‘middle classes’ are relatively small, they appear to have leaned recently in favour of reaction: Narendra Modi in India, the military coup in Thailand, the opposition in Venezuela, and so on.

However, the very fact that they support one side at one point, and the opposite side at another, indicates that it is not the intermediate sections that play the decisive role. Rather, it is the relative strength and capability of the opposing ends of the class hierarchy that influences the intermediate sections as such. Thus it was not the lower middle classes of Germany that played the key role in bringing Hitler to power, but the capitalists, who backed fascist forces as a means of overcoming the economic crisis, and helped him influence the people. In India, while intermediate sections may have supported Modi in the recent elections, the real beneficiaries of his rise to power will be big business houses and foreign capital. 

Equally, in changed circumstances, when the political movement of the working masses is once more ascendant, the stand of the intermediate sections is likely to change, and they may play an important positive role. However, it is not their autonomous action, but their identification with one of the two sides, that will enable them to play that role. In the wake of the Russian Revolution and in protest against the imperialist terms imposed on China after World War I, the ‘May 4th’ upsurge emerged among students and youth in China, and played a very significant role in the history of modern China. Two decades later, while commemorating the May 4th Movement, Mao nevertheless asserted that they would “accomplish nothing” without the correct direction:

In the Chinese democratic revolutionary movement, it was the intellectuals who were the first to awaken. This was clearly demonstrated both in the Revolution of 1911 and in the May 4th Movement, and in the days of the May 4th Movement the intellectuals were more numerous and more politically conscious than in the days of the Revolution of 1911. But the intellectuals will accomplish nothing if they fail to integrate themselves with the workers and peasants.... A true revolutionary must be one who is willing to integrate himself with the workers and peasants and actually does so.

It is now twenty years since the May 4th Movement and almost two years since the outbreak of the anti-Japanese war. The young people and the cultural circles of the whole country bear a heavy responsibility in the democratic revolution and the War of Resistance. I hope they will understand the character and the motive forces of the Chinese revolution, make their work serve the workers and peasants, go into their midst and become propagandists and organizers among them.¹⁰⁹

List of studies reviewed:

(i) Asian Development Bank, Key Indicators for Asia and the Pacific 2010, Chapter 1: “The Rise of Asia’s Middle Class”, 2010. 

(ii) Abhijit Banerjee, Esther Duflo, “What is middle class about the middle classes around the world?”, Journal of Economic Perspectives, Spring 2008.

(iii) Surjit Bhalla, Second among Equals: The Middle Class Kingdoms of India and China, Oxus Research and Investments, 2007.

(iv) Ernst & Young, Hitting the Sweet Spot: The Middle Class in Emerging Markets, 2013.

(v) Economist, “The new middle classes in emerging markets”, Special Report, 12/3/09.

(vi) Homi Kharas, “The Emerging Middle Class in Developing Countries”, OECD Development Centre, 2010.

(vii) Homi Kharas and Geoffrey Gertz, “The New Global Middle Class: A Cross-Over from West to East”, Wolfensohn Center for Development, 2010.

(viii) Ashok Lahiri, “The Middle Class and Economic Reforms”, Economic and Political Weekly (EPW), 15/3/14. (ix) McKinsey Global Institute, The ‘Bird of Gold’: The Rise of India’s Consumer Market, 2007.

(x) Christian Meyer, Nancy Birdsall, “New Estimates of India’s Middle Class: A Technical Note”, Center for Global Development, 2012.

(xi) Branko Milanovic, Shlomo Yitzhaki, “Decomposing World Income Distribution: Does the World Have a Middle Class?”, World Bank, 2001.

(xii) Branko Milanovic, “Global Income Inequality by the Numbers: In History and Now”, World Bank, 2012.

(xiii) National Council for Applied Economic Research (NCAER) and Business Standard, The Great Indian Middle Class: Results from the NCAER Market Information Survey of Households, 2004.
(xiv) Martin Ravallion, “The Developing World’s Bulging (but Vulnerable) ‘Middle Class’”, World Bank, 2009.

(xv) Rajesh Shukla, How India Earns, Spends and Saves, NCAER, 2010.

(xvi) Reeve Vanneman and Amaresh Dubey, “Horizontal and Vertical Inequalities in India”, paper prepared for Inequality and the Middle Class: Lessons from the Luxembourg Income Study, 2010.

(xvii) Reeve Vanneman and Amaresh Dubey, “Horizontal and Vertical Inequalities in India”, pp. 439-458 in Janet Gornick and Markus Jantti (eds.), Income Inequality: Economic Disparities and the Middle Class in Affluent Countries, 2013.

(xviii) World Bank, “Income Distribution, Inequality, and Those Left Behind”, chapter 3, Global Economic Prospects and the Developing Countries, 2009.

(xix) Dominic Wilson and Raluca Dragusanu, “The Expanding Middle: The Exploding World Middle Class and Falling Global Inequality”, Goldman Sachs Global Economics, 2008.
 
The bibliographies of these studies provide further leads for those with the appetite to pursue them.

NEXT: Appendix

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