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The Catalytic Classes: The (New) Bottom Billion’s Best Friend?
March 17, 2011
Andy Sumner has stirred the pot on the future of foreign aid with his recent study on who and where the world’s poor really are. That has given new energy to the recent round of analyses by development economists on who and where the world’s middle class members are and why they matter too, including for the poor. Among others, see: Ravallion and Banerjee and Duflo (though their definition really boils down to who is not poor and not too rich), Milanovic , yours truly, the Asian Development Bank, and soon Francisco Ferreira and his classy group of economists in the Latin America and Caribbean region of the World Bank.
Now Andy and I are thinking about trying to define and “find” the group described in this column by journalist and author Doug Saunders: the catalytic class. They are not necessarily comfortably middle class – but they want and benefit from clear rules of the game. Let us know what you think and whether you agree with us that all these new classifications matter – ultimately for understanding and accelerating development.
2 Responses to “The Catalytic Classes: The (New) Bottom Billion’s Best Friend?”
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March 18th, 2011 at 5:59 pm
This is fascinating and the implications for development – both the processes what may lead to higher living standards (economic as much as political) and whether aid has a role to play in them – seem very broad, and complicated.
After reading Saunders I can’t help but think that indeed it is not so different from what happened in our own countries not so very long ago. Despite the differences, there may be a lot to learn from 19-20th history, not only from recent Chinese or Brasilian experience. How does the catalytic process start? Can we identify the tipping points (and predict them)? What are the enabling conditions for such transformations? Are there ways to support/accelerate the emergence of the middle or catalytic class?
Looking forward to the papers.
April 3rd, 2011 at 10:06 am
Nancy,
In terms of both economic growth and poverty reduction in developing countries, the “catalytic class” appears to be the middle class by developing country standards, which I define as those living between $2 a day (the average poverty line in developing countries) and $13 a day (the US poverty line). A larger middle class by this definition—but not by Western standards—promotes economic growth in developing countries. However, this is almost entirely attributable to lower poverty, which is mainly what drives the expansion in the developing world’s middle class. A larger middle class by developing-country standards also makes growth more poverty-reducing (a higher elasticity of poverty reduction to economic growth). But this too is largely attributable to the effect of a lower initial poverty rate.
So at any given mean consumption, the countries with lower poverty will have a large middle class and see higher subsequent rates of both growth and poverty reduction. Lower inequality only matters to the pace of growth and poverty reduction in so far as it reduces poverty.
(These results are found in my paper, “Why Don’t we See Poverty Convergence?,” which can be found here: http://econ.worldbank.org/docsearch).
Martin