Ideas 2011 July/August 2011

The 14 Biggest Ideas of the Year

A guide to the intellectual trends that, for better or worse, are shaping America right now. (Plus a bunch of other ideas, insights, hypotheses, and provocations.)

1. The Rise of the Middle Class—Just Not Ours

Gillian Tett
U.S. managing editor and assistant editor,
Financial Times

The past year has seen plenty of hand-wringing about the “squeezed middle.” Little wonder. Although the U.S. economy might now be rebounding, incomes for most Americans—if they are lucky enough to have a job at all—are not rising. On the contrary, since 2002, median household income has declined in real terms, as many middle-class jobs have been either destroyed by technological innovation or lost to competition from overseas. For many of the jobs remaining, employers can pay lower wages.

The middle class in America (and Europe) is suffering, but that’s only half the tale. In the past decade, income per capita in the so-called “BRICs” (Brazil, Russia, India, and China) has surged, as the middle classes in those countries have expanded at a striking clip. That is partly because jobs are shifting from the West to the emerging world (just think, for example, of all those Chinese factories and Indian call centers that have sprung up). However, education is also improving in most of these countries, along with infrastructure, as incomes rise and lifestyles improve.

To many Western workers—and politicians—this sounds scary. After all, the addition of millions of well-educated workers in places such as India, China, and Brazil means a lot more competition for Americans and Europeans. However, this cloud has a bright silver lining. Until now, politicians and economists have generally focused on the emerging markets in terms of a “supply shock,” in the sense that these countries can supply cheaper and better goods than can be produced in the West. Production, after all, is what has enabled those emerging-market economies to boom; again, think of those Chinese factories.

But now the world is on the verge of a crucial shift: precisely because the middle classes in the emerging markets are gaining clout, they are also becoming a truly formidable consumption force. The emerging markets thus no longer represent just a “supply shock”; they are creating a “demand shock” too. And that raises big questions: Who or what will meet that demand? Will those new middle-class families who are working at, say, Indian call centers or Chinese factories just buy local products? Or could American companies have an opportunity to serve them? And if so, could that opportunity eventually lead to new American jobs, as those consumers start to travel, read, download apps—and plug in to a globalized lifestyle? The full tale of the “squeezed middle” has yet to be told.

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