When these things are taken into accoutn, the picture looks rather different.
As is clear from the graph below, if one accounts for a constant population and for a consistent set of countries, while the effects of globalisation remain, that developed world, middle class incomes have stagnated, becomes harder to argue – especially when the effect of the massive growth in China is accounted for.
It added: “The part of the curve attributed to them [the lower middle class of the rich world] is dragged down by changes in the list of countries for which there is data, by compositional effects due to higher population growth in poorer countries, and by low growth figures (accurate or otherwise) in Japan and those most affected by the collapse of the Soviet Union. In isolation, the remaining mature economies have seen average growth of around 50% – around 2% per year.”
While it does acknowlege that growth has in many cases been highest among the top deciles of each country, from its analysis it is clear that the divide implied by the curve is not as large.
The one exception to this, is perhaps the US. Which the Resolution Foundation says, perhaps explains the “intuitive appeal of the chart”.
In the US, it said: “Growth has been shared very unequally and (or because of this) growth has been low for the low and middle income parts of the distribution, though still around 1% per year in this data rather than stagnation. In most other Western countries, including the largest such as the UK, France and Italy, the 20 year stagnation narrative is still further from the truth.”
Even with the caveats made, it is clear that globalisation has and is likely to remain a powerful force within the global economy, but as the foundation makes clear, there are other forces at work, of which commentators and policy makers must take account.
