Politicians and the middle class: A modern love affair

One of the great truths in the world today is that politicians, especially those in the West, are fascinated with the middle class. This fascination often borders on love. Politicians’ adoration for this group of people is based on the assumption that they wield great power and influence: According to popular Western belief, elections are won and lost based on how the middle class behaves. The problem is that we all struggle to define who or what the middle class really is.
Statements by a number of politicians over recent weeks have reaffirmed their fascination with the middle class. Geography is no barrier. In an interview with the Financial Times in London, Brazilian President Dilma Roussef, responsible for running Latin America’s largest economy, said: “This, I think, is a very important gain for Brazil — that is, to transform Brazil into a middle class population.” In the US, the Republican Presidential candidate, Mitt Romney, launched a staunch defense of the American middle class, arguing that the policies of President Obama have “crushed” them during the last four years. The centerpiece of Gov. Romney’s attack on Obama during the first live debate was that he would not raise taxes on the middle class if elected. In fact, it was notable how often Romney repeated this line, over and over again. In Britain, elections nowadays are almost exclusively devoted to wooing the middle class, much to the irritation of those who do not consider themselves middle class, who therefore feel marginalized.
Who and what is this middle class that everyone seems so keen to help? I normally define the middle class using two metrics (I’m no social scientist so experts might disagree with me): One is money, the other is education. If someone earns a sufficient amount of money not to be considered poor, but not enough to be rich (all of course very subjective terms), then they can be considered middle class. Basically, their income will hover around the national average. Alternatively, the metric I slightly prefer is concerned with education and the “type” of life someone lives. Very simplistically, highly educated people who work in an office are considered middle class.
The key point is that in the vast majority of cases, members of the middle class are richer rather than poorer. And this is where politicians come in. The reason, I believe, that the world’s leaders are increasing their focus on their middle class populations — promising to expand their number and look after them better — is because of the ongoing world financial crisis. Across the world, from developed to developing markets, unemployment is high and in many places rising. In some African countries, over half of the working population is unemployed; in crisis stricken Spain and Greece, a quarter of the working population does not have a job; in the US, the unemployment rate is at a historically high 8.1 percent. Even those still in employment will have had their incomes squeezed. By definition, when politicians talk about expanding the ranks of the middle class, they are effectively saying they will make people richer. With so many people in the world out of a job, it is of course a welcome message. When Dilma Roussef says “we want a middle class Brazil” she is basically talking about lifting people out of poverty.
The problem is that when advancement in life is dependent on employment, if there are no jobs available it is very difficult to move onward and upward to fulfill your natural potential. This is why I believe the social side of life will be key to a lot of human progress over the next few years. How well we are educated and how much we engage in civic life, religious activity, charity work and so on will better define our lives.
Nowhere is this debate more important than in the Middle East today, a region which has experienced such upheaval over the last two years. One obvious observation must first be made: The middle class in Manhattan is clearly different from the middle class in, say, rural Egypt. They may occupy the same layer in society, but a New York banker is very different economically to an office worker in southern Egypt, perhaps struggling on a low wage. The latter might be described as from the middle class, but he may be not far from the poverty line too. The key difference between the two will be the amount each spends on non-life essential products, such as food and water. In New York, a lot of personal expenditure is devoted toward education and entertainment; on the banks of the Nile, it will be clothing and housing. Despite these differences, it is universally true that being middle class is a self-perpetuating process: The richer we get, the more we focus on intangibles such as, first and foremost, education. Then of course the better educated we are the wealthier we become.
Over time, more people from the developing markets, some of which are found in the Middle East, will enter the middle class bracket. Politicians who can harness this movement by providing new opportunities will be thanked at the ballot box. Dilma Roussef of Brazil, for example, famously owes her electoral good fortune to Brazil’s poor, who voted for her with the hope of leaving poverty behind.
The messages are clear: Middle classes are here to stay, are growing, and have different life priorities than their ancestors did. Politicians across the world who are willing to work with this social change will do very well. That is why Mitt Romney, for one, has re-focused his campaign toward them, making earnest promises and expressions of good faith. He probably lies awake at night worrying about what they think of him. He may not know it, but he is in love.

— John Burman is managing director of an investment advisory firm based in London.
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