Middle Class Mayhem
Let’s take a look at one of the most politically and economically important trends of the last few decades — the rise of a global middle class.
The common presumption was that this group of consumers would steadily rise through the ranks as wages rose in developing countries, lifting millions out of poverty each year. This was a key belief for multinational corporations and the portfolio strategies of sophisticated investors — another economic belief destroyed by the pandemic.
The global economic slowdown seems to have lowered living standards, dragging millions of people out of the global middle class. A recent estimate by the Pew Research Center revealed for the first time since the 1990s, the global middle class decreased in size last year. Roughly 150 million people fell further down the socioeconomic ladder, increasing the ranks of the poor. South Asia and Sub-Saharan Africa represented most of the increase in poverty, undoing years of progress.
In 2020, the number of impoverished people worldwide was estimated to have increased to 803 million, much higher than the original prediction of 672 million.
The sharp increase in global poverty is because many low-income people before the pandemic were living on the edge of poverty. According to World Bank figures, in 2017, 877 million people lived on just $2 to $3 a day. As a result, many people, particularly in South Asia and Sub-Saharan Africa, were at risk of falling back into poverty before the pandemic even began.
According to estimates, the pandemic wiped out a year of growth, pushing millions into poverty and leaving the global middle-class population virtually stagnant between 2019 and 2020.
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.