At the World Bank public briefing and panel, “The Rise of the Middle Class,” held October 10 in Washington, D.C., World Bank Vice President for Latin America and the Caribbean Hasan Tuluy announced that “the middle class in now larger than the poor in Latin America.” World Bank President Jim Yong Kim added to the upbeat tone, noting that now only one in four Latin Americans live in poverty and that inequality is edging downward. Two-thirds of the drop in poverty was due to economic growth and the other third was the result of targeted poverty reduction programs, Kim said.
If true, this is all great news. But is it so?
Not all of the speakers at the World Bank event were so sanguine about the depth and durability of the social progress made in Latin America over the last decade. Enrique V. Iglesias, Secretary-General of the Ibero-American Cooperation Secretariat, noted that the gains in the middle class living standard are tenuous, and could be lost if economic growth begins to slow in Latin America, something that most of the panelists at the event said they believe to be increasingly likely.
In the ensuing conversation, moderated by El País columnist Moisés Naim, panelists lodged several important reservations about the extent of the social gains in Latin America. Nancy Birdsall, President of the Center for Global Development, pointed to the often neglected but rapidly growing group of those in the “new class,” people who are not poor but also not in middle class. Marta Lagos, Executive Director of the polling organization Latinobarómetro, also drew attention to this clase bajo (lower or working class). Today the clase bajo makes up nearly half of all Latin Americans, Lagos said.
The World Bank defines as middle class those who make at least $10 USD a day. But this sum, $3,650 USD a year PPP (Purchasing Parity Power, that is, adjusted to reflect national differences in buying power), is not the financial threshold one would usually think of as providing entry into the middle class. Indeed, it is really stunning that anyone at the World Bank would try to argue that it does. As one member of the audience pointed out, people making that level of income are “dirt poor.”
Another audience member drew attention to the great income inequalities that persist in Latin America, correctly noting that in Chile just 1 percent of the population receives 30 percent of the income. Income distribution Latin America remains the most unequal of any region in the world, by far.
Nancy Birdsall agreed with this assessment, noting that she too was “worried about continuing inequality.” While “conditional class transfer programs are great,” she said, “they are not enough. It is time to move on to [address] concentrations of income and power.” To do this, Birdsall advised, it will be necessary to get serious about tax collection from the Latin American upper middle class and the élite groups which are distinctly under-taxed compared to world averages.
This is a sound recommendation, but it also may not enough. It would be refreshing if the World Bank could express more genuine concern for those ordinary women and men who struggle every day to provide a decent living for their families. At times the World Bank still looks aloof and out of touch, speaking from Washington about the poor of Latin America, but without much heartfelt concern for their plight. $10 a day is not middle class.
Dr. Ronn Pineo is Chair of the Department of History at Towson University.