Boom time for the global bourgeoisie

By Jim O'Neill, chief economist at Goldman Sachs

In the midst of the current widespread gloom and doom in the west, it is important not to lose sight of the true structural themes shaping our era.

Linked to the current mood, commentators often depict an embattled and shrinking middle class, with sharply rising financial inequality. However, globally, this is simply not true. One of the most startlingly positive phenomena for many generations continues to unfold around the world. We are in the middle of an explosion of the world's middle class.

As two of my colleagues, Dominic Wilson and Raluca Dragusanu, showed in a paper Goldman Sachs published last week (The Expanding Middle: The Exploding World Middle Class and Falling Global Inequality), about 70m people a year globally are entering this wealth group, as defined by those on incomes of between $6,000 and $30,000 (€3,800-€19,000, £3,900-£15,000), in purchasing power parity terms.

The phenomenon may continue for the next 20 years, with this global middle accelerating to 90m a year by 2030. If this happens, an astonishing 2bn people will have joined the ranks of the middle class. This demonstrates that, contrary to widespread opinion, global inequality is declining significantly, not increasing.

Behind this powerful development is, of course, the unfolding story of the Bric, as we dubbed Brazil, Russia, India and China back in 2001. In addition to the gloom surrounding cyclical challenges in the US and other developed economies, it is currently becoming fashionable to believe that the Bric story is about to be tipped over the edge by rising inflation, scarcity of resources and their own backlash against globalisation. Some slowing of rapid growth in these economies is bound to happen. Indeed, the sustainability of it might be helped by some softening.

But I believe this negative mood is overstated.