The Global Middle Class Is 50% Bigger Than We Thought, Using A New Measure: Car Ownership

Mark Perry
updated | Author's Website
From Foreign Policy, an article highlights an interesting new measure of middle-class prosperity: passenger car ownership:  
“The swelling middle class in emerging economies is transforming the economic balance of power across the globe. Measuring it, however, is no easy task. There is no widely accepted definition of what constitutes the middle class, and the most common ways of measuring its growth — through looking at rises in income — suffer from a number of flaws.
 There’s an easier way. In the developing world, buying a car is virtually synonymous with entry into the middle class. In these countries, car ownership separates those with the ability to purchase many other nonessentials from those within the wider population. Car statistics, moreover, are generally reliable and frequently updated, and they include data by automobile type that can be used to further segment the middle class. For this reason, the number of passenger cars in circulation serves as the most reliable gauge we have about the size of a country’s middle class. While one can define the middle class in many ways, car ownership is an unambiguous indication of the ability to purchase other luxury goods.
Applying this measure significantly alters our understanding of the middle class in the developing world. It shows that there are many more affluent people in developing countries than had previously been thought and that about 70 developing countries with a combined population of about 4 billion are near or above the point where car ownership rises very rapidly. This suggests that very large numbers of people will enter the middle class in the coming years, transforming the economies and political systems of the countries they inhabit.
Measuring the global middle class isn’t just an academic exercise — its growth carries real-world implications. Political scientists are interested in the topic because a large middle class is associated with greater political awareness, desire for more accountable and representative government, and even demand for free markets. Economists and market analysts are mainly interested in the size of the middle class as an indicator of a population’s ability to rise from poverty and purchase items that go beyond bare necessities.

The most widely used measure was proposed in 2002 by World Bank economist Branko Milanovic and Hebrew University professor Shlomo Yitzhaki, who counted people with daily incomes between roughly $10 and $50 a day, after adjusted for purchasing-power parity, as middle class. If one uses this definition, there are an estimated 369 million people in the developing G-20 economies — Argentina, Brazil, China, India, Indonesia, Mexico, Russia, South Africa, and Turkey — who qualify as “middle class.”

After correcting for household size, measuring car ownership suggests that the middle class in developing G-20 countries is in the range of 550 million to 600 million people — about 50 percent larger than the number arrived at using the Milanovic-Yitzhaki definition.”

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