We need to talk about the middle class.

For decades the idea guiding business decisions around the world has been that of an ever-growing new middle in emerging economies.

Well you can add that to the list of economic truths upended by this pandemic.

The global middle class - there's 2.5bn people out there earning $10-50/day - shrank last year for the first time since the 1990s.

And as @GitaGopinath warned this week that's not the end of the story. Developing economies are recovering far slower than places like the US.
As @carmenmreinhart told us the global economy is "bifurcating".

It sure looks like the world is pivoting from an era of economic convergence between the rich and poor worlds to one of divergence.

But that's not just a story about data. It's about people.

Meet Ravi Sharma.
Ravi is an engineer in India. He had been saving for years to buy his family a car - a $6,000 Maruti Alto. He was hoping to give it to his wife for their wedding anniversary last year.

When he lost his job last year as a result of the pandemic that plan went out the window.
Ravi wasn't alone. Auto sales in India cratered.

He found a new job but it meant moving his family and less pay. And as he told @vrishtibeniwal he has recalibrated everything:

“My life has been set back by at least three years, even as my dreams have moved beyond my reach,”
@vrishtibeniwal You can find impacts like that across emerging economies.

In Brazil the pandemic is raging. And it has literally changed the way Francinete Alves and her daughter eat.

She now follows budget butchers on social media in the hopes of finding a cheap steak.
@vrishtibeniwal In South Africa, Mosima Kganyane gave up her apartment, an emblem of her new life. She went from working for a major retailer to relying on a portfolio of side hustles.

“Covid-19 taught me not to relax and that I need to fight, to fight for survival,'' she told @PrineshaNaidoo.
@vrishtibeniwal @PrineshaNaidoo One reason for the slow recovery we're going to see in many emerging economies is the freeze in international travel.

That matters to people like Yada Pornpetrumpa who built a life on selling snacks and fruit juice to tourists.
@vrishtibeniwal @PrineshaNaidoo Thailand had 39m foreign visitors in 2019. This year it expects to have 3m.

The consequences?

Yada defaulted on the mortgage on her house & her car loan. She now lives in a home she rents from a landlord who’s giving her a break on rent until business improves.
Yada seems pretty resilient. She's also philosophical.

“Having a car or a house is just what society tells us we should value, but it doesn’t define the middle class,” she told @yingyuvej and @rtkwrites. “I have no assets now. But I have peace of mind.”
The big question hanging out there is whether this is going to be a temporary setback or something more permanent.

How long will this era of divergence last? How soon will people in places like India and Nigeria get vaccinated?
But what's happened to the global middle is another example of how this pandemic has upended so many people's realities.

We spent years agonizing about the middle class in the US & other rich economies. This time there's other economic victims as well.


• • •

Missing some Tweet in this thread? You can try to force a refresh

Keep Current with Shawn Donnan

Shawn Donnan Profile picture

Stay in touch and get notified when new unrolls are available from this author!

Read all threads

This Thread may be Removed Anytime!


Twitter may remove this content at anytime! Save it as PDF for later use!

Try unrolling a thread yourself!

how to unroll video
  1. Follow @ThreadReaderApp to mention us!

  2. From a Twitter thread mention us with a keyword "unroll"
@threadreaderapp unroll

Practice here first or read more on our help page!

More from @sdonnan

6 Apr
The challenge for the US here is that the US doesn’t set tax policy in other countries. And that policy makers in other countries don’t have to look back very far to see a very different message coming out of the White House...
And how do you enforce it? Here’s a reminder of how the EU’s efforts to force Apple to pay higher taxes in Ireland have gone: bloomberg.com/news/articles/…
Read 5 tweets
11 Mar
Biden’s about to test just how much bipartisan backing there is for a new American industrial policy. But the forces he’s taking on in his bid to boost manufacturing aren’t just political...

My latest for ⁦@BW⁩:
One big hurdle: How do you make producing in US cost-competitive?

GE Lighting last week shut down a line at its plant in Bucyrus, Ohio, that made LED bulbs. They spent a year and millions trying to make it cost-competitive. And the company says they just couldn’t...
Another: In all likelihood the dollar is going to appreciate significantly in the coming year or two as the economy accelerated faster than others. That’s going to hit the bottom line of folks producing in America for export markets.

Read 12 tweets
25 Feb
And we're off with Katherine Tai's confirmation hearing... Chairman Ron Wyden kicks it off with a call for "smarter, stronger" US trade policy... "Four more years of mean tweets and chaos from the White House won't cut it..."

Here's five questions I'd like to see senators ask @USTradeRep nominee Katherine Tai:

Interesting shot fired by Mike Crapo in his opening statement re the Biden plan to hit the pause button on new trade deals. He's pushing for Biden to go forward with a deal with the UK. Now pointing to China and RCEP... He's calling for "energetic and effective" trade policy.
Read 42 tweets
25 Feb
Today in why context matters...

The initial jobless claims data out this morning points to what some are calling a "sharp fall" in weekly claims.

Claims last week were 3.5x what they were a year ago. The 4-week moving average was almost 4x.
And that doesn't include special programs set up in response to the pandemic that the latest data show covering >12m of the >19m in the US claiming or receiving unemployment benefits.

Another bit of context: 19m is the population of New York state.
Another bit of context:

The decline was largely due to the extreme weather that hit a large swathe of the US last week, as @joebrusuelas points out here: realeconomy.rsmus.com/initial-jobles…
Read 5 tweets
24 Feb
Been thinking about this lovely piece by my former colleague @JoshuaChaffin... My initial take on the 5 I’d invite to dinner was: Philip Roth, Don Delillo, Jan Morris. Nina Simone and Tim Flannery (Aussie polyglot). But I’m having doubts.

Your 5?

My main qualm is I’m worried that I have too many ornery people on my list... I’m pretty sure I’d just end up in a corner talking to Jan, Nina and Tim while Philip and Don grunted at each other in a corner.
Then again I bet Don mixes a mean Old Fashioned... And Philip would bring a nice bottle of wine...
Read 6 tweets
6 Oct 20
If you scratch the surface of this economic crisis it’s not hard to find the legacy of the last... In Cleveland you can find it in the churn in ownership of rental properties in Black neighborhoods. One house we looked at traded hands 7x in two years... 1/ bloomberg.com/news/features/…
11410 Clarebird Ave was essentially owned by two families between 1975 and the early 2000s.

It peaked in value in 2004 at $93k.

Last year it sold to its current owner, a company called BL US1 LLC, for just over $65k.

In other words in 15 yrs it lost a third of its value.
Who is behind BL US1 LLC? All we know is that it is a French investor... Yes... French... And the $900:month rent meant they were getting a 16% gross annual return on their investment... 3/ Image
Read 9 tweets

Did Thread Reader help you today?

Support us! We are indie developers!

This site is made by just two indie developers on a laptop doing marketing, support and development! Read more about the story.

Become a Premium Member ($3/month or $30/year) and get exclusive features!

Become Premium

Too expensive? Make a small donation by buying us coffee ($5) or help with server cost ($10)

Donate via Paypal Become our Patreon

Thank you for your support!

Follow Us on Twitter!