Global Development Monitor by Savoy Conor M.;

Author:Savoy, Conor M.;
Language: eng
Format: epub
ISBN: 4533988
Publisher: Center for Strategic & International Studies

A Better Environment for the Middle Class

Peter Woicke

Over the past several years, there has been a lively debate in the United States and Europe about the important role of the middle class for economic growth, showing a clear bias that savings, investments, and innovation by the middle class people indeed push economies forward. Interestingly, development literature rarely mentions the importance of a strong middle class for the development of poor countries with the emphasis more focused on “poverty reduction.” During my time as head of the International Finance Corporation (IFC), I visited a modern, private hospital in Mexico financed by the IFC. I can vividly recall the discussion with a group of young doctors, whom I had asked what made this hospital so important to them. Many good points were raised, but what impressed me most was the comment by one of the medical staff stressing that with the modern facilities at their disposal they had no more urge to emigrate to Houston. Mexico has built a large middle class of doctors, lawyers, engineers, and entrepreneurs who have made foreign aid almost redundant.

Poor countries continue to suffer from environments that are not conducive to make professionals comfortable. First-class healthcare is not available, educational facilities, particularly secondary and tertiary institutions, do not provide quality education relevant for future jobs, and leisure opportunities are not available. Jobs are scarce, especially in the small and medium-sized enterprise (SME) market. In contrast, the relatively small number of rich nationals, whose wealth often is based on specially granted licenses leading to monopolistic enterprises, are not disadvantaged: they can easily afford to send their sick relatives to the best doctors in Europe, the United States, Hong Kong, or Singapore. They can pay for the most expensive schools and universities wherever these are located. And vacationing in luxury resorts outside their own countries is no drain on their wealth. But unfortunately, this is also the class that all too often is not interested in changing the status quo.

The professionals who do not have access to facilities like the hospital in Mexico in order to utilize their training or to have their relatives treated there, or who cannot afford to send their children abroad to gain a modern, relevant education, or to enjoy leisure facilities we in the developed world take for granted, more often than not decide to emigrate. Young entrepreneurs who might initially see opportunities in their poor countries are stymied by bureaucratic rules and regulations, cannot find the risk capital they need for growth, and take their enthusiasm and ideas to places with a friendlier business environment.

Although some of these developing countries are endowed with enormous natural resources, and despite billions of dollars in foreign aid, and heroic efforts by NGOs to stem some of the worst cases of malnutrition, hunger, and nonexistence of sanitation, little progress has been made in a number of poverty-stricken countries.

This is not to deny that the Millennium Development Goals have shown some success: extreme poverty has been reduced, access

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