The Middle income trap

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Do rapid rates of growth propel developing nations to fully developed status, or do some countries tend to get "stuck"? The latter seems to be true, so here's a

Do rapid rates of growth propel developing nations to fully developed status, or do some countries tend to get "stuck"?  The latter seems to be true, so here's a look at what we know about a puzzling and important phenomenon.

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"How can we reconcile the suggestions that democratic institutions and a thick middle class allow a society to break through the 'Middle Income Trap' with a position such as Crystia Freeland's (Editor: Thomson Reuters Digital) that "..capitalism and democracy are at cross-purposes ( in rich democracies) and the result is the disappearance of middle-skill and middle-wage jobs. (Globe and Mail Friday Feb.15, 2013)"

The answer is in the quote, "...are at cross-purposes (in rich democracies)". Countries stuck in the 'middle income trap' are, by definition, not rich. They are likely rural and undermechanized. India, for example, is going through an urbanization, but is still very agrarian. However, even if only 30% of the population is currently urban, over 70% of the growth over the next decade is projected to come from these city centers.

I don't think it's a long shot that while much of this growth will be pocketed by the wealthy owners of capital, they will do so by the creation of relatively middle-wage/middle-skill jobs.

Middle-income countries are unlikely to have a broad system of higher education. Democracy and capitalism, through the twin demand for education by the people and the demand for a robust workforce by the employers, will force the emergence of a generally educated public, thereby creating a middle-class society.

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"How can we reconcile the suggestions that democratic institutions and a thick middle class allow a society to break through the 'Middle Income Trap' with a position such as Crystia Freeland's (Editor: Thomson Reuters Digital) that "..capitalism and democracy are at cross-purposes ( in rich democracies) and the result is the disappearance of middle-skill and middle-wage jobs. (Globe and Mail Friday Feb.15, 2013)"

The answer is in the quote, "...are at cross-purposes (in rich democracies)". Countries stuck in the 'middle income trap' are, by definition, not rich. They are likely rural and undermechanized. India, for example, is going through an urbanization, but is still very agrarian. However, even if only 30% of the population is currently urban, over 70% of the growth over the next decade is projected to come from these city centers.

I don't think it's a long shot that while much of this growth will be pocketed by the wealthy owners of capital, they will do so by the creation of relatively middle-wage/middle-skill jobs.

Middle-income countries are unlikely to have a broad system of higher education. Democracy and capitalism, through the twin demand for education by the people and the demand for a robust workforce by the employers, will force the emergence of a generally educated public, thereby creating a middle-class society.

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