Editor’s note: This is the second in a two-part series examining the crisis of the global middle class. Part I examined the challenges facing the global middle class and the implications for international politics. Part II examines ways to strengthen the global middle class and avoid the potential dangers of economic polarization.
The damage done to the global middle class, while significant, is not irreparable. The solutions are as varied as the countries themselves, but they all share several key features that influence whether a consumer-driven economy will flourish or not.
First and foremost is access to capital for small and medium-sized enterprises. In developed and developing economies alike, funding all but dried up during the economic crisis that began in U.S. financial markets back in 2008 and quickly spread around the world. Especially during recessionary periods, start-ups are critical job creators compared to existing firms, which tend to shed employees. During the 1991 and 2002 U.S. recessions, start-ups added nearly 3 million new jobs, while established firms laid off 4 million to 5 million people, according to a Kaufmann Foundation report. Meanwhile, the 2008 financial crisis also left corporate research and development funding flat in real terms -- despite growing nominally at about 2.8 percent -- owing to inflation.