A couple of weeks ago, I took sceptical aim at a post by Nancy Birdsall at the Center for Global Development in which she revealed that she and her colleague Andy Sumner would be initiating a research programme looking into the middle classes, and in particular, what she calls â€˜the catalytic classâ€™. I (with all the subtlety of a steroid-guzzling sledgehammer with STUDENT OF POLITICAL ECONOMY embossed on its head) made the point that â€˜the catalytic classâ€™ was merely a synonym for capitalists.
In this post, I want to draw out some of the subtlety from the sledgehammer, because thereâ€™s value to the research agenda they speak of: itâ€™s true that the middle classes and capitalists have a hugely important role in the development of an economic system that successfully employs large numbers of the poor and provides the resources required for the state to provide public and market sub-optimal goods it must. However, I would strenuously argue that to focus on the â€˜catalytic classâ€™ is incorrect: rather, we must understand the conditions under which catalysis occurs.
Further, the role of the middle classes in general and how they function, and the role of capitalists and how they function are quite different, though they are profoundly connected as well, and its important to understand both the differences and the connections.
To start with, itâ€™s very important to be clear about who I am talking about when I say â€˜middle classesâ€™ and â€˜capitalistsâ€™. After my first post, a really good response came up from Chris Prottas. Heâ€™s quite critical of my initial shot at the CGD, arguing that the catalytic class were a very special subset of the middle classes who, in fighting for their own betterment, inadvertently improve the lot of the poor as well. The key passage:
Yes, the emergent bourgeoise are capitalists â€¦ but what makes them (potentially) a special ally of the poor is that they economically support a new set of public interests to compete with those of the existing eliteâ€¦ To the extent this new classâ€™ power benefits from public goods that benefit the poor, the emergent bourgeoisie may indeed catalyze positive change that would not otherwise occurâ€¦
The catalytic class are a special subset of bourgeoisie: bourgeoisie that happen to have interests that align with the poor. It is a happy accident that they benefit from the same public goods. It is a happy accident that their source of wealth increases demand for labor from the poor. To call them simply capitalists is to lump them with the bourgeoisie that make a fine living virtually detached from the poor.
Emphasis mine. Much of this criticism stems from confusion of terms. A capitalist, according to the classical definition, is a very special case of the middle class: a person who holds a large volume of capital and extracts value from wage-labour by using this capital. This is very important. Itâ€™s not sufficient that he is middle class, or bourgeois, or that he is rich. What is necessary that the source of the profits he makes is the use of wage-labour and capital together, to increase the value of the goods he or she produces over and above the cost of the labour he hires. Itâ€™s for this reason I highlight the sentence above: using the term capitalists is therefore serving to do the exact opposite of what has been suggested: it isolates those members of the economically powerful classes who employ the poor. People whose livings are made through feudal structures of landholding, or through speculation are not in the classical sense capitalists.
The middle classes more generally are those with means in the middle range of society â€“ not the very rich (be they capitalist or the hereditary rich who employ few) nor very poor. They are defined by their capacity to consume. This is the crucial distinction: the middle classes are such because of their consumption (and their cultural and social norms), while capitalists are defined by their productive relationships. Both are important in the transformation to a dynamic economy, but itâ€™s only the latter that truly catalyse the economic transformation and with it, the fortunes of the poor.