Marx Is Back

The inscription on Karl Marx’s tombstone in London’s Highgate Cemetery reads, "Workers of all lands, unite." Of course, it hasn’t quite ended up that way. As much buzz as the global Occupy movement managed to produce in a few short months, the silence is deafening now. And it’s not often that you hear of shop workers in Detroit making common cause with their Chinese brethren in Dalian to stick it to the boss man. Indeed, as global multinational companies have eaten away at labor’s bargaining power, the factory workers of the rich world have become some of the least keen on helping out their fellow wage laborers in poor countries. But there’s a school of thought — and no, it’s not just from the few remaining Trotskyite professors at the New School — that envisions a type of global class politics making a comeback. If so, it might be time for global elites to start trembling. Sure, it doesn’t sound quite as threatening as the original call to arms, but a new specter may soon be haunting the world’s 1 percent: middle-class activism.

Karl Marx saw an apocalyptic logic to the class struggle. The battle of the vast mass against a small plutocracy had an inevitable conclusion: Workers 1, Rich Guys 0. Marx argued that the revolutionary proletarian impulse was also a fundamentally global one — that working classes would be united across countries and oceans by their shared experience of crushing poverty and the soullessness of factory life. At the time Marx was writing, the idea that poor people were pretty similar across countries — or at least would be soon — was eminently reasonable. According to World Bank economist Branko Milanovic, when The Communist Manifesto was written in 1848, most income inequality at the global level was driven by class differences within countries. Although some countries were clearly richer than others, what counted as an income to make a man rich or condemn him to poverty in England would have translated pretty neatly to France, the United States, even Argentina.

But as the Industrial Revolution gained steam, that parity changed dramatically over the next century — one reason Marx’s prediction of a global proletarian revolution turned out to be so wrong. Just a few years after The Communist Manifesto was published, wages for workers in Britain began to climb. The trend followed across the rest of Europe and North America. The world entered a period of what Harvard University economist Lant Pritchett elegantly calls "divergence, big time." The Maddison Project database of historical statistics suggests that per capita GDP in 1870 (in 1990 dollars, adjusting for purchasing power) was around $3,190 in Britain — compared with an African average of $648. Compare that with Britain in 2010, which had a per capita GDP of $23,777; the African average was $2,034. One hundred and forty years ago, the average African person was about one-fifth as rich as his British comrade. Today, he’s worth less than one-tenth.

Although many Americans get worked up about absurdly inflated CEO salaries and hedge fund bonuses, a hard economic fact has been overlooked: As the West took off into sustained growth, the gap in incomes among countries began to dwarf the income gaps within countries. That means a temp in East London may still struggle to make ends meet, but plop her down in Lagos and she’ll live like a queen. If you’re feeling bad about your nonexistent year-end bonus, consider this: Milanovic estimates that the average income of the richest 5 percent in India is about the same as that of the poorest 5 percent in the United States. Like banks and multinationals, wealth and poverty are now globalized. The lowest municipal workers in Europe and the United States are far richer than their counterparts in poor developing countries (even when purchasing power parity is taken into account), and they’re almost infinitesimally better off than the majority of people in those countries who still survive off the earnings of small farms or microenterprises.

Sorry, Karl: The simple fact that poor people in Europe and America are in the income elite according to the standards of South Asia and Africa is why the workers of all lands have not yet united. The second congress of the Communist International, in 1920, condemned the despicable betrayal by many European and American socialists during World War I, who "used ‘defense of the fatherland’ to conceal the ‘right’ of ‘their’ bourgeoisie to enslave the colonies." The gathered representatives argued that the mistrust generated could "be eradicated only after imperialism is destroyed in the advanced countries and after the entire basis of economic life of the backward countries is radically transformed."

Yet all that might soon be changing. Globalization may have been the watchword of the 1990s, but it’s still a work in progress. As interconnected global markets get ever more interconnected, average incomes are converging. The last 10 years have seen developing countries grow far more rapidly than high-income countries, closing the gap in average incomes. Economist Arvind Subramanian estimates that China in 2030 will be about as rich as the whole European Union today and that Brazil won’t be far behind, clocking in at a GDP per capita of around $31,000. Indonesia, he reckons, will see a GDP per capita of $23,000 — about the same as tech powerhouse South Korea today.

Put simply, this means that within the space of hardly a generation, a good chunk of the world will soon be rich, or at least solidly middle class. According to forecasts I’ve developed with my Center for Global Development colleague Sarah Dykstra, about 16 percent of the Earth’s population lives in countries rich enough to be labeled "high income" by the World Bank. If growth rates continue as they have in the past decade, 41 percent of the world’s people will find themselves in the "high income" bracket by 2030. In short, if developing countries continue growing at the rate we’ve seen recently, inequality among countries will shrink — and inequality within nations will return as the dominant source of global inequality.

Does that mean Marx was right — if just a couple of centuries off on his timing? Not exactly.

The reality is that this new middle class will have lives that Victorian-era working-class Brits could only dream about. They’ll work in LED-lit shops and offices rather than in dark, hellish mills. And they’ll live nearly 40 years longer than the average person in 1848 based on life expectancy at birth. But will they share common cause with their fellow factory workers an ocean away?

Maybe, but not because the barricade is the only option. Marx predicted that the global working class would unite and revolt because wages everywhere would be driven to subsistence. But as wages increase and level out around the world, the plight of the proletariat — hard work, low pay — today more than ever means easier work and better pay. And it’s bringing hundreds of millions of people, in China alone, out of poverty. Clearly, the communist revolutions of the first half of the 20th century proved far, far worse for living standards than the well-regulated markets of the latter half.

But that doesn’t mean Warren Buffett should breathe easily. In fact, it is exactly because the rich and poor will look increasingly similar in Lagos and London that it’s more likely that the workers of the world in 2030 will unite. As technology and trade level the playing field and bring humanity closer together, the world’s projected 3.5 billion laborers may finally realize how much more they have in common with each other than with the über-wealthy elites in their own countries.

They’ll pressure governments to collaborate to ensure that their sweat and blood don’t excessively enrich a tiny, global capitalist elite, but are spread more widely. They’ll work to shut down tax havens where the world’s plutocrats hide their earnings, and they’ll advocate for treaties to prevent a "race to the bottom" in labor regulations and tax rates designed to attract companies. And they’ll push to ensure it isn’t just the world’s richest who benefit from a global lifestyle — by striving to open up free movement of labor for all, not just within countries but among them. Sure, it’s not quite a proletarian revolution. But then again, the middle class has never been the most ardent of revolutionaries — only the most effective. The next decade won’t so much see the politics of desperate poverty taking on plutocracy, as the middle class taking back its own. But it all might put a ghostly smile on Karl’s face nonetheless.