Showing posts with label middle class. Show all posts
Showing posts with label middle class. Show all posts

Wednesday, February 05, 2014

Middle Earth, the Middle Class and Growth

I like the play of words here: hobbit and habit, Middle Earth and middle class, JRR Tolkien and equilibrium theorists. Article written by my former prof. at UPSE, a math econ, institutional econ, econ history specialist, Dr. Noel de Dios. Bottomline: the need for rule of law.
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Adventure and fantasy -- not to mention Peter Jackson’s fabulous visual effects -- explain much of the recent popularity of J.R.R. Tolkien’s novels and characters, especially their movie incarnations. If one only looks very closely, however, one may also find a small parable relevant to Philippine society.

Tolkien’s Middle Earth is threatened by occult superpowers that seek total domination through their mobilization of brainwashed masses. Little resistance is offered, however, for lack of social cohesion. Human warrior-kings have been corrupted by petty divisions and their narrow ambitions that blind them to an imminent common threat. Dwarves, on the other hand, devote their lives to compulsive wealth-seeking in underground mines. Meanwhile the seraphic, almost-divine elves are only half-committed to this world and already have their eyes trained on the next.

In the end, however, Good still triumphs over Evil and Middle Earth is saved because the One Ring of Power is entrusted to the most unassuming and unambitious of creatures -- hobbits who have neither the desire nor the use for it. (Game theorists will be pleased to note the implied role of credible commitment.) Special meaning attaches to the nature of the hobbits themselves, who are moved neither by dreams of power, fame, exorbitant wealth, nor heavenly reward. Their concerns focus instead on the mundane: orderliness, security, peace, the freedom to attend to one’s own business and to secure one’s own (pipe-smoking) comfort. Embodying Adam Smith’s virtues of prudence, justice, and benevolence, the hobbits (in short) stand for civilisation and the bourgeoisie -- the middle class of Middle Earth.

In what sense can this be a parable for today? Like Middle Earth, if Philippine society is to progress, it too must ultimately hand over power to its middle class. Or more precisely, it must aim to reach the point where the majority of its people become middle class and are sufficiently numerous to set the tone of both polity and economy. (This insight is nothing new, by the way: the work by Easterly and Acemoglu, among others, shows the close causal association between the size of the middle class and economic growth.)

The strength and size of the middle class matters because it is the natural constituency for many of the factors known to make for economic growth and development. The most obvious fact is economic: a large middle class constitutes a diverse market that acts as a magnet for both domestic and foreign investment. It allows the domestic economy to escape the tyranny of Engel’s Law and produce diverse and higher value-added goods and services beyond food staples.