World's Middle Class Squeezed Out
Saturday, 31 October 1998
M E X I C O C I T Y (AP)
FOR 14 years, labor lawyer Patricia Navarro handled some of Mexico's
hottest television stars. Today, she represents dozens of workers laid off
by the broadcasting giant Televisa.
Navarro gets more than 30 phone calls a day from recently laid off
Televisa employees who are in fights over severance pay.
"People are terrified," she said. "It used to be a good company to work
for. After those salaries and benefits, it's not easy finding anything that
comes close."
Middle class people in Mexico and all around the globe are being
squeezed out of once-comfortable lifestyles - and in many cases their jobs
- by the crisis in an increasingly globalized economy.
In recent years, developing nations have begun toppling protectionist trade
barriers and opening up their economies to their regions and the world.
But while free trade policies have increased commerce among nations,
many national economies are now more vulnerable to the world economy's
ups and downs.
And when an economic crisis hits like the one that has rippled around the
world over the past year, middle class professionals are often the first to be
squeezed as interest rates soar and international companies trim payrolls.
"Traditionally, the middle class was a family where the father worked and
supported the entire family," said Luis Feld, a 39-year-old taxi driver in
Buenos Aires, Argentina. "Now the entire family is working, including the
mother and the oldest child."
As the global economy struggles, much of the world's population is being
re-divided into just two classes: a financial elite and a working class.
"In order to stay competitive, companies all over have to slash costs. This
affects the whole world," said Antonio Castro, an analyst at Oxford
Economic Forecasting in Mexico. "The middle class is being absorbed into
the working class to the point that in some cases it has practically
disappeared."
For folks once accustomed to annual vacations or nights on the town, that
means simpler dinners at home and not buying a dream house or a washing
machine.
"I still go for designer labels, but now I wait for sales," said Grace Wong,
28, a Hong Kong bank manager.
Ivan Choy, a political scientist at Hong Kong's City University, said that
attitude illustrates a trend even in places that haven't been hit by hard times.
"People still have a lot of savings, but they're not willing to spend because
of growing unemployment" and increasing instability in global markets, he
said.
After suffering years of turmoil under the late dictator Ferdinand Marcos,
middle class Filipinos who were just beginning to enjoy modest prosperity
are being pinched.
Edna Marie Bartolome, a freelance writer in Manila, is now more careful
about what she buys, avoiding the shopping mall because "you'll end up
spending for something you don't really need."
In hard-hit Indonesia, a middle class that emerged only in the past two
decades is rapidly withering as banks and factories go bust.
In South Korea, it's common to see homeless people in suits and ties
wandering around public parks and railway stations. Unemployment is at a
32-year high of 7.6 percent, with 1.65 million people jobless in a nation of
44 million.
Many of South Korea's new jobless belonged to the middle class, and
those who still have jobs have seen their incomes drop sharply.
"It's a mess," said Kim Jung-hee, a bookstore owner who had to cancel
plans to send her daughter to the United States to study English literature.
"Our income has dropped nearly 40 percent."
In Singapore, layoffs have risen to record levels. Many of the newly
unemployed are finance professionals: brokers, analysts, researchers. Real
estate agents are losing work amid a depressed property market.
The trend has particular implications for developing nations in Latin
America, Asia and Africa where democracy is just beginning to take hold.
In some countries, worsening unemployment and recession could fuel
social discontent and instability, political analysts say.
Groups could channel unhappiness into protests challenging government
policies. In extreme cases, frustrations could lead people in some countries
to opt for authoritarian regimes.
"Mexico, which is at the threshold of democracy, had a better income
distribution when authoritarianism was in full swing in the 1960s and 1970s
than it does now," said Lorenzo Meyer, a professor at the prestigious
Colegio de Mexico and a visiting scholar at Stanford University. "Average
Mexicans could ask themselves why they need to have a democracy."
In South Korea, economic woes are eating away at support for President
Kim Dae-jung. His former approval ratings of 80 percent have dropped
below 50 percent as more people lose jobs and homes.
The economic crisis has seriously affected political stability in Indonesia.
The United Nations predicts that by next year, two-thirds of the country's
140 million people will be living in poverty, pretty much wiping out the
nascent middle class.
The squeeze comes as Indonesian President B.J. Habibie struggles to
assert control over a still shaky government.
Habibie took power in May, after the autocratic President Suharto was
forced to step down when 1,200 people died in rioting triggered in part by
inflation of more than 80 percent and mass unemployment.
Habibie has promised democratic reforms, but he has also become the
target of protests as the crisis deepens.
"This economic crisis is like a cancer. It could attack the body of Indonesia
until it dies," said Daniel Sparingga, a professor at Airlangga University in
Indonesia's second biggest city, Surabaya.
In China, there has been little impact so far on the minuscule but growing
middle class of white collar workers employed by foreign joint ventures
and private enterprises.
There are, however, pockets of hardship as the crisis hits China's exports
and foreign investment.
Latin Americans worry they may be next.
In Argentina, one of the region's most developed countries, people are
working harder to maintain the higher standard of living that long set them
apart from their neighbors.
Middle class Brazilians are steeling themselves for a new round of austerity
measures promised by recently re-elected President Fernando Henrique
Cardoso. Most have stopped buying on credit amid soaring interest rates.
Mexicans fear a repeat of 1995, when a steep devaluation of the peso sent
interest rates soaring to nearly 110 percent. Millions of people lost jobs
and millions more saw their debts mushroom because of compounding
interest assessments.
"People who defaulted in 1995 owe six to eight times the amount they
borrowed," said Jose Maria Imaz, a businessman and member of Mexico's
El Barzon, a group of thousands of middle class debtors.
President Ernesto Zedillo is proposing a $55 billion bank bailout that
would use taxpayers' money to pay for loans that were defaulted on during
that period.
Surging interest rates have some Mexicans worried that another debt crisis
is around the corner. The Mexican Banking Association is urging
consumers not to take out new loans or use credit cards - just in case.
Under pressure from international investors, the Televisa network began
slashing costs after longtime chairman Emilio Azcarraga Milmo died last
year.
Once one of Mexico's largest employers, it has laid off about 6,000
workers, sold corporate jets, cut executive pay and closed its New York
and Los Angeles offices to slash $100 million in costs.
"We really lived in a golden era," said Genoveva Carreon, a sales
representative who was let go after 35 years at Televisa. "These new times
are very dramatic." |
