AMERICAN PUBLIC UNIVERSITY SYSTEM

Charles Town, West Virginia

THE STRENGTH OF THE MIDDLE CLASS AS A POSITIVE INDICATOR OF

POLITICAL STABILITY IN TRANSITIONING DEMOCRACIES

A thesis proposal submitted in partial fulfillment of the

requirements for the degree of

MASTER OF ARTS

in

INTERNATIONAL RELATIONS

AND CONFLICT RESOLUTION

by

Randy J. Saltzmann

February 3, 2014

ii

The author hereby grants the American Public University System the right to display

these contents for educational purposes.

The author assumes total responsibility for meeting the requirements set by United States

copyright law for the inclusion of any materials that are not the author’s creation or in the public

domain.

© Copyright 2014 by Randy J. Saltzmann

All rights reserved

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DEDICATION

I dedicate this thesis to my Wife. Without her patience, understanding, encouragement, and

unrelenting motivation, this work would not have been possible

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ABSTRACT OF THE THESIS

THE STRENGTH OF THE MIDDLE CLASS AS A POSITIVE INDICATOR OF

POLITICAL STABILITY IN TRANSITIONING DEMOCRACIES

by

Randy J. Saltzmann

American Public University System, February 3, 2014

Charles Town, West Virginia

Dr. Laura Culbertson, Thesis Professor

Promotion and protection of democracy abroad has been a stated goal of American

foreign policy since the 1940s. Since then, the United States alone has invested billions of

dollars in an attempt to promote democracy. Both governmental and non-governmental

organizations face difficulty in targeting their limited funds. This paper seeks to identify a

possible target for these funds, while providing for a maximal democratic return on investment.

Since the time of Aristotle, it has been recognized that the middle class provides societal

stability. However, there is no unified definition of who makes up the middle class, or how the

middle class affects stability. The fields of economics and sociology define the middle class

differently, but there is a commonality in the composition of the population that each discipline

identifies. This paper attempts to show that, regardless of the accounting method used, the

middle class, by virtue of its values and aspirations, is the driving force behind economic and

political stability. An examination of the transitions of former Soviet satellite states to

democratic states shows that the middle classes were the instrument of change in these societies.

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Where the middle classes flourish, democratic and economic growth occurs, where the middle

class is oppressed or sidelined, this effect is suppressed.

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Table of Contents

Introduction ................................................................................................................................... 1

Statement of the Problem ......................................................................................................... 2

General review of current theory ............................................................................................ 2

Literature Review ......................................................................................................................... 4

Theoretical Framework .............................................................................................................. 10

Research Design .......................................................................................................................... 15

Methodology ................................................................................................................................ 15

Strategy .................................................................................................................................... 16

Hypothesis ................................................................................................................................ 16

Data Collecting and Recording Procedures ......................................................................... 16

Data Analysis and Interpretation .......................................................................................... 17

Analysis ........................................................................................................................................ 17

Middle class formation in classless societies ......................................................................... 18

Poland................................................................................................................................... 19

Czechoslovakia .................................................................................................................... 22

Yugoslavia ............................................................................................................................ 25

Kazakhstan .......................................................................................................................... 27

Turkmenistan ...................................................................................................................... 28

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Data Analysis ............................................................................................................................... 29

Middle Class ............................................................................................................................ 30

Middle Class Strength ............................................................................................................ 31

Conclusion ................................................................................................................................... 35

References .................................................................................................................................... 38

Appendix 1 ................................................................................................................................... 43

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LIST OF FIGURES

FIGURE PAGE

Table 1, Middle Class Percentages ............................................................................................ 31

Table 2, Polity IV Scores ............................................................................................................ 32

Table 3, Failed States Index Data .............................................................................................. 33

Table 4, Failed States Index ....................................................................................................... 34

Table 5, Corruption Perceptions Index .................................................................................... 35

1

Introduction

Promotion and protection of democracy abroad has been a stated goal of American

foreign policy since Franklin D. Roosevelt’s “Arsenal of Democracy” speech aired on 29

December 1940 (Roosevelt 1940). Although the specific purpose of this speech was to prepare

the country for active participation in World War II, his successor, Harry S. Truman elaborated

on this position. In a speech to Congress on 12 March 1947, Truman stated, “One of the primary

objectives of the foreign policy of the United States is the creation of conditions in which we and

other nations will be able to work out a way of life free from coercion” (Truman 1947). Thus

began the United States’ formal investment in democracy promotion abroad. Since this

straightforward statement, the United States has invested billions of dollars in an attempt to

promote democracy. Since 2012, the United States alone has invested over $45 billion annually

on democratization efforts (Trister 2013, 1). The United States is not alone in its quest for global

democracy. Both the European Union and United Nations have divisions responsible for

democracy promotion: the European Instrument for Democracy and Human Rights (EIDHR) and

the United Nations Development Programme (UNDP) respectively. EIDHR has budgeted

approximately $1.53 billion from 2007 to 2013 for democracy promotion (European Comission

2012), while UNDP spends in excess of $11 billion per year (UNDP 2011). There are also

numerous non-governmental organizations, such as the National Endowment for Democracy and

the National Democratic Institute, whose purpose is to promote and support democracy around

the world (US Department of State 2012). Both governmental and non-governmental

organizations face difficulty in targeting their limited funds.

This paper suggests the middle class as a target for these funds. Even in states that report

little or no middle class, there are portions of society that will espouse middle class tendencies.

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This can be seen in the development of nascent middle classes in the Central and Eastern

European (CEE) states prior to their independence, and in their contributions to the transitions to

stable democracies. Even in an embryonic state, the middle class is the foundation upon which

economic and political stability lies. Those CEE states that have successfully made the transition

all share a common trait, the development of a wide swath of the population with shared values.

These shared values represent the formation of what the West would call the middle class. This

nascent middle class would ultimately force institutional changes that led to economic and

political stability for their respective states. Therefore, programs designed to strengthen the

existing middle classes, or to create middle classes where none exist, would offer a cost effective

way to promote democratization, providing a maximal democratic return on investment.

Statement of the Problem

To assist transitioning democracies in attaining stability, the international community has

invested billions of dollars. Despite this investment, there is no currently accepted norm of

determining what areas to fund, or even how to determine program effectiveness (Comittee on

Evaluation of USAID Democracy Assistance Programs 2008). By a historical investigation of

the formation of the middle class in the CEE states and their contribution to the success of

democratization, it could be shown that this group forms a potential target for future funding.

This paper seeks to answer the question; what is the correlation between the strength of the

middle class and the political stability of transitioning democracies?

General review of current theory

Current theory posits that economic growth creates political stability (Fukuyama, 2012,

Lipset, 1994). There has been considerable research that establishes a positive correlation

between the effects of economic growth and transitioning democracies. Diskin et al. state

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“countries with weak or unstable economies are more prone to democratic collapse…” (Diskin,

Diskin and Hazan 2005, 293), while de Kadt and Wittels found that “…engaging in positive

economic reforms…is correlated directly with a positive democratic effect” (de Kadt and Wittels

2013, 14). Even the venerable Martin Lipset noted “..the factors subsumed under economic

development carry with it the political correlate of democracy” (Lipset 1959, 80). This research

has led to the propensity of government and non-government agencies such as the US

Department of State, the United Nations Development Programme, and the The National

Endowment for Democracy to focus on the economic and political conditions of transitioning

democracies (Epstein, Serafino and Miko 2007, 18-19). Although the economic and political

stability of states is the ultimate goal of democratization, the key to that goal lies in the

strengthening of the foundational middle classes.

An examination of the transitional conditions of the former Soviet satellite states1 shows

that a strong middle class is a positive indicator of stability. Data from the Failed States Index

and the Research Center for the Study and Observation of Living seem to indicate that, of this

group, the five most stable democracies all have middle classes that comprise nearly half to more

than half of the population. In the least democratic, the middle classes do not account for even

one fourth of the population. The importance of a strong middle class on economic growth has

been shown by research conducted by economists Adelman and Morris. In their model, “[t]he

absence of a sizable indigenous middle class…constitute important obstacles to raising capacity

for long-run growth” (Adelman and Morris 1968, 1212).

1 States included in the study are: Albania, Armenia, Azerbaijan, Belarus, Bosnia, Bulgaria, Croatia, Czech Republic, Estonia, Georgia, Hungary, Kazakhstan, Latvia, Lithuania, Macedonia, Moldova, Montenegro, Poland, Romania, Serbia, Slovakia, Slovenia, Turkmenistan, and Ukraine.

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Literature Review

The literature on the middle class is quite diverse, and is primarily located in social

science fields, such as economics and sociology. Although the methodologies of determining

middle class status are linked to discipline, there are commonalities in the makeup of the

resultant groups that transcend these differences and allow for a simplified, yet functionally

accurate, estimation of the middle class based upon any method. Sociologists from the Marxist

perspective would place management and non-labor professions in to the middle class, while

functionalist sociologists include those that espouse values such as education, prudence, and

thrift, while economists include those who earn a median income. Those who value education,

prudence, and thrift tend towards employment in management and non-labor professions, which

in turn, tend to pay median wages.

Joseph Eisenhauer is one of a host of economists that attempt to define middle class.

Eisenhauer describes the inception of the modern term, as part of President Johnson’s “War on

Poverty” in the late 1960s (Eisenhauer 2008, 104). Eisenhauer proposes a definition of middle

class as “…those families who are not poor but who would be so in the absence of employment,”

but notes in his conclusion that “no existing usage has achieved widespread adoption…nor is a

consensus likely to develop around an arbitrary definition” (Eisenhauer 2008, 112). This broad

definition is applicable in that it includes income levels outside of any set percentage. As will be

shown later, income is a convenient attribute in determining middle class status, but not

necessarily the most important attribute. Although Eisenhauer is most likely correct that any

arbitrary definition is unlikely to develop universal consensus, one of the intents of this paper is

to define the middle class in a way that is applicable to political science.

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Many economists, from Lester C. Thurow to Abhijit V. Banerjee and Esther Duflo, have

attempted to identify the middle class in terms of relative income levels. Thurow was the first to

set an income range for the middle class. In a 1987 article, Thurow stated his definition of

middle-income jobs as “those paying from 75 to 125 percent of median …earnings” (Thurow

1987, 30). This range had been widely accepted as a valid determinant of the middle class until

Banerjee and Duflo proposed an expenditure range to calculate the middle class levels in low

income and developing states. Banerjee and Duflo proposed an expenditure range of between 2

and 10 United States Dollars Purchasing Power Parity2, and showed that this range related well

to the 75 to 125 percent of median income range for developed states (Banerjee and Duflo 2008,

6-7). Andrés Solimano simplified this by estimating the middle classes using deciles 3 through 9

of income distribution, with “lower middle class” comprising deciles 3 to 6 and “upper middle

class” being deciles 7 to 9 (Solimano 2009, 28). In a report to Congress, Linda Levine further

simplified this by stating that the three middle-income quintiles are often used to determine the

size of the middle class (Levine 2012, 3). For the purposes of this paper, this last definition of

the middle class will be the starting point used to compute middle class levels between states.

However, economic standing is not the only measure of middle class status.

The middle classes may also be defined by their shared class attributes. These shared

social attributes are the critical factor in the middle class’s contribution to a stable democratic

society. Sociologists list these middle class attitudes and aspirations as: planning for the future,

controlling one’s own destiny, the possibility of upward mobility through hard work and

education, a good education for one’s children, protection against future hardship as relates to

crime, poverty and health, access to housing, financial saving, personal freedoms such as

2 Purchasing Power Parities are the rates of currency conversion that equalize the purchasing power of different currencies by eliminating the

differences in price levels between states

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freedom of assembly, expression, press and religion, and respect for the rule of law (Amoranto,

Chun and Deolalikar 2010, Pew Research Center 2009, U.S. Department of Commerce 2010, 4).

These values are not limited to western societies. In their report on the new middle class in

Eastern and Central Europe, Wallace and Haerpfer use data from the “New Democracies

Barometer”3 and personal interviews to conclude that the middle classes are more likely to have

a secondary academic or university education, own consumer comforts such as cars, telephones

and color televisions, and maintain monetary savings accounts (Wallace and Haerpfer 1998,

480).

Even though the literature on the middle class comes from two separate fields, and the

sources all use different measures, indicators, and methods, there is considerable overlap in the

actual physical composition of the group. In 1941, Hadley Cantril performed a study of the

correlation between income levels and the self-reported identification of class status of a

representative sample of the American public. His findings show that, although 42 percent of

respondents placed themselves in a higher social bracket than their income alone would indicate,

54 percent of respondents placed themselves in the same social bracket as their income bracket

(Cantril 1943, 77-78). These findings corroborate that the category of middle class is not strictly

tied to income, but to the values and aspirations that the group holds in common. This would

also indicate that the number of those espousing middle class values is under-represented by

income levels alone. However, due to time limitations, this paper will utilize the economically

derived quantity of middle class with the assumption that the under-reporting is statistically

equivalent among comparison states.

3 The New Democracies Barometer is a project of the Centre for the Study of Public Policy at the University of Strathclyde, Glasgow and can be

found at http://www.cspp.strath.ac.uk/catalog4_0.html. Its function is to monitor democratic transformation across Central and Eastern Europe

by means of individual survey questionnaires to see how much or how little behavior and attitudes change as people gain more experience of democracy and markets.

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As middle class values and attributes tend toward those things that improve quality of

life, the main indicators of a healthy and growing middle class may include widespread access to

education, leisure activities, material goods (such as home entertainment and computer systems),

quality health care, and secure banking - for credit, savings, and investment(Kapstein 2004, 24).

Scholarship indicates that a healthy middle class is essential for a stable democracy as it is the

prime source of consumerism, which drives a state’s economy as well as providing the human

capital to operate the government (Kharas 2010, 7). As such, the middle class is not only a valid

area of inquiry for political science and international relations, but also a vital one. For by not

understanding the role that the middle class plays in the national discourse and focusing only on

the elite, opportunities for deep and lasting institutional changes will be missed.

As Francis Fukuyama points out, “all economic activity, from running a laundry to

building the latest-generation microprocessor, is carried out not by individuals but by

organizations that require a high degree of social cooperation” (Fukuyama 1995, 90). This social

cooperation is essential to the building of democratic structures, in that “a rich profusion of

social organizations … [can] … become the basis for economic [and by inference, democratic]

cooperation” (Fukuyama 1995, 101). As the middle class grows and institutionalizes the validity

of middle class values, democracy grows stronger. In his 1990 paper, Robert Barro determined

through a panel study of more than 100 states, that democracy “rises with the middle-class share

of income” (Barro 1999, 158). Although Barro’s article focuses on economic strength and

income equality as the bolstering factors of democracy, he does note that there are important

non-economic influences. Some of these positive influences are health, upper-level schooling,

the rule of law, and civil liberties (Barro 1999, 168-178). As noted earlier, these additional

positive indicators are widely considered middle class values.

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Some factors mitigate the effect that the middle class has on democratic stability. Most

notably, research has shown that states that receive rent income from natural resources are able

to appease the masses while still engaging in non-democratic behavior. Seeking to update the

findings of his 2001 article4, Ross concludes, “…there is strong evidence that oil wealth tends to

prolong authoritarian rule” (Ross 2008, 22). This finding is based upon a study of 170 states

from 1960 to 2002 and shows that although income has a strong positive correlation with the

likelihood that an authoritarian state will become democratic, if that income is derived from

natural resources the correlation is strongly negative (Ross 2008, 5). Other detrimental factors

include ethnic or nationalistic divisions in the population, often a result of forced migration,

social engineering, or religious differences. These divisions are frequently seized upon and

amplified by political demagogues in order to form clientelistic relationships to secure political

power. As noted by Kapstein, this “clientelism is more prevalent in young democracies, [as] the

political payoffs from socially beneficial…policies, such as secure property rights, are

correspondingly fewer” (Kapstein 2004, 19). In turn, this demagoguery can lead to civil war or

other oppression, and the reversal of democratic gains.

The point where democracy has stabilized to where it has a high probability of survival is

referred to in the literature as consolidation. Several authors have noted that consolidation

requires “overcoming social fragmentation” and a commitment to democratic values (Fuchs

1998, Kapstein 2004, 20). These values are akin to the common values of the middle class, e.g.

individual freedoms, justice, the rule of law, etcetera (Kapstein 2004, 12). The consolidation of

transitioning democracies has been a cornerstone of American and international foreign policy

since at least the 1940s. Although the United States has spent millions of dollars on democracy

4 Ross, Michael L. 2001. Does Oil Hinder Democracy? World Politics 53 (3):325-361.

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assistance, there is no currently accepted norm of determining what areas to spend on, or even

how to determine program effectiveness. In 2008, The United States Agency for International

Development (USAID) commissioned a study on the impact that USAID has had on democracy

promotion abroad. The report finds that although millions of dollars have been spent annually in

support of democratization, no standard exists for evaluating effectiveness (Comittee on

Evaluation of USAID Democracy Assistance Programs 2008). The USAID study is not the only

research to determine that current democracy promotion efforts may be flawed. In their report

for Congress, Epstein et al. note, “the lack of a clear definition of democracy and a

comprehensive understanding of its basic elements may have hampered the formulation of

democracy promotion policy and effective prioritizing of democracy promotion activities over

the years” (Epstein, Serafino and Miko 2007, i). They conclude, “By clearly identifying,

targeting, and coordinating assistance to countries that have the greatest potential for succeeding

to become democracies, the U.S. taxpayers stand the best chance of benefitting from a foreign

policy that includes funding democracy reform overseas” (Epstein, Serafino and Miko 2007, 25).

Evidence from the democratic transitions of the former Soviet satellite states gives a possible

solution to this problem. In his Masters dissertation, Steven W. Mays utilizes a combination of

historical accounts, news reports, academic articles, and interviews with current and former

members of the Polish labor group Solidarity to attempt to determine why Solidarity was able to

succeed in the face of overwhelming political opposition. Mays concludes that a combination of

seven factors: the structural conduciveness of an industrial society, fraternal loyalty, use of

nonconventional means of communication, ideological framing, the leadership of Lech Walesa, a

collaboration between the working class, the Polish intelligentsia, and the Polish Catholic

Church, and the “Gorbachev Effect” led to Solidarity’s success (Mays 2011, 5-6). Several of

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these factors tend to show similarities in that they correspond to typical middle class desires,

such as freedom of association, fair wages, adequate housing, secure retirement, etc.

The middle class has been defined in multiple ways by multiple sources. Looking at each

individual interpretation in absentia leads to the assumption that the definitions speak of separate

groups. However, this is not the case. The middle class is comprised of individuals who exhibit

at least some of the characteristics of any of the above definitions. There may never be a concise

definition of the middle class, for as stated by Deirdre McCloskey,

“There’s no permanent thing out there in the world for all times

and all purposes called “the middle class.” Social

categories…evolve, and furthermore what will matter about the

categories to the social scientist depends on time and on human

purposes” (McCloskey 2006, 496-497).

However, whatever definition or calculus is used to determine its size, it is the values and

aspirations of the middle classes that are vital to the stability of democracy.

Theoretical Framework

Since the time of Aristotle, it has been recognized that “those in the middle rank of

life…give stability…” to a society (Aristotle as translated by Ellis 1912, 217). Presently, there is

no unified definition of who makes up the middle class, nor is there a definition particular to the

field of political science. The existing definitions come from the fields of economics and

sociology. Economics generally defines the middle class as either those whose occupations

would fall somewhere between pure labor and pure ownership (Marx and Engels 1967), or those

who earn between 75 percent and 125 percent of the median income (Atkinson and Brandolini

2011, 7). Sociology defines it as “…a macro-social group embracing…categories of individuals,

marked by a unique general attitude towards life” (Tilkidjiev 2005, 211). Because there is no

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standard definition of who comprises the middle class, this is where the study must start. There

are two common methods of measuring the number of middle class households; economists use

either income or daily expenditures to determine the number of individuals that are middle class,

whereas sociologists use individual self-perception surveys to ascertain the number of

individuals who express the traits of the middle class. The most convenient way to calculate the

middle class is by income, as this information is more readily available to the researcher than is

individual survey data. This economic information is also available across multiple states and

periods from independent sources such as the World Bank.

The most common economic definitions for middle class in developed states use earnings

ranges: either between the 25th and 75th percentile of the median income level, or from the third

through ninth deciles, or third through fifth quintiles of income distribution (Brandolini 2010,

Easterly 2001, Levine 2012, Solimano 2009, Thurow 1987, U.S. Department of Commerce

2010). For developing states, the accepted standard is those households earning between $2 and

$10 US dollars per day 2005 purchasing price parity, or PPP (Banerjee and Duflo 2008, 5).

Therefore, income does seem to be a relevant determinate of middle class status, as Lopez-Calva

et al. note, “income is a relevant predictor of political and social orientations” (Lopez-Calva,

Rigolini and Torche 2012).

However, the middle class is not defined solely by their monetary worth, but by the

values that they hold. This is where the method used by sociologists applies. Sociologists have

noted “…that the middle class or portions of it have retained a distinctive cultural position within

contemporary society…” (Stearns 1979, 395). They have “…a unique general attitude towards

life... [and] owe everything to their own efforts, resources, qualification, education, etc.”

(Tilkidjiev 2005, 211), and are “more likely to play the positive political role in the provision of

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accountable government” (Birdsall 2010, 8). The middle classes also hold “multiparty elections,

a fair judicial system, a free press, free-speech, and freedom of religion” as important aspects of

their lives (Pew Research Center 2009, 3). The middle class is also identifiable by their desire to

“protect their children’s health and send them to college…own cars and take family

vacations…[and to have] economic stability, a home and a secure retirement” (U.S. Department

of Commerce 2010, vi). Simply put, the middle classes strive to improve their quality of live

through hard work and investment in the future, and they demand institutional systems in place

to assure the freedom to do so.

Even though these groups may sound dissimilar, there is considerable overlap in thier

physical composition. In 1941, Princeton University conducted a study to try to determine

whether economic and social classes had any direct correlation. In this study, 3,114 interviews

were conducted asking respondents to self identify both their social and economic groups -

upper, upper-middle, middle, lower-middle or lower - as well as their weekly income (Cantril

1943, 75). From the data collected, Cantril showed that 54.3 percent of respondents claimed the

same social and economic classes, while 42.5 percent reported a social class one or more steps

higher than their economic class (Cantril 1943, 77). While Cantril concludes that there is not a

“…one-to-one correspondence between social group identification and income group

identification”, he noted that lower income people are more likely to misreport their social status

to a higher level while those in the upper classes tend to misreport lower (Cantril 1943, 78-79).

This pattern falls in line with a 2010 report from the US department of Commerce which states

“Income levels alone do not define the middle class. Many very high and very low income

persons report themselves as middle class” (U.S. Department of Commerce 2010).

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Even though there is an overreporting of middle class status by those who may not fall

within the economic definition , this overreporting appears to be consistent and may, in fact,

represent that the respondents place thier cultural status in a higher regard then their economic

status. Since there is a correlation between the social and economic reporting, albeit not a one-

to-one correlation, economic data will be used in this study to estimate the percentage of middle

class populations. Economic data is more readily available across states than personal survey

data on class status.

Although economic data will be used to identify the size of the populations, the values

and aspirations of the middle class, the cultural aspects that determine the grouping, seem to be

the qualities that determine its stabilizing effect. The US Department of Commerce has

identified several of these values and aspirations. These are listed as: planning for the future,

controlling one’s own destiny, the possibility of upward mobility through hard work and

education, a good education for one’s children, protection against future hardship (crime, poverty

and health), access to housing, financial savings, and respect for rule of law (U.S. Department of

Commerce 2010, 4). Along with these common values, those in the middle class tend to strive to

increase their standard of living.

This effect is shown in the transition of Poland from socialism to democracy. In 1970s

Eastern Europe, those states that fell under the Soviet sphere of influence had been operating

under the Stalinist system imposed on them by their Soviet masters for an entire generation

(Bernhard 1993, 311). At the forefront of the social aspect of the Soviet structure was the

classlessness of society. Under this system, perhaps because of frequent shortages and a lack of

responsiveness by the government, this classless society began to show characteristic desires

most often attributed to the middle class. The Solidarity movement started as a labor protest

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against low wages and grew into a political movement that some say took down the Iron Curtain.

How did this labor movement grow so powerful? There are many theories, from the inevitable

failure of the poorly planned economy (Ratajczak 2009, 6-11), to the role of the Catholic Church

(Meardi 2007, 268). The one thread that is contiguous throughout these theories is what

Solidarity was fighting for: decent wages, food security, adequate housing, the ability to

purchase consumer goods, to have a secure pension, and get an education (Mays 2011, 20-26,

75). These simple demands of Solidarity mirror the desires of the middle class.

It is in line with this paper’s premise that these laborers, forming the bulk of Polish

society, banding together initially over a labor dispute, led to the development of a western-style

middle class, and it was their struggle toward fulfillment of these middle class values and desires

that led to the stable government and economy of Poland today. One of the primary demands of

Solidarity was for economic security. They wanted surety that their jobs and retirement benefits

could not be arbitrarily taken from them. As this was not possible under the Polish centrally

controlled economic model, Solidarity was not appeased, and continued to pressure the

government for change. Even when Solidarity was declared illegal, the social cohesion that it

had built continued the struggle. When the pressure on the Polish government - enabled by the

Soviet glasnost and perestroika reforms - became too much for it to bear, the government broke

and allowed for open elections. This call for elections may have been just another attempt to

appease Solidarity, for it is likely that the communist authority in Poland fully expected to

maintain control of the government. When Solidarity won a majority of the seats in the Polish

legislature, Poland became the first Soviet satellite to elect a non-communist government.

Poland, under the communist system, was a classless society, the labor movement Solidarity

formed the seed of a middle class by aspiring for a better life (Mays 2011).

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Research Design

This paper adopts the mixed methods approach to study how the strength of the middle

class affects the stability of transitioning democracies. This paper will review the historical

circumstances surrounding the transition of various CEE states from communism to democracy,

and compare those states that successfully made the transition to those that are still in the process

or those that have failed, with the intention of identifying the traits common to the successful.

Furthermore it will compare those successful states with the less than successful, utilizing data

from the World Bank, the Failed States Index, and other sources, with the purpose of

highlighting the effect of those successful traits across multiple indicators of economic and social

stability.

Methodology

From the earliest records of political thought, the middle class has been endowed with the

power to keep a state free from oppression. This concept has taken on the air of doctrine even

though never fully explained. This paper will attempt to explain this phenomenon through the

study of the transition of the former Soviet satellite states to democracy following the fall of the

Iron Curtain. This study utilizes data from the World Bank online database to calculate the

percentage of the population that could be considered middle class, and compares this to various

indicators of democratic stability. In addition, using historical case studies of the circumstances

surrounding the transition of various CEE states from socialism to democracy, this paper will

show evidence that the middle class begins to form prior to economic stability. With this in

mind, utilizing prior research on the economic and sociological definitions of middle class and

democratic stability, as well as national demographic data, this paper will show a positive

correlation between the relative strength of the middle class and democratic stability. This

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correlation, in turn, may help policy makers to better identify both targets for democratization

efforts and metrics for measuring their effectiveness.

Strategy

Numerous papers and articles have researched the link between economic stability and

the middle class, and economic stability and democracy. However, these works all seem to

begin with the hypothesis that stable economics or polities form the basis for middle class

formation. By examining the transition to democracy of former Soviet satellite states, this paper

will show that the middle class - or at least a sizeable segment of the population with shared

middle class values and aspirations - forms before economic or political stability has occurred,

and is the driving force behind that stability.

Hypothesis

The emergence and relative strength of the middle class, based on percentage of the

population (IV), encourages political and economic reforms that serve to stabilize governments

in transition to democracy (DV).

Data Collecting and Recording Procedures

Besides peer-reviewed and historical literature, the research will utilize global economic

databases, GINI data, the Failed States Index, contemporary news sources, governmental, and

non-governmental sources. These sources provide insight into past and present conditions of the

economic, social, and political conditions in the study states. Considering the study states all

began their transitions form a common starting point under communism, tracing their paths from

centrally planned societies to their current governments reveals commonalities between those

17

states that successfully democratized, as well as revealing common pitfalls to democratization in

those states that have not yet fully transitioned.

Data Analysis and Interpretation

Economic data is taken from the online databases available from the World Bank. For

the purposes of simplicity, the middle class will be defined economically as those in the second,

third and fourth quintiles less the percentage of the population listed as living below the poverty

line. Subtracting those living below the poverty line brings the tabulated data from the World

Bank income quintiles in line with other published data in regards to the total number of middle

class members in the targeted states.5 Data is presented through direct comparisons of middle

class size and political stability as defined by the Failed States Index as well as other sources.

Analysis

Many modernization theorists, such as Barro, Fukuyama, and Lipset, consider economic

stability and growth a necessity for the emergence of the middle class. This may not be the case.

A 2005 study conducted by Chunglong Lu discovered that “economic development does not

exert direct impacts on democratic status; rather it works through [the] middle class to exert

indirect impacts. This finding suggests that with economic development, middle class as a

consistently pro-democratic force gains size” (Lu 2005, 174). Social class divisions seem to be

based primarily upon a set of shared values and ambitions, or a social cohesiveness, rather than

an economic grouping. This social cohesiveness appears to give weight to demands made by the

group. In the case of the middle class, economic stability - required for the middle class

aspirations of economic security and upward mobility- may be the foremost of these demands.

5 See Table 2

18

As the social cohesiveness of the middle class grows, it can assert greater pressures on the ruling

bodies to appease these demands. Over time, as these demands are realized, the requirements for

economic stability may become institutionalized. This, in turn, can enable further economic

growth, which would tend to further strengthens social cohesiveness. Considering this, it is

stands to reason that economic growth is not the cause of middle class development, but the

result of it.

Although economic stability is unquestionably important, the argument of this essay,

based on historical investigation, is that a middle class, or at least a sizeable segment of the

population with middle class values and aspirations, is prerequisite for economic stability. The

transition of the CEE states that split from the Soviet Union after the fall of the Iron Curtain in

the late 1980s and early 1990s tends to show evidence of nascent middle classes which formed

prior to economic or democratic stability. These groups tended to be the nucleus upon which the

forces for democratic change centered. Each of the CEE states took slightly different paths on

their way toward democratization. Some, such as Poland, Czechoslovakia, and Slovenia have

successfully entered into fully stable democracies, while others have not.

Middle class formation in classless societies

That the middle class is critical to the development of democracy is shown in the

transition of classless Marxist societies to democratic societies. Marxist-Leninist theory rests on

the “Class Struggle of the Proletariat,” or the idea that all society is based upon the conflict

between those who provide labor (proletariat) and those with the means of production

(bourgeoisie). As the bourgeoisie were considered the oppressors of the proletariat, Marxism-

Leninism determined to take the means of production from the bourgeoisie and form a classless

society wherein all would share in both the labor and the fruits of that labor equally. In the

19

Soviet system, the means of production, from small businesses to heavy industry to arable land,

became the domain of the state. Ideally, this meant the transfer of property and the means of

production, from the bourgeoisie to the community of the proletariat. In practical terms, this

meant the suppression of all middle and upper class ideals and values in the name of the

“revolution of the proletariat.” Under both Lenin and Stalin, opposition to this re-distribution,

primarily small business owners and (relatively) wealthy farmers, were systematically eliminated

through confiscation, intimidation, or worse. These purges resulted in the complete annihilation

of the middle classes from those states within the Soviet sphere of influence. In the late 1980’s

however, this was about to change, resulting in the demise of both the Marxist-Leninist system,

and the Soviet Union.

Poland

In 1980, Poland was an obedient client state of the Soviet Union. In Marxist-Leninist

fashion, it maintained a centrally controlled economy, as well as maintaining control over most

every facet of daily Polish life. That the Marxist vision of utopia was not the reality of life in

Poland gave rise to the trade union Solidarność, or Solidarity. Solidarity formed in response to

the widely felt perception that workers were not receiving the fruits of their labor in the

shipyards in Gdańsk. This perception was not new; in December of 1970, the Polish government

announced a correction to the planned economy – a 36 percent hike in the price of foodstuffs.

The general populace, who promptly called a general strike in protest, saw this as unjust. This

strike led to the deaths of dozens of strikers at the hands of a government attempting to restore

order (Mays 2011, 20). Although the Polish government was eventually able to appease the

strikers, the shortages of food, consumer goods, and housing continued. These perpetual

shortages, as well as the perception of low wages and high taxes, led the population to lose faith

20

in their government’s ability to remedy their economic problems. With each subsequent protest

event, the people began to gain confidence that the Soviet Union would not intervene militarily,

as had occurred in Hungary in 1953 and in Czechoslovakia in 1968(Mays 2011, 23-30). By

1980, living conditions in Poland had deteriorated even further; Poland was some $17 million in

debt, people all across the country had resorted to backyard gardens as a primary source of food,

and the workers in Poland’s heavy industries had had enough. In the summer of 1980, workers

from several dozen industrial sites on the Baltic coast formed the "Inter-enterprise Strike

Committee,” the predecessor of Solidarity (Mays 2011, 30). In August of 1980, at the Gdańsk

shipyards, a protest started over the firing of an employee who was close to retirement,

purportedly over her theft of candle stubs from a ceremony honoring those killed in the 1970

strike. This firing was widely seen as an attempt by the shipyard management to avoid paying

her retirement benefits. This protest witnessed both the formation of Solidarity, and the rise of

Lech Walesa to be its de facto leader. That a labor union formed in Poland, even one formed in

opposition to the government-sanctioned unions, is not the main story. The main story is in what

Solidarity demanded in order to end the 1980 general strike:

“The protesters demanded the right to establish trade union

organizations that would be independent from the authorities, the

right to strike, freedom of speech and publication, as well as the

release of prisoners of conscience. They also raised social issues,

such as higher wages, market supplies, a lower retirement age, and

a higher quality of healthcare services” (Kozłowski 2011, 3).

These demands, made by a labor group of some 2.5 million members – of a total

population of 53.7 million6, or 4 percent of the population – are identical to the generally

accepted demands of the middle classes. “The right to establish independent unions,” “freedom

6 Data from the Central Statistical Office, available at http://www.stat.gov.pl/gus/5840_646_ENG_HTML.htm

21

of speech and publication,” “the release of prisoners of conscience,” higher wages, access to

consumer goods, secure retirement, and quality healthcare are all middle class aspirations. The

first three of these are also enshrined in the Bill of Rights to the US Constitution. That these

demands represented the desires of the general population can be seen in the numbers of Poles

who joined Solidarity in the following years. By September of 1981, just over one year after its

formation, Solidarity had grown to over 8.9 million members, or 16 percent of the Polish

population (Kozłowski 2011, 5). The demands of Solidarity were so popular that even when

outlawed on 13 December 1981 with the imposition of martial law, the movement did not die but

went underground and grew. This growth was supported, in part, by financial contributions from

American labor unions and Polish-American Catholic church groups. (Mays 2011) Faced with

intense social and economic pressure, General Wojciech Jaruzelski, the Polish prime minister,

agreed to talks with Solidarity in early 1989. After historic roundtable talks, the two sides signed

a 400-page agreement on sweeping political and economic reforms that officially recognized

Solidarity. In June of the same year, Solidarity supported candidates won all but one seat in the

Polish Senate and all 161contested seats (out of a total of 460) in the lower house. By August, a

new coalition government formed between the remnants of the Communist government and the

new Solidarity party. In December 1990, Lech Walesa was elected as the first president of

Poland. In 1991, Poland had a GNI per capita, PPP of $5,520. In 2012, that had risen 383

percent to $21,170(World Bank 2013).

The case of Poland’s transition from a centrally controlled, Soviet style economy to a

democratic, market economy shows strong evidence of the development of a middle class. This

nascent middle class developed out of the shared values and aspirations of a group of workers

and evolved into the labor group Solidarity. The values and goals of Solidarity were remarkably

22

similar to the universal values and aspirations of the middle class. Solidarity was able to not

only stand up to the authoritarian government of Poland, but was eventually able to force both

market and political reforms on it, leading to free elections and the transition to democracy.

Czechoslovakia

Czechoslovakia started its transition to democracy well in advance of other CEE states.

In the mid to late 1960s, under the leadership of President Antonín Novotný, Czechoslovakia

began a series of economic reforms with the intent of “de-Stalinizing” the country. These

economic reforms encouraged popular support for political reforms. When, in 1968, Novotný

appeared to be ready to give in to popular demands to institute political reform, Soviet leader

Leonid Brezhnev supported his replacement as First Secretary by Alexander Dubček.

Unexpectedly, Dubček continued the economic reforms by promoting the manufacture of

consumer goods over Soviet emphasized heavy industry. He also carried these economic

reforms into the political sphere, increasing freedom of speech and the press, limiting the power

of the secret police, and initiating a ten-year plan to allow multi-party elections (Peirce n.d.).

When Czechoslovakia eliminated state censorship of the press in June of 1968, the Soviet

leadership called on Dubček to come back to the fold. Although the Soviets appeared, at first, to

accept Dubček’s assurances that Czechoslovakia would remain firmly within the Soviet sphere,

they worried that this reform movement could spread to other states. This concern led the

Soviets to call a conference with representatives of the Communist Parties of Czechoslovakia,

Bulgaria, the German Democratic Republic, Hungary, and Poland in Bratislava, Czechoslovakia

on 3 August 1968. At this conference, the states involved adopted the “Statement by the

Communist and Workers’ Parties of Socialist Countries.” In this document, the Czech and

Yugoslav representatives found support for the Czech reforms in the wording:

23

“The participants in the conference expressed a firm desire

to do everything they can to improve the all-round cooperation of

their countries on the basis of the principles of equality, respect for

sovereignty and national independence [emphasis added],

territorial integrity, fraternal mutual assistance, and solidarity”

(The Bratislava Declaration 1968).

After speaking with his Yugoslav counterpart about the conference, US Ambassador to

Yugoslavia, C. Burke Elbrick noted in a cable back to the United States:

[The] “Soviets are to be congratulated for way they worked

things out; Czechs are to be congratulated because they have won

right to continue along path of internal reform. They have also

won recognition again of validity of principle regarding

independence, sovereignty, and non-interference in internal affairs

as cornerstone of relations between socialist states. Bratislava

Declaration is “all-sided” which can be cited to prove almost any

point of view. Thus, Czechs must be extremely careful in way

they proceed along path of reform. Yugoslavs are happy worst is

over and military clash averted (Elbrick 1968).

However, the Soviet leadership placed primacy on a different section of the agreement:

“Unwavering loyalty to Marxism-Leninism … and a relentless struggle against bourgeois

ideology and against all anti-socialist forces” (The Bratislava Declaration 1968). After

purportedly receiving requests for assistance from members of the Czech Communist Party, on

20 August 1968 the Kremlin sent Warsaw Pact troops to put an end to Czechoslovakia’s reforms

by force. One month later, speaking before Polish workers, Soviet leader Leonid Brezhnev gave

the following justification for the invasion of Czechoslovakia:

“The peoples of the socialist countries and Communist

parties certainly do have and should have freedom for determining

the ways of advance of their respective countries. However, none

of their decisions should damage either socialism in their country

or the fundamental interests of other socialist countries, and the

whole working class movement, which is working for socialism.

This means that each Communist party is responsible not only to

its own people, but also to all the socialist countries, to the entire

Communist movement… When forces that are hostile to socialism

try to turn the development of some socialist country towards

24

capitalism, it becomes not only a problem of the country

concerned, but a common problem and concern of all socialist

countries” (Brezhnev 1968).

This was to become known as the “Brezhnev Doctrine.” Simply stated, it gave not only

the authority, but also the imperative for the Soviet Union to intervene in the internal affairs of

any communist country that strayed from the Soviet model.

Even though Czechoslovakia’s plans for political reform were quenched by this invasion,

the desire for the freedoms it would have allowed simmered in the hearts of the public. In 1976,

members of a Czech rock band were arrested for disturbing the peace. Their subsequent

imprisonment led several artists, writers, and musicians, including Vaclav Havel, to circulate a

petition for their freedom, known as the Manifesto of Charter 77. Although Charter 77 was not

intended to be a political party or a social movement, its demands for freedom of expression and

the press, freedom of religion, recourse for grievances, and economic freedoms to name a few,

resonated with the Czech public (Declaration of Charter 77 n.d.). When Mikhail Gorbachev

announced the Glasnost and Perestroika reforms in the late 1980s, the circumstances were right

for the Czech people to take action. On 17 November 1989, a peaceful student demonstration in

the city of Prague was violently suppressed by police. This action prompted the formation of

“the Civic Forum,” a group of students, intellectuals, and artists under the leadership of one of

Charter 77’s authors, Vaclav Havel. The Civic Forum had widespread public support, and by the

time of the general strike on 27 November 1989, held over half – some reports claim as many as

75 percent - of the Czech population as members (Krapfl 2007, 87). The overwhelming force of

the public cry for freedom ultimately led to the dismantling of the authoritarian government. On

10 December 1989, Communist President Gustav Husak resigned, and on 29 December, the

Czech Parliament appointed Vaclav Havel to the presidency of a free Czechoslovakia. Although

25

in 1993, Czechoslovakia would split – on ethnic lines - into the Czech Republic and Slovakia,

this split occurred peacefully and democratically.

That Czechoslovakia, like Poland, was a Marxist-Leninist classless society prior to their

1989 revolutions means that overwhelming numbers of people espousing middle class desires

and values existed, but could not be considered a middle class in the western sense.

Yugoslavia7

Yugoslavia, like Czechoslovakia, was a country built on the association of ethnically

diverse states. In a 1973 National Intelligence Estimate, the Central Intelligence Agency stated,

“The ethnic terrain of Yugoslavia is the most varied and complex in Europe. Few Yugoslavs are,

in fact, Yugoslavs first; they are Serbs or Croats or Montenegrins and only secondarily,

Yugoslavs” (CIA 1973). However, Yugoslavia followed a different socialist path than

Czechoslovakia, and was never completely under the umbrella of the Soviet Union. After the

Second World War, political control of Yugoslavia fell to Josip Broz Tito, the supreme

commander of the Yugoslav partisans. Under Tito, Yugoslavia forged its own style of

communism, one not tied directly to the Soviet Union. In an attempt to deal with the

nationalistic tendencies of the varied ethnic groups in Yugoslavia, Tito decentralized many

government activities in an appeasement effort. This decentralization gave the separate republics

some autonomy over political, economic, and military affairs (CIA 1973). Prior to his death in

1980, Tito began to reassert federal control over the republics. This interim period of relative

political and economic freedom was a critical factor that led to Yugoslavia’s violent transition

into several separate governments. The decentralized nature of Tito’s federal government also

7 The current states that were components of Yugoslavia are, in descending order of democratic stability, Slovenia,

Croatia, Montenegro, Macedonia, Serbia, Bosnia and Herzegovina, and Kosovo (declared independence in 2008 and

not included as a separate state in this study).

26

led to Yugoslavia’s member regions becoming widely divergent economically, with regions such

as Slovenia and Croatia garnering larger shares of development funds than other regions

(Boduszynski 2010, 78). After Tito’s death, these regional disparities took on a tone of violent

ethno-nationalism (Boduszynski 2010, 85). By the late 1980s, Yugoslavia’s republics had

recreated themselves as “virtual fiefdoms where nationalism supplanted communism as the main

source of political legitimacy” and all operated more or less independently of each other and the

federal government in Belgrade (Gow 2008, 295). This separation of the republics extended into

the military sphere. Although the Yugoslav’s People’s Army (YPA) was the official military of

Yugoslavia, it became closely aligned with Serbia, while Slovenia formed a republican army and

Croatia militarized its police force (Gow 2008, 299-300). By 1988, Yugoslavia’s economy was

in shambles; salaries had fallen to as low as $50 per month for factory workers, inflation had

reached more than 2,500 percent, and shortages of goods became the norm. Then in 1990,

Slovenia and Croatia refused to pay their dues into the Yugoslavian Development Fund. This

caused the collapse of the fund, and a reawakening of ethno-nationalistic prejudices

(Boduszynski 2010, 89). Then, on 25 June 1991, Slovenia and Croatia issued declarations of

independence from Yugoslavia. Serbia immediately sent a military incursion into Croatia in an

attempt to force Croatia back into the federation followed weeks later by similarly motivated

attacks on Slovenia. These events convinced the other Yugoslavian republics that the YPA was

no longer Yugoslavia’s army, but Serbia’s, and led to the creation of military units in the

remaining republics (Gow 2008, 300-303). Although the referendums for independence in

Slovakia and Croatia had wide popular support, the United States and European Union favored a

unified Yugoslavia, and at first, supported Serbian President Milosevic in his efforts to unify the

country. This external support for a perceived Serb nationalist further added to the ethnic dissent

27

between the republics. Upon receiving political pressure that Milosevic’s regime was

committing human rights abuses, the United States reluctantly recognized Slovakia and Croatia

as independent states on 7 April 1992. This recognition led to economic, political, and military

assistance to these states by both the EU and the US. This support, as well as their relative

economic prosperity and overwhelming popular support for independence placed Slovakia and

Croatia well on their way to a democratic transition. As for the other Yugoslavian republics,

Serbia fell under the thrall of Slobodan Milosevic’s demagoguery, and pursued a program of

ethnic warfare against its neighbor, Bosnia and Herzegovina, as well as its district of Kosovo.

This warfare was predicated on historical hatred of Serb against Croats and Muslims and was

stoked to intensity by Milosevic’s rhetoric. This war effectively destroyed the middle class in

both states by dividing the middle class into several ethnically derived and counterproductive

groups. In Yugoslavia, the result of secession from the Soviet Union was not the creation of

stable, progressive, democratic regimes, but the revival of traditional, nationalist regimes intent

on maintaining power, often at the expense of democracy and human rights (Sowards 1995).

That some stable, democratic states did arise is testament to the values of the middle class forces

in those states.

Kazakhstan

Kazakhstan is also an ethnically diverse country, with a population composed of: Kazakh

–53.4 percent, Russian – 30 percent, Ukrainian – 3.7 percent, Uzbek – 2.5 percent, German – 2.4

percent, Tatar – 1.7 percent, Uygur – 1.4 percent and other 4.9 percent (Daly 2008, 5). Although

Kazakhstan has, by some accounts, a middle class consisting of up to 60 percent of the

population, its wealth comes from its oil income, and as such, can easily appease the population

in lieu of actual democratic change (Daly 2008). As in many other former Soviet republics, the

28

independence of Kazakhstan did not mean that democracy was established. In 1989, Nursultan

Nazarbayev, an ethnic Kazakh, was appointed head of the Communist Party of Kazakhstan. In

1990, he was elected Kazakhstan’s first president by the Supreme Soviet. On 25 October 1990,

he announced Kazakhstan’s independence and began its economic transition. Initially his regime

was considered liberal and political pluralism began to rise. In the mid 1990s, as Kazakhstan’s

newly discovered oil and gas fields started to generate wealth, this briefly flourishing pluralism

ended (Larsson 2010, 42). Today, Kazakhstan is firmly controlled by an autocratic “president

for life,” although with apparent widespread public support (Lillis 2011). This widespread

support could be caused by the “rentier effect” (Ross 2008, 2). The rentier effect is a term

coined by Michael Ross to explain how income from natural resources prolongs authoritarian

rule. Ross states:

“the rentier effect can be decomposed into three related

pieces: oil wealth may boost the government’s revenues, and hence

its ability to buy support, through a spending effect; reduce the tax

burden that falls on citizens, and hence reduces their demand for

democratic accountability, through a taxation effect; and weaken

social organizations that might otherwise counterbalance the

state’s power, through a group formation effect” (Ross 2008, 15).

The combination of these factors effectively allows the middle class in Kazakhstan to

enjoy access to education, leisure, and consumer goods. With access to these standard of living

issues, abstract issues like political accountability seem to take on a lesser importance.

Turkmenistan

After the fall of the Soviet Union, Turkmenistan chose to carry on in much the same way

politically, as it had for its 67-year history as a Soviet republic. On 27 October 1991, the former

head of Turkmenistan's Communist Party, Saparmurad Niyazov, was elected president of the

newly independent state in an uncontested election. Niyazov retained sole power until his death

29

on 21 December 2006. Upon his death, Gurbanguly Berdimuhamedow was appointed as acting

president prior to his election on 14 February 2007. Turkmenistan defines itself as a secular

democracy and a presidential republic. Realistically, political power is concentrated within the

presidential administration. Only recently – in January 2012 – has Turkmenistan allowed the

registration of political parties. Turkmenistan produces 244,100 barrels of crude oil per day and

exports approximately half of its production either as crude or refined product. This allows

Turkmenistan a GDP of $55.1 billion, only slightly below Slovenia’s $55.6 billion GDP (World

Bank 2013). However, due to the corruption and mismanagement of Turkmenistan’s

authoritarian government, its middle class is nonexistent, and 30 percent of its population falls

under the poverty line (CIA 2014).

Along with Kazakhstan and Turkmenistan, Azerbaijan and Belarus remain the last states

of the former Soviet Union to retain authoritarian governments. These four states were among

the last to separate from the Soviet Union, with Kazakhstan being the final, declaring

independence four days after Russia, on 16 December 1991. On 21 December 1991, all four

states would be members of the new Commonwealth of Independent States. Even though the

new association was rife with separatism, ethnic conflict, and economic dispute, the political

leadership and large portions of the populations of the member states seem to have nostalgia for

the old Soviet system (Solovyov 2011).

Data Analysis

As can be seen by this sample of histories, the transition to democratic governance from

socialism has not always been an easy path. Those states that have successfully made the

transition, or who are well on the way share a commonality, a strong middle class, or at least a

30

sizeable segment of the population with strong middle class values and aspirations. The

following section will show the correlation between middle class size, as determined by data

from the World Bank, Polity IV scores, and Failed States Index data with the prospect for

continued democratic stability and growth.

Middle Class

This study utilizes data from the World Bank online database to calculate the percentage

of the population that could be considered middle class. Calculations were performed in

accordance with the methods proscribed by Linda Levine (Levine 2012, 3). The resultant

percentages were considerably higher than the self-reported values in the states where self-

reported values for the middle classes from contemporary news reports and other external

sources were available. Subtracting the percentage of the population at the $5 per day PPP

poverty level from the resultant sum appears to better approximate the self-reported values.

These are the values used in this paper, and are shown in Table 1. The United States was

included in the table as a reference value.

As has been noted previously, the economic calculation used is not the only way to define

the middle class. The middle class is defined in the Marxist social tradition as those workers

somewhere between the bourgeoisie and the proletariat; non-Marxist tradition defines the

middle classes as those sharing a set of shared value traits, and economists focus solely on

income. The middle class is in all actuality, a combination of these, and no one tradition can

hope to capture the totality of the middle class while remaining within the limits of its tradition.

However, it has been shown that there is a correlation between the economically calculated

percentage of the middle classes and the self-reported percentage. Hadley Cantril’s study of the

correlation between income levels and the self-reported class status of a representative sample of

31

the American public found that although 42 percent of respondents placed themselves in a higher

social bracket than their income alone would indicate, 54 percent of respondents placed

themselves in the same social bracket as their income bracket (Cantril 1943, 77-78). Although

this correlation is not one-to-one, if it is assumed that the correlation is statistically equivalent

across states, it does allow for comparison. Due to the constraints of this study, the economic

model was the most expeditious method to use in this cross-country comparison.

Table 1, Middle Class Percentages

Country Middle Class % from external sources (1)

Calculated Middle Class Percentage

(Mid)

Data Date

Poverty headcount ratio at $5 a day

(PPP) % of population

(Pov)

First Quintile

(Q1)

Second Quintile

(Q2)

Third Quintile

(Q3)

Fourth Quintile

(Q4)

Fifth Quintile

(Q5)

Albania No Data 0% 2008 58.5% 8.14% 12.05% 15.85% 20.94% 43.02%

Armenia 7% 0% 2010 84.6% 8.82% 12.79% 16.51% 21.41% 40.47%

Azerbaijan 20% 13% 2008 45.3% 7.99% 12.09% 16.16% 21.68% 42.08%

Belarus 0% 25% 2011 39.2% 9.39% 13.95% 17.94% 22.92% 35.80%

Bosnia 0% 0% 2007 58.5% 6.65% 11.31% 16.12% 22.74% 43.18%

Bulgaria 8% 0% 2007 76.1% 8.50% 13.74% 17.94% 23.08% 36.74%

Croatia 10% 37% 2008 21.1% 8.05% 12.21% 16.16% 21.62% 41.96%

Czech Republic 63% 55% 1996 9.0% 10.22% 14.33% 17.53% 21.68% 36.24%

Estonia 42% 39% 2004 17.5% 6.80% 11.64% 16.20% 22.18% 43.18%

Georgia 10% 0% 2009 79.5% 5.40% 10.80% 15.00% 21.89% 47.63%

Hungary 63% 54% 2007 6.0% 8.40% 12.86% 16.86% 21.98% 39.90%

Kazakhstan 25% 19% 2009 42.3% 9.12% 13.15% 17.07% 22.25% 38.41%

Latvia 35% 46% 2009 11.4% 6.98% 11.85% 16.48% 22.57% 42.12%

Lithuania 41% 46% 2008 9.8% 6.62% 11.12% 15.73% 22.13% 44.40%

Macedonia No Data 10% 2010 40.6% 4.89% 9.23% 14.47% 22.43% 48.98%

Moldova No Data 9% 2010 49.4% 7.80% 12.19% 16.52% 22.34% 41.15%

Montenegro No Data 51% 2010 12.2% 8.75% 13.36% 17.61% 23.02% 37.26%

Poland 51% 49% 2011 10.0% 7.85% 12.34% 16.62% 22.29% 40.90%

Romania 10% 29% 2011 34.7% 8.84% 13.70% 18.02% 23.32% 36.12%

Serbia 0% 46% 2010 15.5% 8.36% 13.22% 17.45% 22.76% 38.21%

Slovakia 62% 61% 2009 2.9% 10.12% 14.11% 17.54% 22.00% 36.23%

Slovenia 59% 60% 2004 0.8% 8.22% 12.75% 17.00% 22.60% 39.43%

Turkmenistan 0% 0% 1998 89.1% 6.14% 10.15% 14.73% 21.51% 47.47%

Ukraine 24% 30% 2010 34.4% 9.93% 14.13% 17.79% 22.41% 35.74%

USA (2) 55% 49% 2010 0.0% 5.10% 9.60% 14.20% 20.40% 51.90%

NOTES:

(1) See Appendix 1 for a listing of source material

(2) Data for USA from US Census Bureau, http://www.census.gov/cps/data/cpstablecreator.html

Formula: Q2+Q3+Q4-Pov = Mid (World Bank 2013)

Middle Class Strength

As seen in Table 1, eleven out of the twenty-four states has a middle class population at

or above one third of the population total. A comparison of middle class percentages to Polity

IV scores shows that all of the states with at least one third of the population in the middle class

32

are democratic. That there are democracies in seven states with less than one third of the total

population in the middle classes can be attributed to their relatively poor economic conditions

under the Soviet Union which were exacerbated by the effects of the 1990s recession. This left

the economies of Albania, Armenia, Bulgaria, Georgia, Macedonia, Moldova, Romania, and

Ukraine in shambles. This, in turn, often led to a resurgence of simmering ethnic divisions, the

results of which led to further economic difficulties. That the states involved have been able to

maintain democratic governance under these trying conditions is testament to the middle class

values and aspirations of the population, regardless of their economic standing.

Table 2, Polity IV Scores

Country Middle Class % Polity IV Combined Polity Score (2012)

Polity IV Government type

Slovakia 61% 10 Democracy

Slovenia 60% 10 Democracy

Hungary 54% 10 Democracy

USA 49% 10 Democracy

Poland 49% 10 Democracy

Lithuania 46% 10 Democracy

Montenegro 51% 9 Democracy

Estonia 39% 9 Democracy

Croatia 37% 9 Democracy

Romania 29% 9 Democracy

Macedonia 10% 9 Democracy

Bulgaria 0% 9 Democracy

Albania 0% 9 Democracy

Czech Republic 55% 8 Democracy

Latvia 46% 8 Democracy

Serbia 46% 8 Democracy

Moldova 9% 8 Democracy

Ukraine 30% 6 Democracy

Georgia 0% 6 Democracy

Armenia 0% 5 Democracy

Kazakhstan 19% -6 Autocracy

Belarus 25% -7 Autocracy

Azerbaijan 13% -7 Autocracy

Turkmenistan 0% -9 Autocracy

Bosnia 0% -66 Foreign “Interruption”

Polity IV Combined Polity Scores (Marshall 2013)

Economic standing and Polity IV scores do not tell the complete story, however. Three

states with between 13 and 25 percent of the population being middle class are non-democratic,

while some with little to no middle class are. Comparing data from the Failed States Index (FSI)

33

shows that some states with a relatively high middle class population are showing signs of

transitional difficulty.

As shown in Table 2, Serbia and Ukraine score above 60 on the FSI. Ukraine’s score of

65.9 places it in danger of possible internal conflict, and Serbia’s score of 74.4 places it as ripe

for conflict. These scores can be accurately predictive, as on 21 November 2013, large public

protests began in Ukraine, demanding closer European integration. For whatever reason,

Ukraine’s president, Viktor Yanukovych decided not to heed popular opinion, and instead began

to forge closer bonds with Russia. The protests escalated and finally culminated in the 22

February 2014 flight of president Yanukovych to Russia, and the installation of Olexander

Turchynov as interim president (BBC News 2014). At the time of this writing, this issue is still

developing.

Table 3, Failed States Index Data

Excerpt from Failed States Index 2013

Total

De

mo

gra

ph

ic P

ress

ure

s

Re

fug

ee

s a

nd

ID

Ps

Gro

up

Gri

ev

an

ce

Hu

ma

n F

lig

ht

Un

ev

en

De

ve

lop

me

nt

Po

ve

rty

an

d E

con

om

ic

De

clin

e

Le

git

ima

cy o

f th

e S

tate

Pu

bli

c S

erv

ice

s

Hu

ma

n R

igh

ts

Se

curi

ty A

pp

ara

tus

Fa

ctio

na

lize

d E

lite

s

Ex

tern

al

Inte

rve

nti

on

92 Serbia 74.4 4.7 6.6 8.0 4.7 5.9 6.5 6.3 4.7 5.5 6.5 8.0 7.0 117 Ukraine 65.9 4.7 3.2 5.9 5.7 5.3 5.4 7.8 3.6 5.7 4.4 8.0 6.2

(The Fund for Peace 2013)

As can be seen in Table 3, this fits well with Ukraine’s FSI scores. Ukraine scored

highly in three subgroups: “Factionalized Elites” – 8.0, “Legitimacy of the State” -7.8, and

“External Intervention” -6.2. Although Serbia’s composite score is higher than Ukraine’s along

with many of its component scores, it has a larger middle class – 46 percent compared to

Ukraine’s 30 percent, and a higher level of income. Gross Domestic Product data for the two

states shows that Serbia’s GDP is over ten times that of Ukraine (World Bank 2013). This may

34

be allowing the government of Serbia some breathing room. As shown in Table 4, with the

exception of Croatia and Serbia, the Failed States Index indicates that all of the states with a

middle class below 33 percent have governments considered less than stable.

Table 4, Failed States Index

Country Middle Class % Failed States

Index FSI Stability

Slovenia 60% 32.3 Very Stable

USA 49% 33.5 Very Stable

Czech Republic 55% 39.9 Very Stable

Poland 49% 40.9 Stable

Lithuania 46% 43.0 Stable

Slovakia 61% 45.3 Stable

Estonia 39% 45.3 Stable

Hungary 54% 47.6 Stable

Latvia 46% 47.9 Stable

Croatia 37% 54.1 Less Stable

Montenegro 51% 54.4 Less Stable

Bulgaria 0% 55.0 Less Stable

Romania 29% 57.4 Less Stable

Albania 0% 65.2 Warning

Ukraine 30% 65.9 Warning

Macedonia 10% 68.0 Warning

Kazakhstan 19% 69.8 Warning

Armenia 0% 71.3 High Warning

Serbia 46% 74.4 High Warning

Moldova 9% 76.5 High Warning

Bosnia 0% 76.5 High Warning

Belarus 25% 76.7 High Warning

Turkmenistan 0% 76.7 High Warning

Azerbaijan 13% 78.2 High Warning

Georgia 0% 84.2 Very High Warning

(The Fund for Peace 2013)

Of those states with less than a 33 percent middle class, Bulgaria and Romania are listed

as the most stable. One possible reason could be that they both have relatively high GDP’s, and

fairly low perceived levels of corruption in their states (See Table 5). However, both states have

seen recent protests over environmental matters. Protesters in Bulgaria have been protesting

government support for a planned hotel development in the Karadere nature area on the Black

Sea coast (Leviev-Sawyer 2014), while Romanians have been protesting oil and gold exploration

35

(Ilie 2013). There is some evidence that the middle classes tend to be heavily represented in

environmental movements (Taylor 2002). Table 5 shows the perceived levels of corruption in

the study states, with a score of 100 indicating no corruption and a score of zero indicating

complete corruption.

Table 5, Corruption Perceptions Index

Country Middle Class % GDP PPP 2000 2013 CPI Score

USA 49% $36,930.00 73

Estonia 39% $2,502.23 68

Poland 49% $6,838.02 60

Lithuania 46% $7,233.43 57

Slovenia 60% $3,916.94 57

Hungary 54% $5,405.77 54

Latvia 46% $9,518.31 53

Georgia 0% $13,673.57 49

Croatia 37% $17,340.75 48

Czech Republic 55% $11,512.51 48

Slovakia 61% $19,766.26 47

Macedonia 10% $1,657.25 44

Montenegro 51% $11,753.35 44

Romania 29% $6,501.34 43

Bosnia 0% $7,111.70 42

Serbia 46% $12,726.46 42

Bulgaria 0% $12,370.65 41

Armenia 0% $2,295.36 36

Moldova 9% $7,354.13 35

Albania 0% $4,461.05 31

Belarus 25% $4,909.04 29

Azerbaijan 13% $5,810.04 28

Kazakhstan 19% $8,529.20 26

Ukraine 30% $3,316.00 25

Turkmenistan 0% $3,696.44 17

(Transparency International 2014, World Bank 2013)

Conclusion

As has been shown, the middle class can be both a force for stability, and an agent of

change. The middle classes continually strive to improve their standard of living, and if

government policies stand in the way of that, the middle classes will insist on change. The

middle classes tend to take advantage of all opportunities to increase their economic and social

standing. The investment in this economic and social growth serves to stabilize and strengthen

the overall economy. This economic stabilization further serves to increase the rolls of the

36

middle classes. The data clearly shows, with few exceptions, that the percentage of middle class

citizens in a society can be used as a positive indicator of democratic stability. Although the size

of the middle class is not the sole determinate, in the absence of authoritarian or corrupt

governments, as the middle class population increases, democratic stability also increases. In the

case of corruption in government, the middle classes - as in the case of Ukraine - are apt to

demand further democratic changes in the form of transparency and anti-corruption initiatives. If

these middle class demands are encouraged, nurtured, and supported, positive change can occur.

Where these demands are encouraged, but not fully supported, chaos can ensue.

By focusing on the middle classes, program funding can be narrowly targeted, yet

program effectiveness is potentially wide-ranging. Programs designed to foster and advance the

middle class values of access to education, housing, and health care, would provide benefits to

all levels of society. Efforts to enhance financial security and access to consumer commodities

could have direct benefits back to the organizations sponsoring the efforts. International

attention focused on anti-corruption and governmental transparency could bring immediate

positive results to the entire international community.

Although programs currently exist that speak to each of these issues, directing these

efforts at the middle classes directly provides both a definite target and a means to readily

determine effectiveness. Programs administered to allow local control while providing support

and guidance should be the most effective, as was the case in Poland. Allowing the middle

classes in the target states to guide the political efforts to institutionalize change assures local

idiosyncrasies are allowed for. This, in turn, should counteract any possible anti-globalization

backlash that could likely occur if the efforts were directed and controlled by an external

37

organization. As an additional benefit, as the changes take root, the positive effects should be

readily identifiable through the growth of the middle classes.

While it will take a coordinated effort on the part of both governmental and non-

governmental organizations to make the required institutional changes, re-directing their efforts

toward the fortification and growth of the middle classes in transitioning democracies would

alleviate both the issues of targeting their funds and of auditing the effectiveness of their

programs. If “creating conditions in which…nations will be able to work out a way of life free

from coercion” (Truman 1947) is indeed the intent of the international community, encouraging

and supporting the global middle class will create those conditions.

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43

Appendix 1

List of Contemporary news sources and other reference data used to determine self-

reporting of Middle Class percentages:

(1) “Azerbaijan leaves behind the other two South Caucasus countries for the

size of the middle class population, according to an International Labour Organization

(ILO) report. The annual report on the state of labor markets worldwide, the "World of

Work Report 2013,” issued on June 3, shows that some 20 percent of the Azerbaijani

population has a daily income worth $10-$50. In Georgia and Armenia, the other two

regional states, only about 10 and 8 percent of the population has such income

respectively, according to the report.” AZERNEWS. Azerbaijan leads on middle class

size in South Caucasus: ILO. Jun 5, 2013. http://www.azernews.az/business/54947.html

(accessed Mar 15, 2014).

(2) “By unbiased opinion in the Republic of Belarus (RB) still during her 20-

year old independence and existence as a sovereign state and has not formed the middle

class…” Bel.biz. Middle class. Mar 11, 2013.

http://economics.bel.biz/articles/srednij_klass/ (accessed Mar 15, 2014).

(3) "Before the war that devastated the country in the 1990's, Bosnia had a

thriving and stable middle class. But in the wake of the war, many educated Bosnians

took any job they could find just to survive. The economic impact has lasted until

today." Radio Free Europe: Radio Liberty. Bosnia's Struggling Middle Class. Jan 13,

2010. http://www.rferl.org/media/video/1928155.html (accessed Mar 15, 2014).

(4) "...by 2008, only about 20 percent of Romanians were considered to be

"middle class...But since then, the financial crisis has further shrunk salaries and, in the

process, nearly halved the number of middle class citizens in Romania... Around 10

percent of the population in Serbia and Croatia are classified as middle class. The middle

class in Bulgaria is often referred to as the "invisible" class, making up just four to eight

percent of the total population..." Arbutina, Zoran. Uncertainty for southeast Europe's

middle class. Jan 24, 2013. http://www.dw.de/uncertainty-for-southeast-europes-middle-

class/a-16547646 (accessed Mar 15, 2014).

(5) "...a Kazakh professional middle class began to emerge. While estimates

vary, some analysts put its numbers at 25 percent of the total population..." Daly, John

C.K. Kazakhstan’s Emerging Middle Class. Silk Road Paper, Washington DC: Central

Asia Caucaus Institute, 2008.

(6) "- In Serbia, the poor, anyone who is not rich, is poor. Gone is the entire

middle class." Economic Council of the Democratic Party of Serbia. Middle Class in

Serbia Disappears. Apr 21, 2011.

http://www.ekonomskisavetdss.com/english/2011/04/middle-class-in-serbia-disappears/

(accessed Mar 15, 2014).

44

(7) "Turkmenistan's living standards are the lowest in the region and continue

to decline. With mass poverty and absence of a middle class and competent elite, the

country is in no shape to move toward democracy." Tsygankov, Andrei. Danger lurks in

Turkmenistan. Jan 20, 2007.

http://www.atimes.com/atimes/Central_Asia/IA20Ag01.html (accessed Mar 14, 2014).

(8) "The share of middle class in Ukraine is considerably lower... According

to self-definition from 30% up to 50% of our country’s population rate themselves as

middle class..." Foundation for Effective Governance. Middle Class is not Needed for

Ukraine's Economic Development. 2013.

http://www.feg.org.ua/en/cms/projects/debaty/middle_class_economics.html (accessed

Mar 15, 2014).