Throughout the span of a decade the world has experienced significant growth in middle-class incomes, which can be seen as a positive element of economic growth globally. Senior fellow and director of the Global Economy and Development Director of the Brookings Institution Homi Kharas explains this trend in depth in his 2017 publication titled the Unprecedented Expansion of the Global Middle Class. Bearing in mind that increasing middle-class incomes has a positive effect on global economies, it is still something that can have adverse consequences for the world’s economy. In a war-torn country like Iraq, there has been a significant growth in middle-class incomes. This has come as a result from the uplifting of economic sanctions of 1991, the gradual openness to international markets since 2003, and the increase of a growing gross domestic product.
Understanding Iraq’s both societal and economic structure is a very significant aspect in this case. Iraq’s GDP per capita is low when compared to regional standards as shown in neighboring countries, such as Kuwait and Saudi-Arabia in a recent 2017 World Bank study. Welfare in Iraq has began to grow rapidly, and since they have not experienced this rate of growth ever before, it was difficult for Iraqis to cope, especially in an emerging country where it is difficult to gauge the impact of an increasing middle-class. However, in the case of Iraq, we can say that there is an economic problem, since, the needs of the increasing middle-class cannot be met as a result of the scarcity of resources.
In general, there are many Iraqis who belong to the middle-class but are no longer living in the country. Neither do they travel to Iraq for vacation, due to a lack of recreational locations. While there is a significant amount of money available, there is no real economic incentive to spend the money internally, and certainly not for recreational purposes. Which is why Iraqis are among the biggest investors in real estate projects abroad and specifically, regional countries, such as Turkey and Jordan according to a statistical report by the Jordan Lands and Survey Department. Even as far back as 2011 reports reveal Iraq has a serious problem with housing, since there is a structural shortage in real estate in the country. The Iraqi government has failed to optimally allocate resources for Iraq’s increasing middle-incomes in order for them to invest money in their own country.
An increasing Iraqi-middle class also bares negative societal consequences. A 2017 World Bank study shows Iraq’s relatively new middle-class income has doubled the CO2 emission in a period of only seven years.
Second, since welfare is increasing for Iraq’s middle class incomes, it is difficult for middle-class Iraqis to live alongside their poorer compatriots, because the gap between the middle and lower class is only widening.
To sum it all up, despite the fact that an increasing middle-class can bring positive elements to an emerging country such as Iraq, there should still be some consideration for how to use this increasing ‘opportunity’ in positive means. Iraq’s government should invest more in social and recreational infrastructure, such as swimming pools and recreational centers. This will solve the scarcity problem of Iraq’s middle-class incomes. However, in terms of excessive CO2 emission, that will be a gradual and slow process, in which the government needs to promote socially responsible behavior, especially since Iraq is shifting from a process of a transactional society into a society in which co-creation has the potential to be the solution to all of the issues it is dealing with.
Ahmed AlKaabi is a Business analyst based in Europe and International Management Student at the University of Tilburg. He has covered Iraq at ‘Al-Masdar news’ and is a current contributor to ‘Sura English’ and @SoccerIraq