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Middle Class Boom

From Detroit to Chicago to Italy, globalization is driving a transfer of knowledge, enriching people instead of places.
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The city of Venice, built on 117 islands. (PHOTO: TISEB/FLICKR)

The city of Venice, built on 117 islands. (PHOTO: TISEB/FLICKR)

Economic globalization destroyed the middle class. Journalists continue to spin that yarn about the Rust Belt. I think they are wrong. Worldwide, the middle class is booming. The rising tide doesn't lift all boats. But more people (e.g. Mexicans) are getting aboard the S.S. Upward Mobility:

Our report this week from the Mexican-American border points out that Mexicans are becoming too bourgeois to cross illegally into the United States. These days they’d rather stay in high school than risk deserts, rattlesnakes, murderous bandidos and La Migra (as the gringo migration authorities are known) just to bus tables north of the border. In fact, according to an exhaustive report in May by North American experts, known as the Regional Migration Study Group, Mexicans are much more likely to have a degree before going north than they were seven years ago, and the number of years of schooling of 15-19-year-olds is now pretty similar to that in United States. If more educated workers emigrate, it raises their earning capacity, which gives them and their families even more chance of rising up the ranks of the middle class when they and the money flow back to Mexico. In which case, even fewer will need to go to el Norte.

Emphasis added. Note the shift among emigrants from less educated to college educated. The same trend shows up domestically in the United States and around the world. Globalization is driving this knowledge transfer, enriching people instead of places.

Globalization didn't kill Detroit. Globalization avoided Detroit. If anything killed Detroit, it was upward mobility. City living sucked. As soon as you found the means, you left. Detroit did better than most places helping folks get out. Blue collar wealth is the culprit.

The better educated relocate to places impacted by macroeconomic forces. Making such a migration away from the cul-de-sacs of globalization opens up middle-class opportunities. Geopolitician Thomas Barnett maps it:

Show me where globalization is thick with network connectivity, financial transactions, liberal media flows, and collective security, and I will show you regions featuring stable governments, rising standards of living, and more deaths by suicide than murder. These parts of the world I call the Functioning Core, or Core. But show me where globalization is thinning or just plain absent, and I will show you regions plagued by politically repressive regimes, widespread poverty and disease, routine mass murder, and—most important—the chronic conflicts that incubate the next generation of global terrorists. These parts of the world I call the Non-Integrating Gap, or Gap.

In a global city such as Chicago, you'll find a few neighborhoods and the central business district in the Functioning Core. Other parts of town, particularly on the South Side, comprise the Non-Integrating Gap. Globalization is "just plain absent."

The same divide impacts Italy. Parochial places awash in social capital are a fortress against globalization:

Maria Adele Carrai has two master's degrees from Italian universities in economics and Asian languages and is now earning her Ph.D. in international law in Hong Kong. Her linguistic credentials are formidable: Besides native Italian, she has nearly flawless English, a rarity in Italy, as well as French, Arabic, Japanese and Mandarin.

But the 26-year-old from a family of physicians in a small town near the Adriatic Sea, lacks an increasingly crucial key to unlocking the door to work in Italy: a "raccomandazione." It's Italian for the right word from the right person to get you hired, even if you might not be the best one for the job.

As Europe's economic crisis darkens the future of millions of youth, the culture of connections that has lain at the heart of hiring practices in much of the continent is becoming ever more entrenched, even as it harms prospects of recovery. It is blocking young talent or driving it overseas, and contributing to a vicious circle of stagnation that threatens to leave Europe behind in the game of globalization.

The culture of connections runs the Non-Integrating Gap. You only do business with people you trust. Your market is very small. Ideas are scarce. Change is bad. As a result, the best and brightest move to Hong Kong to gain access to globalization. Migrants run the Functioning Core. You do business with everyone. Your market is huge. Ideas are ubiquitous. Change is constant. People develop, not places.