Why growth no longer feels like progress

The middle class has played an important part in creating growth, innovation, and stability. However, as time moves on, the role of the middle class seems to be deteriorating. Indeed, today we face a strange paradox: the economy continues to grow, yet families are becoming poorer. The problem is not the economy's declining GDP; rather, it is the obliteration of the very environment that enables social mobility.

The statistics in this respect are grave. The International Monetary Fund projects that the global economy will grow by about 3% in 2025 and 2026, significantly lower than the average of 3.7% in previous decades. At the same time, according to the World Inequality Database, the richest 10% receive more than half of the world's income, and the top 1% owns almost 40% of the total world wealth.

Exported growth is likely to occur only in the financial sector. It has nothing to do with national economies, leading to the creation of what economists call an "asset economy", where owning property is more important than income.

The most pressing issue seems to be housing. The OECD states that in several developed countries, housing prices have risen sharply since the mid-1990s and, in some cases, have soared by over 70%. This means that in such cities as Toronto, Sydney, London, Singapore, and Seoul, it takes families more than 10 years of savings to purchase a single dwelling.

What is worrying is that the described situation is not something unique to a few countries. In the U.S., healthcare and education are extremely expensive, while childcare costs are out of sight. Europe suffers from low productivity, an aging population and housing problems, while in China property prices are falling and people lack confidence in the economy.

In Japan, wage growth has slowed, and in South Korea, apartment prices are skyrocketing, resulting in high household debt levels. India, in turn, is experiencing a rise in the cost of living.

Technology has certainly complicated matters. One of the biggest promises of Artificial Intelligence is that it will boost productivity by $15.7 trillion by 2030. At the same time, although it is likely to generate revenue for capital owners, it may not improve workers’ financial situation.

All this will lead to serious consequences that go beyond economics. Financial insecurity may hamper entrepreneurial activities, delay starting families, and lead people to abstain from consumption.