Catalytic Class: More than Just Capitalism

After CGD’s Nancy Birdsall pointed to an emerging bourgeoisie middle class as an understudied ally for poverty alleviation (i.e., the “catalytic class”), Ranil Dissanayake rejoined:

I’m afraid that the catalytic class may already be studied under a different name [ed note: capitalists!]. In fact, this guy might argue that this research might be coming some 144 years after the definitive study of this group. I’ve been talking for a while about how they’re a crucial but neglected part of the development process.

This is a curious riposte. Yes, the emergent bourgeoise are capitalists, just as they are humans, and doubtlessly countless other things, but what makes them (potentially) a special ally of the poor is that they economically support a new set of public interests to compete with those of the existing elite.

To the extent this new class’ power benefits from public goods that benefit the poor, the emergent bourgeoisie may indeed catalyze positive change that would not otherwise occur.

Mr Dissanayake might object that entrenched economic elites and their progeny don’t qualify as capitalists, and therefore the catalytic class is no different than capitalist.

Yet I’d object once more. The catalytic class are a special subset of bourgeoisie: bourgeoisie that happen to have interests that align with the poor. It is a happy accident that they benefit from the same public goods. It is a happy accident that their source of wealth increases demand for labor from the poor. To call them simply capitalists is to lump them with the bourgeoisie that make a fine living virtually detached from the poor. It is not even sufficient that the emergent bourgeoisie are emergent to guarantee that their interests align with the poor in any meaningful way.

Still it may be that we acknowledge the catalyst class as distinct from capitalists,  or even the emergent bourgeoisie, but find that we can’t target assistance to the catalytic class. We might not know who they are ahead of time. Or we might not be able to help them outside of more general support for capitalism, in which case, Mr Dissanayake’s conflation of the catalytic and capitalist terms is operationally correct.

Indeed the challenge of identifying the catalytic class is complicated by the fact that there is no single catalytic type of enterprise or group of people. Catalysts aren’t universal. There is no law to be found that dictates a new agricultural producer  association always creates catalytic change. It would be folly to think that a study of catalytic classes would produce a formula for industrial policy.

At the same time, there’s no reason to suppose that catalysts are entirely idiosyncratic. It’s not naivete to suggest that certain types of enterprises might increase demand for the labor of the poor more than others, or require well-maintained roads that connect rural areas to urban hubs, or create a large amount of wealth in the hands of a few new tycoons who might see profit in the liberalization of the airwaves and have the independent power to demand it. These are different types of catalytic change, and they are more or less likely to emanate from enterprises with different dependencies on capital, land, and labor, and which produce different distributions of wealth.

While we should not suppose that there is a magic catalyst class or industry, we should be eager to study how entrepreneur/enterprise characteristics make them more or less likely to create different kinds of catalytic change in different environments. As international organizations are already subsidizing capitalism in developing economies, they might as well incorporate an estimate of the positive externalities for the poor, rather than simply supposing that financial results in non-functioning markets are adequate signals of societal value.