The Middle Class defines its future

CEBU, Philippines — The new actors want to act more internationally and be innovative.

The old middle class is dead. Long live the new middle class!

One might want to shout this in view of the generational change that is pending and already taking place in our entrepreneurial dynasties. In many places, and also here, the death knell has often been sounded for the middle class: too much bureaucracy, too few successors, too limited financing options, and many large competitors. The medium-sized companies, as we known them, will soon cease to exist - or so say the skeptics. Not me!

This may be true, but it doesn't have to be. Undoubtedly, small and medium-sized family businesses are under enormous pressure. However, it remains open whether this pressure will lead to an exodus or even extinction, or to a "renovation," a renewal of the middle class.

In my observation, this renovation is taking place in quite a few family businesses already. A new middle class is emerging that differs significantly from the traditional middle class in essential aspects: the actors operate more individually, internationally, and innovatively.

There is hardly any need to mention that the young middle-class generation is more internationally educated and oriented than their parents and grandparents.

The actors of the new middle class generation act more individually, internationally, temporarily, and innovatively.

The discussions about the duration of personal commitment to the company are also interesting. In the past, joining the family business was also considered the final job. Everyone assumed that a family member managing director would do this job until retirement and often beyond.

This is no longer the case; the commitment has become more temporary. In some companies, the young generation has changed the family constitutions so that family members take on a leadership position only for five or ten years and then leave again.

Finally, in some places, a more innovative handling of family assets can be observed. One case, that I studied, has caused a stir: there, the junior sold a large part of the company, also to enable investments in innovative business fields. This can be seen on a smaller scale with other medium-sized companies as well!

It is no longer taboo to consider partial sales, bringing in investors, or using private debt. The young generation has recognized the financing problem of the middle class and dares to tackle solutions that the parents would have considered betrayal.

These are tough times. But as so often in history, crises also bring forth excellent new things. In the end, a new middle class could blossom in the Philippines. However, those family businesses that believe the old beliefs will be valid for the next decades are in acute danger.

Allow me to quote NEDA Secretary Balisacan: “In Germany, small and medium enterprises are a big part of the economy. But there’s so much human element in their manufacturing sector. That’s what we need to capitalize on.”

He added: “Growth of the manufacturing sector was a primary driver of poverty reduction in many Asian economies.”

In conclusion, I am not sure whether my view on the future of the middle class is accepted. Let me know! I can be reached under my email [email protected] — (FREEMAN)