Can the world afford a middle class?

Posted: Wednesday, February 13, 2008

The middle class in poor countries is the fastest-growing segment of the world's population. While the planet's total population will increase by about a billion people in the next 12 years, the ranks of the middle class will swell by as many as 1.8 billion - 600 million just in China.

Homi Kharas, a researcher at the Brookings Institution, estimates that by 2020, the world's middle class will grow to include 52 percent of the total population, up from 30 percent. The middle class will almost double in the poor countries where sustained economic growth is fast lifting people above the poverty line.

While this is, of course, good news, it also means humanity will have to adjust to unprecedented pressures. The rise of a new global middle class is already having repercussions.

Last month, 10,000 people took to the streets in Jakarta to protest skyrocketing soybean prices. And Indonesians were not the only people angry about the rising cost of food. In 2007, pasta prices sparked street protests in Milan. Mexicans marched against the price of tortillas, and Senegalese protested the price of rice.

These protesters are the most vociferous manifestations of a global trend: We are all paying more for bread, milk and chocolate, to name just a few items. The new consumers of the emerging global middle class are driving up global food prices.

Prices are soaring not because there is less food (in 2007, the world produced more grains than ever before) but because some grains are now being used as fuel and because more people can afford to eat more.

The effect of a fast-growing middle class will be felt in the price of other resources. After all, members of the middle class are also buying more clothes, refrigerators, toys, medicines and eventually will buy more cars and homes. China and India, with nearly 40 percent of the world's population - most of it still very poor - already consume more than half of the global supply of coal, iron ore and steel. Thanks to their growing prosperity, the demand for these products is booming.

Moreover, a middle-class lifestyle in these developing countries, even if more frugal than what is common in rich nations, is more energy-intensive. In 2006, China added as much electricity as France's total supply. Yet, millions in China lack reliable access to electricity; in India, more than 400 million don't have power. The demand in India will grow fivefold in the next 25 years.

And we know what happened to oil prices. Oil reached its all-time high of $100 a barrel not because of supply constraints but because of unprecedented growth in consumption in poor countries.

The public debate about the consequences of this global consumption boom has focused on what it means for the environment. Yet its economic and political effects will be significant too. The lifestyle of the existing middle class probably will have to change drastically as the new middle class emerges. The consumption patterns that an American, French or Swedish family took for granted inevitably will become more expensive; driving your car anywhere at any time, for example, might become prohibitively so. That might not be all bad. The cost of polluting water or destroying the environment might be more accurately reflected.

But other dislocations will be more painful and difficult to predict. Changes in migration, urbanization and income distribution will be widespread.

The debate about the Earth's "limits to growth" is as old as Thomas Malthus' alarm about a world in which the population outstrips its ability to feed itself. In the past, pessimists have been proved wrong. Higher prices and new technologies that boosted supplies, like the green revolution, always came to the rescue. That might happen again. But the adjustment to a middle class greater than what the world has ever known is just beginning.

As the Indonesian and Mexican protesters can attest, it won't be cheap. And it won't be quiet.

• Moises Naim is editor in chief of Foreign Policy magazine.

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