A rising tide of global prosperity

As the world's middle class earners rapidly outnumber any other segment, the global push for prosperity and political freedom is set to surge.


I keep stumbling across unswerving predictions that the future belongs to China. Or, perhaps to the contrary, that the Middle Kingdom will always struggle to challenge US primacy. Don’t ask where India and Brazil fit in. Enjoyable as it is, this exercise in the remaking of the geopolitical landscape is also something of a diversion. The 21st century will not be shaped by the abstract choices of states. Transformative power will belong to a new global middle class.

The story of the past couple of decades has been of the great shift of economic weight and geopolitical influence from west to east. This rebalancing still has some way to go. However, comparisons of the relative position of established and emerging powers obscure some of the more fundamental drivers of change. What is happening within states is every bit as interesting as what might change in the relationships between them. Within 20 years or so a world that is now predominantly poor will be mostly middle class.

States, of course, will remain the dominant form of political organisation. Increasing wealth is unlikely to displace cultural and national identities. In some cases, it may well reinforce them. Resurgent nationalism could prove to be one of the big threats to international peace and security. But the way most new global actors behave will be steered by an unprecedented redistribution of power from rulers to ruled.

The raw numbers are set out in a compelling report – Global Trends 2030 – just published by the Paris-based Institute for Security Studies. On current trends, it says, the ranks of the global middle class will swell from about 2 billion today to 3.2 billion by 2020 and 4.9 billion by 2030 – the last of those numbers out of a total world population of just above 8 billion. Put another way, for the first time in human history more people will be middle class than poor.

Economists can debate the precise definition. The ISS measure of what constitutes middle class counts the number of people with between $10 and $100 a day in disposable income. Others set the bar higher, with a starting point of daily expenditure of $15 or so. By western standards even that figure is very low – but then think of how many people survive on $1 a day. The important thing is that even the most conservative assumptions point to an irrevocable redistribution of economic power.

Unsurprisingly, the transformation is set to be most pronounced in Asia. China already has upwards of 160 million middle class consumers, a number second only to the US. But they represent only about 12 per cent of the Chinese population. By 2030, the ISS projects, the proportion may be 74 per cent. In India, half of the population should cross the $10-a-day threshold before 2025, and by 2040, 90 per cent will be middle class.

These tides will reach beyond Asia. More than two-thirds of Brazilians are likely to count themselves as middle class by 2030. In the same year, central and Latin America will have as many middle class consumers as North America. The transition will be slower in Africa but even there the numbers should be more than double by 2030.

These new consumers, of course, will still have much less disposable income than their North American or European counterparts. The rich nations’ share of global middle class consumption is nonetheless likely to more than halve from 64 per cent to 30 per cent by 2030.

The implications of this transformation will be as profound for dynamics of the political order within rising states as for relations between them and established powers. Bigger, affluent middle classes will probably demand more accountable government. That does not necessarily mean a clamour for western-style representative democracy. It does suggest that existing, often authoritarian elites will be under pressure.

The middle classes’ demand for a bigger say in the organisation of their societies will be amplified by widening access to education – especially among women – and by the relentless advance of digital technology. The impact of the digital revolution has already made its mark in the Arab world. Shared access to instant and virtually free communication hands the global middle classes a potent weapon in the struggle for more control over their lives. There are already more internet users in China than citizens in the US.

For the west, the inherently cheering prospect of billions of people being lifted out of poverty sits alongside the likelihood that many – quite probably the greatest number – will embrace basic values such as individual freedom, human dignity and the rule of law. There is not a mechanistic relationship between a society’s wealth and the extent of individual freedom. Nor is there a straight line between prosperity and democracy. There is plenty of evidence to suggest that the wealthier and more educated they become the more citizens identify with a broad set of universal values. Oppressive governments everywhere will struggle to resist this political awakening.

This is not to say that the world will be a more stable or a more peaceful place. Great powers will still compete. Regimes under pressure at home may well seek enemies abroad. Competition for natural resources and the gap between expectations of the new global middle class and the capacity of states to meet them will invite authoritarian regimes to awaken the demons of xenophobia. A likely fracturing of the institutions of global governance will not help.

But the prospect of a world at once more universally prosperous and more attached to freedom? There must surely be good news in that.

Copyright The Financial Times Limited 2012.

InvestSMART FORUM: Come and meet the team

We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles