Rise of the Middle Class in Emerging Economies Poses Opportunities and Challenges in 2012
A generation ago the economies in Latin America, Africa, India and China were stagnant, left billions in poverty and provided few opportunities for the vast majority of their citizens to build a better life. Fast forward to this decade, and the global financial landscape has drastically changed. Brazil is a creditor nation; China is the world’s second largest economy; India is an enormous hub of technological innovation; and African nations are beginning to manage their rich depth of natural resources more wisely. The undeniable result is a rising middle class that at the same time will consume more, become more aware of their impact on the earth and will help spur economic recovery beyond the borders of the countries in which they live. Arguments that these regions’ economic transformations are only benefitting a few elites and foreign companies ring hollow when you look at demographic, financial and anecdotal evidence. Brazil’s Bolsa Familia program is one reason why poverty in Brazil has been halved in the past decade while Latin America’s largest economy eclipsed the United Kingdom as the world’s largest economy. With China becoming the world’s workshop, the wealth generated has given millions of Chinese the means to take bus tours in Europe and weekend shopping trips to Seoul and Bankgok. Indian conglomerates have entrenched themselves in Europe and North America while the middle class in India grows at a faster pace than that of China’s. The middle class in Africa has tripled in size the last 30 years and countries like Ghana are weaning themselves off of foreign aid. The most accurate count of the population of the global middle class, outside of North America and Europe, is 834 million as of 2009. That number will leap over one billion this decade. But as the developing world’s middle class approaches the one billion mark, the economies of China and India are home to the majority of this demographic and therefore will help drive economic recovery. Both nations offer the obvious markets: automobiles, smartphones, luxury goods and of course, the aforementioned tourism. And both countries pose daunting challenges. China’s middle class is still only about 14 percent of the country’s population but is concentrated in the country’s congested cities. According to some NGOs like the WWF, this growth could lead to a dystopian future of resource depletion, noxious pollution and a ecological footprint with effects that could trample nations far from its borders. Meanwhile in India, a youthful population is surging at a rate faster than the country can educate its people. Deficient infrastructure and bureaucratic red tape in India also stifle the progress that the largest multinational and the smallest social enterprise can make to alleviate poverty and offer economic opportunity within and beyond the subcontinent. Nevertheless the hurdles that both India and China confront are only one part of the story behind the impact its middle classes will have on the world’s economy and its fitful recovery. China’s new and vibrant middle class is becoming more aware of sustainability issues, triggered by reasons including overwhelming air pollution and food scandals rife through the country’s food supply. The Chinese are searching for more reputable brands, safe or organic food and consumer goods not full of toxins. India’s middle class is demanding more transparency from its institutions in both the private and public sectors, with many of its entrepreneurs viewing business not just a means to create products and profits, but to build social movements. Hence the emerging middle classes of China and India will anchor the world’s economic recovery. Both countries are full of customers who demand better, and more sustainable, goods and technology than they can currently find within their countries’ borders. Their needs include engineering products from German, foodstuffs from Brazil, or head-spinning technology from South Korea or Silicon Valley. India and China are also contributing ideas and solutions that can be applied overseas. China’s clean energy hubs like Boading and Dezhou will churn out goods like solar panels that are finding new markets as doubts over global oil stocks linger. India is hardly limited to its heralded technology hub, Bangalore: countless cities on the subcontinent like Jodhpur boast innovative companies like Datawind that churn out such low-cost devices as the Aakash tablet that only cost like US$50. Finally, the stubborn fact called geography place India’s and China’s middle classes in an enviable position: they are conveniently located near the growing economies of the Middle East, Southeast Asia and the resource laden Central Asian countries. Yet smaller countries can also rival giants like Brazil, India and China when it comes to the role that their new middle class can have on its country and on the global economy. Gabon, a small central African country home to 1.4 million people, is a leading example of the strides similar countries have made in recent years. Investments in infrastructure and even a regional FIFA soccer tournament are the result of the steps the country has taken to diversify its economy away from oil and lift more people out of extreme poverty. From improved telecommunications to new offices and hotels for business travelers, Gabonese have more opportunities to enter deals with neighboring countries--who in turn will increase commerce with their neighbors and cement business links across the globe. Political movements like those during last year’s Arab Spring, often inspired by the middle class, have been a gateway to more economic opportunities. With a growing middle class that is becoming more free to communicate and exchange ideas, look for more social entrepreneurs to factory owners rise among the one-billion plus who will help reshape, reform and revitalize the world. Photo of Salvador da Bahia, hub of a booming region in Brazil, courtesy Leon Kaye.