Martin McCauley writes from London: The middle class in the European Union (EU) is being squeezed. Think of Greeks taking free food hand-outs by farmers or Spaniards going to Red Cross centres to help feed their families. Of course, the other side of the coin is that the middle class in Luxembourg and Germany are getting more prosperous.
The story is completely different in the developing world. Middle class numbers in developing countries (which include China, Russia, India and Brazil) that are members of the G20 have been rising rapidly. One estimate is that in 2009 there were 369 million. Other projections put the number over 550 million. In comparison, about a billion can be classified as middle class in advanced countries.
About ten years ago, 83 per cent of people living in 70 developing countries accounted for 18 per cent of global consumption. Now this has jumped to 30 per cent. If this trend continues, they will consume half of the world’s food and goods by 2030. They are also adopting Western consumption patterns. Demand for meat, toothpaste and cell phones, for instance has tripled over the last decade. Of the 6 billion cell phones in use worldwide now, 4 billion are in developing countries. Often an African or Indian has a phone before he gets running water or electricity.
One way of gauging the rise in middle class numbers is to count the number of cars in the developing world. Over the years 2006-10 car ownership in G20 developing countries increased by 10.3 per cent annually. The rise in China was a phenomenal 33 per cent annually. It was 13.2 per cent in India and 6.7 per cent in Russia. At this rate the middle class in China will double every 2.2 years, 5.3 years in India and 10.5 years in Russia. In 2010 alone, BRIC countries (Brazil, Russia, India and China) saw car ownership jump by 14 million.
What do these extraordinary figures mean for the governments of developing countries? As citizens join the middle class they become more politically aware, seek greater representation in decision making and expect infrastructure to improve. Demand for advanced education and health care jumps. So governments have to become more accountable and improve living standards. In other words, they have to move towards democracy. Theorists posit that democracies do not go to war with one another.
The rapid increase in car ownership means more pollution, greater demand for oil, steel and plastics and so on. China is now attempting to invest in North Sea oil and gas in an attempt to ensure that its cars do not run out of petrol. The developed world can welcome the rising numbers of middle class citizens in the developing world (think of rising export markets) but it means more competition for the earth’s resources. The conclusion is that household incomes in the advanced world are going to be more and more squeezed. Wealth is being created in the developing world at such a rate that the Old World (Europe, the US and Canada) is being left behind.
Where is car ownership for 1,000 citizens highest in the advanced world? The United States? No. It is in Italy with almost 600 cars, followed by Germany with 510 and Spain with 480. Then comes the US with 439. These numbers may represent the high water mark of car ownership in the advanced world. The trend in the developing world is the exact opposite. Mind you they have a long way to go. For instance in China it is 34. However Beijing is trying to restrict new car registrations and has a policy of only allowing certain number plates a day to use its roads. Its roads are choked as are those of the Middle Kingdom’s major cities. Just imagine car numbers reaching Italian levels!
The developing world is on the march and claiming a greater share of the world’s resources. By 2030 it will be at least half. Tough times ahead for the developed world.