The middle class is growing – just not in the United States or Europe – but in the far reaches of the globe, a change that very likely will move power away from the world’s current centers of prosperity, a United Nations study released Thursday concludes.
The middle class in developing countries is rising “at an unprecedented speed and scale” and will require “an epochal global rebalancing,” the study says.
By 2025, 1 billion households will be earning more than $20,000 a year, and three-fifths of those will be in countries that today are better known for their poverty than their wealth, among them Rwanda, Brazil, Chile, Tunisia, Turkey, Ghana, Mauritius and some 30 similar nations.
“History has never seen something like this,” said Khalid Malik, lead author of the United Nations Development Program report titled “The Rise of the South.”
“You are witnessing a very large phenomenon,” he said.
“A very significant number of developing countries have transitioned themselves into dynamic, emerging economies with growing geopolitical influence,” said Helen Clark, a former prime minister of New Zealand who is the administrator of the U.N. Development Program and was in Mexico to unveil the report. “Mexico is one of these dynamic nations.”
While Europe and North America have been stuck in outright recession or tepid growth, many developing countries have been trading heavily with one another, investing in education and social services and watching their middle class expand, Malik said.
Both the scale and the speed of the changes surpass what happened during the Industrial Revolution, which began in Britain in the late 18th entury and spread over the next decades to Western Europe and the United States, he said.
In 1990, Malik said, the global middle class – defined as earning from $10 to $100 a day – comprised 1.8 billion people, and a clear majority lived in Europe and North America. By 2020, projections say the global middle class will have expanded to 3.2 billion people, with more than half living in the Asia and Pacific region.
By 2030, the U.N. report says, the middle class is likely to comprise 4.9 billion people, with two-thirds in Asia, not only in populous India and China but also in Mongolia, Laos and Bangladesh, among others. At that point, 80 percent of the world’s middle class will live in what is now considered the developing world.
Not only are citizens there growing better off, but their governments have amassed ever-greater financial reserves, Malik said. Some $6.8 trillion in reserves are now in the hands of developing nations, compared with $3.5 trillion in the central banks of developed countries.
Social policies that empower women, provide more equitable health care and better education are key factors in the expansion of the middle class, the study found. But technology also has been a huge contributor to the expansion of wealth.
“Farmers in India or in Africa can use their telephones, get prices for their crops but also know what happens in the U.S. elections,” he said.
In Ghana, 61 percent of cocoa farmers now own mobile phones, the report says.
By the end of the decade, the combined output of three leading developing-world countries – Brazil, China and India – will surpass the combined economic output of the United States, Germany, the United Kingdom, France, Italy and Canada, the report says.
Once-poor countries are now trading with each other at a quickening pace, climbing from less than 10 percent of all global trade in 1980 to more than a quarter of its trade 30 years later, the report says.
The continued expansion of the middle class is far from assured, and in some places it may encounter reverses if further reforms are not undertaken or if countries don’t deal concretely with problems associated with an aging population, the report says.
The population of Africa is projected to grow from 1 billion today to 2 billion in 2050, and the poverty numbers there “could go up by half a billion people,” Malik said.
Another challenge is to rebalance global institutions to better reflect the reality of the economic shift, he said, noting that China, the world’s No. 2 economy, has only a 3.3 percent share in the World Bank, while France has a 4.3 percent share. India, which may surpass China as the world’s most populous country, does not have a permanent seat at the U.N. Security Council.
The emerging middle class may not enjoy all the luxuries of the current holders of that status. For one, they may not be able to own a personal vehicle, as middle-class people do now.
“It’s physically not possible, either for the Earth’s atmosphere or just to find parking lots,” Malik said. “So something has to change.”