Can the world afford a middle class?

More countries are pulling themselves out of poverty, placing greater demand on food supplies and natural resources.
Moisés Naím, Los Angeles Times 8 Feb 08;

The middle class in poor countries is the fastest-growing segment of the world's population. While the total population of the planet 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 a staggering 52% of the total population, up from 30% now. 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. In January, 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. Senegalese protested about the price of rice, and Indians took up banners against the price of onions. Argentina, China, Egypt, Venezuela and Russia are among the nations that have imposed controls on food prices in an attempt to contain a public backlash.

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. The food-price index compiled since 1845 by the Economist is now at its all-time high; it increased 30% in 2007 alone. Wheat and soybean prices rose by almost 80% and 90%, respectively. Many other grains reached record highs.

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 average consumption of meat in China, for example, has more than doubled since the mid-1980s.

The impact 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% 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 and that of other countries such as Brazil, Indonesia, Turkey and Vietnam, 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. China alone accounts for one-third of the growth in the world's oil consumption in recent years.

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 will probably have to drastically change as the new middle class emerges. The consumption patterns that an American, French or Swedish family took for granted will inevitably become more expensive; driving your car anywhere at any time, for example, may become prohibitively so. That may not be all bad. The cost of polluting water or destroying the environment may 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. And expect growing demands for better housing, healthcare, education and, inevitably, political participation.

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 may 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.

Moisés Naím is editor in chief of Foreign Policy magazine, where a longer version of this column will appear.