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http://foreignpolicy.com/2009/10/09/can-the-world-afford-a-middle-class/

Can the World Afford A Middle Class?

Yes, but it will be awfully expensive.

BY MOISES NAIM

OCTOBER 9, 2009

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 1 billion
people in the next 12 years, the ranks of the middle class will swell by as many as 1.8
billion. Of these new members of the middle class, 600 million will be 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 percent of the global population, up
from 30 percent now. The middle class will almost double in the poor countries where
sustained economic growth is lifting people above the poverty line fast. For example,
by 2025, China will have the world’s largest middle class, while India’s will be 10 times
larger than it is today.

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. Last 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, higher pasta prices sparked street protests in Milan.
Mexicans marched against the price of tortillas. Senegalese protested the price of rice,
and Indians took up banners against the price of onions. Many governments, including
those in Argentina, China, Egypt, and Russia, 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 food prices everywhere.
The food-price index compiled by The Economist since 1845 is now at an all-time high;
it increased 30 percent in 2007 alone. Milk prices were up more than 29 percent last
year, while wheat and soybeans increased by almost 80 and 90 percent, respectively.
Many other grains, like rice and maize, 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 soon be felt in the price of other
resources. After all, members of the middle class not only consume more meat and
grains, but they also buy more clothes, refrigerators, toys, medicines, and, eventually,
cars and homes. China and India, with 40 percent 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. Not
surprisingly, in the past two years, the world price of tin, nickel, and zinc have roughly
doubled, while aluminum is up 39 percent and plywood is now 27 percent more
expensive. 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 2005,
China added as much electricity generation as Britain produces in a year. In 2006, it
added as much as France’s total supply. Yet, millions in China still 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 you know what happened to oil prices. Again, oil reached its all-time high of $100
per barrel not because of supply constraints but because of unprecedented growth in
consumption in poor countries with rising middle classes. China alone accounts for one
third of the growth in the world’s oil consumption in recent years. The middle class also
likes to travel: The World Tourism Organization estimates that outbound tourists will
grow from today’s 846 million a year to 1.6 billion in 2020. Venice and Paris will be
even more expensive — and crowded — to visit.

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
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.
Some, like driving your car anywhere at any time, may even become prohibitively so.
That may not be all bad. It may mean that the price of some resources, like water or oil,
may more accurately reflect its true costs.

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 unanticipated effects of the new global middle class will become part
of our daily news.

The debate about the Earth’s "limits to growth" is as old as Thomas Malthus’s alarm
about a world where the population outstrips its ability to feed itself. In the past,
pessimists have been proven wrong. Higher prices and new technologies, like the green
revolution, always came to the rescue, boosting supplies and allowing the world to
continue to grow. 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.