BC Business Matters:
Denise Mullen >>
What the Expanding Global Middle Class Means
A recent report from researchers affiliated with the Brookings Institution concludes that, at the end of 2015, the middle class represented 44% of the world’s population—that’s approximately 3.2 billion people. By the end of the decade, current forecasts suggest the middle and upper classes, defined as those who spend between $11 and $110 per person per day, will be a majority of the earth’s population for the first time in history.
Of today’s global middle class, 2.8 billion live in Asia. The division between developed (12%) and developing (88%) economies is not expected to change. Developing countries have more dynamic economies, as more of their consumers can now acquire both necessities and luxuries through increased purchasing power. Notably, most developed countries have chronically sluggish economic growth and flat or shrinking middle class populations.
The following chart provides some more context for the growth of the global middle class. In 1985, the middle class was 21% of the world’s population and resided mostly in developed countries. The middle class population doubled (to 2 billion) by 2006, and continued to grow thereafter. By 2028, the total number of people considered middle class is likely to be five times bigger than in 1985 — or up a whopping 420% — and they are expected to constitute 63% of the global population.
Despite a slower expansion of the middle class compared to the overall population from the post baby boom era to the end of the 1970s, and a lower purchasing power of new entrants — $8,500 in developing countries compared to $19,000 in developed countries — the growing global middle class is having a profound effect on the demand for goods and services. In 2015, middle class consumption reached US$35 trillion, equal to one third of global economic output. By 2030 middle class consumption will rise to about US$64 trillion.
Given the strong correlation between materials consumption and a rising human development index, additional consumption, no matter who supplies it, increases the competition for scarce food, fresh water, timber, fibre, minerals, and fuel resources. The ability of earth systems to respond to the added pressure from lifestyle expectations by those making their way into the global middle class is a challenging and complex public policy issue.
Social expectations are high. In developed countries, not losing ground and a perception of “things getting worse” have sparked political upheaval and the emergence of nationalist, inward-looking, trade-fearing, and anti-immigration sentiments. In developing countries, the search for a better life is forcing rapid urbanization, with escalating material footprints in some cases approaching those of OECD countries. Aspirations for and realities of upward mobility may be the source of friction, conflict, and political perturbation, but they also have a silver lining.
Fortunate places like Canada and British Columbia have the raw materials the world needs. We also have a strong environmental ethic, good regulatory systems, relatively high material productivity, and creative problem-solving abilities. We can reap the long-term economic benefits from our endowments of natural resources, and technology and process innovations. We need to promote what we do well, including our clean energy system inputs (80% renewable electricity), resilient and adaptable people, and penchant for trade. A world with a steadily expanding global middle class can offer important economic advantages and opportunities for Canada.
 “The Unprecedented Expansion of the Global Middle Class, An Update,” Homi Kharas, Brookings Institution, February 2017.
 The HDI provides a measure of human development using three key metrics: life expectancy, education and per capita income.
 Global Material Flows and Resource Productivity, Assessment Report for the UNEP International Resource Panel.
 Europe and North America, which had annual per capita material footprints of 20 and 25 tonnes in 2010, are at the top of the table. By comparison, China had a material footprint of 14 tonnes per capita and Brazil 13 tonnes.
 Resource Efficiency: Potential and Economic Implications, International Resource Panel Report, UNEP 2016.