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05.08.2008, 09:01
Hamish McRae: In 2050 the world will be run by a new middle class – based in Asia
One of the difficulties of economic commentary at the moment is that the noise from the economic cycle is drowning out the signals about the long-term structural shifts in the world economy.
That is understandable and inevitable. This is, after all, a most interesting economic cycle, and we are at a sensitive point of it. We know that we are heading into some kind of global slowdown, but we know too that overall demand will be sustained by the Brics – Brazil, Russia, India and China. But that is about it.
We don't know the shape of the dip: how deep or how long? We don't know how seriously the various developed economies will be hit: will the US and UK, heavily borrowed but flexible, be more damaged than continental Europe, where personal debt is lower but the economies perhaps less nimble in their response to an external shock?
Crucially, we do not know whether strong continuing demand in Asia will in a sense "rescue" the old developed world by sustaining demand, or whether, by keeping up the price of energy and raw materials, actually increase the headwinds that the developed world already faces.
As you can see, the cyclical and the structural get jumbled together. We can see that this cycle will be different from previous cycles because of the structural shift of economic power to Asia, but we tend to focus less on the long-term effects of that shift. So I am grateful to the economic team at Goldman Sachs for drawing attention, with their latest run of the Brics econometric model, to this power shift, and in particular to the boom of the middle class of the new economic world. (I noted this study yesterday but I think it deserves more detailed coverage.)
What is happening is huge. It is bigger than the growth of the middle class in the 19th century, growth that changed the face of Europe and then North America, for within a quarter-century there could be another two billion people, most of them in Asia, leading a middle-class lifestyle. You could almost say that the idea of being middle class, with its values as well as lifestyle, will become a phenomenon of Asia as much as of Europe and North America.
To put some numbers on this, have a look at the graphs, taken from Goldman's latest paper. First, there is the global pecking order now, with China racing up the league of total GDP, and about to pass Germany this year or next. Now look at the 2050 league table in the next graph: utterly different. China has shot past the US, overtaking it some time around 2025, while India is snapping at its heels. Brazil, Russia, Indonesia and Mexico are all bigger than the second biggest of the present developed world, the UK. And Japan, France and Germany have smaller economies than Turkey.
If that comes as a bit of a shock, look at the wealth-per-head league in the other two tables. The US and UK head the pack both now and also in 2050. (I have not shown the results for 2020 but then the UK is actually a bit ahead of the US in GDP per head, becoming for the first time since the 1870s the richest country in the world.) Other members of the old developed world follow along, but the gap in wealth per head between the old rich and the new rich will be much smaller then than it is now.
To put that in perspective, the Chinese will in another 40 or so years' time have a standard of living that is about the same, maybe even a bit higher, that we have today. Indians will have a standard of living about the same as Koreans now, or Britons had a quarter-century ago. Iranians will have the same sort of living standards as Italians now. Indeed, you could almost say that being middle class will have become a global standard, bar for one region, Africa. Of that, more in a moment.
Meanwhile a word about the absolute numbers of this new middle class. Where are the 2 billion new middle class going to be? It depends of course on the threshold level you set for middle class status and on the income distribution within the country concerned. But Goldman reckons that some 35 per cent of the population of China now qualifies, and that this will rise to 70 per cent by 2020. India is running about 10 years behind China, with only about 5 per cent today (though up from just 1 per cent as recently as 2000). But the Goldman team reckons that by 2040 the vast majority of Indians will count as middle class. There will also be sizeable numbers in what it dubs the "Next 11", countries such as Mexico, Indonesia and Nigeria. (Note Nigeria will have a larger economy than Italy or Canada by 2050.)
What is happening, aside from this increase in wealth, is a narrowing of differentials globally. As a result of the progress made in China and India, the proportion of the world's population living on less than $1,000 a year has tumbled from around 60 per cent in the 1950s to about 15 per cent now. Goldman predicts that it will fall steadily from now on. As a result, whereas at the moment roughly half the world's poor now live in Asia and half in Africa, with just a tiny proportion in Latin America, by 2030 only about 10 per cent of the world's poor will be in Asia and 90 per cent will be in Africa.
Quite what happens about Africa is a matter that goes beyond the Brics exercise, but as Goldman acknowledges, there is a risk that the story of declining global inequality will pass some areas by.
All this assumes that the Bric model is more-or-less right. It has been so far; indeed if anything it has underestimated the progress made in India and China. But this sort of analysis does raise a number of objections. One is that it is too linear: that it assumes that what is happening will continue to happen. But that is what models do: they tell you what will happen unless there is some new and unexpected variable.
That leads to the second objection: that something new, maybe environmental pressures, will render these outcomes unattainable. I think that is a realistic objection, and we are getting a taste of the pressures that growth, particularly in China, is putting on the planet's resources at the moment. I think we have to hope that our technologies advance swiftly enough to cope with this pressure on resources and alleviate this. But that is a debate that goes beyond this exercise. If so many more people in the world are to enjoy a middle-class lifestyle, it will have to be a somewhat different type of lifestyle than the one we have become accustomed to, but no worse for that.
There are other, more detailed objections. To come closer to home, is it realistic to assume that the UK will continue to outpace its European competitors? The thrust of this report is the shift of power to Asia, but the shifts within the developed world are fascinating too. They are mostly the result of demography and in particular the size of the working population: projections for the US and UK are more favourable than those for continental Europe and Japan. But to focus on the detail is to miss the message: that increasingly the world will be run by a new middle class, largely in Asia, and that our ideas will matter less and less. Even if we wanted to, which we absolutely shouldn't, there is nothing we can do to stop it.
Hie mal eine statistik:
http://www.independent.co.uk/multimedia/archive/00038/hamish-mcrae-chart-1_38006a.jpg
Kurz:
Goldman Sachs' neustes econometrisches Model zeigt einen Machtumschwung, besonders für die Mittelklasse, in Richtung Asien.
Diese Entwicklung übertrift, von der Bedeutung her, die Bildung der Mittelklasse in Europa in 19. Jh.
Denn nach der Studie könnte es innerhalb eines viertel Jahrhunderts, weitere 2 Milliarden Menschen geben die ein Mittelklasse leben führen, hauptsächlich in Asien.
Nach der Studie wird sich die globale Hackordnung folgendermaßen ändern:
China wird absolut gesehen beim BIP führend, die USA werden 2025 von China überholt werden.
Gefolgt von Brazilien, Russia, Indonesien, Mexico und UK
Die Türkei wird die neunt größte Wirtschaftsmacht sein, noch vor Japan, Frankreich und Deutschland.
Und was die Verteilung des BIP pro Kopf betrifft, belegt die Türkei Platz 10.
----------------------------
Quelle: The Independent (http://www.independent.co.uk/news/business/comment/hamish-mcrae/hamish-mcrae-in-2050-the-world-will-be-run-by-a-new-middle-class-ndash-based-in-asia-863940.html)
One of the difficulties of economic commentary at the moment is that the noise from the economic cycle is drowning out the signals about the long-term structural shifts in the world economy.
That is understandable and inevitable. This is, after all, a most interesting economic cycle, and we are at a sensitive point of it. We know that we are heading into some kind of global slowdown, but we know too that overall demand will be sustained by the Brics – Brazil, Russia, India and China. But that is about it.
We don't know the shape of the dip: how deep or how long? We don't know how seriously the various developed economies will be hit: will the US and UK, heavily borrowed but flexible, be more damaged than continental Europe, where personal debt is lower but the economies perhaps less nimble in their response to an external shock?
Crucially, we do not know whether strong continuing demand in Asia will in a sense "rescue" the old developed world by sustaining demand, or whether, by keeping up the price of energy and raw materials, actually increase the headwinds that the developed world already faces.
As you can see, the cyclical and the structural get jumbled together. We can see that this cycle will be different from previous cycles because of the structural shift of economic power to Asia, but we tend to focus less on the long-term effects of that shift. So I am grateful to the economic team at Goldman Sachs for drawing attention, with their latest run of the Brics econometric model, to this power shift, and in particular to the boom of the middle class of the new economic world. (I noted this study yesterday but I think it deserves more detailed coverage.)
What is happening is huge. It is bigger than the growth of the middle class in the 19th century, growth that changed the face of Europe and then North America, for within a quarter-century there could be another two billion people, most of them in Asia, leading a middle-class lifestyle. You could almost say that the idea of being middle class, with its values as well as lifestyle, will become a phenomenon of Asia as much as of Europe and North America.
To put some numbers on this, have a look at the graphs, taken from Goldman's latest paper. First, there is the global pecking order now, with China racing up the league of total GDP, and about to pass Germany this year or next. Now look at the 2050 league table in the next graph: utterly different. China has shot past the US, overtaking it some time around 2025, while India is snapping at its heels. Brazil, Russia, Indonesia and Mexico are all bigger than the second biggest of the present developed world, the UK. And Japan, France and Germany have smaller economies than Turkey.
If that comes as a bit of a shock, look at the wealth-per-head league in the other two tables. The US and UK head the pack both now and also in 2050. (I have not shown the results for 2020 but then the UK is actually a bit ahead of the US in GDP per head, becoming for the first time since the 1870s the richest country in the world.) Other members of the old developed world follow along, but the gap in wealth per head between the old rich and the new rich will be much smaller then than it is now.
To put that in perspective, the Chinese will in another 40 or so years' time have a standard of living that is about the same, maybe even a bit higher, that we have today. Indians will have a standard of living about the same as Koreans now, or Britons had a quarter-century ago. Iranians will have the same sort of living standards as Italians now. Indeed, you could almost say that being middle class will have become a global standard, bar for one region, Africa. Of that, more in a moment.
Meanwhile a word about the absolute numbers of this new middle class. Where are the 2 billion new middle class going to be? It depends of course on the threshold level you set for middle class status and on the income distribution within the country concerned. But Goldman reckons that some 35 per cent of the population of China now qualifies, and that this will rise to 70 per cent by 2020. India is running about 10 years behind China, with only about 5 per cent today (though up from just 1 per cent as recently as 2000). But the Goldman team reckons that by 2040 the vast majority of Indians will count as middle class. There will also be sizeable numbers in what it dubs the "Next 11", countries such as Mexico, Indonesia and Nigeria. (Note Nigeria will have a larger economy than Italy or Canada by 2050.)
What is happening, aside from this increase in wealth, is a narrowing of differentials globally. As a result of the progress made in China and India, the proportion of the world's population living on less than $1,000 a year has tumbled from around 60 per cent in the 1950s to about 15 per cent now. Goldman predicts that it will fall steadily from now on. As a result, whereas at the moment roughly half the world's poor now live in Asia and half in Africa, with just a tiny proportion in Latin America, by 2030 only about 10 per cent of the world's poor will be in Asia and 90 per cent will be in Africa.
Quite what happens about Africa is a matter that goes beyond the Brics exercise, but as Goldman acknowledges, there is a risk that the story of declining global inequality will pass some areas by.
All this assumes that the Bric model is more-or-less right. It has been so far; indeed if anything it has underestimated the progress made in India and China. But this sort of analysis does raise a number of objections. One is that it is too linear: that it assumes that what is happening will continue to happen. But that is what models do: they tell you what will happen unless there is some new and unexpected variable.
That leads to the second objection: that something new, maybe environmental pressures, will render these outcomes unattainable. I think that is a realistic objection, and we are getting a taste of the pressures that growth, particularly in China, is putting on the planet's resources at the moment. I think we have to hope that our technologies advance swiftly enough to cope with this pressure on resources and alleviate this. But that is a debate that goes beyond this exercise. If so many more people in the world are to enjoy a middle-class lifestyle, it will have to be a somewhat different type of lifestyle than the one we have become accustomed to, but no worse for that.
There are other, more detailed objections. To come closer to home, is it realistic to assume that the UK will continue to outpace its European competitors? The thrust of this report is the shift of power to Asia, but the shifts within the developed world are fascinating too. They are mostly the result of demography and in particular the size of the working population: projections for the US and UK are more favourable than those for continental Europe and Japan. But to focus on the detail is to miss the message: that increasingly the world will be run by a new middle class, largely in Asia, and that our ideas will matter less and less. Even if we wanted to, which we absolutely shouldn't, there is nothing we can do to stop it.
Hie mal eine statistik:
http://www.independent.co.uk/multimedia/archive/00038/hamish-mcrae-chart-1_38006a.jpg
Kurz:
Goldman Sachs' neustes econometrisches Model zeigt einen Machtumschwung, besonders für die Mittelklasse, in Richtung Asien.
Diese Entwicklung übertrift, von der Bedeutung her, die Bildung der Mittelklasse in Europa in 19. Jh.
Denn nach der Studie könnte es innerhalb eines viertel Jahrhunderts, weitere 2 Milliarden Menschen geben die ein Mittelklasse leben führen, hauptsächlich in Asien.
Nach der Studie wird sich die globale Hackordnung folgendermaßen ändern:
China wird absolut gesehen beim BIP führend, die USA werden 2025 von China überholt werden.
Gefolgt von Brazilien, Russia, Indonesien, Mexico und UK
Die Türkei wird die neunt größte Wirtschaftsmacht sein, noch vor Japan, Frankreich und Deutschland.
Und was die Verteilung des BIP pro Kopf betrifft, belegt die Türkei Platz 10.
----------------------------
Quelle: The Independent (http://www.independent.co.uk/news/business/comment/hamish-mcrae/hamish-mcrae-in-2050-the-world-will-be-run-by-a-new-middle-class-ndash-based-in-asia-863940.html)