Think the Industrial Revolution was a big deal? It pales compared to what’s happening today.
Two hundred years after the Industrial Revolution redefined economic power, shifted power bases around the globe and jettisoned the rural into the urban, it’s happening again.
Only faster. With more dramatic flair. And on an unprecedented scale.
Growing the global middle class
Western Canada’s response to this changing global landscape was the subject of the recent Canada West Foundation’s conference on the world’s growing global middle class (GMC). Speakers from the World Bank,McKinsey Institute and the Honorable Gerry Ritz paid tribute to both the challenges and opportunities ahead for all agricultural producers.
– It took 150 years to double the income of 10 million people in the UK at the time of the Industrial Revolution; it’s taken 12 years to double the income of one billion people in China.
– The next 15 years will add 3 billion more middle class consumers to the world’s total.
The outdated concept of emerging markets
The day’s talks made clear: We need to rethink the concept of “emerging” markets. Exporters have been referring to emerging markets… for years. While it’s true that many world economies have still to attain the income growth necessary to drive increased consumption, the common use of the term hides an important reality. Many conference speakers pointed out that in 2015, it’s fair to say these new players, the growing global middle class, have emerged. As in the past tense.
They’re here and are now in the process of furthering the incredible transformation they’ve already undergone. To think of them as “emerging markets” misses the point and the opportunity: these populations think of themselves as middle class, consume on the basis of middle class incomes and demand with the force and weight that only a large and growing middle class can bring to bear on markets.
The middleweight city: the new economic world champion
Certainly, at the city level, it makes more sense to talk about the economic power and consumption of the middle class. And cities, not entire countries, are where future market opportunities will appear.
– In 2007, 50% of global GDP came from cities in developed regions; according to McKinsey, in ten more years, 100 cities in China alone will count among the “City 600” – the world’s top 600 cities driving 60% of global growth.
– The dominance of the ‘mega-city’ – population 10 million or more – in world economics will give way to the economic virulence of the ‘middleweight’ city – population 150,000 – 10 million: by 2025, the 577 middleweights will contribute more than half of global GDP.
Food is one of the first and most important commodity choices in populations experiencing increases in disposable income. As income grows, consumers buy fridges before – and more frequently – than they buy washing machines. And even as the overall economic growth of certain economies fades – think of China as an example – that slow-down will impact imports of commodities used to build infrastructure before it impacts imports of food.
In Part 2 of this series, I’ll look at some of the challenges facing producers, including the World Bank’s projections for an extended period of lower ag commodity prices and the competition ramping up from within many of these same markets.
(This blog originally appeared on Farm Credit Canada’s website)
– By Martha Roberts, Economic Research Specialist, Farm Credit Canada