Saturday, February 09, 2008

Can the world afford a middle class?

By Moisés Naím February 8, 2008 LATimes

More countries are pulling themselves out of poverty, placing greater demand on food supplies and natural resources.

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. 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.