In 2015, the Family Business Center at the University of Louisville hosted a presentation by an expert on leadership agility and innovation named Greg McCann. At
the beginning of his seminar, McCann spoke about a colleague of his, Rich Morris, who said that: In the past one good business idea might sustain a company for three
generations; however, today companies will need to come up with three great ideas in each generation just to keep up with the changing world that we now live in.
This statement really resonated with me, because I had been struggling to adequately express how much I believed the rate of change had begun to accelerate in
most of the successful businesses with whom I do transition and strategic planning work. With McCann’s words (quoting Morris) in mind, I went in search of good, reliable,
data to begin to actually quantify the magnitude of change in the business world today and I thought that information about the size of the middle class globally would be a good single place to start. For the last century or so, a rising middle class has arguably been the best “early indicator” of larger-scale economic prosperity for entire countries and even
entire regions of the world.
What I found astounded me. A dramatic shift in the numbers of members of the middle class living in various regions globally had already taken place between 2009 and 2015 and that trend is expected to continue. Homi Kharas, a Senior Fellow and Co-Director in the Global Economy and Development program at the Brookings Institution, has been following the change in middle class populations by region of the world for nearly a decade.
Between 2009 and 2015, the number of members of the middle class in North America had actually decreased by 3 million (down 1%) and Europe had increased by 60
million (up 9%). In the same time period, Central and South America saw its middle class population increase by 104 million (up over 57%) and the Asia Pacific region saw
increases of 885 million (up almost 163%).
If we separate “The West” (North America and Europe), from “The Rest” of the world the statistics are even more staggering. During the same time period that the middle class in “The West” grew only 6%, “The Rest” of the world grew an astounding 132% – more than doubling in 6 years! To say that this implies that a dramatic shift would be an understatement, especially when you consider that when Kharas published his first data sets on the middle class in 2009, “The West” accounted for 54% of the world’s middle class and by 2015, “The West” represented only 35%.
Furthermore, if Kharas’ predictions are correct, by 2030, “The West” will host only 21% of the world’s middle class. And, the Asia Pacific region will dominate the world
with 65% of the world’s middle class living there. That’s right, in 21 years (2009-2030) there will likely have been a tsunami-sized reversal from “The West” dominating the
world’s middle class to “The East” dominating it.
Kharas also predicts that in 2030, the population of the world’s middle class will grow from a little over 3 billion to just over 5.4 billion that’s an increase of approximately 2.4 billion (up another 79%). During this same time period “The West” will add only 28 million, an increase of only 2.6%.
The good news is that many businesses in our Region are already doing business globally and more are entering new markets and new regions of the world every day.
Fortunately, with important infrastructure located here like River Ridge and the UPS World Port and many other competitive advantages our Region is uniquely positioned to
provide products and services to the world.
As the future shifts in the middle class continue to unfold, we will continue to see some of the most dramatic changes in human history – economically, socially,
technologically – but we will also bear witness to some of the greatest business opportunities in human history.
Certainly now more than ever, maintaining and developing a global mindset at an institutional level should be an integral part of team development as it will likely have a
dramatic impact on a company’s ability to grow sustainably.
Kharas, Homi. “The Emerging Middle Class in Developing Countries”. Brookings Institution June 2011 & “The Unprecedented Expansion of the Global Middle Class (An Update)”. Global Economy & Development. Brookings Institution February 2017
This article was written by and provided courtesy of Vaughan Scott, MBA, CPWA ® , Managing Director –
Investment Officer with Axiom Financial Strategies Group in New Albany, IN. Visit our website at www.AxiomFSG.com.