The rise of the middle class around the world is seen by many as the next frontier in business opportunities. In fact, the concept of "emerging markets" is closely associated with the likelihood of a rapid rise in middle-class incomes; in other words, a large "internal market potential" or an "increasing purchasing power among consumers." One report by McKinsey & Company estimated that annual private spending in emerging markets will reach $30 trillion by 2025. It has been estimated that global consumers and proportional spending will increase from 1.8 billion people spending $21 trillion in 2009 to 4.9 billion people spending $56 trillion by 2030.
Another trend, however, raises the prospect that these opportunities will be tempered, at least in certain markets. The so-called middle-income trap, also referred to as "growth slowdowns," is increasingly cited as a concern by analysts and policy makers in a growing number of countries. Middle-income traps have been defined differently by various analysts, but generally refer to a slowing or stalling of increases in income and productivity during specific periods of time, especially for countries once they reach a middle-income range. Many countries have seen their average living standards remain in a specific range for decades, while a relatively small group of countries have experienced continuous growth and have made it into the high-income range. These latter countries can serve as sources of policy recommendations to others. Singapore, Ireland, South Korea, and Taiwan are examples.
Prime, Penelope B.
"Emerging Market Challenges: Moving Beyond Trade to Promote the Middle Class and Avoid the Middle-Income Trap,"
Mercer Law Review: Vol. 65:
3, Article 8.
Available at: https://digitalcommons.law.mercer.edu/jour_mlr/vol65/iss3/8