Washington—The world is poised on the threshold of economic changes that will reshape global consumption, especially in rapidly growing emerging-market economies, according to a new book by Tomas Hellebrandt and Paolo Mauro of the Peterson Institute for International Economics. The authors project that consumers in these rising economies will spend their rising incomes less on food and more on transportation, energy, and services—straining infrastructure and accelerating climate change. The largest gains will occur in poorer regions, chiefly sub-Saharan Africa and India, followed by China and other Asian countries. In their book, World on the Move: Consumption Patterns in a More Equal Global Economy, Hellebrandt and Mauro analyze these changes in detail and warn policymakers to prepare for their projected profound effects.
“The narrowing income gap between the world’s rich and poor populations will benefit billions but will fundamentally reshape global consumption patterns,” said Adam S. Posen, PIIE President. “Mauro and Hellebrandt set out a persuasive map for how these developments will unfold in the next 30 years. The world they depict is indeed on the move, with income flaws transforming the international economy and the planet. This book is the Peterson Institute’s latest contribution in our ongoing research on inequality and long-run growth from a global perspective. Like all that prior work, World on the Move makes clear the trends and forces policymakers must plan for.”
While public discourse about inequality in the United States and other advanced economies is dominated by concerns about the rising income share of a relatively few rich individuals, Mauro and Hellebrandt find that inequality globally is declining and will continue to do so. Ignoring national borders and considering the income of all households across the globe, equality has risen among the world’s households since the turn of the millennium—the first time that has happened since the now advanced economies pulled ahead of the rest of the world during the Industrial Revolution. The authors project that this trend will continue, leading to a convergence in consumption opportunities and expenditures in emerging-market and advanced economies.
As incomes rise throughout the world, people will spend proportionally less on food and more on transportation, energy, and services. Massive investments in infrastructure (railways, bridges, roads, and ports) will be needed as spending on transportation rises, which will put a strain on government budgets, scarce natural resources, and the environment. Building new paved roads and railroads alone to meet rising global demand will cost an estimated $48 trillion through 2035. Many of the countries in which these investments are needed, however, have weak institutions. The authors suggest ways governments can ensure both that public money is not wasted and that the public sector is not saddled with fiscal risks from excessive guarantees to private providers. Furthermore, because climate change causes powerful international spillovers, global cooperation will be needed to avoid further environmental damage.
The Institute thanks the GE Foundation and the ERANDA Foundation for their support of this research.
World on the Move: Consumption Patterns in a More Equal Global Economy
by Paolo Mauro and Tomas Hellebrandt
assisted by Jan Zilinsky
The Peterson Institute for International Economics is a private nonpartisan, nonprofit institution for rigorous, intellectually open, and in-depth study and discussion of international economic policy. Its purpose is to identify and analyze important issues to make globalization beneficial and sustainable for the people of the United States and the world, and then to develop and communicate practical new approaches for dealing with them. Its work is funded by a highly diverse group of philanthropic foundations, private corporations, and interested individuals, as well as by income on its capital fund. About 35 percent of the Institute's resources in its latest fiscal year were provided by contributors from outside the United States. View a list of all financial supporters for the preceding four years.