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How education innovations flourish

11:00AM-12:00PMYoung Changemakers
Student voice is crucial in innovation and changemaking. In this session, we offer a global perspective on innovation through four impressive Ashoka Young Changemakers from India, Singapore, the Middle East, and the United States. They will share their experiences using changemaking skills and make a direct connection to education systems that enabled their growth. FEATURING Garvita Gulhati (Ashoka Young Changemaker, India), Midria Pereira (Ashoka Young Changemaker, Brazil), Faye Simanjuntak (Ashoka Young Changemaker, Indonesia)

Figure of the week: Climate change and African agriculture

Agriculture is central to sub-Saharan Africa’s economic development and growth, but environmental and climatic changes threaten the stability of Africa’s agricultural development. In order to better understand how climate change will impact African agriculture, a recent report by the McKinsey Global Institute models the impact of changing precipitation and temperature patterns on staple crop yields in Ethiopia and Mozambique.
The report highlights the heterogeneity of climatic changes, as temperature and precipitation, across the continent vary substantially by region (Figure 1). In terms of temperature, McKinsey predicts that northern and southern Africa will experience the greatest increases relative to preindustrial levels. By 2050, nearly the entire continent will be experiencing at least a 2.6-3.0 Celsius temperature increase, and large swaths of both northern and southern Africa are projected to exceed increases of 3.5 Celsius. Consequently, McKinsey projects that the severity of drought will evolve to be much more enduring and pervasive over time, particularly in northern and southern Africa.
Figure 1. Evolution of precipitation patterns (left) and temperature patterns (right) in Africa

Source: “How will African farmers adjust to changing patterns of precipitation?,” McKinsey Global Institute, 2020. Note: Climate projections based on RCP 8.5 CO2 concentration—a high emissions scenario that reflects no further decarbonization.
The authors write that they expect these facets of climate change to have a severe impact on African agriculture, particularly by increasing crop yield volatility. Using the context of coffee and wheat production in Ethiopia and corn (maize) and cotton in Mozambique, the authors evaluate crop yield volatility by contrasting the probability of a 10 percent or greater decrease in crop yields in the present and 2030.
Figure 2 reveals the probability of declining yields by crop and country and categorizes the positive and negative climatological drivers behind the shifting yields. Notably, unlike the other staple crops researched in the case study, McKinsey projects a significant increase in cotton yield stability in Mozambique. The authors attribute this increase to cotton’s preference for warm temperatures. However, benefits for cotton aside, the authors maintain that the higher volatility for corn in Mozambique is extremely problematic and counters the benefits of higher cotton yields—as most corn in the country is grown for domestic consumption and more economically important than cotton: In the case of a 25 percent single-year decline in corn yields, McKinsey estimates that Mozambique’s economic output would decline 2.5 percent even after accounting for an increase in cotton yields.
Figure 2. The effects of climate change on African crop yields–today vs 2030

Source: “How will African farmers adjust to changing patterns of precipitation?,” McKinsey Global Institute, 2020. Note: Climate projections based on RCP 8.5 CO2 concentration – a high emissions scenario that reflects no further decarbonization.
In Ethiopia, where agriculture accounts for one-third of its GDP and more than seven in 10 Ethiopians depend on income from agriculture, the authors speculate that disruptions from climate change could be devastating. As the right-hand side of Figure 2 reveals, the probability of a 10 percent or greater decline in wheat yields in a given year is projected to rise 0.3 percentage points by 2030. This rise in the probability of weaker wheat yields reflects an approximately 43 percent increase from the probability of this event in the base year. With more than one-third of farming households dependent on income from cultivating wheat, and wheat providing 13 percent of the caloric intake of Ethiopians, the authors warn that climate change could hamper food security in the country.

Leo Holtz

Intern – Africa Growth Initiative

Christina Golubski

Associate Director – Africa Growth Initiative

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cmgolubski

Notably, Ethiopia is the top coffee producer in Africa and the 10th-largest in the world, and decreasing precipitation and rising temperatures may exacerbate the probability of a 25 percent or greater yield decline for Ethiopian coffee. Considering coffee is the country’s most valuable export crop, deriving more than one-third of the country’s export earnings, McKinsey analysts conclude that the economic impacts of climate change on both wheat and coffee in Ethiopia will detrimentally affect smallholder farmers, downstream sectors (trade and food processing), and the broader economy.
While the threat of climate change on the increasing volatility of crop yields looms in the near future for Africa, as well as throughout the world, McKinsey postulates that changes in technology and the adoption of modern agricultural practices, such as irrigation, new seed varieties, fertilizers, and machinery, have the potential to mitigate some of the heightened yield volatility. Although the continent has been slow to modernize agriculture, the authors underscore the importance of governments, investors, and international organizations to institute localized, commodity-specific agriculture planning, in addition to facilitating access to digital tools, in Africa.
For more on climate change and Africa, read “Climate adaptation and the great reset for Africa,” “Confronting the challenges of climate change on Africa’s coastal areas,” and “Africa can play a leading role in the fight against climate change.”

EUROPE: CEE PULSE

A summit between the US and Russian presidents in mid-June seems increasingly likely. Local elections in Croatia reaffirm the ruling party’s strength. A cabinet reshuffle in Latvia may take place after the municipal elections scheduled for 5 June. Meanwhile, in Ukraine, recent ca… Become a member to read the rest of this article Username […]

SOUTHEAST ASIA: Infection trends put travel plans on edge, spur vaccine search

The countries to watch are Malaysia (community transmission), Indonesia (possible post-Idul Fitri spike) and Thailand (vaccine deliveries by Siam Bioscience). Thailand will continue with its phased tourism reopening plan, with a milestone scheduled for July, but public confide… Become a member to read the rest of this article

COLOMBIA: No clear end in sight to protests

After three weeks of often violent protests, President Ivan Duque continues to struggle with the fallout of his aborted tax reform. Events of the past 24 hours demonstrate how fluid the situation remains while also providing clearer indications of Duque’s assumptions and strategy… Become a member to read the rest of this article

EUROPE: Managing the pandemic – what we are watching

This updated weekly piece provides snapshots of how selected European governments are dealing with the ongoing Covid-19 pandemic. Please do not hesitate to contact us if you want to discuss any of the countries mentioned in more detail. Graph of the week France – The key Cov… Become a member to read the rest […]

SUB-SAHARAN AFRICA: Macron’s summit outcome not shifting the pandemic dial

The declaration issued at the end of the 18 May ‘Summit on the Financing of African Economies’ hosted by French President Emmanuel Macron offers little to write home about as far as African countries’ immediate pandemic management and debt problems are concerned. The most notewor… Become a member to read the rest of this […]

A long-term view of COVID-19’s impact on the rise of the global consumer class

Wolfgang Fengler

Lead Country Economist, Southern Africa – World Bank

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Homi Kharas

Senior Fellow – Global Economy and Development, Center for Sustainable Development

COVID-19 has triggered the greatest global economic crisis since the end of World War II. It is important, however, to keep its impact in perspective and measure it against the long-term trends of steady economic progress in the world. Despite last year’s global economic meltdown, COVID-19 will only look like a blip in the steady expansion of the global consumer class, which we define as anyone earning more than $11 per day in 2011 PPP (or approximately $12 per day in 2017 PPP). In the long-term, the forces of demographic change and productivity growth are too strong to be substantially interrupted by a short-term crisis. Since 2003, when the number of poor and vulnerable people in the world probably peaked, the middle class ($11-110) has been growing fast. It is the dominant group in the consumer class; the upper class ( >$110) only includes some 200 million relatively wealthy people, although they do account for one-quarter of the total spending by the global consumer class (see Figure 1).
Figure 1. The growth of the global middle class seems unstoppable

Source: World Data Lab’s MarketPro, 2021 update
In 2019, we predicted that half the world—for the first time ever—would be part of the global consumer class, which combines the middle class and upper class. This also happened to be the first time half the world was older than 30 years. COVID-19 stopped the rise of the global middle class (and the global old age group) temporarily. However, due to Asia’s economic dynamism, the expansion of the global middle class is set to continue in the next two decades. 2020 and 2021 will likely be remembered as two of the most extraordinary years in the history of the global consumer class:

2020 has been the only year of decline since estimates of the global consumer class have been recorded. Despite population growth of around 80 million people, the global consumer class shrank by 75 million people compared to 2019.
2021 will likely be remembered as the year with the highest ever increase—175 million—of the global consumer class, most of which entered the middle class.

By the middle of 2021, the world economy, in the aggregate, will be basically where it was before COVID-19 hit everyone. Half the world is again spending more than $11 per day, half the world is spending less than $11 per day. The global consumer class is experiencing a V-shaped recovery. If the recovery continues, the global consumer class will reach 4 billion in 2022.
By the middle of 2021, the world economy, in the aggregate, will be basically where it was before COVID-19 hit everyone.
This also means that the group of poor and vulnerable will keep declining. In 2004, this group reached a historic peak of 4.4 billion people which has been unnoticed by the world community. Despite a global population group of 75 million people per year, the poor and vulnerable class will keep declining by an average of 70 million people per year. This means that we will be experiencing a fundamental reversal of global fortunes within one century. In 1950, 90 percent of the world were poor and vulnerable. Today, this stands at 50 percent and by 2040, the extreme poor and vulnerable will only represent 25 percent of the world’s population (Figure 1).
Consumer spending in 2030
By 2030, households around the world will spend an estimated $91 trillion (in 2017 PPP, it would be around $100 billion). This is almost 50 percent higher than in 2020. The drivers of these $100 trillion of consumer spending are almost equally the lower-middle class, the upper-middle class, and the upper class (representing the wealthy people). The breakdown and shifts are as follows:

Each segment of the consumer class should grow by approximately $10 trillion.
The largest spenders will be the 3.8 billion people in the lower middle class who will collectively spend an estimated $35 trillion (2011 PPP).
The upper-middle class and the upper class, people spending more than $50 per day, will number 1.4 billion and collectively spend over $50 trillion.
The poor and vulnerable will remain large in absolute numbers but will only account for $5 trillion or about 6 percent of total spending, having an ever more marginal economic weight.

Table 1. All major income groups will grow strongly until 2030—but the lower middle class spends most

Total spending
($ trillion, 2011 PPP)

Number of people
(in billion)
Average spending per person ($ thousand/year)

Upper Class
23 (+9)
0.3 (+0.1)
70 (+0.8)

Upper Middle Class
27 (+9)
1.0 (+0.4)
26 (+0.1)

Lower Middle Class
35 (+9)
3.8 (+0.9)
9.4 (+0.2)

Poor & Vulnerable
5 (-0.7)
3.3 (-0.7)
1.5 (+0.1)

TOTAL
91 (+27)
8.4 (+0.7)
11 (+2.5)

Source: World Data Lab’s MarketPro; Note: in brackets you see the difference between 2030 and 2020
This means that the expansion of the global consumer class seems unstoppable (as long as we successfully manage climate change). Fifty years ago, middle class consumers lived almost exclusively in Western countries. Today, middle class consumers are almost everywhere and by 2030, there will be middle class dominance with 4.8 billion people (plus 335 million wealthy people). The global consumer class is also expanding because people live longer, especially in Asia, which also means that global consumers are becoming increasingly older. One year after the start of COVID-19, global consumer spending is recovering strongly. Even the worst pandemic has not been able to interrupt long-term shifts.