May 20, 2021

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

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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

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.

Biden’s nominees would bring diversity to the Fed—if they’re confirmed

President Biden has announced his roster to fill key vacancies on the Federal Reserve’s 7-seat Board of Governors. If confirmed by the Senate, Biden’s nominees would advance his economic agenda at the central bank. They would diversify the ranks of economic policymakers and likely tighten supervision of Wall Street.

Sarah A. Binder

Senior Fellow – Governance Studies



Mark Spindel

Chief Investment Officer, Potomac River Capital LLC

These nominations follow in the wake of Biden’s decisions late last year to reappoint Jerome Powell to a second term as Fed chair and to elevate Lael Brainard as second in command. Powell and Brainard already serve as confirmed governors, but the Senate will also need to approve their four-year leadership posts. If the Senate confirms all five, Biden’s Fed appointees would reverse the heavy GOP-tilt of the Board engineered by the Trump administration.  
Here’s what you need to know.
Diversity counts
Biden has nominated two Black economists, Michigan State’s Lisa Cook and Davidson College’s Phillip Jefferson, to seats on the Board. He has also named former Fed governor and Treasury official, Sarah Bloom Raskin, as the Fed’s vice chair of supervision, a position Congress created in the wake of the global financial crisis as the Fed’s top banking cop.
These appointments help to diversify the Fed’s almost exclusively white ranks. Since Congress revamped the Federal Reserve Act in 1935, creating the 7-seat Board of Governors, 82 people have served on the Board. Just three of them were Black men, and ten of them were white women. And while Biden’s nominations augment the Fed’s racial diversity, confirming Cook, Brainard, and Raskin would expand the number of women governors by just one, since both Raskin and Brainard already have Board service under their belts. Notably though, this would be the first Board with a majority (four) of seven seats filled by women governors.
Rough waters ahead?
Observers expect a broad swath of Senate Republicans to vote to confirm Powell, a Republican, to a second term as chair. However, it remains to be seen how many, if any, Republicans will vote to confirm the other four nominees. Of course, Senate Democrats—if they stick together—can confirm all four without any GOP support, since Democrats banned nomination filibusters back in 2013.
Like most Congressional decisions, Fed confirmation votes are more contentious today than they were even 15 years ago, before the global financial crisis. The figure below shows shrinking Senate support on final confirmation votes for Fed nominations since the Reagan administration. Of those nominees considered on the Senate floor between 1982 and 2011, only one, Alice Rivlin, received less than 94% of the vote. The most dramatic contests came in 2020: The GOP-led Senate rejected Trump’s nominee, Judy Shelton, by a vote of 47-50, and just barely confirmed another Trump nominee, Christopher Waller. Four other Trump picks never even made it to a floor vote.

Nor can Biden count on filling the Board swiftly. Prior to the financial crisis, nominees waited about three months on average for confirmation. After the crisis, the wait time ballooned closer to eight months. The Senate took nearly ten months to confirm Waller, a record delay for the contemporary Senate’s handling of Fed nominees. Even with Democrats in control this year, Republicans have found ways to slow down the Senate.
Beware partisan crosshairs
Decades of rising partisanship are seeping into senators’ views of the Fed, often turning otherwise low profile Board nominations into politically charged votes. At the same time, public attention to the Fed has grown with its expanding imprint on the economy.   
The central bank has played an outsized role in stemming the economic damage caused by the global financial crisis in 2007-08 and the global Coronavirus pandemic in 2020-21. And with interest rates near zero, central bankers need to use more creative and often contentious tools to manage the US economy. Critics from both sides of the partisan aisle blame the Fed for either doing too much—or too little—to stem an array of old and new problems.
Add in rising expectations that the Fed will hike interest rates early this year to combat inflation and a hot economy, these nominees will face questions at the core of central banking—how fast and how soon to take away the punchbowl. Raising the price of money is never easy, but this Board could find tightening especially difficult given the addition of Biden’s governors committed to the Fed’s goal of a stronger and more racially inclusive labor market. 
The parties also disagree about whether the Fed can or should do more to combat climate change, especially in light of Congress’s own tentative steps. Democrats want the Fed to use its supervisory powers to force banks to address climate risk in their lending decisions; Republicans think such policies fall outside the Fed’s mandate. Partisans also contest whether the Fed should do more to redress racial economic inequities.
Presidents use appointments to advance their agendas. The Fed is no exception, despite the myth that central banks like the Fed are “independent.” But given the often partisan Senate confirmation process, Democrats will likely need to hang together to get Biden’s picks over the finish line.

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