For the past couple years, everyone has been buzzing about the economy and state of the world, so we want you to be on the up-and-up—especially when you hobnob with family, old friends, and old flames this holiday season. From now through December, we’ll bring you a special “holiday cocktail chatter” segment every week, which will touch on current financial and world events you should know about.
Today, we cut to the heart of the matter: What’s the state of the world economy? As a planet, we are struggling with the twin forces of a rising middle class (good) and the aftermath of financial indigestion (not so good).
1. The Rise Of The Global Middle Class
There are over 6.8 billion of us on this planet (310 million of whom live in the United States). Roughly speaking, 1.8 billion of us have already hit “consumer status,” which roughly means annual household earnings of at least $5,000 US per year. But, during our lifetimes, roughly 1 billion people have limited hope of coming anywhere near that threshold. That still leaves 4 billion people who are heading toward middle class status, many of whom live in the "BRIC" countries (Brazil, Russia, India, and China). From a purely economic standpoint, the upside is that there are a lot more people to sell products and services to. From a human standpoint, of course, the upside is that many more people will have many more opportunities. However, change can be messy. As our planet has started going through these transitions, there have been some hiccups.
2. Global Financial Indigestion
In 2005, New York Times columnist Thomas Friedman wrote The World Is Flat: A Brief History of The 21st Century, a cult phenomenon that described the rapidity with which information, ideas, and problems can now spread around the globe. This means that good ideas can spread rapidly, but so too can bad ones. That's what happened with a lot of financial practices. As a result, many countries are now dealing with their own versions of the sub-prime mortgage bailout crisis. Across the globe, spending exceeded income—for governments, many businesses, and individuals. So, now we're left to deal with the fallout. Current hot spots include India (India's Major Crisis in Microlending), Ireland (The Irish Bailout Crisis), and Greece (Greece's Economy To Shrink By Up To 3%).
The Effect Of These Two Factors Going Forward
The pains our global economy faces are the inevitable side effects of change. It just feels extra rough this time around because, in this global world of the internet, the ups and downs are chronicled 24/7/365. If history is any indication, human ingenuity will prevail and we'll get back to the right balance.
Tell us in the comments: Which country do you think is in the greatest financial straits?