The Mighty Middle

Produced by (E) BrandConnect

By Harj Dhaliwal

As incomes rise and poverty declines, the world is becoming more middle class. Around the globe, five people enter the middle class every second. And it’s estimated that by 2030, out of a world population of around 8.5 billion, there will be 4.9 billion people who will be middle income – that is to say, earning $10-$100 per day (adjusted for what a dollar buys in their country). In other words, more than half of the people on Earth will be middle class.

But this phenomenon is not spread evenly around the planet. Almost nine in ten of the next billion middle class consumers will be Asian, hailing from China, India and South East Asia. And it’s no coincidence that this is a region where golf is currently booming. The game has come to be seen as a marker for emerging countries, because joining a club and playing golf are seen as a sign of status. For those who suddenly find themselves with disposable income, golf can be a powerful signifier of social success.

In the 2010s, more golf courses were built in China than in any other country in the world. But as regional export-based economies have boomed, other Asian countries are jostling to become the continent’s golfing capital. The latest to experience the boom is Vietnam, where the government has called for 89 new golf courses to be completed by the end of 2020 in an effort to attract golfers from the northern hemisphere where chilly winters make courses unplayable for a large part of the year.

Golf’s growing popularity in Asia signals a broader shift in global trade and manufacturing. The new Asian middle class has discretionary income and can spend it on luxury items manufactured all over the world. And at the same time, local companies that have grown fat by servicing this growing market are increasingly looking to export abroad.

The trade that flows in both directions depends on the existence of a sophisticated global supply chain that is constantly evolving. The growth of e-commerce has created an on-demand mindset. We want things to be delivered as soon as possible after we’ve ordered them. We don’t want next day, we want next-hour. So new technologies are being used to meet this demand. That can mean the use of sensor technology and the Internet of Things; advanced robotics and automation; and autonomous vehicles – anything that can make the transport of goods faster and more efficient.

The next step change in logistics innovation will be the use of Hyperloop technology. In early 2018 Virgin Hyperloop One partnered with DP World to start work on a powerful new system of delivering goods. DP World Cargospeed is the first initiative of its kind in the world; it will deliver on-demand goods at the speed of flight but at something close to the cost of trucking.

So how does it work? In layman’s terms we are integrating aerospace and high-speed rail engineering. Essentially we have a tube, we evacuate the air to create a partial vacuum, we put a vehicle we call a pod within it, we levitate that pod using electromagnetics, and then we propel it using linear induction motors. It can move at very high speeds with very little resistance and very high energy efficiency. The system is totally autonomous and requires very little human input.

We’ve been working very closely with all of the teams at DP World to understand what the logistics market of the future is going to look like and how our technology can be integrated into it, and we’ve identified that we’re looking at high-value, time-sensitive goods such as pharmaceuticals, perishable foods, and high-value electronics.

But more importantly, what we’re looking to do in our partnership with DP World is to understand how consumer behaviour will develop over the next 20 or even 50 years. By the end of 2020, the ecommerce business is going to be worth four trillion dollars, which is equivalent to the GDP of a country like Germany. That market is growing, and what’s driving it is the on-demand behaviour I mentioned earlier. That aligns very much with how DP World Cargospeed works. It’s an on-demand technology. We use algorithms to predict demand, so we can add pods or take them out when necessary, and we transport goods direct to destination at very fast speeds. We use a third less energy than the fastest bullet train on Earth and function at twice the speed.

Our vision for DP World Cargospeed is to radically change the way cargo and logistics operates today, and to open up new markets, which are hampered by poor connectivity. In effect, we’re looking at a balancing of economies around the world, helping to make efficient end-to-end logistics a commercial advantage for as many businesses as possible.

So it looks likely that the growth of the global middle class will increase yet further. Expect more golf courses, used by more people, in more countries throughout the world.

Produced by (E) BrandConnect, a commercial division of The Economist Group, which operates separately from the editorial staffs of The Economist and The Economist Intelligence Unit. Neither (E) BrandConnect nor its affiliates accept any responsibility or liability for reliance by any party on this content.