Rich, Global, and Vulnerable

I consider it to be an extremely important global trend. It cries out for statistics that do not exist. It takes experience to recognize it, but few people have that experience, so it is rarely discussed, if ever, from a global perspective. I refer to the rise of an ever more isolated, insular, global upper-class. There are consequences and not all of them are good. How it affects advice on investment in “frontier markets” is significant, but something I will discuss in a future commentary. Today, I want to consider the general picture.

I may not have statistics, but I do have nearly five decades of experience working, sometimes living as I do now, all over the world in more than 40 nations, as a staffer on multi-year projects, as a short-term and mid-term consultant, and currently as a full-time resident.

Throughout that period, I have worked with upper-class people and their representatives in these nations. In decades past, they sought me out. In the Philippines in the 60’s, I worked first in a large town, than a mid-sized city. My coworkers were middle-class, well-educated in their home nation, but lacking experience outside.

Local people with money would invite me to their homes to talk, sometimes for dinner, but primarily to talk. They shared their memories of Washington, New York, Boston and other US cities where they had lived, often to get a bachelor’s degree in an American university. They were pretty good folks overall, but isolated from people with similar backgrounds and experience. They followed global events as best they could in those pre-Internet days, but they were hungry for two-way communication and I could provide that. It couldn’t happen too often, I had work to do, but I enjoyed those occasional visits. But each left me feeling as if I had visited a tiny island in the middle of the ocean.

As the years passed, I did more and more work in capital cities, as well as towns and villages. Meeting or talking with upper-class people was completely ordinary. They ran the government. They had the only serious local investment money. In the 60’s, 70’s, and 80’s, most had their homes in small exclusive neighborhoods, many of them gated, surrounded by poorer neighborhoods and some really impressive slums. Larger perhaps, but still islands in the ocean of that city.

Then came the 90’s, the end of the Cold War, and the arrival of a new word in the common lexicon – globalization. Things took off from there and they have been accelerating.

For people like me, the change has been rapid, astounding, and obvious. After decades of flying in small planes to small airports in cities where the best restaurant would be closed by a health department in the US or burned by rioters in Paris, and the best hotels were….lacking in amenities, we suddenly found cities exploding with activity and new construction. When I went back to Accra, the capital of Ghana in West Africa, in 1995 after a decade’s absence, I found many new hotels, nice ones, but I had to struggle to get a hotel room. There were foreigners all over the place, all of them on business.

So it has been in city after city. Not simply in places like Panama City which is fairly well-known in the Old World of the North Atlantic as up-and-coming, but also cities like Ulan Bator in Mongolia, a nation that has had one of the fastest growing GDPs in the world for several years now. Money is flowing into a wide variety of nations that were considered to be “Third World” and unattractive not that long ago. Call them “emerging”, “frontier”, or whatever, nations that were mired in poverty for generations are coming into their own so quickly that many people just cannot keep up with it all.

I am not going to waste my time and yours with a long list of changes that have occurred in the last couple decades. The changes are immense and dramatic. They are also real. This is not “smoke and mirrors”. However, I know folks like to see something that helps demonstrate this visually. The UN Conference on Trade and Development provides two simple graphs that provide a decent overview.

Global imports and exports

That is just the last decade. Starting earlier would have likely made for an even more dramatic graph. In any case, this is not something coming down the road. It has arrived and has been here for awhile.

Throughout most of my lifetime, the saying, “When the US catches a cold, the rest of the world gets pneumonia”, or variations on that have been common and not without reason. But as you can see above, the crash in the US of 2008-9 did indeed hit the emerging market economies. However, their recovery indicates they were not the ones to catch pneumonia.

One of the side effects of this rapid economic growth is the sharp reduction of the insularity of the various national upper-classes. Not only are their numbers increasing as wealth grows in their nation, they are also much, much more closely interlinked with each other around the world than was ever the case before. Why?

Two factors do not separate them from the rest of us, influential though they may be. Yes, the Information Revolution has provided quick and easy access to people, products, and new ideas globally, but it is as useful for someone of low or middle income as anyone else.

Then there is what I call the Transportation Revolution which rarely gets much notice. I am not speaking of how quickly you can move from one nation to another. That really hasn’t changed much in the last few decades. I am talking about where you can travel. The end of the Cold War eventually opened up 95% of the world to everyone.

However, both of these “revolutions” technically were shared by every class. Then what factors made a difference for the upper-class?

1) The majority were better-off financially than other classes from the beginning of globalization.

2) They were, on average, better educated and more aware of global changes.

3) They already had traveled to other nations, vacationed there, and done business overseas.

4) They were already more likely to be bi-lingual and many from non-English speaking nations had already chosen English as their second language, despite English not yet being the global language it has become.

5) Quite logically, they had far more disposable income available to invest on a larger scale, from having homes to owning businesses or shares thereof in more than one nation.

Put all the above together and you have an understanding of why the upper-classes of so many nations recognized the opportunities presented by globalization early, understood their potential, and took advantage of them.

If you look back at that chart shown above, I suspect you would find, if the stats were available, that much of the money that fueled greater exports and imports to the “developing economies” came from within the ranks of the upper-classes of the “advanced (sic) economies”. You know them, the ones up to their ears in debt, still suffering from their self-inflicted “global financial crisis”, and seemingly incapable of facing the challenges they created for themselves constructively.

But there’s more. The upper-classes of North America, Europe, Japan and a few others of the “advanced economies” have serious competition. They are the upper-classes of the “emerging economies”. They are growing rapidly in number, they have degrees from universities every bit as good as their counterparts, and in every respect, they are beginning to live very much the same lives as their counterparts up north.

Above all, they are excited! They see the whole world opening up to them and, for a change, coming to them. Panama is one of those nations with dramatic GDP growth rates over the last ten years or so, the period I have been a resident here. The change in attitudes among the upper-class and the aspiring middle-class over that period has been so obvious that it cannot be ignored if you have any experience with them at all.

From a period of low self-esteem, feeling they were second-class global citizens, they are increasingly comfortable in New York, Geneva, Tokyo or any of a hundred other high-income cities. When once they hoped for an invitation to a major financial or investment conference in the “big” countries, now they divide their time from answering the many invitations they receive and hosting the conferences here in Panama. Friends of mine in other rapidly developing economies report the same.

In short, the “global upper-class” is now well in formation. Its members come from nations all over the world. They are well-educated, well-connected, well-traveled, and well-off. They are not all millionaires, much less billionaires, but they are rising rapidly in income and plenty of it is “disposable”. And in most cases, the share a common language – English.

They have formed their own community that knows no boundaries. They are not ignorant of their home nations, not at all, but neither are they wholly focused on their home nations. Now disappearing are the small “islands” of wealth in seas of poverty that I once experienced nearly everywhere I went.

But as with everything created by humans, there is a downside that is equally obvious if you step back and look at things as objectively and unemotionally as possible. This global upper-class may not be ignorant of their home nations, but they are far less attached to them. If things go wrong at “home”, they can always pack up and move, and they will be moving to another nation where they have visited before, done business before, and where they already have friends and associates. The upper-class has truly been “globalized”.

The problem is that there is only so much attention they can give to any one thing, just like every other human being. Today, they are losing touch with the middle, working, and lower classes (or whatever titles you want to give them). They have more important things to do and more important places to be, but that leaves them in a dangerous position….they are vulnerable.

What could go wrong as a result of this emerging global upper-class? Take a look at the European Union. There you can find a smaller-scale “continental upper-class” that drove the creation of the EU, but whose “union” is in serious trouble. They live in democracies and they are being re-introduced to their own general public. They lost touch and now they are being hit hard. Unless they get their act together soon and start providing the competent leadership they pretend to represent, they can expect worse to come. This is a warning to the global upper-class.

I want to stress something so there is no misunderstanding. I do not see the global upper-class as evil. I do not see any conspiracy. I see human beings dealing with their personal reality, just as you and I do, but it’s a different reality in some important respects. I think it very likely that if any of us were in their position today, we would be responding in a similar fashion.

But they have to be careful that they do not just create another island, no matter how large, only now in the global sea. They may find they have to fear their own climate change.

I have now reached the limit I have set for myself as to the length of any single blog post, so this must come to an end. I consider it a very important topic posing a very real potential problem in the future, so I will return to it in days to come, but let this be the foundation.

——-

This is a personal blog, more of a notebook, unadvertised and without promotion. It is where I jot down thoughts that are important to me and may potentially be used in other commentaries for general publication. I write when time and spirit allow. Should you stumble across it and wish to be notified of new posts, just enter your email address at the upper-right of this page. I have no other use for email addresses. I already have too many in my “address book”. Rest assured, yours will be kept private.

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