The Price Tags Of Growth
Kent Wertimeon 13 March, 2019
The current synchronicity of global growth bodes well for the continued expansion of the middle-class around the world. The past quarter century has seen an amazing drop in overall global poverty, due to the emergence of two billion middle-class consumers who now have access to a myriad of services and products that improve their daily lives.
But while there are numerous, positive aspects of global growth, the wealth effect has also come at an increasing cost. Lifestyle changes across more of the fast-growth or “Velocity” markets in Asia are leading to a swell of health, social, and environmental issues, which collectively constitute a significant price tag of growth.
As Velocity markets continue to add another billion global middle-class consumers to their ranks in the next decade, they will need solutions to these problems to ensure that continued growth doesn’t come with such a trade-off. Ironically, in many countries this will mean concurrently tackling the problems of under-development in some areas and amongst certain segments of the population, while simultaneously addressing problems stemming from the wealth effect in other segments of their population.
For Velocity markets to enjoy the full benefits of future development, they will need to find new solutions to the following:
Price Tag 1: The Disease Boom
Some infectious diseases have been brought under increased control due to improved vaccination programs. But at the same time, “wealth-related” diseases such as diabetes and heart disease, which stem from significant shifts in diet and more pressurized lifestyles, are on the rise. Indeed, some could even argue that wealth diseases are experiencing a boom, especially in Asia-Pacific.
People from South Asia face a greater risk of cardiovascular disease and diabetes, and are likelier than people from elsewhere in the world to have a heart attack before the age of 50; in fact, almost one in three South Asians will die from heart disease before 65. This can be attributed to a number of factors, including a regional diet high in sugar and fats, and a cultural proclivity towards smoking. South Asians are also statistically more likely to be insulin-resistant. In China alone, almost 10 per cent of all adults currently live with diabetes – that’s approximately 110 million people (a figure expected to rise to 150 million by 2040), while a further 500 million people have prediabetes. Almost 1 million people in China die from diabetes and related conditions each year, 40 per cent of whom are under the age of 70. This will have potentially grave social and economic consequences unless this is reversed. China already spends $25 billion on managing diabetes.
People are also living longer than ever before, meaning care providers are also facing a rise in chronic conditions due to an ageing population. Healthcare officials, consumer product companies, regulators, and insurance companies are all re-thinking what can be done to address the growth of these lifestyle diseases. Self-tracking devices are already giving patients a degree of autonomy in their own care, in addition to generating a wealth of personal health data which can be used in future research.
Price Tag 2: Child Obesity
Childhood malnutrition was — and still is — a challenge in many markets. However, more children are now suffering from the opposite problem – too much food, too much of the wrong foods, and increasingly sedentary lifestyles. The increase in childhood obesity threatens the health of the next generation in several Velocity markets.
In 2015, China had the highest number of obese children in the world at 15.3 million, followed by India at 14.4 million. While primarily associated with high income countries, childhood obesity is also a concern in middle income Velocity markets including Indonesia, Malaysia, Thailand, and the Philippines. According to research by UNICEF, ASEAN and WHO, the causes of undernutrition and overnutrition are linked – a child whose growth is stunted in early childhood is at greater risk of becoming overweight later in life.
Additionally, risk factors such as physical inactivity and increased access to junk food with high trans fat and sugar contents are growing trends in Asia-Pacific. Nutrition education is a vital factor in empowering consumers in these markets to make informed choices about their own health, and that of their families.
Price Tag 3: Divorce
More Velocity markets, even traditional ones, are experiencing an increase in a Western export: divorce. The divorce rates have been rising as women become more economically independent and more willing to challenge traditional, socially conservative values. This has been further facilitated by the easing of legal restraints. China for example has seen a rapid and seemingly exponential rise in divorce rates over the past few years, with 4.2 million couples legally divorcing in China in 2016. To many, the country appears to be on the brink of a social crisis in a society where divorce used to be an extreme rarity.
This is having a profound impact on various societies that are adjusting to the social knock-on effect that results from divorce. For example, the phenomenon of “posthumous divorce,” in which somebody who has been widowed can legally divorce their late spouse in order to sever ties with their in-laws, is a growing trend in Japan; filings for posthumous divorce rose by almost 50 per cent between 2014 and 2016.
Price Tag 4: Digital Addiction
Across the planet, the advent of digital devices is bringing people the positive benefits of access, mobility, and greater ease of commerce. But the negative consequences of too much access – increasingly in the form of addiction – are being taken increasingly seriously by mental health professionals. Excessive screen time can actually cause atrophy of gray matter in the frontal lobe of the brain, and frontal lobe development has a direct effect on academic and professional success and personal sense of wellbeing.
The fear of being without one’s smartphone, also known as ‘nomophobia’, can result in a spike in heart rate and blood pressure, and most commonly affects those who use their devices to store, share and access personal memories. In 2015, 24 million of China’s 632 million internet users were thought to be addicted to their phones, prompting more than 300 “digital detox” teenage boot camps to open. In January 2018, the World Health Organisation listed gaming addiction as a mental health condition for the first time.
Smartphone addiction isn’t the only consequence of this new technologically-enabled paradigm; we’re in the midst of a tech-fuelled mental health crisis. 62 per cent of 18 to 34 year olds say that Facebook and Twitter make them feel inadequate, while almost half say their social media feeds make them feel unattractive. Instagram was ranked the worst social platform for mental health in 2017. The effects of an always-connected lifestyle range from sleep deprivation (which studies have linked to ADHD) to a variety of mental health problems, including depression and anxiety. Schools and workplaces are now turning to the principles of mindfulness to help foster a balanced and healthy relationship with technology.
Price Tag 5: Environmental Degradation
Cities such as Beijing and Delhi, once famed for their history, are today the poster cities for overwhelming pollution and air quality degradation. And this is just the tip of the iceberg. The growth of megacities is causing an alarming range of environmental problems as infrastructures reach their breaking point. China already emits more carbon from burning fossil fuels than the United States and Europe combined, and new figures suggest that the country’s climate-changing greenhouse gas emissions are still on the rise, with an increase in oil, natural gas and coal consumption, driven by a massive car market and recent boom in electricity use, which jumped 6.6 per cent last year.
India is also facing acute issues given rapid urbanisation and industrialisation that is putting a major strain on the country’s natural resources. Chennai, Sriningar and Guwuhati lost 50 per cent of their wetlands between 2000 and 2016 due to urbanisation. Carbon emissions in India rose almost 5 per cent in 2016. With 200 million more people expected to be living in cities by 2030, a focus on alternative energy will be fundamental as the nation continues in its rural-to-urban transition. An important first step is taking place in the state of Maharashtra, where a new initiative will see large industrial plants receive a public rating based on the amount of air pollution they produce.
Policy makers and energy providers alike will be required to confront the very real need for sustainable alternative solutions across Velocity markets in the not-so-distant future. One encouraging sign is the drop in renewable energy prices over the last few years – solar and wind power are at record lows, making it theoretically cheaper for governments to buy clean energy than to rely on coal, and more countries are experimenting with average citizens selling electricity back to the grid.
Price Tag 6: Traffic Congestion
Lastly, as infrastructures struggle to keep up with growth, traffic has become a rampant problem. This is more than a mere annoyance, as serious traffic problems become an economic inhibitor as well as a degrader of what should be increasingly better lifestyles. Poorly designed roads, bad driving habits, and a rise in car ownership are all contributing to substantial hours wasted on peak congestion, with an estimated cost to Asian economies of 2 to 5 percent of GDP annually. Jakarta, Manila, Hanoi and Ho Chi Minh City are at risk of reaching standstill levels of congestion by 2022.
Plus, the congestion on streets further compounds the environmental problems already noted, and accounts for a staggering number of fatalities; 50,000 people die in traffic incidents in Indonesia every year, about two thirds of which are motorcyclists and bus commuters. Vietnam also suffers from this “hidden epidemic”, with 15,000 traffic deaths last year.
Governments need to shoulder some of the blame for these problems, due to poor planning, inadequate regulations, and the paucity of social programs. Equally, it’s tempting to blame companies for the products and services they put into the market that contribute to these problems. But that won’t readily solve the problems. Equally, the Velocity markets won’t suddenly go into reverse, returning to old lifestyles and norms of yesteryear.
What’s needed is new world solutions to address this evolving spate of challenges. This is where smart solutions need to help offer opportunities for improvement: smart cities will be designed to optimize traffic flow through connected, intelligent highway infrastructure; more personalized and digitized health services will help both the old and young maintain better health; and less intrusive and intuitive technology will help lessen the creeping overload of a digitized world. The solutions aren’t easy. And some of these growth challenges – particularly related to infrastructure – will take some time and enormous capital to address. But in one way the future is clear: for future growth to be sustainable, it can’t continue to come at such a high expense.
Read Ogilvy’s The Velocity 12 Markets report here.