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Will China's Consumer Boom Spark US Shortages?
Published on:
Chinese and Indian consumers are living well and eating well. And that could spark a global crisis. The consumer boom in China and India will touch off global inflation and could lead to food and water riots if investment, policy, and technology don't keep pace.
Without smart, quick action by the private sector and government alike, surging Chinese and Indian demand for premium foods will lead to commodity volatility, runaway food prices, and worldwide water shortages as the "boomerang effect" brings the unexpected impact of Asian growth to U.S. shores.
That's the conclusion of research by The Boston Consulting Group (BCG).
"Chinese and Indian consumers are celebrating their newfound wealth by eating like Americans: they're shifting their diets from grain to meat," Silverstein said. "Their wealth is a good thing. It creates new markets and new opportunities. But it can also lead to global traumas: highly inflated food prices across the U.S., as well as dangerous worldwide shortages of key natural resources, especially water.
The Boomerang Effect Brings Surprising Outcomes from Asia to the U.S.
"This is an example of what we call the boomerang effect-a set of hard-to-foresee outcomes that come home to roost as a result of developments far away," Silverstein said. "We have seen it before. In the early 1990s, direct investment in China led to a flood of cheap goods and permanent shifts in the U.S. labor market. This time, it's different. The Chinese and Indian middle-class consumers have developed new food preferences that will lead to hypercompetition for commodities such as feed, corn, and water. Climate change is already creating droughts worldwide and bringing the threat of famine, food riots, and water wars in Asia. This new surge in consumer demand will worsen the strain in Asia and the U.S. as well."
But the boomerang effect doesn't necessarily lead to chaos, Silverstein added. "Crisis can always lead to opportunity. Smart investments and policies can limit the impact of inflation and shortages."
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