The widening wealth gap is the buzzy political concern of the moment. In America and in Europe, politicians on the left and even those on the right fret about the rising multiples of income that separate the professional and capital-owning classes and the rest. What we hear about less often is the continental quake – the shifting balance of prosperity between the old capitalist world of Europe and America and the emerging markets.
We were just getting used to the notion that the expanding market for luxury products is no longer Paris, London and New York but Shanghai, Dubai and Mumbai. What many had not noticed was the emergence of a new Third World back home. Paul Polman, the chief executive of Unilever, the soap to soup combine, this week delivered a stern warning about a decade-long slump in Europe and an emerging class of poor in the U.S., some 46 million people dependent on government support "who scrape by until the end of the month."
This is a recurring theme for Unilever which has over the past decade been shifting its business focus to emerging markets: the rising middle classes in these regions now account for more than half of its revenues. The Anglo-Dutch multinational has been doing business in Asia, Africa and Latin America for a century and it understands how to sell stuff to people with little cash – packaging soap and shampoo in small sachets rather than large containers. What is alarming is that these marketing lessons are now being transferred to the First World.
In August, Unilever warned of a return to poverty in Europe and its European head, Jan Zijderveld, said the company was in countries such as Greece, beginning to promote lower cost brands and products in individual sachets.
In the midst of all this parsimony, companies that sell luxury goods are still raking in the lucre. Porsche, the German sports car maker, has this year already beaten its annual record for car sales with a month to go. The company boasts that sales in November were up by 39 per cent. No suprise that the appetite for pricey motors is not coming from Europe, where sales are down, but from China in particular. Demand is also coming from the U.S., where the rich, again, are doing very well – while the emerging American poor buy soap in sachets.
In Britain, there has been some good news – employment is still increasing – but real wages (after inflation) are still falling. Meanwhile, house prices in the capital continue to rise at the same time as homelessness increases. Clearly, this is not sustainable, longer term. What is not apparent is any sign that the political classes, whether on the left or the right, have any useful solutions.
Carl Mortished