The thesis of The $10 Trillion Prize is that the economies of China and India will continue to grow and that annual consumer spending in the two countries combined will reach $10 trillion by 2020. Consumers with middle-class aspirations already number in the hundreds of millions in China and India—and by 2020, there will be nearly 1 billion middle-class Chinese and Indians. Over the current decade, 135 million Chinese and Indian citizens will obtain a college education. Meanwhile, labor productivity will increase dramatically as both countries continue the movement from rural agricultural economies to modern industrial powerhouses with investment in plants, infrastructure, modern housing, and dependable power at home and at work.
We believe that the case for momentous growth is persuasive on the basis of four fundamental growth drivers:
A Booming Middle Class. China and India will see the rise of 300 million middle-class households with vitality, confidence, and eagerness to spend. There will also be a remarkable surge in so-called PhDs—the poor, hungry, and driven—with those between the ages of 20 and 30 outnumbering American youth by ten to one. These young people have boundless optimism and potential.
Multiple Market Segments. The new consumers of China and India include high-income individuals and a vast middle class—but also an enormous number of people living below the poverty line who may soon leap forward into the middle class, a group we refer to as the next-but-one billion. Over the current decade, most spending will occur in the cities, but rural communities, if properly supported by government investment, will boom as well, with per capita income increasing across all of these segments.
Changing Patterns of Trade, Technology, and Information. Revolutionary changes will make countries, consumers, and companies more closely interrelated than ever before. Market penetration will require rapid-fire response times and the ability to master local differences and customize to each segment, imitating and then improving upon incumbent products and brands. Hypercompetition will follow and new alliances will be required, sometimes bringing rivals together in new co-ventures.
The Distinct Role of Government. In both India and China, the role of government is different than in the West. The two governments invest in and interact with business organizations in much more complex ways, and their influence in these partnerships is profound. In both countries, the government can act as an inhibitor or a patriarch, a corrupt entity that has to be circumvented or a proud national sponsor of industry—safeguarding citizens and ready to invest billions.
But this consumer-driven growth is only the first burst of historic economic energy. It will also lead to enormous global infrastructure projects, mostly involving roads, telecom, power, airports, water, health care, and educational institutions. It will drive the rise of powerful, capital-rich companies in China and India, many with official and unofficial state backing and 50-year time frames. It will create worlds of disparity with distinct groups of haves and have-nots, where the rich work and live side-by-side with the poor. There will be massive income growth in China, in contrast with very modest growth in the United States and the West.
India, too, is at an inflection point. The cronyism and corruption that tarnish its democracy, and the gaping disparity among its social classes, need to give way to fundamental change, to fully ethical and accountable government leadership, collaboration, and investment across all sectors.
Prodigious new consumption in China and India will also lead to increased environmental hazards, urban sprawl, and massive boom-or-bust industrial projects. In both countries, there will be ongoing battles between harmony and stability, greed and fear.
There is a second-order consequence of all this growth. We call it the boomerang effect because of all the ways in which rising demand in China and India for everything from food and water to housing, luxury goods, transport, and education will boomerang back to Western nations—leading to price volatility, inflation in supply-constrained commodities, scarcity of resources, and hypercompetition. The boomerang effect will mean chasing new consumers around the world, learning new lessons, meeting competition in all its forms, and playing on a field where the winner takes the globe.
Some companies and people will lose—the slow-to-move and the uneducated will fall victim. There will be tragedies of corporate indecision: failed investments, conflicting priorities, the wrong products, the wrong distribution chains, leadership sacrificed, and fortunes lost. Winning a slice of the prize will take considerable courage and perseverance—on the part of CEOs and politicians alike.