Inadequate demand for primary commodities because of rising living standards

Nature

Consumer demand for some commodities does not rise as incomes rise (the per capita income elasticity of demand is low in the richer countries). In some cases, most notably with cereals as a source of food calories, rising standards of living tend, in high-income countries, to reduce per capita consumption to the point of offsetting the effects of population growth (which tends to be slow in such countries). This phenomenon leads to an unusually slow increase in demand for the primary commodities produced by the developing countries.

Background

The issue of inadequate demand for primary commodities amid rising living standards first gained prominence in the mid-20th century, as industrialized nations shifted consumption patterns toward manufactured goods and services. Economists and policymakers observed declining terms of trade for commodity-dependent economies, particularly in the 1960s and 1970s, prompting international concern. Subsequent analyses highlighted how technological advances and changing consumer preferences further exacerbated the vulnerability of primary commodity exporters in the global market.

Incidence

The inadequate demand for primary commodities due to rising living standards has affected numerous economies reliant on exports of raw materials. As consumers in developed and emerging markets shift preferences toward processed goods and services, traditional exporters of commodities such as coffee, cocoa, and minerals face declining global demand and price volatility. This trend undermines economic stability and development prospects in many low- and middle-income countries.
In 2022, Ghana experienced a significant drop in cocoa exports as European and North American consumers increasingly favored alternative products and premium processed chocolates. This shift contributed to a 20% decline in Ghana’s cocoa export revenues that year.

Claim

The inadequate demand for primary commodities due to rising living standards is a critical issue that cannot be ignored. As societies advance, their consumption shifts away from basic goods, devastating economies that rely on exporting these commodities. This imbalance threatens livelihoods, deepens global inequality, and destabilizes entire regions. Addressing this problem is essential for ensuring fair economic opportunities and sustainable development worldwide. We must act now to create more equitable and resilient global markets.

Counter-claim

The notion that rising living standards cause inadequate demand for primary commodities is not an important problem at all. In fact, higher living standards reflect economic progress, innovation, and diversification, naturally shifting demand toward value-added goods and services. This transition is a sign of development, not a crisis. Worrying about reduced demand for basic commodities ignores the broader benefits of prosperity and the opportunities it creates for more sustainable, knowledge-based economies.