The new leaders of global growth
This year is pivotal for the global economy. In 2013, for the first time since mechanisation led Britain down the path of industrialisation in the 19th century, emerging economies will produce the majority of the world’s goods and services.
The inhabitants of rich, advanced economies have long represented only a small but powerful proportion of the world’s population. Now, they are less economically important than the mass of people living in the world’s poor and middle- income countries.
The shift in the balance of global economic power is profound. It is also one that economists expect to continue. By 2018, the International Monetary Fund reckons emerging markets’ share of world output will have risen to 55 per cent, making the term “emerging” increasingly irrelevant.
Although living standards remain more than five-times higher in advanced economies, the gap has been narrowing rapidly since 1990. Where income and growth once went hand in hand, catch-up is now the theme. In addition to the emerging economies’ half share of global output, three-quarters of the world’s economic growth is set to depend on their dynamism during the next five years.
Mr Jim O’Neill, the recently retired chief economist at Goldman Sachs, likes to use a stark comparison for the shift. Annual growth of 8 per cent in China, he says, is now as important as 4-per-cent growth in the United States.
It is quite a contrast from 1980 when China was growing even faster but was a relative minnow: In 1980, 10-per-cent growth in China was less important than 1 per cent of any US expansion.
THE LONG MARCH
The long march to prominence of economies outside the Group of Seven — the US, Japan, Germany, the UK, France, Italy and Canada — should come as little surprise. Growth has been stronger in emerging economies for more than 30 years. Per capita living standards have been catching up for the past 20.