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Going Beyond East and West

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It is undeniable that the world has been going through in these very last decades major changes and profound transformations which have been challenging the post-world war II international order.  

The first driver at the basis of these changes has certainly been economic. The reduction of trade restrictions and falling costs of transport and communication, brought along through progressive trade liberalization promoted in the WTO framework by the Uruguay round, first, and the ongoing Doha Round then, has certainly boosted economic integration which has risen rapidly worldwide in these very last decades and which has gradually led to the emerging of new economies (which just back to two decades ago were considered as poor developing countries).

Indeed, we are assisting today to the rising of new economies (e.g. not only the BRICS countries, but also Turkey, South Korea, Indonesia, Nigeria etc.) – often referred to as “emerging economies”, in terms of their increase of share in the world GDP, per capita income, or trade – which are challenging the global leadership (especially of the economy) of the “West” (US+Western Europe) and demanding for more recognition and, especially, more leadership within it.

The numbers of course are more helpful than words to support these statements. Hence, if we look at how the share in the world GDP has been changing during these past decades (according to an FT study on it), we gather evidence for our thesis:

1) Between 1982 and 1987 the wealth between emerging and advanced economies was divided with 31% in the hands of emerging and 69% in the hands of the advanced economies. In this period while the U.S. had 29.8% of GDP, Japan 10.3%, Germany, the UK and Italy 10.6%, China had a 9.9% share and India 3.8%.

2) Ten years later, between 1992 and 1997, things changed and the share between the two hypothetical blocks underwent a first violent move. The U.S. share drops to 24.2%, Japan – in what is called its lost decade – moves down to 3.8%, while China moves up to 18.9%, India registers 6.1%, and Mexico and Indonesia arrive on the stage.

3) But it is only at the turn of the millennium, between 2002 and 2007, that we witness the first real shift of the balance in favour of emerging economies. The U.S. share drops to 12.6%, whereas China’s moves up to 23.6% and India’s to 7.7%. Japan and Western Europe continue their fall and Turkey surfaces with its 1.8%.

What as for future prospects?

The U.S. are expected to account for half of the share of advanced economies’ growth, whereas China’s share is predicted to reach 33.6% and account for half of emerging economies’ share of global growth. India will reach 9.4% and the MIST countries: Mexico 1.6%, Indonesia 2.4%, South Korea 1.8% and Turkey 1.35%.

Actually, major contribution to the world’s GDP in 2013 came from Asia (especially South – East Asia); Africa and to a less extent from South America (also according to world’s GDP forecasts for 2013 from the April 2014 IMF World Economic Outlook).

By 2030 Brazil, Russia, India, and China’s combined share of world GDP is expected to match that of the original G7 countries. Moreover, by 2035, the BRICS + Indonesia, Turkey, Mexico, Korea, Saudi Arabia and Nigeria are forecast to rank among the world’s top twenty economies.

This trend is also confirmed by other important figures:

– Emerging countries’ share of global exports has increased over the last decade from 33% to 43% and their share of global foreign direct investments (FDI) inflow has grown from nearly 20% to over 50%.

– Over 60% of the world’s population (which has climbed from 1.6 billion in 1900 to around 7 billion today, and is projected to exceed 8 billion by 2025 and perhaps 9 billion by 2050) is likely to live in Africa and Asia by 2050.

– If Europe’s defense spending is plunging (by 15%, since the beginning of the economic crisis), and the US defense budget is hammered by across-the-board cuts, China’s military expenditure is rising at a pace roughly equal with GDP growth of 7% or more, a trend emulated by most of the emerging powers.

– A rising middle class. It is believed that the global middle class could constitute between 50% and 75% of the world’s population by 2030. Moreover, by 2030, it is forecast that two-thirds of the global middle class will be residents of the Asia-Pacific region, up from just under one-third in 2009 (see box below). On the other hand, although the middle-class populations in North America and Europe will remain roughly constant, their respective shares of this population are drastically reduced in the following forecast – Europe’s declining by more than half to 14% by 2030.

 

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