The emerged world of the 21st century
Economist David Hale includes some fascinating statistics in a recent WSJ op-ed piece. He notes that the rise of emerging markets and their growing ability to finance American debt and current account deficits, is “a complete reversal of 20th-century history.”
The current business cycle will go down in the history books as one which confirmed that leadership in the global economy is now shifting from the old industrial countries to the emerging market countries. During 2007, the developing countries produced over 52% of global growth, compared to 37% during the late 1990s. China alone produced 17.8% of global GDP growth last year, compared to 14.6% for the U.S. economy. The developing countries’ share of total world output has risen to 29% this year from 18% in 1995. The World Bank is forecasting that the economies of developing countries will grow 7.4% this year, compared to 2.2% in the old industrial nations.
As a result of their large current account surpluses, the developing countries also account for 75% of the world’s $6 trillion of foreign exchange reserves. They also have sovereign wealth funds with assets of $2.5 trillion. And there has been a huge expansion of developing-country stock markets during the past decade. Their market capitalization now exceeds $17.8 trillion, compared to $2.2 trillion in 2000. The capitalization of the U.S. stock market is $17.5 trillion.
In the decade before 2005, American consumers were the growth engine for the world economy, accounting for more than half of global consumer spending. The balance of power is now shifting.
In 2000, the consumer spending of the world’s 17 largest emerging-market countries was equal to 48% of U.S. consumer spending; last year it was equal to 65%. At current growth rates, the developing countries could exceed U.S. consumer spending by 2015.
This consumption boom is changing global trade patterns. America’s share of global imports has fallen to 14% last year from over 20% in 2000. The import share of the developing countries has grown to 40.6% last year from 33% in 2000.
This disconfirms the popular left-wing trope that the rich are getting richer while the poor are getting poorer. In reality, the rich are getting richer, but so are the poor. It suggests even that “inequality”, the fall-back number on which Western neo-socialists alight whenever they realise they simply cannot claim the poor are worse off than they were 50 years ago, is a fallacy.
These numbers remind me of the spectacular presentation Hans Rosling gave at TED in 2006, and a follow-up in 2007. If you haven’t seen his presentations, do yourself a favour and take the time to watch Rosling make data come alive:
Myths about the developing world, Hans Rosling, TED 2006
Watch the end of poverty, Hans Rosling, TED 2007
“The seemingly impossible is possible. We can have a good world,” he concludes, before debunking the image of the Swedish academic and statistician by swallowing a bayonet.
Growth in production and overall consumer spending within development countries do not indicate that it is the poor people in those countries whose lives improve.
You are simply *assuming* that they do.
And based on nothing but that assumption, you label reports of the poor getting poorer as “fallacy”.
Is this unfinished logic what served Hans Rosling as grounds for his spectacularly colourfull presentations?
First, I was talking about poor countries, not poor people. Second, I’ve cited data before that would support the view that the poor — by which I mean the poorest quintile of people — are getting richer in most countries. I’ve also explained the exceptions. Unfortunately I’m not near a computer today or tomorrow, so I can’t provide exact links right now — the search function on the right should be of use. Third, Rosling is perfectly clear about what data he uses, what it does and doesn’t mean, including an explicit drill-down that shows it’s important to recognise the differences within countries. Fourth, I’m quite convinced that no data in the world would convince you that we aren’t going to hell in a handbasket because of the evils of capitalism and liberty.