The economists, the statisticians and the investment bankers have done their work, and everybody in the financial world now has more or less the same picture of the future in their minds. The predictions are so consistent that even the general public thinks it knows where the trends are leading us: Asia and Latin America up, Europe and North America in a holding pattern, Africa and the Middle East down. But maybe the predictions are wrong.
Goldman Sachs started the game almost a decade ago with its study predicting that the BRICs, the four largest emerging economies (Brazil, Russia, India and China), would overtake the rich countries of the G7 (the United States, Japan, Germany, Britain, France, Italy and Canada) some time in the 2030s. The world’s economic center of gravity, the study implied, was shifting from the West to Asia.
Hardly anybody disputes this model any more; the pundits just differ on the details, like when China’s economy will pass that of the United States. As soon as 2020, said PricewaterhouseCoopers. 2027, says the latest Goldman Sachs prediction. 2035, says the Carnegie Institute. As late as the mid-2040s, according to Karen Ward’s recent study for HSBC. But they all agree it’s going to happen.
Ward’s study, “The World in 2050,” is particularly interesting for two reasons. One, because it is more realistic about China, whose economy is currently the biggest bubble in world history. And two, because it offers predictions for the world’s 30 biggest economies.
China’s economy, at $25 trillion annually, is only a couple of trillion ahead of the United States in 2050. (All calculations are in constant dollars of the year 2000.) Then there is a long drop to India at $8 trillion and Japan at $6 trillion — and no other country reaches $5 trillion.
Places five to 11 are mostly filled by the rest of the G7 countries, with only Brazil and Mexico breaking into the magic circle. The rest of the Top Twenty, however, are almost all developing countries (Turkey, South Korea, Russia, Indonesia, Argentina, Egypt and Malaysia), with only Spain and Australia from the developed world. So in this model, Asia and Latin America really are taking over, with 11 out of the top 20 slots.
Of the Middle Eastern countries only Egypt scrapes in at No. 19, just ahead of Malaysia (which has only a third of Egypt’s population). Most of the non-oil economies face virtual stagnation, and there are big question marks over the claimed oil reserves of a number of the oil states. Africa and the Middle East down.
Up and down are purely relative, of course, and there are certainly some large African countries with quite respectable projected growth rates, like Nigeria and South Africa. But despite the world’s highest population growth rates, no African country’s economy makes it into the Top Twenty by 2050.
It’s only a game, but it’s the sort of thing that the strategists and the geopolitics experts love — and it could be wrong. Not just wrong in detail, but utterly, spectacularly wrong.
The predictions are not simple-minded straight-line extrapolations. They all assume, for example, that China’s economy, which has grown at 10 percent for the past 20 years (and therefore doubled in size every seven years), will drop to about half that growth rate (doubling only every 14 years) well before 2050. But they do assume that energy — especially oil — will remain plentiful and relatively affordable for the next 40 years.
Even more implausibly, they also assume that global warming will not cause serious disruptions in the world’s economies over the next two generations. Yet there is already enough warming locked into the system by past, present and near-future emissions that severe disruption is virtually guaranteed, especially in the tropical and subtropical parts of the planet.
All the big “emerging” economies except Russia and Argentina are located wholly or largely in the tropics and-or the subtropics. That means they will almost certainly suffer very serious disruption, including huge losses in food production.
Just when the poorer countries finally start to catch up economically with their former imperial masters, the warming caused by two centuries of greenhouse gas emissions by the rich countries knocks them back yet again. Which may also knock all those predictions that the emerging economies will soon overtake the developed ones into a cocked hat.
Gwynne Dyer is a London-based independent journalist whose articles are published in 45 countries.