one view
"THIS year will be the first in which emerging markets account for more than half of world GDP on the basis of purchasing power, according to the International Monetary Fund (IMF). "
"In 1990 they accounted for less than a third of a much smaller total."
" From 2003 to 2011 the share of world output provided by the emerging economies grew at more than a percentage point a year (see chart 1). "
"According to a recent study by Arvind Subramanian and Martin Kessler, of the Peterson Institute, a think-tank, from 1960 to the late 1990s just 30% of countries in the developing world for which figures are available managed to increase their output per person faster than America did, thus achieving what is called “catch-up growth”."
" That catching up was somewhat lackadaisical: the gap closed at just 1.5% a year. "
"From the late 1990s, however, the tables were turned. The researchers found 73% of developing countries managing to outpace America, and doing so on average by 3.3% a year. Some of this was due to slower growth in America; most was not."
"The remarkable growth of emerging markets in general and the BRICs in particular transformed the global economy in many ways, some wrenching. Commodity prices soared and the cost of manufactures and labour sank. Global poverty rates tumbled."
" Gaping economic imbalances fuelled an era of financial vulnerability and laid the groundwork for global crisis"
". A growing and vastly more accessible pool of labour in emerging economies played a part in both wage stagnation and rising income inequality in rich ones."
"The shift towards the emerging economies will continue. But its most tumultuous phase seems to have more or less reached its end."
" Growth rates in all the BRICs have dropped."
" The nature of their growth is in the process of changing, too, and its new mode will have fewer direct effects on the rest of the world. "
"The BRIC era arrived at the end of a century in which global living standards had diverged remarkably. Towards the end of the 19th century America’s economy overtook China’s to become the largest on the planet. By 1992 China and India—home to 38% of the world’s population—were producing just 7% of the world’s output, while six rich countries which accounted for just 12% of the world’s population produced half of it. In 1890 an average American was about six times better off than the average Chinese or Indian. By the early 1990s he was doing 25 times better."
Riding the whirlwind
"The fruits of this cheap labour were huge steps forward in global trade."
" Merchandise exports soared from 16% of global GDP in the mid-1990s to 27% in 2008."
" The Chinese share of global exports topped 11%, with trade accounting for more than half of the country’s GDP."
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"The growth in trade was matched by a growth in demand for commodities as China and the nations supplying it soaked up energy and raw materials such as iron ore, copper and lead (see chart 3). Prices surged, generating a bonanza for the emerging world’s commodity producers and contributing to a broad-based boom, to the great benefit both of fellow-BRICs Russia and Brazil and of smaller economies, including many in Africa."
"From 1993 to 2007 China averaged growth of 10.5% a year. India, with less reliance on trade, managed an average of 6.5%, more than twice America’s average growth rate. The two countries’ combined share of global output more than doubled to nearly 16%."
" Global financial imbalances ballooned. "
"From 1999 advanced economies ran a current-account deficit which peaked at nearly 1.2% of rich-world GDP in 2006."
" Emerging economies’ combined current-account surplus peaked in the same year at 4.9% of GDP."
". China sits atop a $3.5 trillion hoard, more or less all of it piled up since 2000. All told the BRICs have reserves of about $4.6 trillion."
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"The emerging economies’ share of output is no longer rising as fast as it did in the 2000s. In 2009 the year-on-year increase in that share was almost one and a half percentage points (see chart 1). Now it is back below one percentage point."
" This tallies with a striking slowdown in BRIC growth rates."
" In 2007 China’s economy expanded by an eye-popping 14.2%. India managed 10.1% growth, Russia 8.5%, and Brazil 6.1%. The IMF now reckons China will grow by just 7.8% in 2013, India by 5.6%, and Russia and Brazil by 2.5%."
"Unsurprisingly, this means that the BRIC economies are contributing less to global growth. In 2008 they accounted for two-thirds of world GDP growth. In 2011 they accounted for half of it, in 2012 a bit less than that. "
"The IMF sees them staying at about that level for the next five years. Goldman Sachs predicts that, based on an analysis of fundamentals, the BRICs share will decline further over the long term. Other emerging markets will pick up some of the slack. Yet those markets are not expected to add enough to prevent a general easing of the pace of world growth"
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". Bleeding-edge innovation is harder than catching up."
" the “Next 11”
Bangladesh, Indonesia, Mexico, Nigeria and Turkey.
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" The N11 has a population of just over 1.3 billion. That is less than half that of the BRICs. "
"When the BRIC economies began their economic surge their population-weighted output per person was just 7% of America’s
the N11 is already 14% of that in America. "
"in India, where population has risen fast, that its figure today is still just 8%."
". Two decades of BRIC-led growth mean that there are far fewer people earning very little. In 1993 about half the world lived at below 5% of American GDP per person, according to an analysis of IMF figures by The Economist (see chart 5). In 2012 the equivalent figure was 18% of American GDP per person."
". The world economy is much larger than it used to be: twice as big in real terms as it was in 1992, according to IMF figures. "
"That means that emerging markets—whether the BRIC economies or the N11 or both—must deliver larger absolute increases in output to generate a marginal economic boost matching that seen in the 1990s and 2000s."
"The same maths apply to labour markets. New additions to the workforce will henceforward have a harder time disrupting the global economy."
" The billion jobs that the McKinsey Global Institute sees as having been added to non-farm employment from 1980 to 2010 boosted it by 115%. If the world were to put on another billion jobs from 2010 to 2040 that would represent just a 51% increase in world employment: impressive but much less dramatic."
". China’s working-age population began shrinking in 2012."
" India, with more favourable demographics, is struggling to create enough employment;"
" it added no net new jobs between 2004-05 and 2009-10, according to a recent survey."
" Big demographic booms are brewing elsewhere: Nigeria, for example, may be more populous than America in less than 40 years."
". Emerging-world reserve accumulation has diminished along with current-account imbalances. "
"Since 2011 Chinese reserves have been mostly flat."
". The transition need not be painful. In China a slower overall growth rate may feel fine to workers if the share of consumption in the economy rises relative to investment."
" In India, though, the picture is not so pretty."
". If central banks fail to stem capital outflows then slower growth could give way to outright contraction."
Many countries will find that commodities no longer provide a crutch. David Jacks, an economist at Simon Fraser University in British Columbia who studies
" long-run commodity-price movements may have already begun a sustained period of below-trend price growth."
". A slowdown could bring new focus to global trade talks. A deal that addressed non-tariff trade barriers, and especially those on trade in services, could yield big benefits."
". A century ago the world’s last great era of trade integration ended with a war and ushered in a generation of economic nationalism and international conflict."
" The recent proliferation of regional trade agreements could signal a move towards fractionalisation of the global economy."
" And slowed growth in the now-large BRICs could lead to the sort of internal tensions that countries can displace by picking external fights."
