New Economic Reality
The economic trend
of the globe is moving towards the East, according to a recent report. By 2050, the
global economic centre of gravity is poised to be in Asia, where top 4 countries
out of 5 in terms of per capita income will be. The report predicts
that within 40 years, Asia will boast more wealthier residents than any other
continents.
Fastest Growing economies
Compiled by
Citibank and a property consultancy named Knight Frank, it’s a lengthy
analysis styled "The Wealth Report 2012," based partly on interviews with the super rich (people with more than
$25 million in investable assets). The most interesting part of the study is
that, it predicts that Singapore-the tiny Southeast Asian city-state will be
the world’s richest nation by 2050, with an estimated per capita income of
$137,710.By that they mean its per capita GDP at purchasing power parity (that
is, it attempts to more accurately measure the average income by considering
inflation, cost of living and exchange rates).
More interestingly, the report predicts that India,
Bangladesh, Vietnam, the Philippines, Mongolia and Sri Lanka all make the
fast-growing list. Of the top 10 fastest rising economies- all but three are in
the region (Table-2). By contrast, the western European countries as
well as Japan will be the worst performing ones.
Shifting Centre of Gravity
LSE professor
Danny Quah forecasts that by 2050 the world’s economic centre of gravity- a
theoretical measure of the focal point of global economic activity based on
GDP, will have shifted eastwards to lie somewhere between China and India. In
1980 it was in the middle of the Atlantic.
Apart from those
who inherit wealth, most of the millionaires are business owners. To be able to
amass such huge amounts of wealth, means there must be an alignment between
opportunity and ability present in these economies. The sectors where most wealth
are generated from are- natural resources, manufacturing and construction. Citi forecasts that the North American and
Western European share of world real GDP will fall from 41% in 2010 to just 18%
in 2050. Developing Asia’s share is expected to rise from 27% to 49% in 2050.
China will
overtake the U.S. to become the world’s largest economy by 2020, which in turn
will be overtaken by India in 2050. Russia or Brazil (part of so-called BRIC)
do not make it on to Citi’s list of Global Growth Generators (“ 3G” countries).
Instead Citi includes countries such as Bangladesh, Egypt, Indonesia, Iraq,
Mongolia, Nigeria, Philippines, Sri Lanka and Vietnam on this list.
While these
countries can expect rapid economic growth, much of the wealth already held in
developed economies will be maintained, according to Citi.
Measuring a
country’s affluence in terms of GDP per capita shows that Singapore currently
tops the chart. By 2050, Singapore is expected still to be in the top spot,
with Hong Kong and Taiwan moving up to take the second and third places. But
the U.S., Canada, UK, Switzerland and Austria will all still be in the top 10, although
the U.S. will have dropped down to fifth place in the overall rankings (table-3
). And the U.S. is the only non-Asian nation to make it through top 5.
Canada, Switzerland
and Austria will be able to maintain their berth into the top 10 list upto that
time (2050). But old world economies will have the worst growth performance in
the next 40 years, the report predicts. Spain, France, Italy and Germany are at
the bottom of this list. But, Japan and its aging population will have the
weakest projected growth of all economies, Knight Frank estimates.
Most of the
countries coined as 3G are currently known as “emerging markets”. But this term
is used to tag those countries that are considered likely to thrive in the
globally integrated economy.
Table
1: THE WORLD’S LARGEST ECONOMIES
2010
|
Countries
|
GDP
$tn
|
2050
|
Countries
|
GDP
$tn
|
1
|
US
|
14.12
|
1
|
India
|
85.97
|
2
|
China
|
9.98
|
2
|
China
|
80.02
|
3
|
Japan
|
4.33
|
3
|
US
|
39.07
|
4
|
India
|
3.92
|
4
|
Indonesia
|
13.93
|
5
|
Germany
|
2.91
|
5
|
Brazil
|
11.58
|
6
|
Russia
|
2.20
|
6
|
Nigeria
|
9.51
|
7
|
Brazil
|
2.16
|
7
|
Russia
|
7.77
|
8
|
UK
|
2.16
|
8
|
Mexico
|
6.57
|
9
|
France
|
2.12
|
9
|
Japan
|
6.48
|
10
|
Italy
|
1.75
|
10
|
Egypt
|
6.02
|
·
GDP by purchasing power parity (PPP)
·
Source: Global Growth Watchers, Citi Investment Research and
Analysis, 2011
Table 2:
ECONOMIC GROWTH (3G) 2010-2050
|
TOP
10
|
%
|
BOTTOM
10
|
%
|
1
|
Nigeria
|
8.5
|
Spain
|
2.0
|
2
|
India
|
8.0
|
France
|
2.0
|
3
|
Iraq
|
7.7
|
Sweden
|
1.9
|
4
|
Bangladesh
|
7.5
|
Belgium
|
1.9
|
5
|
Vietnam
|
7.5
|
Switzerland
|
1.9
|
6
|
Philippines
|
7.3
|
Austria
|
1.8
|
7
|
Mongolia
|
6.9
|
Netherlands
|
1.7
|
8
|
Indonesia
|
6.8
|
Italy
|
1.7
|
9
|
Sri Lanka
|
6.6
|
Germany
|
1.6
|
10
|
Egypt
|
6.4
|
Japan
|
1.0
|
·
GDP change year on year
Table 3: GDP PER
CAPITA
2010
|
Countries
|
$US
|
2050
|
Countries
|
$US
|
1
|
Singapore
|
56,532
|
1
|
Singapore
|
137,710
|
2
|
Norway
|
51,226
|
2
|
Hong Kong
|
116,639
|
3
|
US
|
45,511
|
3
|
Taiwan
|
114,093
|
4
|
Hong Kong
|
45,301
|
4
|
South Korea
|
107,752
|
5
|
Switzerland
|
42,470
|
5
|
US
|
100,802
|
6
|
Netherlands
|
40,736
|
6
|
Saudi Arabia
|
98,311
|
7
|
Australia
|
40,525
|
7
|
Canada
|
96,375
|
8
|
Austria
|
39,073
|
8
|
UK
|
91,130
|
9
|
Canada
|
38,640
|
9
|
Switzerland
|
90,956
|
10
|
Sweden
|
36,438
|
10
|
Austria
|
90,158
|
·
2010 PPP US $
The report notes
that tough economic times over the past few years have not affected the rise of
centa-millionaires, people with more than $100 million in assets. Today there
are 63,000, up 29 percent since 2006. However, rapidly rising GDP does not tell
us much about the distribution of wealth. Many of the richest countries in the
world today – Qatar, for example- have tremendous wealth gaps. “The
distribution of that wealth will be dictated by political factors as much as
the economic process itself,” noted Willem Buiter, Citi’s Chief Economist, in
the report.
The Future?
CNN notes that
some of the West’s super-rich are already crossing the Pacific, in anticipation
of the “new Asian Century”. Facebook co-founder Eduardo Saverin, moved to
Singapore in 2009 and renounced his US citizenship. Jim Rogers, the co-founder
of the Quantum Fund with George Soros, did the same and is now teaching his
daughters Mandarin. “I’m preparing them for the 21st century by
knowing Asia and by speaking perfect Mandarin”, he told CNN. “It’s easier to
get rich in Asia than it is in America now. The wind is in your face. (The US) is
the largest debtor nation in the history of the world,” Rogers added.
The report warns
that the dissatisfaction with income inequality shown in the Occupy Wall Street
demonstrations “will gain momentum, and that there could be a long-term recalibration
between governments, businesses and society as a result.” No doubt, there could
be phenomenal shake-up in global economic and political landscape during these
times ahead, with massive scopes of wealth re-distribution. The ones who are well-informed
and keen will definitely reap the benefits.
