UN Highlights Global Shift in Economic Power
A new study from the United Nations Development Programme highlights the global shift in economic power from developed to developing economies.
Describing a “dramatic re-balancing of global economic power” the reports authors predict that the combined economic output of China, India and Brazil will overtake the combined output of the 6 largest developed economies – the United States, Canada, Britain, Germany, France and Italy by 2020. Already, in less than 20 years, China and India have managed to double their per capita economic output – a rate which is around twice that of Europe and North America during the Industrial Revolution.
The tendency of developing economies to grow faster than developed economies is called economic convergence. I recently wrote about his same shift in global economic power in my article Economic Convergence: Third World Poverty Coming to A Street Near You? In that article I showed how rising wealth inequality demonstrates that not only are concentrations of wealth shifting towards the developing economies, but also there is a parallel trend of poverty shifting from the developing to the developed world:
“Convergence, driven by globalisation and perhaps other factors, is eroding the income and wealth differences between countries. This convergence, however, does not mean that all people will converge on the same income, but rather that the same global inequalities of wealth previously seen between different countries will, in the future, be seen within individual countries.”
This latest report from the UN paints a much more optimistic picture than I did in that article, focussing only on rising wealth in the developing world and not rising poverty in the developed world. It also noted that the rapid growth of developing economies has significantly cut global levels of extreme poverty – global growth and poverty reduction are the main mitigating factors I noted in my article, which have the potential to prevent third world levels of poverty from reaching the developed world in the future.
The proportion of people living in extreme poverty around the world fell from 43% in 1990 to 22% in 2008. In China alone over 500,000 million people were lifted out of poverty during this period. The proportion of people living on less than $1.25 per day has been halved, meaning that the world has succeeded in meeting one of the main targets of the Millennium Development Goals.
The report does also note a range of approaching challenges which could halt or reverse this trend, however. Ageing populations, social inequalities and environmental pressure could all contribute to levels of extreme poverty rising once again. Climate change, the report claims, could push as many as 3 billion people into extreme poverty by 2050 and may be enough to reverse development progress in the world’s poorest countries on its own.