Protectionist Gareth
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A new global superpower or a museum? Which way the future of Europe?
As the Continent looks on powerless at events on the other side of the Mediterranean, some new long-term global economic growth forecasts suggest the answer may be the latter.
A report from Citigroup economists led by Willem Buiter, published this week, looks forward to the world in 2050.
The report is not about Europe—but about the likely growth hotspots around the world over the next four decades. It cites five rules of thumb for rapid economic expansion: start poor with a youthful population, open up, adopt a market economy and don't be unlucky.
The fifth rule: Don't blow it, Argentina-style.
It concludes the countries with the most promising growth prospects are: Bangladesh, China, Egypt, India, Indonesia, Iraq, Mongolia, Nigeria, Philippines, Sri Lanka and Vietnam.
At the other end of the growth telescope: a lot of European economies. Spain is forecast to be the slowest-growth economy in the world over the years to 2015, with per-capita purchasing power declining slightly.
Also on the list of laggards: Austria, Switzerland, Belgium, Sweden, France and Italy. Pretty much the same band is on the laggards' list over the 20- and 40-year horizons.
Western Europe accounted for 28% of global economic output in 1950 and in 1970. By 1990, this had fallen to 24% and stands at 19% today.
The Citigroup forecast suggests it will shrink to 11% by 2030 and 7% by 2050—a smaller share either than Africa or Latin America.
By 2050, "developing Asia" will account for 49% of global GDP. (Central and Eastern Europe's share, which has stayed at a consistent 4% of world GDP since 1950, is forecast to shrink to 3% in 2030 and 2% by 2050.)
In 2010, Europe has four representatives among the top 10 world economies, occupying fourth to seventh place: Germany, France, the U.K., and Italy. By 2020, Italy drops out. By 2040, France drops out and by 2050, Germany drops out.
That leaves the U.K., in 10th place, as the only European economy in the top-10.
The U.K.'s position is in part due to the forecast's currency assumptions. Adjusted for purchasing power parity—what people can buy with their money—Germany is the only member of the top 10 by 2040 and even it has dropped out 10 years later.
Not everybody agrees that Europe's decline will be so sharp. In another forward-looking report published last month, Karen Ward of HSBC forecast that Germany, the U.K. and France would all remain in the world's top 10 economies by mid-century.
How does Europe stand to benefit economically from the rise of Asia?
In the short-term, not that much. Only Ireland stands out among the weaker euro-zone economies as a major exporter to Asia, though the Netherlands, Sweden, Switzerland and Germany all have above-average and steadily increasing export exposure to the region.
The U.K., Italy and France all score badly. If you add in other emerging markets—not forecast to grow so fast—Italy does reasonably well.
The U.K. and the U.S. both do poorly. But as Asian demand shifts from investment to consumption, this is expected to improve the prospects of consumer goods and service exporters, which would better the two countries' prospects.
The report cites a recent paper from Danny Quah, a professor at the London School of Economics, which calculates the world economy's center of gravity. It finds that in 1980 this point was in the Atlantic Ocean. By 2008, because of the rise of China and the rest of East Asia, it had migrated to a point east of Helsinki and Bucharest. By 2050, he extrapolates that the center of gravity will be somewhere between China and India.(That's what i call a reasonable prediction,not centered on a particular country)
It's easy to argue that such forecasts are little better than guesses. And it's certainly true that they are heavily dependent on assumptions, especially for the far-out years. But some of the possibilities that would keep Asia down as an economic competitor, such as war, are unlikely to be good for Europe either.
It is perhaps possible, however, to draw comfort from one of the other conclusions of the report. Despite the rapid growth elsewhere, Japan, North America and Western Europe will remain the world's most affluent regions in 2030 and 2050.
Even so, what happens to modern economies where growth remains sluggish for long periods? What will life be like in the museum?
Perhaps Italians already know.
According to a report out this week from the European Economic Advisory Group, a group of seven economists, the euro area on average has grown by just 30% from 1995 to 2009, with Ireland growing by an extraordinary 105%. Germany, the area's so-called economic powerhouse, grew by only 16.2% in that period; Italy by a meager 11.4%.
Wall Street Journal
As the Continent looks on powerless at events on the other side of the Mediterranean, some new long-term global economic growth forecasts suggest the answer may be the latter.
A report from Citigroup economists led by Willem Buiter, published this week, looks forward to the world in 2050.
The report is not about Europe—but about the likely growth hotspots around the world over the next four decades. It cites five rules of thumb for rapid economic expansion: start poor with a youthful population, open up, adopt a market economy and don't be unlucky.
The fifth rule: Don't blow it, Argentina-style.
It concludes the countries with the most promising growth prospects are: Bangladesh, China, Egypt, India, Indonesia, Iraq, Mongolia, Nigeria, Philippines, Sri Lanka and Vietnam.
At the other end of the growth telescope: a lot of European economies. Spain is forecast to be the slowest-growth economy in the world over the years to 2015, with per-capita purchasing power declining slightly.
Also on the list of laggards: Austria, Switzerland, Belgium, Sweden, France and Italy. Pretty much the same band is on the laggards' list over the 20- and 40-year horizons.
Western Europe accounted for 28% of global economic output in 1950 and in 1970. By 1990, this had fallen to 24% and stands at 19% today.
The Citigroup forecast suggests it will shrink to 11% by 2030 and 7% by 2050—a smaller share either than Africa or Latin America.
By 2050, "developing Asia" will account for 49% of global GDP. (Central and Eastern Europe's share, which has stayed at a consistent 4% of world GDP since 1950, is forecast to shrink to 3% in 2030 and 2% by 2050.)
In 2010, Europe has four representatives among the top 10 world economies, occupying fourth to seventh place: Germany, France, the U.K., and Italy. By 2020, Italy drops out. By 2040, France drops out and by 2050, Germany drops out.
That leaves the U.K., in 10th place, as the only European economy in the top-10.
The U.K.'s position is in part due to the forecast's currency assumptions. Adjusted for purchasing power parity—what people can buy with their money—Germany is the only member of the top 10 by 2040 and even it has dropped out 10 years later.
Not everybody agrees that Europe's decline will be so sharp. In another forward-looking report published last month, Karen Ward of HSBC forecast that Germany, the U.K. and France would all remain in the world's top 10 economies by mid-century.
How does Europe stand to benefit economically from the rise of Asia?
In the short-term, not that much. Only Ireland stands out among the weaker euro-zone economies as a major exporter to Asia, though the Netherlands, Sweden, Switzerland and Germany all have above-average and steadily increasing export exposure to the region.
The U.K., Italy and France all score badly. If you add in other emerging markets—not forecast to grow so fast—Italy does reasonably well.
The U.K. and the U.S. both do poorly. But as Asian demand shifts from investment to consumption, this is expected to improve the prospects of consumer goods and service exporters, which would better the two countries' prospects.
The report cites a recent paper from Danny Quah, a professor at the London School of Economics, which calculates the world economy's center of gravity. It finds that in 1980 this point was in the Atlantic Ocean. By 2008, because of the rise of China and the rest of East Asia, it had migrated to a point east of Helsinki and Bucharest. By 2050, he extrapolates that the center of gravity will be somewhere between China and India.(That's what i call a reasonable prediction,not centered on a particular country)
It's easy to argue that such forecasts are little better than guesses. And it's certainly true that they are heavily dependent on assumptions, especially for the far-out years. But some of the possibilities that would keep Asia down as an economic competitor, such as war, are unlikely to be good for Europe either.
It is perhaps possible, however, to draw comfort from one of the other conclusions of the report. Despite the rapid growth elsewhere, Japan, North America and Western Europe will remain the world's most affluent regions in 2030 and 2050.
Even so, what happens to modern economies where growth remains sluggish for long periods? What will life be like in the museum?
Perhaps Italians already know.
According to a report out this week from the European Economic Advisory Group, a group of seven economists, the euro area on average has grown by just 30% from 1995 to 2009, with Ireland growing by an extraordinary 105%. Germany, the area's so-called economic powerhouse, grew by only 16.2% in that period; Italy by a meager 11.4%.
Wall Street Journal
