Today’s headline for UN wire is “Developing Economies to
be Bigger than Developed in 50 Years,” a striking title to say the least. They
claim that China will become the world’s largest economy in the next four years,
setting the stage for developing countries to surpass developed countries. They
also anticipate the incomes of citizens in developing countries to quadruple.
The OECD claims that inequality will persist, as “living standards in the emerging countries will still only
be 25%-60% of the level enjoyed by those in the US.” This is still significant,
as many underdeveloped countries exhibit negative absolute growth rates; their
relative growth rates are simply plummeting.
Let’s start with China and India, countries many of our
readings have been focusing on. These two countries benefitted greatly from the
1980’s surge in globalization and are now taking over the economies of
previously developed areas. China is expected to surpass the US by 2016 and
India is well on its way to surpassing Japan and is “forecast to pass the
eurozone in about 20 years.” China’s world GDP as of 2011 was 17% and is
expected to grow to 27.8% by 2060; India’s was 6.6% and is expected to grow to
18.2%. The guardian takes the claims of the UN even further, claiming that
China is on the rise now, but India and Indonesia will have the highest growth
rates by 2020. Productivity is the main driver of this growth, as technology
and human capital is spreading rapidly.
In light of Collier’s, The
Bottom Billion, he claims that for underdeveloped countries to truly
benefit from the current surge of globalization, they need conditioned
protection from Asia (similar to the infant industry argument that Crystal and
Wood advocate against). If China and other areas in Asia truly are growing at
these unprecedented rates, the price gap will form that Collier states is
necessary. Once this price gap is created, underdeveloped countries such as
those in Africa, Latin America, and Southeast Asia will have the opportunity
and capability to develop their economies. However, unless Asia provides some
protection for these areas, the price gap they create may not be enough to
create the massive rise in economies that the UN, OECD, and the guardian
anticipate.
If the increase in productivity actually does occur in
underdeveloped areas (indicating developed economies), trend unemployment is
expected to return to pre-crisis level and global growth is expected to be
about 3% per year. We must keep in mind though that this positive number must
be taken in consideration with the very high numbers that China and India
provide; we cannot assume that sustainable growth will be occurring in all
developing areas. This makes me wonder how prevalent Professor Anderson’s talk
is to this situation. He claims that the percentage of Chinese in a country is
a large indicator of their economic growth, so I question whether the rise in
China’s economy will have multiplied effects on areas with a large percentage
of a Chinese population or if the relative success of China does not effect the
Chinese diaspora abroad.
As the Chinese continue to have near exponential growth,
we must closely watch and monitor underdeveloped areas and we cannot assume
that they will experience the four-fold growth the guardian speaks of. The
success of China will undoubtedly create the opportunity for growth, but
without some protection and global governance, the corrupt regimes and natural
resource dependence that is indicative of many stagnant areas will prevent
sustainable development.
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