According to Perspectives on
Global Development: Shifting Wealth, a new publication from the OECD
Development Centre, the economic and financial crisis is accelerating a
longer-term structural transformation in the global economy. Longer-term
forecasts suggest that today’s developing and emerging countries are likely to
account for nearly 60% of world GDP by 2030.
The rapid growth of emerging
economies has led to a shift in economic power: forecasts based on analysis by
the late economist historian, Angus Maddison, suggest that the aggregate economic weight of
developing and emerging economies is about to surpass that of the countries that
currently make up the advanced world. The Paris-based think tank says that in
2010, its 31 developed-country members will account for 51% of world economic
output. But with the rapid growth of China, India and other developing
economies, that share has narrowed from 60% in 2000 and the OECD predicts it
will shrink further to 43% by 2030.
The OECD publication, which was
launched in Paris last week, says that in 2009 China became the leading trade
partner of Brazil, India and South Africa. The Indian multinational Tata is now
the second most active investor in sub-Saharan Africa. Over 40% of the world’s
researchers are now in Asia. As of 2008, developing countries were holding
US$4.2trn in foreign currency reserves, more than one and a half times the
amount held by rich countries. These are just a few examples of a 20-year
structural transformation of the global economy in which the world’s economic
centre of gravity has moved towards the East and South, from OECD members to
emerging economies, a phenomenon the report calls “shifting wealth”.
Perspectives on Global Development shows how developing
countries have become important economic actors and demonstrates the dynamism of
the new South-South economic ties. Although the process has been ongoing for 20
years, the opportunities and risks for poor countries posed by shifting wealth
are only starting to be understood.
OECD non-member economies have markedly increased their share of
global output since the 2000s, and projections predict that this trend will
continue. This realignment of the world economy is not a transitory phenomenon,
but represents a structural change of historical significance.
The report says it is no longer enough to divide the world
simply between North and South, developed and developing countries. In order to
understand the complexity of the shift, it takes and develops former World
Bank president James Wolfensohn’s concept of a “four-speed” world. This
splits the world into Affluent, Converging, Struggling and Poor countries
according to their income and rate of growth per capita relative to the
industrialised world. This framework reveals a new geography of global growth,
exposing the heterogeneity of the South: some developing countries are beginning
to catch up to the living standards of the affluent, others are struggling to
break through a middle-income “glass ceiling”, and some continue to
suffer under the weight of extreme poverty.
Seen like this, two distinct time periods emerge in terms of
growth performance. For most developing economies, the 1990s were another
“lost decade”, hampered by financial crises and instability.
Two regions in particular failed to rebuild their economic fortunes: Latin
American growth responded only weakly to reforms, and sub-Saharan Africa
continued to stagnate.
In the 2000s things moved up a gear and much of the developing
world enjoyed its first decade of strong growth in many years. The new
millennium saw the resumption - - for the first time since the 1970s
-- of a trend towards strong convergence in per capita incomes with the
high-income countries. The number of converging countries (that is, countries
doubling the average per capita growth of the high-income OECD countries) more
than quintupled during this period (from 12 to 65), and the number of poor
countries more than halved (from 55 to 25). China and India grew at three to
four times the OECD average during the 2000s. Nevertheless, there was a great
diversity in outcomes and a group of struggling and poor countries continued to
The report asks what factors underlie the realignment? First,
the opening of the formerly closed large economies of China, India and the
former Soviet Union brought a supply shock to the global labour market. An
additional 1.5 billion workers joined the open market-oriented economy in the
1990s. This reduced the cost of a range of traded goods and services, and made
the take-off possible in a number of converging countries, principally in Asia.
Second, growth in the converging countries boosted demand for
many commodities, particularly fossil fuels and industrial metals, transferring
wealth to commodity exporters and bringing an immediate boost to growth across
Africa, the Americas and the Middle East. Third, many converging countries moved
from being net debtors to net creditors, keeping US and global interest rates
lower than they might otherwise have been.
As these processes accelerated, global imbalances grew sharply
which has led some observers to call for an appreciation of the Chinese
currency, the renminbi. However, the authors say a rapid and premature
appreciation may harm Chinese growth and, by extension, some of China’s economic
partners, including many countries already falling in the “struggling”
and “poor” categories of the four-speed world. At a deeper level, the
imbalances reflect structural issues and addressing them may require profound
social changes in China to boost consumption.
said trade and investment links between developing
economies are growing rapidly. It estimated that
while world trade flows quadrupled between 1990 and
2008, flows between developing economies increased
“This trade could be one of the main
engines of growth over the coming decade,”
the OECD said.
estimates that if developing countries cut their
tariffs on goods produced by other developing
countries to the levels that now apply to trade
between developed economies, the world economy would
receive a $59bn boost.
years ago, the then EU trade commissioner, Peter
Mandelson, said that 70% of tariffs paid by
developing countries, are paid to other developing
Also last week, the IMF's Finance & Development
publication said Asia is moving into a leadership role in the world economy.
A copy of the report
can be downloaded free from Scribd
OECD page with links to videos etc