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Juggernaut: How Emerging
Markets are Reshaping
Globalization
Uri Dadush and William Shaw
Carnegie Endowment for
International Peace
June 2011
Human History Characterized by
Economic Stagnation
Population and Per Capita Income
Millions of People
Shaded area represents forecast
Constant dollars
10,000
8,000
40,000
Population (left axis)
30,000
Per Capita Income
6,000
20,000
4,000
10,000
2,000
0
1000
1200
Sources: Maddison, “Juggernaut.”
0
1400
1600
1800
2000
Only Recently, Catch-up Conditions
Spread…
• Japan was the first non-Western breakthrough
around 1850.
• A century later came a few “Asian Tigers.”
• In the last 20 years, the catch-up affected very
large numbers of people:
– Failure of central planning and import substitution
– China and India
Demographic Projections
Working Age Population
Percent change since 2010
50%
More Developed
40%
Less Developed
30%
Europe
20%
10%
0%
-10%
-20%
2010
2015
2020
Source: UN Population Division.
2025
2030
2035
2040
2045
2050
Largest Economies
World economies by PPP GDP
Advanced country
Developing country
2010
2050
1
United States
China
2
China
United States
3
Japan
India
4
India
Brazil
5
Germany
Mexico
6
Russia
Russia
7
Brazil
Indonesia
Source: “Juggernaut.”
European Nations Losing Ground
2050 GDP
PPP dollars, trillions
80
70
60
50
40
30
20
10
0
China
United
States
Source: “Juggernaut”.
India
United
Kingdom
Germany
France
Italy
EU still in Contention
2050 GDP
PPP dollars, trillions
80
70
60
50
40
30
20
10
0
China
United
States
Source: “Juggernaut”.
India
EU
United
Kingdom
Germany
France
Italy
Opportunity
Size of the middle and rich class
Millions of people
Source: “Juggernaut.”
Poverty
Percent of population living on less than $1.25/day
PPP
70
60
Projected
50
40
India
30
Sub-Saharan Africa
20
10
0
1980
1990
2000
Sources: World Bank, “Juggernaut.”
2010
2020
2030
2040
2050
Largest Economies Will Stay
Relatively Poor
Per Capita Income
PPP
Source: “Juggernaut.”
Income Gaps are just the Headline
Measures of Governance, Openness, and Institutional Strength
10 represents best ranking of countries surveyed; 1 represents worst ranking
United States
Corruption
10
China
8
India
6
4
2
Environmental
Performance
0
Democracy Index
Financial Openness
Risks
• Geopolitical breakdown
• Protectionism
• Financial crisis and depression
• Climate change
Political Tensions
Circle represents relative size of economy
Real U.S. dollars
1990
China
India
Japan
Source: World Bank.
Political Tensions
Circle represents relative size of economy
Real U.S. dollars
2010
China
Source: “Juggernaut.”
Japan
India
Political Tensions
Circle represents relative size of economy
Real U.S. dollars
2050
China
Source: “Juggernaut.”
Japan
India
European and Chinese Trade Today
EU’s and China’s Share of Trade by Country
80%
2006
70%
60%
EU
China
50%
40%
30%
20%
10%
0%
* For EU, this shows intra-EU trade as a share of total EU trade.
Source: UN Comtrade.
…and in 2050…
EU’s and China’s Share of Trade by Country
80%
2050
70%
60%
EU
China
50%
40%
30%
20%
10%
0%
* For EU, this shows intra-EU trade as a share of total EU trade.
Source: “Juggernaut”.
Financial Crises More Dangerous
Number of Banking Crises by Year by Income Group
14
12
Developing
Advanced
10
8
6
4
2
0
1960
1970
Source: “This Time is Different.”
1980
1990
2000
Carbon Emissions
Atmospheric Carbon Concentrations by Emitter
Parts per million
800
5º5
700
4ºC
600
3ºC
500
2ºC
Developing
Countries
400
300
Developed
Countries
200
100
0
2010
Source: “Juggernaut.”
2020
2030
2040
2050
Trade in The Best Shape
Domestic Policy
International
Institutions
Trade:
B
C
Finance:
D
D
Migration:
F
F
Global Commons:
D
F
Critical Mass Agreements Needed
• Universal, consensus-based attempts fail
• Agreement among a critical mass can be both
efficient and legitimate
• Group can vary by issue
Greater Country Awareness Crucial
• Nation states will decide
• Role of civil society, analysis and advocacy
• International dialogue contributes, does not
determine
• Expectations must be set accordingly
Addressing the Long-Term Challenges
• Greater use of information and communication technology
• United States spent an average of 67 percent more per capita on ICT from
2003 to 2009.
• Maintain economic ties with emerging markets
• European merchandise exports to emerging markets average 5.3 percent of
GDP, compared to 2.5 percent in the United States.
• Reform labor markets
• On average, EU countries rank 40th out of 183 countries in ease of doing
business, but 104th in hiring employees.
• Further European integration
• A stronger fiscal and political union is needed not only to maintain relevance
over the next century, but also to correct today’s crisis.