Panta rhei. Everything flows.
This Greek aphorism often comes to mind when I think of the economic and political changes in my lifetime. They seemed as impossible before they occurred as they have felt natural in retrospect. Communism fell. Germany was united. The US elected a black man president. Now we are in a phase in which Asia is catching up with the West and US hegemony is being challenged.
While American casino capitalism has collapsed, and the US’ European economic satellites are suffering, China seems to be taking advantage of the situation, increasing its trade surplus in the midst of the global economic crisis. Indeed, in the first four months of this year, China became the world’s leading goods exporter, overtaking Germany, the previous champion.
It is true that in other economic terms, China still lags far behind. Although China accounts for 20 percent of the world’s population, its share of global GDP currently is only 7 percent. By contrast, the US and the EU account for 54 percent of global GDP, despite having only 12 percent of the world’s population.
These figures are changing rapidly, however, owing to China’s exuberant growth. From 1995 to last year, China’s economy grew by 229 percent, while the world economy grew by 63 percent, the US economy by 45 percent and the 27-member EU economy by only 37 percent. It may be difficult for China to ever match the success of a small Asian country like Singapore, which has already overtaken the US in terms of GDP per capita as measured by purchasing power parity. Yet China will undoubtedly become the world’s largest economic power in the foreseeable future. To achieve this leadership position, it needs less than a quarter of US per capita GDP, because its population is more than four times larger.
The forces of globalization that were liberated by the fall of Communism have created a better world, with rapid economic convergence and shrinking inequality. The proportion of people living below the World Bank’s poverty line of US$1.25 a day shrank from 52 percent in 1981 to only 25 percent in 2005. More than 50 percent of the world’s population is now considered middle class, with a living standard above the average of the developed countries’ poverty lines and the worldwide Gini coefficient of inter-country inequality fell from 0.653 to 0.556 from 1980 to 2007, owing largely to the astounding performance of the emerging countries, particularly China and India.
The development of the world has not been without its problems, however. Carbon dioxide emissions have been growing fast, fossil-fuel resources are being depleted rapidly and global warming has accelerated. Even if the US embraces the Kyoto Protocol under President Barack Obama, the world’s temperature will break the record of the last 800,000 years in the next 30 years.
Moreover, huge waves of migrants from developing countries to Organization of Economic Cooperation and Development countries challenge the assimilation capacity of the latter and deprive the former of its educated work force. In the US and Germany, 13 percent of the population is foreign born, as are 8 percent of France inhabitants and 10 percent of Britain’s. Unskilled migrants tend to come to Europe, where they burden the welfare state, and skilled migrants are lured to the US, although they are urgently needed at home. The brain drain is a problem not only for South America west of the Andes and many African countries, but also for Turkey, Italy, Britain, the Balkan countries, Germany and Finland.
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