The financial crisis of the past two years will provide the catalyst for a profound change in the global economy — which, according to the man running the World Bank, will see China and India become established centers of power, the dollar eclipsed as the sole reserve currency, and Latin America, Southeast Asia and Africa emerge as new sources of growth.
But as he surveys the wreckage caused by what the bank and its sister organization, the IMF, agree is the most severe crisis since the devastation caused by World War II, Robert Zoellick is surprisingly upbeat about the future.
Asked by this reporter how he envisages the global economy in 20 years’ time, Zoellick says: “There will certainly be a larger role for the emerging powers, there will be multipolar sources of growth, there will be more south-south trade between developing countries.”
“The crisis gives us the opportunity to hasten this process. If we are concerned about the past reliance for growth on the US consumer, we have to make sure consumers in developing countries have enough finance to buy,” he said.
Zoellick says that, while this does not mean the end of the US as a big player on the world stage, it has brought the curtain down on the unipolar world that followed the collapse of communism 20 years ago.
Developing countries were on the rise before the credit crunch and, as the latest snapshot of the global economy released last week illustrates, their position has been strengthened by their ability to keep growing as the west teetered on the brink of a 1930s-style Depression.
“We have reached a tipping point in global economic affairs,” says Stephen King, chief economist of HSBC. “While there are some encouraging signs of recovery in the developed world, the real economic action is taking place elsewhere. For both cyclical and structural reasons, the emerging nations are set to dominate world economic activity in the years ahead.”
The US, Zoellick says, can no longer rely on the dollar ruling the roost. The euro and the Chinese yuan are candidates to become reserve currencies.
Tellingly, this year’s annual meetings of the Bank and Fund take place in Istanbul, the point where Europe meets Asia and for almost two millennia a melting pot for cultures and religions. The view of both Zoellick and Dominique Strauss-Kahn, managing director of the IMF, is that there is a discernible shift in power and influence eastwards.
“These annual meetings take place at a defining moment in global governance,” Strauss-Kahn says. “We have experienced unparalleled economic co-operation in the last 12 months. It has never happened in history.”
While noting that there is a risk of the consensus vanishing now the immediate threat of economic meltdown has receded, Strauss-Kahn says it is the will of world leaders to continue collaborating in the years ahead. The days of the G7 — an elite gathering of policymakers from the US, Britain, Japan, Germany, France, Italy and Canada — are over. Power has shifted to the G20, which includes the G7 plus a number of leading developing countries such as China, India, Mexico, Brazil and South Africa.
John Hawksworth, head of macro-economics at PricewaterhouseCoopers (PwC) in the UK, says political influence will result from the increased economic clout of the big developing countries. Within two decades, he says, China may have overtaken the US as the world’s biggest economy.
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