The world’s biggest economies are recovering from the Great Recession at troublesome speeds: too fast or too slow.
China, India and other major developing countries quickly returned to breakneck rates of growth after escaping the worst of the economic downturn in 2008 and 2009. Their rapid recoveries showed for the first time that emerging economies have grown big and strong enough to thrive independently, while the US and other developed countries struggle.
Today, to an unprecedented degree, the developing world is driving the global recovery, instead of relying on the US for economic leadership as it used to. This picture emerges from the Associated Press’ new Global Economy Tracker, a quarterly analysis of 22 countries that account for more than 80 percent of the world’s economic output.
The shakeup in the world’s economic order has taken 30 years. The developing world’s share of global economic output has risen from 18 percent in 1980 to 26 percent last year, the World Bank says. So growth in emerging markets now has a far bigger effect on the world’s economic performance.
Leading the transformation is China, an economic backwater three decades ago that last year replaced Japan as the world’s second-biggest economy. Japan, after more than a decade of stagnation, is struggling again in the aftermath of the earthquake and nuclear disaster that struck on March 11.
Rapid growth in emerging economies has lifted hundreds of millions of people out of poverty and created vast consumer markets for US goods and services. At the same time, “this two-track world poses some unusual risks,” said Nobel Prize-winning economist Joseph Stiglitz of Columbia University. He and others fear that too much money flowing to developing economies is driving up commodity prices and inflating dangerous bubbles in emerging market stocks and housing prices.
Rapid growth in the developing world is also pulling jobs and investment from the US and other developed countries, and is fanning international disputes over trade and currencies.
The AP Global Economy Tracker found that:
‧ The fastest-growing countries — Argentina, China and India — are all in the developing world. The slowest are all European: Spain, Britain and France. The US ranks 12th among the 20 largest economies plus Argentina and South Africa.
‧ Speedy growth is triggering inflation in emerging countries. The countries where consumer prices rose the most last year were Argentina, India and Russia.
‧ High unemployment is plaguing developed countries. At the end of last year, unemployment was more than 20 percent in Spain, 9.6 percent in the EU as a whole and 9.4 percent in the US. The US rate fell to 9 percent in January and 8.9 percent in February. In contrast, the unemployment rate was 5.3 percent in Brazil.
In the past, the developing world depended on advanced economies — particularly the US — to generate global growth, which trickled down to them when the developed countries bought their exports, so that when developed countries faltered, poorer ones suffered too.
“The conventional wisdom was when we went into recession, they went into recession,” said Robert Lawrence, professor of trade policy at Harvard University’s Kennedy School of Government.
The Great Recession overturned the old relationship. Emerging economies dodged the housing crisis that froze credit markets in the US and Europe and threw the developed world into the worst downturn since the 1930s. Developing countries just kept growing, though more slowly.