Just for fun, let’s turn away from the troubles of the present — the meltdown of the subprime mortgage sector, the volatility of the stock market, the cratering of hedge funds — and look to the horizon. What is the world going to look like in 2050?
The growing consensus is that we will be in the middle of the Chinese century. “China’s rise has more in common with the rise of the United States a century earlier than with the progress of its modern-day predecessors and followers,” writes Oded Shenkar in his 2005 book The Chinese Century. Measured in terms of purchasing power parity (PPP), China’s economy is already number two and gaining fast on the United States.
But it’s not just China that is ascendant. During the next few decades, studies say, the world’s economic center of gravity will shift. By 2050, the seven largest emerging economies, or E7 — China, India, Brazil, Russia, Indonesia, Mexico, and Turkey — could collectively surpass the current G7 countries (the United States, Japan, Germany, the United Kingdom, France, Italy, and Canada) by 75 percent in PPP terms, or by 25 percent in U.S. dollar terms, according to a 2006 PricewaterhouseCoopers report, “The World in 2050.” Currently, the E7 economies are 20 percent the size of the G7 in dollar terms and 75 percent in PPP terms.
China’s GDP could be nearly half again as large as the United States’s, predicts John Hawksworth, author of the PwC report. Meanwhile, India’s economy could equal the United States’s in PPP terms. By 2050, in fact, India could be the fastest-growing large economy, with Indonesia second, as their populations age less rapidly than China’s.
As the E7 economies grow, so will their corporations. Antoine Van Agtmael, author of the recent book The Emerging Markets Century, notes that 58 of the global Fortune 500 companies are currently based in emerging markets. He writes: “We all sense — and those who travel frequently know from experience — that the pulsing center of the 24/7 global economy is shifting rapidly away from the cosmopolitan cities of London, Paris, and New York to the equally cosmopolitan cities of Shanghai, Mumbai, Seoul, and Mexico City.”
Is Your Job Next?
But while fashionistas shop for Fendi bags in Shanghai, many Americans could face lost jobs or lower wages. If you think global competition is bad now, it will only get worse, especially in tradable services. “Eventually, the number of service-sector jobs that will be vulnerable to competition from abroad will likely exceed the total number of manufacturing jobs,” predicted Princeton economist Alan Blinder in a 2006 Foreign Affairs article. “Thus, coping with foreign competition, currently a concern for only a minority of workers in rich countries, will become a major concern for many more.”
But cheaper goods and services are a good thing for consumers. And as the developing countries grow, their markets will become increasingly attractive to U.S. businesses. Also, global companies from emerging markets will establish more subsidiaries, and create more jobs, in the United States. Van Agtmael speculates that the rise of emerging-market multinationals may stoke the competitive fires of Western-based companies, as Japanese companies did in the 1970s.