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GLOBAL ECONOMY: MULTIPOLARITY
Global Development Horizons 2011

Issue Date - 09/06/2011
 
Amidst the transformative change that the global economy is witnessing, it is anticipated that within the next two decades the rise of emerging economies will inevitably have major implications for global economy and geopolitics. The world bank argues that a new world order with a more diffused distribution of economic power is emerging. B&E analyses the shift towards multipolarity.

The new Growth Poles

Over the course of two millennia, there have been several instances of shift in global economic powers. The period of China’s Tang dynasty to the Ming dynatsy (600-1600), saw to it that China was the dominant force in the global economy accounting for a quarter of the global growth. The Renaissance phase coupled with the advent of the industrial revolution saw the coming of age of the European economies (e.g. Italy, Spain, France , Great Britain). Post World War II, innovation and consumer demand propelled the United States to the position of world’s foremost economic power with Germany, Japan and the former Soviet Union playing pivotal roles. Post the financial crisis of 2008-09, the global economy is tilting towards new growth poles.

 
Dynamics of Growth Poles

In the wake of the financial crisis, the global macro-economy is apparently poised to follow a two-track course. Considering the baseline scenario, the World Bank estimates that the emerging economies’ share of global output will expand in real terms from 36.2% (in 2010) to 44.5% by 2025. A closer scrutiny reveals that China will lead this impressive rise in share of global output. What is interesting to note is the fact that despite the demography driven changes (the old age dependency ratio in China is expected to double between 2010 and 2025), China will be able to maintain its comparative advantage in manufacturing. Consistent with historical productivity trends, India’s annual growth in 2025 will be 5.4%.

          

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