The New Big Three Economies

Until just a few years ago the largest national economies existed in the developed world.  United States, Japan and Germany (The Big Three) achieved the largest gross domestic product (GDP) in 2000.  “Ten years ago rich countries dominated the world economy, contributing around two-thirds of global GDP after allowing for differences in purchasing power.  Since then that share has fallen to just over half.  In another decade it could be down to 40%.  The bulk of global output will be produced in the emerging world,” wrote The Economist in 2010.  In the last 20 years or so the developed and developing worlds have undergone a re-positioning with the explosion of rapidly expanding, formerly developing economies in Brazil, Russia, India and China, which are known collectively by the acronym BRIC.  In fact, Goldman Sachs’ projections suggest China will jump into the number two position in the new Big Three list by 2020 and will become number one, surpassing the United States by 2050, and India will become the third largest economy as measured by GDP unless something cataclysmic derails its unprecedented growth, which by some measures approaches 10% annually.   

Three forces will dictate China’s rise…demography, convergences and “gravity.” 

from Threes, Chapter 6, “Threes in Economics and Finance” 

Also included in my new Kindle mini-e-book, Threes in Economics and Finance, that's available now.

Three Transformative Events

During the highly volatile and transformative period since 2000, we have witnessed three significant ongoing events or episodes.  They have not yet played out.  These three events about which much has been written are:

simultaneously developing economies in China, India, Russia, Brazil and other countries,

the emergence of state-based capitalism in many of these same states,

and the collapse of financial systems in established capitalist economies such as the United States and the countries of western Europe.  As a result the world economic order has been recast, and the great financial shuffle will continue for years to come. 

Those who follow these developments have three worries about the effect of the ascendant emerging markets.  “The first worry is about direct competition for things that are in more or less fixed supply: geopolitical supremacy, the world’s oil and raw materials, the status and perks that come with being the issuer of a trusted international currency.…The second set of anxieties relates to job security and pay.  Ever stronger trade links between rich and would-be rich countries will mean a reshuffle in the division of labor around the world, creating new jobs and destroying or replacing existing ones….A third concern, which is at odds with the first two, is that the emerging markets are prone to crises that can cause a still-fragile world economy to stumble.  Sluggish GDP growth in the rich world means developing countries have to fall back on internal spending, which in the past they have not managed well.  It raises the risks of overspending, excessive credit and inflation that have spurred past emerging-market crises.”

from Threes, Chapter 6, “Threes in Economics and Finance”