"In 1980 the global economy’s centre of gravity was mid-Atlantic. By 2008, from the continuing rise of China and the rest of East Asia, that centre of gravity had drifted to a location east of Helsinki and Bucharest." (Quah) He goes on to explain that this does not mean the US will have a huge fall in its economic activity, it may just mean the overall pie is getting bigger. Yet, he remained confident that the center of this world economy is shifting towards the economies of China and India.
Friday, March 25, 2011
The World Economy Shifts Eastward
This article discusses the new paper by Danny Quah on how the center of world economy is shifting to the eastern part of the globe. Quah has been calculating the economic activity and movement across the world for the last few decades and has seen that there has been a clear movement eastward.
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5 comments:
I believe this to be true in that the overall pie is getting larger. In saying that world economy is shifting eastward does not necessarily mean that the united state's economy is weakening, but rather that many of the eastern countries are catching up
This is exactly right, the center of the World Economy is shifting eastward, and rapidly. Within the last 50 years the growth in Eastern Asia and in developing nations such as India has been unparalleled by growth seen in the "Advanced Nations". As these economies are experiencing a shift in the type of sectors that their econ relies on the most. These developing nations will soon shift from being net exporters, to net importers in the global market. This shift will in part be a result of the increased value of these nations' currencies in the global market, as their money can go much farther importing their goods from other nations.
I agree that the overall pie is getting larger. But how much larger can it get? We live in the world where key resources are scarce. While today we can say that growth in eastern countries only helps world economies, someday it will turn into zero sum game because of a scarcity of key resources.
it is important to remember that global trade is not a 'zero sum game'. Everybody would theoretically benefit, in economic terms because of the growing pie. However greater affluence would mean greater influence as well. It would be interesting to analyse the political changes that would result from this shift.
With countries (especially in the east) moving towards greater liberalization of their markets, this is creating tremendous growth in their economies. Globalization is becoming not only just acceptable, but almost necessary in order for firms to remain competitive. These countries in the east have experienced this great economic prosperity recently because they did a very good job in pacing themselves through the process of liberalizing their markets. They didn't rush the process as many countries have, which has caused many countries economies to fail miserably.
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