Will ‘Chindia’ Rule the World in 2050, or America After All?

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With a small tweak in assumptions and the inexorable force of compound arithmetic, Citigroup and HSBC have come up with radically different pictures of what the world will look like in 2050.

Which of the two is closer to the mark will determine whether the West hangs on, or disappears as a relevant voice in global affairs.

For neo-Spenglerites – who believe the West is finished – Citigroup’s Willem Buiter offers some astonishing projections. The Muslim powerhouse of Indonesia will alone match the combined GDP of Germany, France, Italy, and Britain by mid-century.

The economies of China and India will together be four times as large as the United States, restoring the historic order of Asian dominance before Europe’s navies burst on the scene in the 16th Century. Panta Rei, says Dr Buiter: all is in flux; nothing will remain the same.

Africa will at last emerge from its long string of disappointments to take the baton as the fastest growing region, clocking 7.5pc a year over the next two decades.

It does not require miracles of performance for this to occur. Catch-up countries merely need to keep reforms on track, open markets, “don’t be unlucky, and don’t blow it”, and let convergence theory do the work for them.

Having rid themselves of calamitous nonsense – Maoism, the Hindu model, and other variants of central planning or autarky – and having at last achieved a “threshold level” of law and governance, nothing should stop them, or so goes the argument.

“Sustained growth prospects in per capita incomes across the world have not been as favourable as they are today for a long time, possibly in human history.” Global growth will quicken. GDP will quadruple again from $73 trillion to $378 trillion by 2050 (constant US dollars).

Dr Buiter’s team adds the usual caveats: “beware of compound growth rate delusions;” or “the bigger the booms, the more spectacular the bubbles, and the devastating the busts;” or indeed that “convergence is neither automatic, nor inevitable. In history, it has been more the exception than the rule.”

Argentina is a salutary lesson. Why did it diverge from its sister economy Australia, so similar in trading patterns in the late 19th Century? Why did it fall from the world’s fifth richest in per capita terms in 1900 to a third of Australia’s level a century later?

It is hard to pin-point where the rot began, though Peron clinched decline by bleeding farm wealth to fund his populist patronage, and by forcing the central bank to print the shortfall. Bad policies hurt.

Oddly, Britain will scrape through in Citigroup’s global reshuffle, just holding on as the world’s 10th biggest economy in 2050, the only EU state left in the top ten. It will even overtake the US in per capita terms.

Can this be so? Britain has slipped to 25th in reading, 28th in maths, and 16th in science in the Pisa rankings. Shanghai’s school district takes top prize across all three, ahead of Korea and Finland. While the UK faces a less disastrous ageing crisis than much of Europe, this is thanks to our unrivalled leadership in unwed teenage pregnancies.

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