There has been a profound change in the world’s progress as we have known it up to recently; capitalism’s geography is changing. In recent years, the average economic growth rates gap between the big emerging countries versus the big developed ones has been both substantial and consistent; that has already been going on for a considerable number of years, overwhelmingly favoring the largest emerging nations. The relative economic and political weight of the E7 economies has been the net result, said weight has been progressively increasing compared to the G7 countries’ weight.
The previous table shows a most interesting comparison between those two groups of nations: the G7 and the E7. The figures shown in the table are 2010 statistics. There are several outstanding points which are very important to bear in mind:
The G7 nations’ total output was approximately 33% larger than the E7’s during 2010. That gap was 44% the year before. During 2011, that gap was still reduced further, to less than 30%; we’ll know that for sure later in the year when official 2011 figures are released.
During 2011, there also must have occurred a couple of momentous displacements among the top-eight nations of the world in economic output: a) India overtook Japan as the world’s third-largest economy. b) Likewise, Brazil and the UK traded places. Brazil started the year as #8, ending up as #7.
During the previous year, 2010, a couple of displacements took place among the top-eight nations: a) Russia displaced the UK from 6th standing. b) Brazil displaced France from the 8th position.
Most of the G7 countries have yet to successfully overcome major long-term structural issues: debt, deficits, deleveraging and the accompanying slow-growth. The E7 nations, in contrast, are growing at a very healthy and substantially higher rate of growth than the E7’s countries, they currently have very low debt levels, and also low and manageable budget deficits. As a result, to different degrees, the E7 nations are very much on a speedy and consistent catching-up trail with their developed brethren. There still remains a gigantic per capita output gap to be filled, before the E7 countries can be close enough to a developed nation status; it will take a few decades for that gap to be completely filled. On a volume basis, however, that gap is not substantial, and is getting smaller by the day, as we have already seen.
We are living in a very dynamic world. What we have witnessed in the past few years is a harbinger of things to come. It does not have to be a traumatic repositioning of economic and political power. It is of utmost importance, however, to understand what is going on and why in order to be better prepared for new opportunities and risks, as they emerge.
Austria, Netherlands and UK offer the world a great and very constructive testimonial of former world-leading-nations that have transitioned with class and dignity from that status to a new one of highly respected developed nations of a second tier nature. Indeed, they are three role model nations that can teach the world a lot in that particular aspect so critical for the world’s well-being.