The end of the imperialist epoch
Marv Gandall
Sun Jan 9 07:47:34 PST 2011
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Without describing it in these blunt terms, Financial Times economic
columnist Martin Wolf argues below that "far away the biggest single
factor about our world" is the ending of Western imperialist
domination of Asia, Africa, and Latin America.
This is a controversial thesis, particularly among Marxists and in the
face of US military power, but since 1980 the relative rates of growth
in output and per capita incomes between the advanced capitalist
countries and their former colonies and semi-colonies have reversed
dramatically. Although the statistical evidence varies, there is no
dispute that in China, the epicentre of this historic change, output
over the past three decades has risen from around 5% to 20% of US
levels, with the trend having accelerated sharply over the past five
years. As Wolf notes, citing Ben Bernanke, "the aggregate real output
of emerging economies was 41 per cent higher than at the start of
2005. It was 70 per cent higher in China and about 55 per cent higher
in India. But, in the advanced economies, real output was just 5 per
cent higher. For emerging countries, the 'great recession' was a blip.
For high-income countries, it was calamitous."
One can dispute Wolf's attribution of the reversal to the adoption of
pro-capitalist policies by China and India, which he sees as driven by
the globalization of markets and technology, and he neglects the
widening disparities of income which have accompanied the process, but
his conclusion is one which is now widely shared: "In the past few
centuries, what was once the European and then American periphery
became the core of the world economy. Now, the economies that became
the periphery are re-emerging as the core. This is transforming the
entire world."
The overheated Chinese economy may or may not be heading for an
imminent bust, but as Wolf also notes, "even world wars and
depressions merely interrupted the rise of earlier industrialisers. If
we leave aside nuclear war, nothing seems likely to halt the ascent of
the big emerging countries, though it may well be delayed."
-MG
* * *
In the grip of a great convergence By Martin Wolf January 4 2011
Convergent incomes and divergent growth – that is the economic story
of our times. We are witnessing the reversal of the 19th and early
20th century era of divergent incomes. In that epoch, the peoples of
western Europe and their most successful former colonies achieved a
huge economic advantage over the rest of humanity. Now it is being
reversed more quickly than it emerged. This is inevitable and
desirable. But it also creates huge global challenges.
In an influential book, Kenneth Pomeranz of the University of
California, Irvine, wrote of the “great divergence” between China and
the west. He located that divergence in the late 18th and 19th
centuries. This is controversial: the late Angus Maddison, doyen of
statistical researchers, argued that by 1820 UK output per head was
already three times and US output per head twice Chinese levels. Yet
of the subsequent far greater divergence there is no doubt whatsoever.
By the middle of the 20th century, real incomes per head (measured at
purchasing power parity) in China and India had fallen to 5 and 7 per
cent of US levels, respectively. Moreover, little had changed by 1980.
What had once been the centres of global technology had fallen vastly
behind. This divergence is now reversing. That is far and away the
biggest single fact about our world.
On Maddison’s data, between 1980 and 2008 the ratio of Chinese output
per head to that of the US rose from 6 to 22 per cent, while India’s
rose from 5 to 10 per cent. Data from the Conference Board’s “total
economy database”, computed on a slightly different basis, indicate
that the ratio rose from 3 to 19 per cent in China and from 3 to 7 per
cent in India between the late 1970s and 2009. The comparisons are
uncertain, but the direction of relative change is not.
Rapid convergence on the productivity of advanced western economies is
not unprecedented in the era following the second world war. Japan was
the forerunner, followed by South Korea and a few small east Asian
dragon economies – Hong Kong, Singapore and Taiwan. Japan had already
begun to industrialise in the 19th century, with remarkable success.
After its defeat in the second world war, it restarted at about a
fifth of US output per head, roughly where China is today, to reach 70
per cent in the early 1970s. It attained a peak of close to 90 per
cent of US levels in 1990, when its bubble economy burst, before
declining again. South Korea started at 10 per cent of US levels in
the mid-1960s to reach close to 50 per cent in 1997, just before the
Asian crisis, and 64 per cent in 2009.
What is unprecedented this time is not convergence, but the scale.
Suppose China were to follow Japan’s path during the 1950s and 1960s.
Then it would still have 20 years of very fast growth in front of it,
reaching some 70 per cent of US output per head by 2030. At that
point, its economy would be a little less than three times as large as
that of the US, at PPP, and larger than that of the US and western
Europe combined. India is further behind. At recent rates of growth,
India’s economy would be about 80 per cent of that of the US by 2030,
though its gross domestic product per head would still be less than a
fifth of US levels.
China is today where Japan was in 1950, relative to US levels at that
time. But its output per head is far higher in absolute terms, since
US levels have themselves risen threefold. Today, China’s real GDP per
head is roughly where Japan’s was in the mid-1960s and South Korea’s
in the mid-1980s. India’s are where Japan was in the early 1950s and
South Korea in the early 1970s.
In short, today’s divergent rates of growth between successful
emerging economies and the high-income economies reflects the speed of
the convergence of incomes between them. This divergence in growth is
staggering. In an important speech in November, Ben Bernanke, chairman
of the US Federal Reserve, noted that in the second quarter of 2010,
the aggregate real output of emerging economies was 41 per cent higher
than at the start of 2005. It was 70 per cent higher in China and
about 55 per cent higher in India. But, in the advanced economies,
real output was just 5 per cent higher. For emerging countries, the
“great recession” was a blip. For high-income countries, it was
calamitous.
The great convergence is a world-transforming event. Today, the west –
defined to include western Europe and its “colonial offshoots” (the
US, Canada, Australia and New Zealand) – contains 11 per cent of the
world’s population. But China and India contain 37 per cent. The
present position of the former group of countries will not be
sustained. It is a product of the great divergence. It will end with
the great convergence.
This assumes that the convergence itself will continue, if not
necessarily at recent speeds. The best response to those who doubt
this is: why not? Powerful market and technological forces are
spreading the stock of knowledge across the globe. No one doubts that
Chinese and Indian people are capable of applying it. They are quite
as entrepreneurial and driven as westerners. Being poorer, they are
surely far more so.
Until recently, political, social and policy obstacles were decisive.
This has not been true for several decades. Why should these
re-emerge? True, many reforms will be required if growth is to
proceed, but growth itself is likely to transform societies and
politics in needed directions. True, neither China nor India may
surpass US output per head: Japan failed to do so. But they are far
away today. Why should they be unable to reach, say, half of US
productivity? That is Portugal’s level. Can China match Portugal?
Surely.
Of course, catastrophes may intervene. But it is striking that even
world wars and depressions merely interrupted the rise of earlier
industrialisers. If we leave aside nuclear war, nothing seems likely
to halt the ascent of the big emerging countries, though it may well
be delayed. China and India are big enough to drive growth from their
domestic markets if protectionism takes hold. Indeed, they are big
enough to drive growth even in other emerging countries as well.
In the past few centuries, what was once the European and then
American periphery became the core of the world economy. Now, the
economies that became the periphery are re-emerging as the core. This
is transforming the entire world. What this means for us all will be
the subject of next week’s column.
http://www.ft.com/cms/s/0/072c87e6-1841-11e0-88c9-00144feab49a.html?ftcamp=rss#axzz1ASEnH9A3
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