Emerging nations threaten G7 dominance Larry Elliott, The Hindu, March 7, 2006
http://www.hindu.com/2006/03/07/stories/2006030706371100.htm EVER SINCE the days of Henry Ford, Detroit has been the hub of the world's motor industry. Motor City boasted the big three Ford, General Motors, and Chrysler but it is now a shadow of its former self. Chrysler has been swallowed by Daimler, while between them Ford and General Motors have announced 60,000 job cuts. This may be more than production moving south to the non-unionised foreign-owned plants in the sunbelt: it could be a sign of a world where the economic geography is changing. Since the dawn of the industrial revolution 250 years ago, the global economy has been dominated by western Europe and north America. If the 19th century was Britain's the 20th century was America's. When Valery Giscard d'Estaing first convened a meeting of the great powers in 1974 to discuss the impact of a five-fold increase in the price of oil, it was dominated by the old order. The G7, as it eventually became, comprised Britain, Germany, France, and Italy and the two nations of North America. The sole representative from the rest of the world was Japan. Little more than 30 years after Mr. Giscard's get-together at Rambouillet, it is clear that the G7 is an anachronism. The club has extended membership to Russia, while China, India, and Brazil could all stake a reasonable claim to be included at the expense of Italy or Canada. Over the coming years, this group will grow in number and size, according to a report from PricewaterhouseCoopers (PwC). By 2050, the firm estimates the E7 China, India, Brazil, Russia, Indonesia, Mexico, and Turkey will have a combined size at least 25 per cent bigger than the G7, and perhaps 75 per cent bigger, depending on the measure used to gauge the size of an economy. Measured using market exchange rates, the GDP of China is 18 per cent that of the U.S.; by 2050 PwC forecasts it will be 76 per cent as big. Using purchasing power parity (PPP) which takes into account that a dollar in China buys more than a dollar in the U.S., China's GDP is already 94 per cent as big as that of the U.S.; by 2050 it could be almost half as big again. All this does not mean the rise of the E7 will be entirely trouble free. History suggests that shifts in the balance of power cause geo- political upheaval witness the period between 1890 and 1945 as the new kids on the block flex their muscles and the old guard seeks to maintain the status quo. The U.S. is already wary about the growing economic strength of China, and with some justification has complained publicly about the way Beijing's manipulation of the exchange rate has boosted China's exports at the expense of American manufacturers. China's intentions may be entirely honourable but that is not the way everybody in the U.S. sees it. Huge expansion forecast Even if the differences between the E7 and the G7 can be settled amicably, there is one final point the ability of the world to cope with the phenomenal economic expansion that the PwC forecasts envisage. Previous work in this area by Goldman Sachs (GS) looked at the Bric economies Brazil, Russia, India and China and concluded that demand for energy and consumer goods would rocket. Take oil: between now and 2050, GS estimates demand for oil will double to 169 million barrels a day, with both China and India requiring more than the U.S. does now. Where will all this oil come from? The industry is confident there are new sources of supply, but some analysts say the world may be close to "peak oil," the moment when supply starts to dwindle. Now, there are around 500 cars for every 1,000 people in the U.S., 8 for every 1,000 in India, 15 for every 1,000 in China, and 137 for every 1,000 in Brazil. By 2050, penetration in the U.S. will have risen to 555 per 1,000; in India it will be 382, in China 363, and in Brazil 645. Do the maths. China and India together have about 2.5 billion people. If, on a rough estimate, one in every 100 people has a car, that means 25 million cars. If you take two conservative assumptions that the population of the two countries modestly increases by 2050 and that there are 300 cars for every 1,000 that means getting on for a billion more cars. Throw in the rest of the E7 and that adds up to a lot of greenhouse gas. Somewhat surprisingly, there is no mention at all in the PwC analysis of whether the world has the carrying capacity to cope with growth of this magnitude. Given our own consumption patterns, it would be two-faced to deny the E7 what we take for granted ourselves. But far from being reassured that the West has nothing to fear from the rise and rise of the E7, the opposite is true. We should be terrified, if not for ourselves, then for our children. © Guardian Newspapers Limited 2004 -- This is ZESTGlobal. Post articles on international affairs to [email protected] If you got this mail as a forward, subscribe to ZESTGlobal by sending a blank mail to [EMAIL PROTECTED] OR, if you have a Yahoo! ID, by visiting http://groups.yahoo.com/group/ZESTGlobal/join/ Yahoo! Groups Links <*> To visit your group on the web, go to: http://groups.yahoo.com/group/ZESTGlobal/ <*> To unsubscribe from this group, send an email to: [EMAIL PROTECTED] <*> Your use of Yahoo! Groups is subject to: http://docs.yahoo.com/info/terms/
