The global economy currently is undergoing a great transformation in terms of economic structure, power, and influence. The economies that have been commonly called ” emerging markets” appear to have finally emerged and are coming into their own in terms of their contributions to global economic and financial activity. The international corporate and landscape and even the shape of the international financial system as they redefine the international economy has become even more important to grasp with this phenomenon engenders, both for the major developing economies at the forefront of this change, as well as for those especially the least developed economies that remain at the periphery. The phenomenon of shifting growth drivers is not a new one, at least from the perspective of global economic history.
What does appear to be genuinely different this time is the hitherto unprecedented importance of developing countries at the helm of this change. Economies like China &India are increasingly assuming an importance in the global growth picture to the advanced countries like US and Japan. From the first principal component of trade, finance, and technology -weighted growth shares measured in constant form of dollars, normalized to the maximum and minimum of the full period. What this translates into the world is increasingly multipolar, and will only continue to be so in the future. In fact, from the perspective of the relative economic size, the world is more multipolar now than it has been in the 60s, and this trend of greater diffusion is set to continue into the future certainly through till 2025.
What is importance to recognize here, however, is that a more diffused distribution of global economic activity need not imply a more balanced distribution of the relative shares of growth contributions does dip down from the highs of the 1970s, but we are living in the midst of what appears to be a nadir.
As we leave the financial crisis of 2007/2008, the consolidation in economic growth coupled with increased economic size of emerging powers such as China and India means that the world actually retreats from the multipolarity in growth contributions that we see today. Now,while some have framed with transition in the language of competition and in the context of the developed world this change should really be thought of more in terms of how the global distribution of world activity and influence is now simply less concentrated. Hence, the story is not so much one of the advanced economy decline or emerging economy might. But a more balanced sharing of tremendous benefits that comes with economic growth.
Put another way, this is the sort of economic convergence in output and incomes that economics have long dreamt about and which has thus been elusive and is now tantalizingly close to being realized at least for the largest developing countries.
The future that a multipolar world hold for developing countries are the forefront of the entire multipolarity phenomenon, their greater involvement in the future direction of the global economy means that greater diversification of growth activity translates to a better world in terms of equality.