Economic Rise of the East

In its latest report entitled "Global Trends 2025: A Transformed World", the National Intelligence Council has made various predictions about the continuing and changing influence of globalization around the world. It is argued that "as some countries become more invested in their economic well-being, incentives toward geopolitical stability could increase." This is positive. Indeed one of the goals of economic interconnectedness is to disincentive military conflict; in addition it has created an unprecedented increase in prosperity worldwide. The assertions of the report are generally positive about globalization, however also identified are troubles looming that could affect this economic progress; these include competition for resources, aging populations, global economic imbalances and popular backlash against a more open international system, and resulting fragmentation and regionalism.

The continued dominance of the United States (albeit relatively weakened) is a key idea of the report. Whether it wants it or not, the US must continue in its global economic leadership role - if not us- who? There appear to be no other widely acceptable alternatives. However, trends in globalization, already underway, are predicted to change the nature of the global economy to one that is more multipolar and where economic growth is more diffuse. The executive summary states:

In terms of size, speed, and directional flow, the transfer of global wealth and economic power now under way - roughly from West to East - is without precedent in modern history. This shift derives from two sources. First, increases in oil and commodity prices have generated windfall profits for the Gulf States and Russia. Second, lower costs combined with government policies have shifted the locus of manufacturing and some service industries to Asia.

Growth projections for Brazil, Russia, India and China (the BRICs) indicate they will collectively match the original G-7's share of global GDP by 2040-2050. China is poised to have more impact on the world economy over the next 20 years than any other country. If current trends persist, by 2025 China will have the world's second largest economy and will be a leading military power.

This may provoke fear for some; in the body of the report however, it is clarified that this is a "global shift in relative wealth and economic power." The key word here is relative. The implication being that emerging markets are experiencing rapid increases in wealth, wealth that is bringing them more into line with the industrialized world; however, this does not imply that the rest of the world will become poorer as a result. The development of the global economy is not a zero-sum game. Emerging countries are getting a bigger slice of the pie, that is certain, but at the same time, the pie itself is getting bigger. China's economic rise does not necessarily entail a poorer west. In fact, the opposite is true. As the middle class grows globally, in particular in the BRIC countries, it adds greatly to economic growth everywhere and opportunities for companies to expand their markets.

According to the report, "Over the next several decades the number of people considered to be in the 'global middle class' is projected to swell from 440 million to 1.2 billion or from 7.6 percent of the world's population to 16.1 percent." Almost 1 billion new consumers with disposable income is an opportunity - no question. Although emerging markets will generate new globally competitive corporations to serve these consumers, in many ways U.S. and European companies with their longer experience of designing