Reshaping the Global Economic Landscape

Originally published by the Carnegie Endowment for International Peace in Brussels
Participants: Uri Dadush, Stephen Fidler, Jan Techau

Within a generation, developing countries will likely account for six of the world’s seven largest economies and dominate world trade. In an unprecedented development, the relatively poor may hold the keys to international diplomacy. How will this affect power relations and global governance?

Carnegie’s Uri Dadush tackled these issues.  He was joined in this discussion by expert respondent Stephen Fidler, Brussels Bureau Chief of the Wall Street Journal. Carnegie’s Jan Techau moderated.

The event marked the publication of Juggernaut: How Emerging Markets Are Reshaping Globalization (Carnegie Endowment, 2011), written by Uri Dadush and William Shaw, which explores how the rise of developing countries will reshape the economic landscape.

Unprecedented Global Economic Developments

The world’s most populous countries have only recently begun to play substantial roles in the global economic scene, Dadush explained. The fall of the Berlin Wall, the collapse of the import-substituting economies of Latin America, and the opening and stabilizing of the Chinese and Indian economies have greatly contributed to this development.

Projected Shifts

Dadush argued that key elements that will contribute to an evolving global economic landscape include:

• demographic shifts, with the working population shifting toward developing countries;
• technological advancements;
• increasing investment and savings rates in developing countries.

Predictions for the Year 2050

• A Shift in Trade: Economic predictions for the year 2050 suggest that relatively poor countries will dominate world trade, with the center of global trade shifting from the EU to China, explained Dadush.
• Poverty: Poverty is expected to be minimized and constrained to 5 to 7 percent in Sub-Saharan Africa and Western Asia.
• Standards of Living: Fidler argued that the standard of living in developed countries will remain relatively high, but with low growth.
• Climate Change: They also forecast catastrophic climate change, with temperatures rising due to accumulated harmful emissions from developing economies.

Transition and Risk Management

National and international measures to promote governmental and economic openness, institutional strength, sustainable environmental performance, and anti-corruption will help to manage this global economic transition, explained Dadush. These measures will address the risks created by the future shift, including geopolitical breakdown, protectionism, financial crises, economic depression, and climate change.

Leadership and Moving Forward

Juggernaut argues that the current international frameworks responsible for economic management are almost entirely unequipped to manage the transition, Dadush explained. He argued, however, that the G20, despite its many shortcomings, can help the evolving global economic society move forward on many issues by building consensus among a critical mass of players and legitimizing important decisions among a wider international body.