By Alan Wheatley, Reuters
BEIJING — Developing economies now account for about half of global growth. Thanks to a brisk recovery from the financial crisis, their import demand is growing twice as fast as that of advanced markets. In a powerful symbol of such shifts in the world economy, the manager of the eurozone’s financial rescue fund reckons he could quickly raise money to bail out Ireland — by turning to Asia. “We are confident that we can raise the necessary funds from institutional investors, central banks and sovereign funds, in Asia in particular,” said Klaus Regling, chief executive of the European Financial Stability Facility. So is it game over for the Old World? Not so quick, argues George Magnus, senior economic adviser at UBS Investment Bank in London. In “Uprising, Will Emerging Markets Shape or Shake the World Economy?,” Magnus cautions against writing off the West, especially the United States. Given America’s proven capacity to reinvent itself, the epitaph RIP being prepared for it should perhaps stand for Renewal in Progress instead of Rest in Peace, he says. And Japan’s precipitous decline since the end of the 1980s, when the land under the Imperial Palace in Tokyo was worth as much as the whole of California, is reason alone to question the “Sino-euphoria” generated by China’s seeming inexorable rise. Magnus’s overarching argument is that China still lacks the organizations and institutions that accept — indeed welcome — the risk-taking that holds the key to technological innovation.
For it is technology that will be a major determinant of the fortunes and failure of developing countries over the next decades. It’s one thing to manufacture an iPad. It’s another to invent, design, brand and commercialize it. On this score, the United States and parts of Europe are likely to retain pole position for a long time, Magnus believes. “China has proved itself quite adept at being able to introduce economic reforms, but I wonder whether it has the legal and political and social institutions to be able to encourage and tolerate disruptive change,” he said in a telephone interview.
In raising questions about the durability of the rise of emerging markets, Magnus is swimming against a strong tide.
The Organization for Economic Cooperation and Development (OECD), a club of 33 industrial democracies, forecasts in a new report that by 2030 non-OECD economies will account for 57 percent of global GDP, up from just 40 percent in 2000.