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The Seven Global Economic Spheres of 2020

What will the world’s economic landscape look like in 2020?

January 28, 2011

What will the world's economic landscape look like in 2020?

It is not the strongest of the species that survives, nor the most intelligent, but the one most responsive to change.” — Charles Darwin

We live in very uncertain times. While it is thus hazardous to make any form of prediction, I nevertheless want to paint a possible portrait of the world’s economic landscape in 2020.

This is emphatically not a forecast. It is very unlikely that in ten years reality will correspond to my narrative. But it should help envision a possible view of the world. Yes, there will be great disruptions. 2020 will be unlike 2010 — as 2010 was unlike 2000.

In the 20th century, the world economy was dominated by the United States and to lesser extents by a few countries in Western Europe and Japan. My narrative envisions the (re-)emergence of seven major global spheres.

These spheres are not autarkic and show a great degree of interdependence — assuming that the current rules-based global multilateral system is maintained. Another narrative, arising from resurgent protectionism, would envision acute economic conflict between the spheres.

First, starting from the East, we have first the very big and expanding Greater China Economic Sphere that embraces the Asia/Pacific region. Within that sphere there are sub-spheres, including Korea, Japan, Australia and ASEAN.

None, however, constitutes a sphere of its own — and all look to China as the regional economic locomotive. The Greater China Economic Sphere has extensive and intensive connections with the other spheres and with countries outside any specific sphere, notably in Africa.

Second, the Indian Economic Sphere is substantial due to its demographic and economic growth. Among the constraints in its expansion, however, is that India, unlike China, engages in quite a limited amount of trade and investment with its neighbors, especially its two big neighbors, Pakistan and Bangladesh. It is unlikely that a “greater Indian economic sphere” encompassing South Asia will emerge by 2020.

Third, to the north lies the Russian Economic Sphere, encompassing the economies of the former Soviet Union. It is diminishing in size and influence, mainly due to demographics. The Russian population will decrease from its current 140 million to 90 million by 2050.

It is difficult to see how such a dwindling population will be able to manage such a large territory. Russia remains primarily an oil-and-gas economy. Unlike the other BRIC economies, it has not engaged in profound market-oriented reforms.

Fourth, to the southwest, there is the emergence of a Neo-Ottoman Economic Sphere. Turkey is one of the countries that have undergone the most remarkable transformations in this last decade.

It started off the decade very badly, with a major economic crisis. Under the skilful leadership of the then-Minister of Economic Affairs, Kemal Dervis, the Turkish economy emerged revitalized and reformed. It is the fastest-growing economy of the OECD.

Turkey has also undergone an important psychological shift from aspiring to join the EU to developing a much more independent policy, which includes renewing ties with its eastern neighbors, Syria, Iraq and Iran, and also with the Middle East and Africa.

Fifth, the EU Economic Sphere is still there, though its relative and possibly absolute weight in the world economy will decline. This is due, in good part, to demographics, but also because the EU gets lackluster scores in reference to Darwin’s dictum about survival. It has not responded well to change and has become inward-looking. There are many uncertainties about its future, including that of the euro.

Sixth, crossing the Atlantic, I see two quite robust spheres in both the north and south. There is the North American Economic Sphere, composed of Canada, the United States and Mexico. The United States’ current, quite acute difficulties notwithstanding, there are good reasons to anticipate it will remain a major global force.

This is in part due to the positive forces that still drive the American economy — primarily innovation, but also immigration, the two being quite strongly interlinked. Furthermore, the North American sphere encompasses a dynamic emerging economy, Mexico, which the EU does not, so long as it keeps Turkey out.

And seventh, in South America there is the Brazilian Economic Sphere. If “Darwin prizes” were to be given to the countries that have best responded to challenging times, Brazil would be the runaway first-prize winner, with, as suggested above, possibly Turkey in second place. Brazil is a major global economy, competitive in many areas and with emerging powerful multinational corporations.

But most importantly, under the successive administrations of Presidents Fernando Henrique Cardoso and Luiz Inácio Lula da Silva, Brazil has succeeded not only in its economic policies, but also in social terms. There has not only been a significant reduction in poverty, but also — unlike most countries in the world today — there has actually been a reduction in income inequality.

There is not, for the moment, the emergence of an African economic sphere. It remains to be seen what developments there will be in that continent during this coming decade.

Takeaways

Yes, there will be great disruptions. 2020 will be unlike 2010 — as 2010 was unlike 2000.

India, unlike China, engages in quite a limited amount of trade and investment with its neighbors, especially its two big neighbors, Pakistan and Bangladesh.

Turkey is now the fastest-growing economy of the OECD.

If "Darwin prizes" were to be given to the countries that have best responded to challenging times, Brazil would be the runaway first-prize winner.