Tuesday, June 26, 2012

Rise of China is just a return to normal

Wonderful Graphic from Atlantic 

1,000 years of economic history in one graph.  So what is happening in the world?  Well we start 1,000 years ago with a world economy dominated by Asia. In 1,000 AD China and India accounted for 70% of the world's economy.

Over the 1,000 years we see the rise of Europe, and Europe's rise launches the rise America, Japan and Russia.  Now we live in an age where Europe is still massive, but we are seeing a rise really in China.  America is holding its own, though the rise in China is significant.

China has simply returned to 30% or the world economy.  India is still very far away from returning to its global former economic position.  1,000 years ago India was almost 40% of the world economy.  Europe is holding up.  The west of US, France, Spain, Italy, Germany and the UK still account for 40% of the world economy.  Add it Japan and you get half the world economy in what we might call 'the West.'  The term BRICS is kind of silly, Russia is in significant decline from its former greatness.  India has recovered some but still have undergone a collapse over the past 1,000 years.  China is the only member that has really reclaimed its position.

So this is our world.  The West and Japan are half the global economy.  The autocratic 'Communists' in China are 30%.  Most of the rest is emerging economies like Egypt, India, and Russia which are not models of stability.

This economy of 30% US, 30% EU, 30% China and 10% Japan is often seen as a source of stability.  If one leg falls, as the US did in 2008, another leg like China can carry the load.  The problem we have now is that one leg may cause another to fall.  The crisis in the US is be extended in the EU.  Perhaps this new world economy has some bad feedback loops.