Home > The Economy > Emerging vs. developed countries’ GDP growth rates 1986 to 2015

Emerging vs. developed countries’ GDP growth rates 1986 to 2015

March 24, 2011 Leave a comment Go to comments

This unusual graph is from an article by Gavyn Davies posted yesterday in the Financial Times Blog.

Davies comments on the graph as follows.

The red lines show the growth rate of the emerging economies, on an annual basis and on trend. The forecasts are from the IMF. The strengthening in emerging market growth since the late 1990s is very pronounced, and is exactly what everyone would expect. The blue lines show the GDP performance of the developed economies. Not only have the growth rates of the developed world fallen relative to the emerging countries since the late 1990s, they have actually fallen in absolute terms as well.

Of course, a large part of the decline in western growth has been due to the collapse of the financial sector in 2008. But I am beginning to wonder whether the rise in the red lines, and the fall in the blue lines, are somehow connected.

If so, it is going to cause a lot of trouble.

The article can be read here: http://ftalphaville.ft.com/blog/2011/03/23/523231/the-worlds-economic-centre-of-gravity/

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Categories: The Economy
  1. Helge Nome
    March 24, 2011 at 6:02 pm | #1
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    I think this means that investment capital is being taken out of developed countries and injected into emerging market economies. It’s money looking for more money as quickly as possible, regardless of consequences.

  2. Fred Foldvary
    March 24, 2011 at 8:49 pm | #2
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    Developed economies are moving towards less economic freedom (more taxes, subsidies, restrictions, bureaucracy) while emerging economies (e.g. China, India, Indonesia, Brasil) are moving towards greater economic freedom. Yes, capital is flowing into emerging economies, because financial capital flows to where it is best treated. A good example of an economy not treating investment well is Venezuela. Cf. http://www.freetheworld.com

  3. Eva
    March 24, 2011 at 9:59 pm | #3
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    Fred, a few years ago, your European soulmates used to rant about the increasing “economic freedom” of the “Icelandic tiger”, the “Celtic tiger” (Ireland) and the “Baltic tigers” (Estonia, Latvia, Lithuania). There’s much less tiger talk over here now and I wonder why…

  4. paul davidson
    March 24, 2011 at 10:29 pm | #4
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    when multinational [developed nation?s]corporations outsource jobs (incomes), is it surprising that the blue trend line slows and evenfalls in absolute rerns — while the nations receiving the outsourced jobs (incomes) grow more rapidly.

    only the idiot economists whostill believe in the universality of the law of comparative advantage would think otherwise.

    Did you know Keynes wrote against the comparative advantage argument–especially when textile manufacturing jobs were “outsources from the UK midland to India, etc., as early as 1933????.— See mybook THE KEYNES SOLUTION.
    where Keynes indicates comparative advantage has relevance for mineral deposit and climate vrelated industries (agriculture).
    Paul Davidson

  5. Stefan
    March 25, 2011 at 10:04 am | #5
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    Gavyn Davis schould know better: the reason why the blue line is falling is that population growth in rich countries has slowed sharply over the past two decades (Japan & Germany in particular). And the reason why the red line has been rising is that these countries boosted their education systems, exchange more goods and ideas with other countries and allowed many of their citizens to decide important things for themselves (freedom). There is no causal link between the two lines.

    • Greg
      March 25, 2011 at 8:33 pm | #6
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      Further to this, not only has population growth slowed in rich countries, but labour force participation is declining. Retirement of Baby Boomers is reducing the savings ( ≅ investment ) rate too. All of these reduce the growth rate.

      Indeed, Gavyn Davies should know better. If he doesn’t know elementary growth theory he really should not be paid to comment on economic matters.

  6. Fred Foldvary
    March 25, 2011 at 1:55 pm | #7
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    Regarding the Celtic, Baltic, and other tigers, my “free market” soul mates have only a superficial and misleading understanding of market dynamics. The pure market excludes subsidies. The mother of all subsidies is implicit: the generation of land rent and land value by public goods paid for by taxing wages. Workers get double billed, paying both taxes and higher rent, while landowners get a gigantic redistribution of wealth from workers. “Free marketeers” of the Chicago and Vienna varieties have long resisted this understanding in their rejection of the ideas of Henry George. Moreover, the subsidy to land values generates a periodic speculative real estate boom that is the main cause of business cycles, as I have laid out in my neglected paper on the Geo-Austrian business cycle. There was no free market in Ireland, the Baltics, the US, the UK, and elsewhere. Moreover, the Austrian economists, blaming central banking’s money creation, do claim theoretical success, and they are half right. They too miss the land subsidy side.

  7. Fred Foldvary
    March 25, 2011 at 2:00 pm | #8
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    Regarding Paul Davidson’s statement anti comparative advantage, is not all trade based on having a lower opportunity cost. That is why a lawyer who can type fast will nevertheless hire a secretary. Nobody has explained why we are better off with higher transaction costs in general. Am I an idiot for trading my specialized labor for food rather than growing my own food?

  8. charlie thomas
    March 26, 2011 at 4:59 pm | #9
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    good lord folks the base on which percentage growth is computed is undoubtedly a major component in this graph. Small economies growing faster than large economies by percent is not a surprize.

  9. Dave Taylor
    March 26, 2011 at 9:19 pm | #10
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    In answer to Fred’s first question, no; not all trade is based on having a lower opportunity cost. Perhaps most wholesale trade is, where the purpose of the trading is to acquire money rather than for both sides to acquire equal advantage. Moneyless medieval trade involved exchanging one’s own SURPLUS goods for the different kinds of SURPLUS goods of others, there being negative advantage in taking their necessities. The “idiotic” logical fallacy in the theory of marginal pricing is akin to doing sums by taking logarithms of valuations, then failing to take the antilogarithms back to values with different kinds of real significance. As I see it, money is an appropriate indicator of value only within a firm or person, these providing the common denominator in decisions about which kinds of surplus to produce.

    As for Fred’s second question, perhaps he IS an idiot if he is trading ALL his specialised labour for food, forgetting through pride in (or anxiety about) his specialised talents the advantages of exercise, much better food, looked-after land and time experiencing the wonders of Nature. “What is this life if, full of care, we have no time to stand and stare”?

    • balasaravanan palanirajh
      August 25, 2011 at 5:06 am | #11
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      Hi Mr. Taylor,

      I am a student following science but got pulled in to jewellery trade to carry on the family business so I have no idea on economics and commerce.

      Are you suggesting that the US and other leading countries have to stop all imports and strengthen exports thus enhancing local employment?

      I was told India, China and other under developed countries prospered on given work labor and now dominating the world markets.

      Any sites where I get access to up-to-date GDP info for most countries?

  10. Michael Monterey
    November 23, 2012 at 6:01 pm | #12
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    Anyone care to explain the problem of increasing job loss to automation as the global population increases? And what of the effect of the USA’s under-developing and general decline into mass-insanity and/or carefully cultivated nonsense (favoring ever greater devastation by the inventors of Plutonomy)?

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