DISRUPTION IN GLOBAL ECONOMIC POWER

Satisfying consumers is the single biggest challenge to all players, old and new.

The past three decades showed major disruptions in global politics and economics. These include the fall of European socialism with the collapse of the Berlin Wall in 1989, the creation of many new countries from the former USSR, the move towards freer trade with the creation of the World Trade Organization ( WTO) in 1995, and the transition from heavy central planning to the market economy of two big socialist economies in the world, China and Vietnam.

Disruption in macro economy and business is a result of endless innovation by new players both in business and politics. What used to be dirt-poor economies have transformed to middle-income, Internet-savvy ones.

Let us review global economic performance over the past 25 years. We use 1992 as base year because there was no WTO at that time so many economies were still grappling with trade restrictions and by extension, investment constraints.

The then top 10 East Asian economies are covered here ( see table).

These numbers show the following disruptions over the past quarter of a century.

One, China’s communist central planning until the ’ 80s has resulted in a very poor economy. Its transition to some principles of the market economy resulted in massive turn-around towards more prosperity: GDP size has expanded 24x in current prices and nearly 16x in PPP values.

Two, India has similar economic policies with China until the ’80s, very nationalistic, socialist, and restrictive. Its transition to some market reforms allowed it to expand its GDP size nearly 9x.

Three, seven to eight ASEAN economies have experienced GDP size expansion of at least 5x in just 25 years, whether in current prices or PPP values. Only Thailand and Brunei failed to expand 5x because they have a relatively high economic base in 1992 or earlier.

Four, traditional rich economies of Europe, Japan, and US were only able to expand three times at most. This is because they already have a high economic base in 1992, and they have become more regulated and more