Economic gloom lifting slowly
Analyst cites ‘supercycle’
It’s been a gloomy world out there for so long that one could be forgiven for wondering if real prosperity will ever return. After all, North America has been in recovery for more than a year, but that would be hard to tell from the level of pessimism out there.
There’s no immediate cure for the economy, just the hope of gradual improvement over the next year or two. But if you’re willing to look further ahead, there is a remedy for our pessimism.
It comes from Gerard Lyons, chief economist at the Standard Chartered Bank.
This 157-year-old institution, the same size as one of Canada’s big banks, is based in London, England, but does little business in England. Its biggest shareholder is in Singapore and most of its activities are in Asia, Africa and the Middle East.
Working for such an outfit, Lyons is particularly wellpositioned to analyze the implications of Asia’s rising industrial powers, and that’s just what he has done in a big new report. Its bottom line: we’re in for at least 20 years or so of global good times.
Or as he put it succinctly in a telephone interview Friday, “I think the doom and gloom is wrong.”
That’s not to say that there are no risks in the outlook. There are plenty, particularly in the next year or two.
But Lyons’ point is that we’re in what he calls a “supercycle,” a long period when the global economy is able to grow faster than it typically does because of some long-lasting positive trend.
The last such supercycle came from the end of the Second World War to the early 1970s, when the reconstruction of war-ravaged countries helped to spur rapid growth in Europe and a powerful spurt of development in Japan, which grew from three per cent of the global economy to 10 per cent.
This supercycle will be based largely on the well-known story of emerging markets that are moving rapidly to become wealthy industrial nations: principally China and India but also more recent success stories like Brazil.
In wealthy Western national, we tend to see this as a story of decline: the decline of the U.S. as the world’s undisputed superpower and the decline of North America, Europe and Japan as home to most of the world’s prosperity.
It’s quite true that today’s wealthy nations will experience a long period of relative decline, acknowledges Lyons, but relative decline is not such a bad thing if you’re still able to grow and prosper.
Indeed, the erstwhile poor nations of the world are beginning to act as locomotives for the economically damaged, heavily-indebted industrial elite of the world, a phenomenon that makes it more likely that the U.S., epicentre of the 2008 global financial crisis, will be able to come out of its doldrums reasonably soon.
You can get some idea how powerful this Emerging Market supercycle is by looking back to 2000, the year Lyons uses as its starting point.
Since that time, the world has gone through an exceptionally severe financial collapse and recession, crushing growth in most of the bigger economies. But with the vigour imparted by emerging markets, the global economy has still grown at a very healthy clip, roughly doubling in size from $32 trillion (or if you prefer, $32 thousand million) to a forecast $64.7 trillion in 2011.
While we still have to navigate the shoals of today’s economic woes, Lyons believes the big picture is quite positive, with global growth likely to average 3.5 per cent from 2000 to 2030, up substantially from the world’s 2.8 per cent pace of growth in the preceding quarter century.