Is Asia the dominant economic power? | The Economist
- 5 years ago
Asia is regaining the economic dominance it enjoyed a millennium ago - but it still has some way to go
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A thousand years ago Asia dominated the world economy, producing about two thirds of its output. Western Europe was far behind and the economy of what's now the United States barely existed. Western Europe's economy rose throughout the middle ages despite setbacks caused by plagues and conflicts.
Then in the 1800s America's rise and Europe's industrial revolution combined to bring Asia's share of world GDP down sharply to just one fifth of the total by 1980.
China's reforms in the 1980s boosted Asia's share of the world economy but then if you're measuring GDP using market exchange rates, its share slumped in the 1990s when the Asian economic crisis caused the regions currencies to collapse. If you now compare economies using Purchasing Power Parity, which takes into account the lower prices Asian consumers pay for goods and services on their home markets, the continents rise continues, right through the 1990s crisis.
Using this more realistic way of measuring GDP Asia will produce about a third of the world's output this year. Asian countries built up their reserves of foreign currency after the 1990s crisis, especially China. This increase is often taken as a sign of Asia's growing economic clout even though its been partly reversed in recent years.
Furthermore currency reserves themselves are only a few percent of the worlds total stock of the worlds financial assets. Asia's share of this broader range of assets is growing but it's still only about a fifth.
The East is undoubtedly rising but its new day has barely begun.
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A thousand years ago Asia dominated the world economy, producing about two thirds of its output. Western Europe was far behind and the economy of what's now the United States barely existed. Western Europe's economy rose throughout the middle ages despite setbacks caused by plagues and conflicts.
Then in the 1800s America's rise and Europe's industrial revolution combined to bring Asia's share of world GDP down sharply to just one fifth of the total by 1980.
China's reforms in the 1980s boosted Asia's share of the world economy but then if you're measuring GDP using market exchange rates, its share slumped in the 1990s when the Asian economic crisis caused the regions currencies to collapse. If you now compare economies using Purchasing Power Parity, which takes into account the lower prices Asian consumers pay for goods and services on their home markets, the continents rise continues, right through the 1990s crisis.
Using this more realistic way of measuring GDP Asia will produce about a third of the world's output this year. Asian countries built up their reserves of foreign currency after the 1990s crisis, especially China. This increase is often taken as a sign of Asia's growing economic clout even though its been partly reversed in recent years.
Furthermore currency reserves themselves are only a few percent of the worlds total stock of the worlds financial assets. Asia's share of this broader range of assets is growing but it's still only about a fifth.
The East is undoubtedly rising but its new day has barely begun.
Get more The Economist
Follow us: https://twitter.com/TheEconomist
Like us: https://www.facebook.com/TheEconomist
View photos: https://instagram.com/theeconomist/
The Economist videos give authoritative insight and opinion on international news, politics, business, finance, science, technology and the connections between them.