Shifting economic winds in the Asia-Pacific
A seismic rebalancing of the world's economy has taken place since Ronald Reagan left office. Almost immediately after Reagan's administration ended, the advanced economies -- led by the United States -- began their long, slow slide from global economic dominance.
During Reagan's two terms, the advanced economies held steady at 64 percent of the global economy, leaving the residual one-third for the emerging market and developing nations. In a near-linear fashion starting in 1990, the advanced economies have declined to just 43 percent of the global economy by 2015 -- projected to drop further to below 40 percent by 2020. The emerging market and developing nations are nearly at 60 percent and increasing rapidly.
We have witnessed the end of Western economic dominance over the past quarter-century, in large part due to the West's rather rash, unguided ventures into globalization and free trade with developing nations.
Reagan espoused the principles of free trade, but he never governed under a globalized economy drifting towards ever-increasing amounts of free trade between the freedom-loving West and the largely authoritarian East. If he had, he likely would have realized his mistake. The Cold War would not have been won under the fabric of globalization and free trade -- the United States simply would not have been able to bring the required economic pressure to bear on the U.S.S.R.
The rise of the emerging market and developing nations since 1980 has been dominantly driven by the Asia-Pacific members. This developing bloc's share of the global economy has increased from just 9 percent in 1980 up to 31 percent in 2015, and is expected to reach 35 percent by 2020. In 2016, emerging and developing Asia is projected to pass the G7 in economic size.
China was the major powerhouse over this time, but as its economy begins to slow, we see the shifting of the economic winds in the Asia-Pacific.
Over the next five years, China's economic rank among the emerging and developing Asian countries is expected to drop from the first or second place it has consistently held since 1980 down to eighth. India -- long a steady, stalwart economic success story -- is projected to climb up in to replace China in second place. Vietnam will barely hang on to tenth place after declining steadily since the first half of the 2000s.
The other nations in the top ten -- Myanmar, Laos, Cambodia, Bangladesh, Papau New Guinea, Sri Lanka, and the Philippines -- may not have immediately come to mind (with the possible exception of the Philippines) to many as the hottest economies in developing Asia. But these economies are growing fast, and have been outperforming Indonesia and Malaysia for some time.
Even if China's slowdown holds, the massive size of its economy -- now the world's largest -- will mean that even modest rates of Chinese growth translate into large pieces of an economic pie.
None of these nations are truly free societies in the classical Western tradition of liberal democracies. Even India is only reasonably ranked as partly free once one probes deeper into how its economic and press systems function.
The times they are a changing in emerging and developing Asia. With enhanced economic clout, many of these countries are also becoming more geopolitically aggressive. Over time, the aggression will spread further from Asia's shores.
The West will soon regret its willing participation in creating an Asian economic superpower.