Halligan: China, Not the West, Will Dominate World Economy

January 5, 2015

Liam Halligan, economist, broadcaster, and author of the weekly "Economics Agenda" column in London's Sunday Telegraph for 11 years, asserts and demonstrates in yesterday's column entitled, "A Return to an Old World Order," that the U.S. and other economies of the West are now clearly second to the economies of the East, spearheaded by the BRICS whether we like it or not.

Halligan "marches the facts":

--In 1980, China's annual economic output was just one-tenth of the U.S.; in 2004, it was half; in October, IMF stats showed China's annual GDP at $17.6 trillion, compared with $17.4 trillion in the U.S. This is hugely symbolic, says Halligan, as the U.S. has been the world's largest economy since 1872, when it overtook Britain.

--Since the early 1980s, China's average GDP growth has been 9.8%, compared with 2.7% in the U.S., a performance China achieved not by following the "Western model," but by "combining aspects of our market mechanism with state control..." Asia, Africa, and Latin America are increasingly impressed by the Chinese model, he writes.

"More importantly, says Halligan,

"Western growth is still far too heavily dependent on rising indebtedness, virtually-printed money, and hype. Many of the large emerging markets continue, in contrast, to ride a megatrend of rapid industralisation, urbanisation, and population growth the likes of which the West hasn't seen for generations... Such nations now account for more than half of global GDP, three-quarters of foreign exchange reserves, and four-fifths of humanity. Their economies, while very far from perfect [emphasis in original] have long been much faster growing, more dynamic and far less indebted than our own."

It is "unwise" for the West to "snub" such countries, and exclude them from the higher echelons of institutions like the IMF.

"We scoff when Brazil, Russia, India and China--countries with a total GDP now nine-tenths of the U.S. and EU combined--set up their own development bank, as they did in 2014. But these countries will run the global economy inhabited by our children and grandchildren."

Halligan says trade talks are "in tatters," and East-West relations are at their lowest ebb for many years, and signs are that the conflict is growing.

"But China, India, and much of the rest of the non-Western world are largely unimpressed by our narrative, remaining more than willing to do business with Moscow....It is less important that the rest of the world resembles us and follows the same path of history we did, building societies we perceive to be in our image, than we continue to trade, to do business and live together in peace... Now, after a couple of centuries of European and then American dominance the East--whether we like it or not--is set to dominate global commerce once more."