Haves and have-nots

Next decade challenge | Our definition of who fits what category will change in the next decade

Issue: "Realities: 2011-2020," Jan. 15, 2011

The International Monetary Fund made an odd decision last summer. While Greece was in economic meltdown, its workers rioting in the streets-with Ireland and other parts of Western Europe signaling more global economic bad news to come-the IMF actually raised, mid-cycle, its forecast for average economic growth around the world.

If you are a European, North American, Mexican, Japanese, or a Russian, economic growth of 4½ percent in 2010 would have been big, big news. But if you live in China, India, Brazil, or Thailand, that rate barely begins to tell your story.

Much of the world that we think of as the "haves"-particularly the dominant economies of the United States, Canada, Japan, and Germany-are growing at miniscule rates compared to countries in Asia, South America, and even Africa. The alleged have-nots, meanwhile, have powered through global recession by actually increasing their economic growth rates, with China leading the way at a whopping 2010 rate of 10.5 percent. India followed closely at 9.4 percent, with Brazil, Thailand, Malaysia, and even Vietnam not far behind. The United States, meanwhile, experienced an economic growth rate of 3.3 percent in 2010, which put it slightly ahead of Australia, New Zealand, and countries of Eastern European, while behind Mexico, Russia, and the Middle East. Germany, Japan, France, and the United Kingdom are barely keeping their places on the chart.

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What this means is that the coming decade will see economic influence and economic decision-makers increasingly emerge from Asia and the global south-where the engines of production are running hotter and barriers to entry are falling faster.

To orient oneself in the 20th century it was important to understand a world centered on the Atlantic Ocean; to find one's way into the 21st century a map centered on the Indian Ocean will be essential. "Asia and the global south's high rate of growth, even discounted by faulty statistics that overvalue state-induced investments, almost double that of the developed world," said Alejandro Chafuen, president of the Atlas Economic Research Foundation.

The paradox, Chafuen told me, is that "some countries with very weak rule of law are growing much faster than the developed world." This once ran counter to everything we capitalists knew. But capitalist countries have changed. "China and India score very low on indices of economic freedom," said Chafuen. But developed economies with better records of economic freedom "are trapped by heavy interventionist systems that shackle production and investment. In addition, their policies on entitlements are unsustainable and create increased uncertainty."

The bottom line: The world producers of goods and services see the costs of corruption in Asia and the global south as lower than the costs of regulation and expanded welfare states of the developed north.

Chafuen, an Argentinian by birth and graduate of Grove City College who founded the Hispanic American Center of Economic Research and recently received a Global Leadership Award from the World Congress of Families, is a renowned realist who sees plenty of room for optimism in what may seem like a bleak picture: "The gradual move towards more respect of private property and market incentives, in countries in all continents, is bringing millions up from poverty." What the latest IMF numbers suggest is that global indicators for growth abroad-despite the longest recession since World War II-are better than ever before. But the United States and much of Europe will not be able to capitalize on the growth if they maintain a high tax, high regulatory environment. What the United States can offer in the new global economy will be stability, and an ability to increase for investors what Chafuen calls its biggest treasure-"a rule of law respectful of personal and economic freedoms."
-with reporting by Kristin Chapman


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