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The World Order in 2050

Uri Dadush, Bennett Stancil, Shimelse Ali

Carnegie Endowment for International Peace


February 23, 2010
Key Messages
• In 2050, four of the top six economic
powers will be emerging countries
• Developed countries will remain far richer
• World trade relations will be transformed
• Major domestic and international reforms
are needed
• Big risks on the downside

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Emerging Markets Growing Rapidly
Real GDP Growth
China India United States Japan

14

12

10

-2

-4

-6
2000 2010 2020 2030 2040 2050
Actual Projected 3
Convergence Conditions Vary
United Kingdom
Canada
Germany
Australia
Japan
France
Korea, Rep.
Italy
Saudi Arabia
South Africa
Mexico
Turkey
China
Russian Federation
Argentina
Brazil
Ghana
Indonesia
India
Kenya
Ethiopia
Nigeria

0 1 2 3 4 5 6 7 8 9 10
4
Source: World Bank World Development Indicators (2009), authors' calculation.
China and India Will Join U.S. as Global Leaders

Real U.S. Dollar GDP


2005 U.S. dollars,
United States China India
trillions
50

45

40

35

30

25

20

15

10

0
2010 2030 2050

5
The Trend is Even More Pronounced in PPP Terms

PPP GDP
2005 PPP dollars,
United States China India
trillions
80

70

60

50

40

30

20

10

0
2010 2030 2050

6
Emerging Markets Surpass Advanced Economies

U.S. Dollar GDP


2005 U.S. dollars,
Advanced Economies Emerging Economies
trillions
100

90

80

70

60

50

40

30

20

10

0
2010 2050

7
Working Age Population in G20 Emerging Markets
Growing
Size of the G20 Working Age Population
People, aged 15-59,
millions Advanced Economies Emerging Economies

2,500

2,000

1,500

1,000

500

0
2010 2050

8
Source: US Census International Database (2009).
…and Even Faster in Other Developing Countries

Size of the World Working Age Population


People, aged 15-59,
millions More Developed Regions Less Developed Regions

5,000

4,500

4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

0
2010 2050
9
Source: US Census International Database (2009).
Europe in a World of Giants
U.S. Dollar GDP
2005 U.S.
dollars, trillions China United States Germany United Kingdom EU

50

45

40

35

30

25

20

15

10

0
2010 2020 2030 2040 2050

10
Advanced Economies Remain Much Wealthier
Per Capita Income

2005 U.S. dollars Advanced Economies Emerging Economies

90000

80000

70000

60000

50000

40000

30000

20000

10000

0
2010 2030 2050

11
Absolute Poverty Declines
Poverty Rates
Percent of population living
on less than $1.25/day India Sub-Saharan Africa

50

45

40

35

30

25

20

15

10

0
2005 2015 2025 2035 2045
Estimated Projected
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A Large Portion of the Global Middle and Rich Class
Will Reside in Developing Countries

13
Developing Countries Will Account for the Larger
Portion of World Trade

Share of World Exports

2006 2050
14
Source: UN Comtrade.
Developing Countries Will be at the Center of
World Trade Relations
Top Five Trading Partners
(percent of world trade)
2006 2050

China-Asia Pacific
Intra-EU
Developing

U.S.-Other
Intra- EU
Industralized

EU-Other China-Other
Industralized Industralized

EU-U.S. China-U.S.

U.S.-Latin
China-EU
America

0% 5% 10% 15% 20% 25% 30% 0% 2% 4% 6% 8% 10%

15
Source: UN Comtrade.
U.S. Exports Reoriented

16
Source: UN Comtrade.
Africa: Competitive Manufacturer?

Per Capita Income


2005 U.S. dollars Sub-Saharan Africa China India

35000

30000

25000

20000

15000

10000

5000

0
2010 2020 2030 2040 2050

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Potential May not be Realized: Downside Risks

• Geopolitical Strife

• Financial Crisis and Depression

• Protectionism

• Climate Change

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Climate Change
Projected Atmospheric Carbon Concentrations
Parts per million and Estimated Global Temperature Increase
800
> 5°C
750

700
> 4°C
650

600
> 3°C
550

500
> 2°C
450

400

350

300
2010 2020 2030 2040 2050

Source: Stern Review on the Economics of Climate Change (2006).


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Risks Have Bigger Effect on Emerging Economies
Projected Annual Real Growth Rates
2010-2050
Baseline Low-Case

0
United States Germany China India Sub-Saharan Africa
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