Small countries with idiosyncratic economic advantages--such as Mongolia and Macau--have powered their way to the top of world growth charts these clays as traditional leaders, such as the United States and China, are bouncing well below normal levels. Sure, Mongolia and Macau (formally an administrative region of China) are tiny, and their outsized increases in gross domestic product (GDP) benefit from computations based on Lilliputian bases. Mongolia is building its economy atop vast mineral wealth and Macau is gambling--and winning big--that its proliferating gaming tables are a good bet to carry its economy.
Still, their contrast with wheezing neighbor China highlights worldwide trends. The powers that be have, at least for the moment, and maybe in some cases for the future, been. Many developing world economies are ascendant.
The Chinese economic engine that could suddenly can't. Though it may hit 7 percent growth in 2013, economists such as Colin Moore, chief investment officer at Columbia Management, believe the rate will be closer to 5 percent, meaning China is in the throes of a relative recession.
The United States is hiccupping along, slowly clearing away bad mortgages and even more slowly dealing with serious fiscal problems, which threaten to restrict GDP growth to 1 percent in 2013, and maybe beyond. Germany is spinning its wheels in the eurozone muck. The rest of the BRICs--Brazil, Russia and India--have become bric-a-brac, at least at the moment.
Meanwhile, the prospects for healthy, long-term growth seem brightest for developing countries with burgeoning, young working age populations and plenty of room for productivity growth. Going forward, forget about the BRICs; here come the MITS (Malaysia, Indonesia, Thailand and Singapore). Global Trends 2030: Alternative Worlds, a study released in December by the U.S. National Intelligence Council, reported: "The health of the global economy increasingly will be linked to how well the developing world does--more so than the traditional West."
Though it didn't exactly write an epitaph for China, India and Brazil, it did predict the ascendancy of countries such as Colombia, Indonesia, Nigeria, South Africa and Turkey.
Global Economy for a Global Generation
So is there a changing of the economic guard? The International Monetary Fund's (IMF) Managing Director Christine Lagarde's address to the annual Davos conference in Switzerland on Jan. 23, 2013 was titled A New Global Economy for a New Generation. In her statement, Legarde said: "I believe we are standing in the antechamber of a new global economy, marked by rapidly shifting circumstances and new modes of thinking. This new economy will be geographically different, driven more by the dynamic emerging markets and developing countries. But it will also be generationally different, shaped by different values and principles."
Keith Hembre, chief economist for Nuveen Asset Management, agrees that emerging market economies will grow fastest going forward, in part because they are starting from a low level. But he is not ready to relegate the U.S. and other developed economies to the status of also-rans. "It is not historically the role of emerging market economies to replicate productivity gains," he adds. "The U.S., China and Europe will shrink in relative size but their economies will not be eclipsed by those in the developing world."
Certainly, near-term prospects are not good for traditional economic locomotives. The World Bank's Global Economic Prospects (GEP) report, issued in January 2013, contained reductions in forecasts for international economic growth in 2013...