“The only function of economic forecasting is to make astrology look respectable,” said John Kenneth Galbraith, the wisest American economist of his generation. (“A paltry honour,” he would have murmured.) But you still can’t resist wondering when the Chinese economy will be bigger than the US economy – or the Brazilian bigger than the British, or the Turkish bigger than the Italian – as if it were some kind of horse race.
The latest document to tackle these questions is “The World in 2050″, drawn up by HSBC bank, which ranks the world’s hundred biggest economies as they are now, and as (it thinks) they will be in 2050. It contains the usual little surprises, like a prediction that per capita incomes in the Philippines and Indonesia, now roughly the same, will diverge so fast that the average Filipino will have twice the income of the average Indonesian by 2050.
The Venezuelan economy will only triple in size, but Peru’s economy will grow eightfold. Per capita income will double-and-a-bit in Nigeria; in Ethiopia it will grow sixfold. Bangladesh powers past Pakistan, with a per capita income in 2050 that’s half again as big as Pakistan’s. (It’s only two-thirds of Pakistan’s at the moment.) And so on and so forth: local phenomena mostly of interest to local people.
But what’s happening at the top of the list is of interest to everybody. That’s where the great powers all live, with the BRICs nipping at their heels. Or rather, some of the BRICs are nipping at their heels, and some are not. That’s the big news.
We owe the concept of the BRICs to Jim O’Neill, who came up with it almost fifteen years ago when he was head of economics at Goldman Sachs. He was the first to realise that some big, poor countries were growing so fast economically that they would overtake the established great powers in a matter of decades.
The really impressive performers were Brazil, Russia, India and China, so he just called them the BRICs – and pointed out that at current growth rates the Chinese economy would be bigger than that of the United States by the 2040s. We’re quite familiar with that kind of prediction today, but at the time it was shocking (especially to Americans), and the term BRIC has become firmly entrenched in the language. Just in time for HSBC to spoil it.
By now the BRICs are formally the BRICS (with a capital S added for South Africa), . But the South African economy is only in the group out of courtesy, because you couldn’t leave Africa out altogether. It’s much smaller than any of the others and growing very slowly, so you can safely leave it out of the calculations altogether.
China is performing roughly as expected, and by 2050 its economy will be around 10 percent bigger than that of the United States. (Per capita income, of course, is a different matter, and even then China’s will be only a third of America’s.) India will come next, but with an economy only one-third as big as China or the United States
But the other BRICs practically vanish from view. Brazil hasn’t even overtaken Britain by 2050, despite having three times as many people. And Russia’s performance is downright embarrassing: its economy barely doubles in the next 35 years, and it ends up smaller than Spain’s. So six of the top ten countries in the 2050 list are already there today, and the world isn’t going to look so dramatically different at all.
Now, predictions like this are open to all sorts of criticism. China’s growth rate has consistently been two or three percentage points higher than India’s for several decades. Project that to 2050, and China ends up far ahead of India. But China’s growth rate is falling, and India’s may even overtake it this year.
India will almost certainly grow faster in the long run, because it has a young, rapidly growing labour force and China does not. There’s enough time for that to change the pecking order radically by 2050.
The recent performance of the economy obviously affects the long-range forecast more than it should, so Russia drops down the list and Mexico goes soaring up. Five years ago it would have been the other way around, and yet there’s no reason to believe that the fundamental strengths of either economy have changed.
And then there are the “Black Swans”, events like the Sarajevo assassination that tumbled the world into the First World War and invalidated all existing assumptions about the economic future. Not to mention the disasters that you know are coming, like catastrophic climate change – but leave out of your calculations anyway, because you don’t know how to quantify them and don’t know when they will arrive even to the nearest decade.
All that said, some sketchy notion of what the future may bring is better than no idea whatever. And the basic idea behind the BRICs is still sound: the centre of gravity of the world economy is moving south and east.
To shorten to 725 words, omit paragraphs 3, 7 and 12. (“The Venezuelan…people”; “By now….altogether”, and “The recent…changed”)
Everybody knows where the population explosion came from. Two centuries ago birth rates and death rates were high everywhere, and population growth was very slow. Then clean water, good food and antibiotics radically cut the death rate—and the human population of this planet increased 300 percent in the past 90 years.
Eventually, as people moved into the cities and big families were no longer an advantage, the birth rate dropped too. The world’s population is still growing, but it will only increase by 50 percent in the next 90 years. So far, so obvious. But what’s happening to the human lifespan is equally dramatic.
Here’s the key statistic: the average human lifespan in a developed country has been increasing at three months per year ever since the year 1840.
Everybody assumes that lifespan grew much faster in the 19th and early 20th centuries, and is growing much slower now. But no. It has plodded along at the same rate, adding about three months to people’s life spans every year, for the past 175 years. And yes, that does mean that a baby born four years from now can expect to live, on average, a whole year longer than a baby born this year.
There have always been some people who lived to 70 or 80, but the average age at death in 1840 was only 40 years. By the year 2000 it was 80 years. That’s 40 more years of life per person in 160 years.
And lifespan is still increasing at the same rate. In Britain, for example, the average lifespan has increased by 11 more years in the past 44 years. Three months per year, just like in the 19th century.
This is why actuaries predict that babies born in the year 2000 will have an average lifespan of 100 years. Give those babies the 80 years of life that people who died in 2000 enjoyed, then give them an extra three months for every one of those 80 years—and they will have 20 years more years to live. That is, an average of 100 years.
This sounds so outlandish that you instinctively feel there must be something wrong with it, and maybe there is. The fact that it has gone on like this for 175 years doesn’t necessarily mean that it will go on forever. But it’s not stopping or even slowing, so the smart money says that it will continue for quite a while yet
What about the developing world? Most of it has been playing catch-up, and by now the gap isn’t very big any more. In China the average lifespan was only 42 years as recently as 1950—but then it began increasing by six months per year, so that the average Chinese citizen can now expect to live to 75. Once you hit an average lifespan of 75 years, however, the pace slows down to three months per year, the same as in the developed countries.
India is a little behind China: average lifespan was still 42 years in 1960, and is now 68, so it’s still going up at six months per year. But we may expect to see it fall to the normal three months per years in about 2030, after the average Indian lifespan reaches 75.
All the developing countries of Asia, Latin America and the Middle East are in the same zone. The sole exception is Africa: where 35 countries have average life spans of 63 years or lower. But even most African countries are seeing a slow growth in average lifespan.
So do we end up with a huge population of people so old they can barely hold their heads up, let alone eat solid food? Probably not.
Three hundred years ago Jonathan Swift wrote about people like that in his satire Gulliver’s Travels. Struldbrugs, he called them: people who could not die, but went on ageing until they were so decrepit and disabled that death would have been a mercy.
They were declared legally dead when they reached eighty, as otherwise their longevity would mean they ended up owning everything. But they weren’t really dead; now it was the public that had to support them for the rest of their interminable lives.
In real life, crippling diseases and disabilities are still mainly a phenomenon of the last decade of life, and as the lifespan lengthens that final decade also moves.
Demographers now talk about the “young old”, who are in their 70s and 80s and still in reasonably good shape—and the “old old”, in their 90s and 100s, who are mostly frail and in need of care. So the time is probably coming when people must work until into their 80s, because the over-65s will amount to a third of the population. No society can afford to support so many.
But by then people won’t be decrepit in their 80s. And the only alternative is dying younger.
Here are two good things about the Ebola virus. It is unlikely to mutate into a version that can spread through the air, as some other viruses have done. And people who have been infected by Ebola cannot pass it on to others during the incubation period (between two and 21 days). Only when they develop detectable symptoms, notably fever, do they become infectious to others, and only by the transfer of bodily fluids.
Here are three bad things about Ebola. The “bodily fluids” that can transmit it include even the tiniest droplet of sweat: just the slightest touch can pass the virus on. The death rate for those who become infected is 70 percent. And the US government’s Centers for Disease Control warned recently that we could have 1.4 million cases of Ebola by January.
Since the number of known cases so far is only around 7,500, that suggests that the number of new cases is doubling approximately every two weeks. This is called exponential growth: not 1, 2, 3, 4, 5, 6… but 1, 2, 4, 8, 16, 32…. If you put one grain of wheat on the first square of a chess-board, two on the second, and keep doubling the grains every square, there are not enough grains of wheat in the world to get you to the 64th square.
Exponential growth always slows down eventually, but the question is when? A vaccine would slow it down, and the British pharmaceutical giant GlaxoSmithKline already has one under development, but it is still in an early stage of testing. Human volunteers are now being given the vaccine to check for unforeseen side effects.
If no serious side-effects are found, the vaccine will then be given to health workers in West Africa. A process that normally takes years is being compressed into mere months, and ten thousand doses of the vaccine are already being produced (for the health workers). But it will be the end of the year before we know if it actually gives a useful degree of protection from the virus.
If it does, then millions of doses would have to be produced and injected into the people of Liberia, Sierra Leone and Guinea, where Ebola is already an epidemic – or tens of millions of doses if the disease has spread by then to more populous countries like Ivory Coast, Ghana or, worst of all, Nigeria, which has 175 million people.
Until and unless a vaccine becomes available in very large quantities, the only way to stop the exponential spread of Ebola in the affected countries is to isolate the victims, a task that is very difficult in mostly rural countries with minimal medical facilities. Liberia with 4.2m people, had only 51 doctors and 978 nurses and midwives at the start of the crisis, and some of those have already died or fled.
You don’t need to find and isolate everybody who gets the disease to break the exponential pattern. Just isolating 75 percent of them as soon as they become infectious would drastically slow the spread. But at the moment, in the three most affected countries, only an estimated 18 percent of the victims are being taken to treatment centres (where, of course, most of them will die).
This is why the most important intervention so far has been the dispatch of 3,000 US troops to Liberia, with the primary job of creating seventeen large tent hospitals and training 500 nurses to work in them. Britain is providing 200 new hospital beds in its former colony of Sierra Leone, with 500 more in the next few months. Cuba has sent 165 health workers, China has sent 60, and France has sent various teams to help its former colony, Guinea.
But with the exception of the American aid to Liberia, it is all woefully inadequate. Nine months after the first case of Ebola was confirmed in Guinea, we are still playing catch-up, and playing it badly. Why is that? Aren’t the developed countries also at risk if the virus continues to spread?
Well, no, or at least their governments don’t think so. Even without a vaccine, they are confident that their health services can find and isolate any infected people quickly and prevent Ebola from becoming an epidemic in their countries. They are probably right, and so they see the limited help they are sending to West Africa as charity rather than a vital self-interest. But they may be wrong.
As Professor Peter Piot, who first identified the Ebola virus in 1976, said in a recent interview with Der Spiegel, “I am more worried about the many people from India who work in trade or industry in West Africa. It would only take one of them to become infected, travel to India during the virus’s incubation period to visit relatives, and then, once he becomes sick, go to a public hospital.
“Doctors and nurses in India often don’t wear protective gloves. They would immediately become infected and spread the virus.” Then you would have Ebola on the loose in a country of more than a billion people, millions of whom travel abroad each year. All hope of confining the disease to Africa and driving it back down to almost nothing, as was done in previous outbreaks, would be gone.
To shorten to 725 words, omit paragraphs 4, 5 and 6. (“Exponential…people”)
Soon after winning an absolute majority in the Indian parliamentary elections, prime minister-elect Narendra Modi promised “to make the 21st century India’s century.” If he can avoid tripping over his own ideology, he might just succeed.
“India’s century” is a misleading phrase, of course, because no country gets to own a whole century. It wasn’t ever really going to be “China’s century” either, although China is a huge country whose economy has grown amazingly fast over the past three decades. What Modi meant was that India, the other huge Asian country, may soon take China’s place as the fastest growing large economy – and it might even surpass China economically, in the end.
At first glance this seems unlikely. India’s GDP is currently less than a quarter of China’s although the two countries are quite close in population (China 1.36 billion, India 1.29 billion). Moreover, the Chinese economy’s growth rate last year, although well down from its peak years, was still 7.7 percent, while India’s grew at only 4.4 percent.
But China’s growth rate is bound to fall further for purely demographic reasons. Due partly to three decades of the one-child-per-family policy, the size of its workforce is already starting to decline. Total population (and hence total domestic demand) will also start to shrink in five years’ time. And this doesn’t even take into account the high probability of a financial crash and a long, deep recession in China.
India’s growth rate has also fallen in recent years, but for reasons like corruption, excessive regulation and inadequate infrastructure that are a lot easier to fix. And the reason that Narendra Modi’s Bharatiya Janata Party (BJP) won by a landslide was precisely that voters thought he would be better at overcoming these obstacles to growth than the worn-out and deeply corrupt Congress Party.
Modi did NOT win because a majority of Indians want to pursue divisive sectarian battles that pit Hindus against India’s many minorities, and especially against Muslims. That has always been part of the BJP’s appeal to its core voters, but its new voters were attracted by Modi’s reputation as the man who brought rapid development to the state of Gujarat, which he has ruled for the past thirteen years. They want him to do the same thing nationally.
They over-estimate his genius: Gujarat has always been one of India’s most prosperous states, and the local culture has always been pro-business. It was doing very well even before Modi took power there. Nevertheless, he might well be able to fulfill the hopes of his new supporters, for he arrives in New Delhi without the usual burden of political debts to special interests.
The BJP’s absolute majority in parliament means that Modi will not be constrained by coalition allies like previous BJP governments. This could lead to a leap in the Indian growth rate if he uses his power to sweep aside the regulations and bureaucratic roadblocks that hamper trade and investment in India. He also has a golden opportunity to crush the corruption that imposes a huge invisible tax on every enterprise in the country.
Unfortunately, his extraordinary political freedom also means that he will find it hard to resist the kind of sectarian (i.e. anti-Muslim) measures that the militants in his own party expect. He cannot use the need to keep his coalition allies happy as an excuse for not going down that road. Nobody knows which way he’ll jump, but it might be the right way.
Even some Muslims in Gujerat argue that Modi has changed since he failed to stop the sectarian riots that killed around a thousand Muslims there in 2001. Moreover, the election outcome makes it clear that a considerable number of the country’s 175 million Muslims must actually have voted for him. If he can keep his own hard-liners on a short leash, everybody else’s hopes for a surge in the economic growth rate may come true.
What might that mean over the next decade? It could mean a politically stable India whose growth rate is back up around 7 or 8 percent – and a China destabilised by a severe recession and political protests whose growth rate is down around 4 percent.
While neither political stability in India nor political chaos in China are guaranteed in the longer run, by 2025 the demography will have taken over with a vengeance. China’s population will be in decline, and the number of young people entering the workforce annually will be down by 20 percent and still falling. India’s population will still be growing, as will the number of young people coming onto the job market each year.
That will give India a 3 or 4 percent advantage in economic growth regardless of what happens on the political front. In the long run both countries may come to see their massive populations as a problem, but in the medium term it looks increasingly likely that India will catch up with and even overtake China in economic power.
To shorten to 725 words, omit paragraphs 7 and 10. (“They…interests”; and “Even…true”)