24 May 2011
The World in 2050
by Gwynne Dyer
The economists, the statisticians and the investment bankers have done their work, and everybody in the financial world now has more or less the same picture of the future in their minds. The predictions are so consistent that even the general public thinks it knows where the trends are leading us: Asia and Latin America up, Europe and North America in a holding pattern, Africa and the Middle East down. But maybe the predictions are wrong.
Goldman Sachs started the game almost a decade ago with its study predicting that the BRICs, the four largest emerging economies (Brazil, Russia, India and China), would overtake the rich countries of the G7 (the United States, Japan, Germany, Britain, France, Italy and Canada) some time in the 2030s. The world’s economic centre of gravity, the study implied, was shifting from the West to Asia.
Hardly anybody disputes this model any more; the pundits just differ on the details, like when China’s economy will pass that of the United States. As soon as 2020, said PricewaterhouseCooper. 2027, says the latest Goldman Sachs prediction. 2035, says the Carnegie Institute. As late as the mid-2040s, according to Karen Ward’s recent study for HSBC. But they all agree it’s going to happen.
Ward’s study, “The World in 2050,” is particularly interesting for two reasons. One, because it is more realistic about China, whose economy is currently the biggest bubble in world history. And two, because it offers predictions for the world’s 30 biggest economies, not just the top ten.
China’s economy, at $25 trillion annually, is only a couple of trillion ahead of the United States in 2050. (All calculations are in constant dollars of the year 2000.) Then there is a long drop to India at $8 trillion and Japan at $6 trillion – and no other country reaches $5 trillion.
Places five to eleven are mostly filled by the rest of the G7 countries, with only Brazil and Mexico breaking into the magic circle. The rest of the Top Twenty, however, are almost all developing countries (Turkey, South Korea, Russia, Indonesia, Argentina, Egypt and Malaysia), with only Spain and Australia from the developed world. So in this model, Asia and Latin America really are taking over, with eleven out of the top twenty slots.
Now, you can quibble with bits of this, like categorising Russia as an emerging economy. In terms of infrastructure, average education level and birth rate, Russia is clearly a developed country. But if these predictions are roughly correct, then it is definitely Asia and Latin America up, and Europe and North America (plus Japan) in a holding pattern.
And are Africa and the Middle East really down? Up and down are purely relative, of course, and there are certainly some large African countries with quite respectable projected growth rates, like Nigeria and South Africa. But despite the world’s highest population growth rates, no African country’s economy makes it into the Top Twenty by 2050.
Of the Middle Eastern countries only Egypt scrapes in at No. 19, just ahead of Malaysia (which has only a third of Egypt’s population). Most of the non-oil economies face virtual stagnation, and there are big question marks over the claimed oil reserves of a number of the oil states. Africa and the Middle East down.
It’s only a game: only the very brave or the very foolish would base major investment decisions on such a long-term extrapolation of current trends. But it’s the sort of thing that the strategists and the geopolitics experts love – and it could be wrong. Not just wrong in detail, but utterly, spectacularly wrong.
All of these predictions assume that global conditions will remain essentially unchanged for the next forty years. That is highly unlikely.
The predictions are not simple-minded straight-line extrapolations. They all assume, for example, that China’s economy, which has grown at ten percent for the past twenty years (and therefore doubled in size every seven years), will drop to about half that growth rate (doubling only every fourteen years) well before 2050. But they do assume that energy – especially oil – will remain plentiful and relatively affordable for the next forty years.
Even more implausibly, they also assume that global warming will not cause serious disruptions in the world’s economies over the next two generations. Yet there is already enough warming locked into the system by past, present and near-future emissions that severe disruption is virtually guaranteed, especially in the tropical and sub-tropical parts of the planet.
The old-rich countries of the G7 are all in the temperate zone, which may get away with relatively minor damage from global warming in the period to 2050. All the big “emerging” economies except Russia and Argentina are located wholly or largely in the tropics and/or the sub-tropics. That means they will almost certainly suffer very serious disruption, including huge losses in food production.
This is monstrously unfair. Just when the poorer countries finally start to catch up economically with their former imperial masters, the warming caused by two centuries of greenhouse gas emissions by the rich countries knocks them back yet again. Which may also knock all those predictions that the emerging economies will soon overtake the developed ones into a cocked hat.
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To shorten to 725 words, omit paragraphs 7, 8 and 9. (“Now…down”)
Gwynne Dyer is a London-based independent journalist whose articles are published in 45 countries.
15 March 2011
Superstition: Nuclear Power vs. Coal
by Gwynne Dyer
Suppose that a giant hydro dam had crumbled under the impact of the biggest earthquake in a century and sent a wave of water racing down some valley in northern Japan. Imagine that whole villages and towns had been swept away, and that ten thousand people were killed – an even worse death toll than that caused by the tsunami that hit the coastal towns.
Would there be a great outcry worldwide, demanding that reservoirs be drained and hydro dams shut down? Of course not. Do you think we are superstitious savages? We are educated, civilised people, and we understand the way that risk works.
Okay, another thought experiment. Suppose that three big nuclear power reactors were damaged in that same monster earthquake, leading to concerns about a meltdown and a massive release of radiation – a new Chernobyl. Everybody within a 20-km (14-mile) radius of the plant was evacuated, but in the end there were only minor leakages of radiation, and nobody was killed.
Well, that was a pretty convincing demonstration of the safety of nuclear power, wasn’t it? Well, wasn’t it? You there in the loincloth, with the bone through your nose. Why are you looking so frightened? Is something wrong?
In Germany, tens of thousands of protesters demonstrated against nuclear power last Saturday, and Chancellor Angela Merkel suspended her policy of extending the life of the country’s nuclear power stations until 2036. She conceded that, following events in Japan, it was not possible to “go back to business as usual,” meaning that she may return to the original plan to close down all 17 of Germany’s nuclear power plants by 2020.
In Britain, energy secretary Chris Huhne took a more measured approach: “As Europe seeks to remove carbon based fuels from its economy, there is a long term debate about finding the right mix between nuclear energy and energy generated from renewable sources…. The events of the last few days haven’t done the nuclear industry any favours.” I wouldn’t invest in the promised new generation of nuclear power plants in Britain either.
And in the United States, Congressmen Henry Waxman and Ed Markey (Democratic), who co-sponsored the 2009 climate bill, called for hearings into the safety and preparedness of America’s nuclear plants, 23 of which have similar designs to the stricken Fukushima Daiichi plant in Japan.
The alleged “nuclear renaissance” of the past few years was always a bit of a mirage so far as the West was concerned. China and India have big plans for nuclear energy, with dozens of reactors under construction and many more planned. In the United States, by contrast, there was no realistic expectation that more than four to six new reactors would be built in the next decade even before the current excitements.
The objections to a wider use of nuclear power in the United States are mostly rational. Safety worries are a much smaller obstacle than concerns about cost and time: nuclear plants are enormously expensive, and they take the better part of a decade to license and build. Huge cost overruns are normal, and government aid, in the form of loan guarantees and insurance coverage for catastrophic accidents, is almost always necessary.
The cost of wind and solar power is steadily dropping, and the price of natural gas, the least noxious fossil-fuel alternative to nuclear power, has been in free fall. There is no need for a public debate in the United States on the desirability of more nuclear power: just let the market decide. In Europe, however, there is a real debate, and the wrong side is winning it.
The European debate has focussed on shutting down existing nuclear generating capacity, not installing more of it. The German and Swedish governments may be forced by public opinion to revive the former policy of phasing out all their nuclear power plants in the near future, even though that means postponing the shut-down of highly polluting coal-fired power plants. Other European governments face similar pressures.
It’s a bad bargain. Hundreds of miners die every year digging the coal out of the ground, and hundreds of thousands of other people die annually from respiratory diseases caused by the pollution created by burning it. In the long run, hundreds of millions may die from the global warming that is driven in large part by greenhouse emissions from coal-fired power plants. Yet people worry more about nuclear power.
It’s the same sort of mistaken assessment of risk that caused millions of Americans to drive long distances instead of flying in the months just after 9/11. There were several thousand excess road deaths, while nobody died in the airplanes that the late lamented had avoided as too dangerous. Risks should be assessed rationally, not emotionally.
And here’s the funny thing. So long as the problems at Fukushima Daiichi do not kill large numbers of people, the Japanese will not turn against nuclear power, which currently provides over 30 percent of their electricity and is scheduled to expand to 40 percent. Their islands get hit by more big earthquakes than anywhere else on Earth, and the typhoons roar in regularly off the Pacific. They understand about risk.
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To shorten to 725 words, omit paragraphs 6 and 8. (“In Britain…either”; and “The alleged…excitements”)
Gwynne Dyer’s latest book, “Climate Wars”, is distributed in most of the world by Oneworld.
27 December 2010
2010 Year-Ender
By Gwynne Dyer
Fake elections in Egypt, Burma and Belarus. A massive earthquake in Haiti, devastating floods in Pakistan, and a volcano in Iceland that killed nobody but inconvenienced millions. Something verging on civil war in Thailand, a reviving civil war in Ivory Coast, and a real civil war in Afghanistan (with lots of foreign help). As these things go, not a bad year at all.
There are 192 countries in the world – or 202 countries, whatever the number is this week. There are almost seven billion people. All those countries and all those people will unfailingly supply enough bad news to hold the ads apart all year, every year. It doesn’t mean that the planet is really going to hell. The media will always search out what bad news there is and highlight it.
A broader view of events would report that not one country in the world was invaded in the past year. Not a single one out of 192, or however many it is. That’s not bad, considering our history, and it’s not just a fluke. No countries were invaded in 2009 either, or in 2008. In fact, the last time a country really got invaded was Iraq in 2003.
It is the absence of really big events (which are generally really bad events) that characterises the year. No Second Great Depression, for example (though the essential work on avoiding that was actually done in 2009). No Great Flu Pandemic. No war in the Korean peninsula despite the sinking of the South Korean frigate Cheonan in March and North Korea’s shelling of Yeonpyeong Island in November.
No American attack on Iran, despite all the threatening language. No large-scale killing on the Israeli-Palestinian front, though of course no progress towards a peace settlement either. No high-casualty terrorist attacks on Western countries, though lots in Pakistan, Iraq, India and Afghanistan. (Why do attacks on Western countries matter more? Because they tend to go berserk when they are targeted.)
No financial meltdown in Europe, though both Greece and Ireland have been put through the wringer. No recession at all in the emerging economies of the former Third World, which still account for less than 40 percent of the world’s economy but provided two-thirds of the world’s growth over the past year. And maybe that’s the real news of 2010: this was when the new world order finally became manifest.
This revolution has been predicted since economist Jim O’Neill at Goldman Sachs first grouped the big developing countries with fast-growing economies together as the BRICs (Brazil, Russia, India, China) in 2001. Subsequent Goldman Sachs studies predicted that their combined economies would be larger than the combined economies of today’s rich countries by 2050, and every update of the study has brought that date closer.
It is still probably five to ten years away, but this was the year when China, the biggest of the BRICs, overtook Japan to become the world’s second-largest economy. It also overtook the United States in 2010 to become the world’s biggest producer of cars. For all practical purposes, the revolution is no longer imminent. It is here.
This is as big an event as the end of Pax Britannica and the rise of the United States, Germany and Japan to great-power status at the end of the 19th century. Just last year the G8, the group of seven rich Western countries plus Japan, was still at least notionally the board of management of the world economy, while the G20, incorporating the emerging economies, was a mere courtesy gesture to the new players.
This year, the G20 was where real action was, and the preceding G8 meeting was just a regional strategy session before the big event. The consequences of this historic shift in the world’s centre of gravity will play out over the years and the decades to come, but the reality and irreversibility of the change is now undeniable – even if China’s economy, at the moment, is the biggest bubble in the history of the world.
Apart from that, what else can we say about 2010 that is in any way meaningful? Lists are traditional at this time of year, but there isn’t really much point in a list that includes an oil spill in the Gulf of Mexico, a British royal wedding, and 33 trapped Chilean miners. If you must have a list, go online and you’ll find hundreds of the things. They all mean virtually nothing.
And then there’s predicting the future. The year-ender format always includes some predictions about the future, but the real future is full of surprises. Just consider what a reasonable person would have predicted, on the available evidence, in the last couple of years that ended with “10″.
In 1810, all the European empires had been at war for more than fifteen years, with fighting in every continent. In the next five years, Napoleon would invade Russia and lose an army of half a million men, Britain and the United States would fight a war that included the burning of Washington and Toronto, and after Napoleon was finally defeated at Waterloo in 1815 the old absolute monarchies would come back all over Europe.
So who would have predicted in 1810 that after a few more bad years Europe would enjoy a full century of almost uninterrupted peace and soaring prosperity, or that democracy would spread to most of the big European countries? Nobody.
Same with 1910. It was very near the end of the Long Peace by then, but nobody knew that at the time. The First World War would shatter the old world in only four years’ time, the Second World War would come only a quarter-century later, and by the end of the 20th century the European empires would all be ancient history. Nobody foresaw it. Nobody could.
And the future? Who knows? One could seize the opportunity to bang on about the world’s failure to address the threat of radical climate change, but this year’s failure is not worse than last year’s, nor in all probability than next year’s.
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To shorten to 800 words, omit paragraphs 12-15. (“And then..could”)
Gwynne Dyer’s latest book, “Climate Wars”, is distributed in most of the world by Oneworld.
17 August 2010
The Chinese Miracle: A Cautionary Tale
By Gwynne Dyer
Will the 21st century belong to China? For a while, perhaps – but only in the sense that it was said to belong to Japan in the 1980s. Looking back now, that seems ridiculous, but at the time best-selling books were predicting that Americans, not to mention the rest of the planet, would be reduced to virtual serfdom by the relentless high-speed growth of the Japanese economy. Then it stopped growing.
Official data published on 16 August revealed that China’s economy has overtaken Japan’s this year, making it the second-biggest economy in the world. This followed last month’s announcement by the International Energy Agency that China is now the world’s biggest consumer of energy (and burns about half of the world’s total coal production).
Earlier this year China overtook Germany to become the world’s No. 1 exporter, and it now makes more cars than any other country in the world. Indeed, it makes as many as Japan and the United States together.
It has more kilometres (miles) of high-speed rail, more mobile phone users, and more wind power than anywhere else. As long ago as 2007 it became the world’s biggest emitter of carbon dioxide and other greenhouse gases. The milestones are zipping past so fast that it’s surprising that the Chinese are not suffering from a collective case of whiplash.
If the average growth rates of the US and Chinese economies over the past quarter century continue for another ten years (around 10 percent for China, and about 3 percent for the United States), then China’s economy will be three times bigger than it is today, and bigger than that of the United States. That’s the magic of compound interest. Better start learning Chinese, then.
But hang on. China is already the world’s second-biggest importer of energy (mostly oil and coal), and its biggest importer of minerals and other industrial raw materials. None of those resources is growing at 10 percent a year, or even 5 percent. If China’s imports of those goods grow at 10 percent a year, then the share of other countries must shrink.
China still has an export-led economy, and these other countries are its customers. If commodity prices soar because of ever-expanding Chinese demand for raw materials, then how will those other countries earn the money to pay for Chinese manufactured goods? So the Chinese rate of growth must eventually slow down – but when?
The straight-line projection of current trends would make the Chinese economy bigger than that of the United States by 2020. You can still find economic forecasts which predict precisely that, but it is striking that most of the economic consultancies that make such forecasts now suggest that China will not overtake the United States until some time between 2027 and 2030.
That implicitly assumes that China will shift to a much lower annual rate of growth in the near future: from 10 percent to only 5 or 6 percent. However, no organisation that is making a lot of money from the current orgy wants to spoil the party by spelling out exactly what might cause that sharp decline – so let us do it here.
Back in 1988, the last year of Japan’s 30-year boom, the land in the garden of the Imperial Palace in central Tokyo was allegedly worth more than the entire state of California, but that was just another way of saying “unsustainable property bubble.” The bubble duly burst, bringing down the entire Japanese economy with it – and it has stayed down for the past 22 years, achieving at best 2 percent annual growth and usually much less.
The property bubble in China is reaching similar dimensions, with prices rising annually by 50 percent or more in dozens of cities. When property bubbles finally burst – and they always do – they tend to do a great deal of damage. (Nobody say “sub-prime”.)
There is huge over-investment in China, often in state-sponsored infrastructure and housing projects motivated by considerations of “prestige” or by the opportunities they offer for cronies to make large sums of money. (That is what caused the slump in the smaller Asian “tigers” like Thailand and South Korea in 1998.)
China’s wage costs are going up fast, and lower-cost Asian producers like Vietnam, Indonesia and Bangladesh are taking away the labour-intensive goods like clothes and toys that once drove Chinese export growth. Meanwhile, at the upper end of the market, there is little of the genuine technological innovation that the Japanese economy was delivering towards the end of its boom.
The Chinese population is ageing almost as fast as Japan’s, and China is as resistant as Japan to reinforcing the dwindling workforce by allowing large-scale immigration. If ther same inputs tend to produce the same outputs, then the Chinese economy is in big trouble.
That doesn’t necessarily mean that China also faces two decades of less than 2 percent growth. It does probably mean that it faces a very nasty slump in the next few years, followed by the transition to a permanently lower rate of growth. Not such a terrible outcome, really: it’s still an amazing success story. But it may threaten the regime’s survival, since its popularity (if that’s the right word) depends almost entirely on its record in delivering the economic goods.
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To shorten to 725 words, omit paragraphs 4 and 13. (“It has…whiplash”; and “China’s…boom”)