The Standard Chartered Bank in London recently released an interesting study called "The Super-Cycle Report, which suggests that in 2000 we entered a new "super-cycle" of global economic growth that will last until 2030, where "super-cycle" is defined as:
“A period of historically high global growth, lasting a generation or more, driven by increasing trade, high rates of investment, urbanization and technological innovation, characterized by the emergence of large, new economies, first seen in high catch-up growth rates across the emerging world.”
From the paper's introduction:
1. The first super-cycle took place during the second half of the 19th century, from 1870 until 1913, the eve of the First World War. At that time, the world economy witnessed a significant step-up in its rate of growth, rising 2.7% on average annually in volume, or real, terms. That was a full 1% higher than the average growth rate seen during the previous half-century. America was the big gainer, moving from the fourth largest to the largest economy.
2. The second super-cycle was after the Second World War until the early 1970s. World growth averaged a huge 5% per annum, again in real or inflation-adjusted terms. Japan and the Asian tigers saw the biggest gains over this time. Japan, for instance, moved from 3% to 10% of the world economy.
The rapid growth seen during both of these periods reflected a number of factors. In particular, the first super-cycle saw greater use of new technologies that had emerged during the Industrial Revolution, and the emergence of a new major economy in terms of the USA. The second super-cycle reflected many factors, in particular the post-Second World War reconstruction, involving investment, rebuilding and catch-up, plus both the emergence of a sizeable middle class in the Western world and of exporting nations across Asia. That cycle was also characterized by cultural shifts and a baby boom. A super-cycle would also appear to need the backdrop of relative peace, or certainly no global war, and stable monetary policies.
The third super-cycle started – in our view – in 2000. The period between the second and third super-cycles, from the early 1970s to 2000, was characterised by ongoing economic challenges in the West, a slowdown in Japan, the collapse of the Soviet Union, debt and currency crises in Latin America, and the relatively small size of China and India, both of which were in the early stages of opening up. There was no dynamic driver for the world economy. In 2000 the world economy was $32 trillion in size. Now, following the global recession and financial crisis, the world economy is almost twice the size of a decade ago. There was a significant contraction as a result of the crisis and global recession, but now the world is back to its pre-recession peak. Next year, based on conservative growth assumptions, this could rise to $64.7 trillion. Global trade has also recovered to pre-recession levels.
By 2030 – the time period for this analysis – we believe that the world economy, on the projections laid out here, would rise to $308 trillion, which would equate to $129 trillion in today's prices and dollars, and would be $143 trillion, keeping prices constant but allowing for some emerging-market currency appreciation (see chart above).
These are big numbers. Really big."
MP: If these estimates are accurate, it would mean that the global economy will double from its current size of $62 trillion to $126 trillion by 2027.