Sunday, January 03, 2010

Sonic Boom: Dramatic Global Economic Growth

WALL STREET JOURNAL -- The big idea behind [Greg Easterbrook's new book] "Sonic Boom: Globalization at Mach Speed" is that globalization—celebrated, reviled and analyzed for at least a decade now—has hardly begun. The world, Mr. Easterbrook believes, is on the verge of a period of pell-mell integration that will dwarf anything before now, and a good thing too: The coming age of global integration, he argues, will produce riches that none of us can imagine and scatter them more widely than ever before.

AMAZON.COM REVIEW -- Probably the international recession is ending--so what comes next? A Sonic Boom is what comes next. Dramatic global economy growth is likely to resume, especially in the developing world, where growth is needed most. Prosperity should start back upward. Goods and service will continue getting better and cheaper. That’s the boom part. But job anxiety and economic insecurity will accelerate, too. Even as the global economy recovers, we may not feel especially good, because economic change will keep coming faster. That’s the sonic part. A sonic boom is powerful, but also nerve-shattering.

History teaches that when some crisis interrupts larger trends, as soon as the crisis concludes, the larger trends resume. Before the international economic crisis that began in late 2007, the larger trends were robust global growth and rising economic insecurity. Look for both trends to resume in a Sonic Boom world.

Many aspects of a Sonic Boom world will be wonderful. Faster, cheaper communication; easy global access to information and knowledge; rapid innovation, including for green energy; increasing freedom, especially women’s freedom; greater awareness of other cultures. Women’s freedom will itself double the world’s supply of ideas! And the more we know about each other, the less nations and cultures will fear each other, meaning militarism should decline.

MP: The top chart above shows actual, annual real GDP growth for the world from 1981 to 2008, and projected real GDP growth from 2009 to 2014, using
data from the International Monetary Fund (IMF). Following three years of below-trend growth in 2008 (3%), 2009 (-1.06%) and 2010 (3.10%), above-trend growth is expected for years 2011-2014. Also, the trend line shows that the world economy will add a full percentage point of real economic growth in less than 25 years, going from about 3% in 1990 to 4% by 2014.

The bottom chart above shows world real GDP per capita in 2009 dollars, from 1981 to 2014, using IMF data for world GDP and
U.S. Census Bureau data for world population. Following a 2.2% decline in per-capita real GDP in 2009, positive growth is expected to resume in 2010, as the long-term upward trend continues so that by 2014 real per-capita GDP will be almost $10,000, almost double the level of the early 1980s.

Bottom Line: Given a long enough time period for some perspective, the recent financial and economic troubles will probably look rather insignificant in comparison to the long-term positive trends in global output, measured by world real GDP growth rates and real world GDP per-capita. It's been said that "the media constantly dwell on minor problems without celebrating the broader, more upbeat context in which they exist." The trends outlined by Easterbrook and those shown in the graphs above are definitely part of the broader, more upbeat context of an unprecedented period of global wealth creation, increased prosperity, and significant reductions in poverty.


At 1/03/2010 10:04 PM, Anonymous Benny "Tell It LIke It Is Man" Cole said...

These are great charts. I keep telling people--the Far East is going to boom in the next 20 years like you have never seen.
There is a global "glut" of capital. No good idea goes unfinanced. There is venture capital money, private equity money, money from corporations, government money for R&D in staggering amounts compared o 20 years ago.
The world is becoming market-driven, and technical knowledge is sped around the world by web.

The only fly in the ointment is a financial system that appears weak. If global government can use markets or law to construct rock-solid financial systems, then we will have an endless boom.

Another fly might be the fascist-commie nature of China. Resources might be poorly allocated, leading to a collapse of some sort. However, they seem to be resilient, more so than the USA.

The USA may lag, due to chronic red ink bled by the right-wing and the left-wing. Cut a Republican and he gushes red ink. The Democrats are bleeding hearts anyway, you don't have to cut them.

Look to the Far East for investing, living.

They do have a problem with pollution though.

At 1/03/2010 11:54 PM, Anonymous Lyle said...

It partly depends on what your goal is. Perhaps the US will settle down to a European style lifestyle, not as rich in material goods, but having other rewards.
There is a major issue on goal of society do we maximize GDP/Capita or maximize happiness per capita? The construction of happiness indexes indicate that some would go for the latter.
Here in one sense social liberties collide with economic ones, as one decision leans one way and the other the other way.
Now it may happen that the rising generation takes a different tack on this than the Boomers, and becomes less stuff obsessed, realizing that stuff ultimately does not make one happy.
I don't have any answers for these questions, but the answers likely differ depending upon the stage of development a country is in (see hierarchy of needs)

At 1/04/2010 3:21 AM, Anonymous O Bloody Hell said...

> to a European style lifestyle, not as rich in material goods, but having other rewards. double-digit unemployment, a health care system collapsing under its own absurd mandates, a much lower cancer survival rate, immigrants (legal and illegal) committing violence against "non" immigrants, and a median standard of living notably below that of the bottom 20% of the USA?

That kind of rewards.


Gimme Some O' THAT!

Simple question:
Which way do the immigration numbers run in re: the USA-Europe? Towards Europe, Away from Europe, or a Rough Stasis?

Which way are the rafts flowing, Lyle?

Now, from that, which of the systems do you think people like to live under, better? Hmmmm?

This country pushes socialism by appealing the "Free Stuff!" hook to the lowest class, combined with a dunderheaded lack of common sense in a substantial portion of the population -- most notably the Boomers.

That it's all a bait-and-switch power grab by the politicos is obscured by the Bread And Circuses media. "Hey, LOOK!! Michael Jackson!.... Hey, LOOK!! Tiger Woods!!.... Hey,LOOK!!! (insert distraction here)....".

Which way to the egress?

At 1/04/2010 5:45 AM, Anonymous niknaknoo said...

Don't forget this is global data! Wealth will continue to flow from the West (Europe, USA) to the east (China, India, Singapore etc)

They have surplus capital and minimal debt, we have mountains of debt and no capital for investment in the means of production.

At 1/04/2010 6:32 AM, Blogger sethstorm said...

O Bloody Hell said...

For once I agree with you, but not in selling sovereignty to Asia.

Don't forget this is global data! Wealth will continue to flow from the West (Europe, USA) to the east (China, India, Singapore etc)

There are ways to correct that problem that may not be palatable to Asia, but palatable to the US. We still have a substantial military, y'know.

Consider that if enough (or certain) Benedict Arnolds wish to cripple the nation.

At 1/04/2010 9:48 AM, Anonymous morganovich said...

be very careful with long term simple linear trend lines. they can be astoundingly misleading and are extremely susceptible to cherry picking start points.

if this chart had been started in 1984, it woulds show much less trend. if it ran from 1984 to 2002, the trend would be negative. given its low start point it would take a massive and extended period of sub trend growth to make it look negative.

if you measure takes 10 years to notice a trend change, it's not that useful for investing...

At 1/04/2010 12:44 PM, Blogger Tom said...

It is amazing that massive growth and progress is not recognized by many people; they spout leftist pessimism.

By the end of this century the world will be at least 10 times richer. We'll all be millionaires.

At 1/04/2010 1:12 PM, Anonymous Norman said...

Up until ten years ago or so all of the world's inventions, which are the true source of growth, came from a small percentage of the world's population centered in Europe (300m people), the US (310m) and Japan (120m) for a total of 630m people which is about 10% of the world's population. The other 90%users of this output.

But now we are in the beginning of a period where probably 60% to 70% of the world's population is getting educated in countries with various forms of freedom. These people will add to our creativity by a factor of six maybe in 50-100 years but it will occur.

Thus, the boom will be fantastic.

At 1/04/2010 4:17 PM, Blogger sethstorm said...

But now we are in the beginning of a period where probably 60% to 70% of the world's population is getting educated in countries with various forms of freedom. These people will add to our creativity by a factor of six maybe in 50-100 years but it will occur.

They do not, for they do not reside in this nation.

The recovery begins when the US recovers, not when the Third World wishes to usurp.

At 1/04/2010 4:36 PM, Anonymous Benny The Man said...

There is one funny aspect to these charts: $10k per capita, globally?

That means the average family of four, globally, has income of $40k?

Oh happy days--but something is awry or not explained here.

At 1/04/2010 4:57 PM, Blogger Mark J. Perry said...

Benny: I believe that the numbers are correct. For 2009, world GDP is $57.228 billion and world population 6.755 billion, for per capita real GDP of $8,471. With annual growth rates of 3-4.5% in real world GDP, the per-capita GDP approaches $10,000 by 2014. It's not so surprising when you consider that countries like the U.S. have per capita GDP of $46,000 for 2009, and that could grow to something like $55,000 by 2014.

At 1/04/2010 5:32 PM, Anonymous Benny The Man said...

Yes, I guess labor gets about 50-60percent of GDP in wages, so maybe the numbers add up.
In general, I agree with the sentiment: Life is getting better, and will get a lot better, for much of the globe.
Seemingly, only an Islamic or totally corrupt government or solidly anti-market can squelch growth.

At 1/04/2010 6:56 PM, Anonymous Dr. T said...

The charts have no value. The conclusion is: as time goes on, the world gets wealthier. Economic and martial calamities add dips, boom times add peaks, but it all evens out to progressively more wealth. But, since the charts cannot predict the good times or the bad times, they only provide a pretense that there is logic or science to the wealth trend. There is neither.


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