Asia to Lead Us in Global Economic Super-cycle
April 09, 2011
With all the news of political upheavals, rising energy prices and natural disasters, it can be hard to believe that the recent spate of good economic news can last. Yet in the long run, a strong upward trend in the world economy may be the bigger story.
According to a 150-page study released by Standard Chartered Bank (PDF, 4.78 MB), the world is in "a sustained period of high economic growth, or super-cycle" that started in 2000 and is expected to last for another 20 years or more. Despite two global recessions (2001–2002 and 2008–2009), the report shows global output increased more than 50 percent in the last decade. By 2030 Standard Charter predicts the global economy will reach $300 trillion, up from $62 trillion today.
The report defines a super-cycle as a period of exceptionally high global growth, "lasting a generation or more, driven by increasing trade, high rates of investment, urbanization and technological innovation and characterized by the emergence of large, new economies, first seen in high catch-up growth rates across the emerging world." The report points to two previous super-cycles: from 1870 to 1913 and from the end of the Second World War to the oil crisis of 1973.
This new, 21st century super-cycle is expected to last until at least 2030.It is being propelled by emerging markets such as India, China, Indonesia, the Middle East, Africa and Latin America. "Hundreds of millions of people are likely to enter the global workforce," the study reports, "driving urbanization, high rates of investment and technological innovation. While earlier super-cycles were driven by the comparatively small populations in the West, the current super-cycle will involve 85 per cent of the world population."
Asia in particular is expected to see sustained and dramatic growth. The study forecasts that living standards, measured by real per capita income, will have increased nine-fold in China and India between 2000 and 2030. "Rising personal incomes will push billions of people into the middle classes and drive consumption which will spur domestic economic growth," according to the study. China is predicted to be the largest global economy by 2030, passing the United States. India is expected to be the third largest economy.
Standard Chartered was formed in 1969 through a merger of the Standard Bank of British South Africa, founded in 1863, and the Chartered Bank of India, Australia and China, founded in 1853. The bank reports that 90 per cent of its income and profits come from operations in Asia, Africa and the Middle East.
The Short Term Economic News
March was indeed a good month for economic news around the world, with capital equipment sales strong across the globe. U.S. government reports for March showed a continued upward trend in the economy and unemployment continued downward, though still high compared to pre-recession levels.
In March the Conveyor Equipment Manufacturers Association (CEMA) reported that 2010 shipments in North America were up 9.6%. CEMA estimates that shipments totaled $6.642 billion for 2010, an increase of $584 million from 2009 shipments of $6.058 billion. New orders were estimated to total $6.85 billion in 2010, up $1.14 billion over 2009, an increase of 19.96%.
Equipment Sales in the Short and Long Term
Economists have long considered industrial equipment sales to be a lagging indicator of the business cycle: the equipment business can remain strong for many months after a recession starts and remain in the dumps long after the larger economy has recovered. When it comes to longer-cycle trends, however, we might expect to see equipment sales to be a leader in sustaining a super-cycle. Certainly we should see a significant increase in demand for water and waste water processing capacity as we progress to a $300 trillion world economy by 2030.