The Rise and Fall of modern empires Part IIIb What drives economic growth: population vs. income per capita improvement Countries’ analysis Created by the Forecasting Net Follow us on LinkedIn: Forecasting Net GroupLike us on Facebook: Forecasting Net page August 2013

“The energy of the mind is the essence of life” Aristotle, Greek philosopher 384 BC – 322 BC

What we discovered in Part IPart I and Part IIPart II

 Economic power “moves” from the West to the East  Japan, China, and India lead the way  This is a long term trend initiated many decades ago  Income gap is shrinking BUT inequality still holds strong The Rise and Fall of modern empires From the United States to China: a journey of global economic dominance from 1950 to 2010

So, economic power is shifting from the West to the East However…

Is this shift of power attributed to the growing and much larger population of Asia and especially China and India? …or is it based on the improvement of living standards, productivity, and innovation on an individual basis?

* All figures are relative to corresponding Global GDP/Population/GDP per capita growth figures ** We have included the eight largest countries, in terms of 2010 GDP percentage contribution. The Russian Federation has been excluded from this analysis as it did not exist before 1992 ***Source of actual GDP (in millions of 1990 US$, converted at Geary Khamis PPPs) and population data used in this analysis is: “The Conference Board Total Economy Database, January 2011, Let’s do the following:  We will analyze GDP growth* of selected countries**, between 1950 and 2010, based on two growth drivers:  Population growth*  Income per capita growth*  By performing this analysis, we will identify the dominant elements for every country and gain valuable insights about their growth dynamics

Let’s start!

Countries’ GDP growth performance  As we had expected Asian countries exhibit the largest GDP growth followed only by Brazil

…and what drives countries’ GDP growth 1950 – 2010 Larger than the World’s average GDP per capita growth Smaller than the World’s average World Bubble size = GDP growth Smaller than World’s population growth Larger than World’s population growth Population growth Western countries exhibit below average growth mainly due to low population growth and near average GDP per capita growth Germany is the only exception with relatively large GDP per capita growth Japan, India, and Brazil they all share similar, greatly above average, GDP growth rates! However, Japan’s growth is attributed entirely to its second best GDP per capita growth On the other hand, Brazil’s growth is attributed almost entirely to population growth India’s growth is based on a mixture of population and GDP per capita growth And the top performer is: China Despite popular belief China’s growth is entirely based on GDP per capita and not population growth

But how did we get there?

Larger than the World’s average GDP per capita growth Smaller than the World’s average Smaller than World’s population growth Larger than World’s population growth Population growth

 China  Is by far leading the way in GDP growth for the period  Started to stand out after 1980 and especially after 2000  Contrary to the popular belief, its growth is entirely based on GDP per Capita improvement-not population growth  On the contrary, population growth has been below average due to the one child policy  This unveils important growth dynamics implying significant developments in living standards, productivity, and innovation on an individual basis  Japan  Has the second best GDP per capita growth, next to China  Led the way in GDP growth until It was then succeeded by China  India  Has the second best GDP growth rate, next to China  Growth is based on a mixture of population and GDP p.c. growth (not impressive though compared to China and Japan)  Brazil  Brazil has a well above average GDP growth attributed almost entirely to population growth  The West  Western countries exhibit below average GDP growth rates, low population growth and near average GDP p.c. growth  The only exception is Germany exhibiting significant GDP per capita growth Let’s summarize

The Rise and Fall of modern empires Part IIIb What drives economic growth: population vs. income per capita improvement Countries’ analysis Created by the Forecasting Net Follow us on LinkedIn: Forecasting Net GroupLike us on Facebook: Forecasting Net page August 2013