1. How Emerging Markets Will Change Your Worldby
Jeffrey E. Garten
YALE School of Management
August 19, 2008

2. How significant in global economy?
INTRODUCTION
Who are they?
How significant in global economy?
How will they affect global economic policy, prices, jobs?
How will they affect trade and global competition?

3. How will they use their wealth?
INTRODUCTION
How will they use their wealth?
How will they use their political power?
What does it mean for you?

4. The paradigm for the global economy is shifting dramatically
MAJOR POINTS
The paradigm for the global economy is shifting dramatically
Virtually every bit of conventional wisdom about finance, trade, technology, management, and geopolitics needs to be re-examined
At the heart of these changes is the emergence of a number of countries that are moving from the periphery of international relations to the center
The critical question you have to ask is whether your thinking, your strategy, your talent base is changing in a way and at a speed that is proportional to the shifts underway.

5. HISTORICAL PERSPECTIVE
1960’s – Colonial links
1970’s – Independent governments
Resource nationalism
Sovereign borrowing
1980’s – Further integration
Debt rescheduling
Efforts to attract foreign direct investment
1990’s – “Emerging”
Increasing western interest
Economic reforms begin in China, India
Asian tigers take off
Asian financial crisis

6. HISTORICAL PERSPECTIVE
2000 – Today
Recovery from crisis and lessons learned
Emergency of “BRIC”
Broad base of investors
Fear of contagion lessened

7. HISTORICAL PERSPECTIVE
Rise of west in 15th and 16th century
Emergence of Great Britain and then US in 19th and 20th century
Now, rise of “the rest”*

8. WHAT IS IT
THAT
EVERYONE SEES?

13. HOW SIGNI FICA NT IN GLOB AL ECO NOM Y?
POPULATION
2000 = 6 billion
1 billion in rich countries
5 billion in rest
2000 to 2050 = 6 billion to 9 billion
1.1 billion in rich countries
7.9 billion in rest
Conclusion – All of the 3 billion new people will be added to developing world

14. HOW SIGNIFICANT IN GLOBAL ECONOMY?
EMERGING MARKETS
HOW SIGNIFICANT IN GLOBAL ECONOMY?
POPULATION
Population in 2000 = 6 billion
Population in 2050 = 9 billion
Incremental 3 billion will be almost entirely outside of rich countries
Source: World Bank / UN

15. EMERGING MARKETS HOW SIGNIFICANT IN GLOBAL ECONOMY?
GROSS DOMESTIC PRODUCT (ECONOMIC ACTIVITY)
In 2000 rich countries = 75% global GDP, rest = 25%
Today 50% of all incremental growth from developing world
In 2050 rich countries = 32% global GDP, rest = 68%
Source: World Bank

16. HOW SIGNI FICA NT IN GLOB AL ECO NOM Y?
HIERARCHY OF NATIONS
By 2050, probably before, China will be largest economy in world
China
United States
India
Japan
Vietnam

17. HOW SIGNI FICA NT IN GLOB AL ECO NOM Y?
HIERARCHY OF NATIONS
TO COME

18. HOW WILL THEY AFFE CT GLOB AL POLI CY, PRIC ES, JOBS ?
DEMAND FOR RESOURCES
SUPPLY OF RESOURCES
SUPPLY OF MANUFACTURED GOODS
LOCATION OF INDUSTRY

19. HOW WILL THEY AFFE CT GLOB AL POLI CY, PRIC ES, JOBS ?
ROLE IN GLOBAL SUPPLY CHAIN
IMPACT ON INFLATION
SOURCE OF INVESTMENT CAPITAL
DEBTORS TO CREDITORS
SOURCE OF LABOR COMPETITION

20. IMPA CT ON GLOB AL FINA NCE
DEBTORS TO CREDITORS
ASIA = 60 FX RESERVES
CHINA =
JAPAN =
RUSSIA =
INDIA =
EU =
PERSIAN GULF
$700 BILLION/YEAR IN REVENUES FROM OIL

21. REAL IGN MEN T OF WOR LD ECO NOM Y
NO LONGER SINGLE ENGINE WORLD ECONOMY
MULTIPLE GROWTH ENGINES
IMPLICATION
SMOOTHER GROWTH PATH, LESS VARIATION?
MORE SYNCHRONIZATION, ALL RISE AND FALL TOGETHER?

22. MAJ OR POP ULAT ION SHIF TS
MASSIVE URBANIZATION
TODAY – 180,000 TO CITIES
NEEDED – CITY FOR 1 MILLION PEOPLE EVERY WEEK UNTIL 2050
ONE N.Y.C. EVERY TWO MONTHS UNTIL 2050

23. MAJ OR POP ULAT ION SHIF TS
EMERGENCE OF MIDDLE CLASS
2 BILLION PEOPLE COULD CONSTITUTE MIDDLE CLASS WITHIN 25 YEARS
COULD ACCOUNT FOR 60% GLOBAL GDP
IMPLICATION: MAJOR SHIFT IN SPENDING POWER TOWARDS EMERGING MARKETS FROM RICH COUNTRIES