The Rise and Fall of modern empires

Part IIIbWhat drives economic growth: population vs. income per capita improvement

Countries’ analysis

Created by the Forecasting Net

www.forecastingnet.com

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August 2013

“The energy of the mind is the essence of life”

Aristotle, Greek philosopher384 BC – 322 BC

What we discovered inPart I and Part 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 empiresFrom 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, http://www.conference-board.org/data/economydatabase/”

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 performance1950-2010

As we had expected Asian countries exhibit the largest GDP growth followed only by Brazil

…and what drives countries’ GDP growth1950 – 2010

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World Bubble size = GDP growth

Smaller than World’s population growth Larger than World’s population growth

Population growth

Western countries exhibitbelow average growthmainly due tolow population growth and near average GDP per capita growth

Germany is the only exception withrelatively largeGDP per capita growth

Japan, India, and Brazil they all share similar, greatly above average, GDP growth rates!

However, Japan’s growthis attributed entirely to its second bestGDP per capita growth

On the other hand,Brazil’s growthis attributed almost entirely to population growth

India’s growthis based on a mixtureof population andGDP per capita growth

And the top performer is:ChinaDespite popular beliefChina’s growth is entirely basedon GDP per capita and not population growth

But how did we get there?

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Smaller than World’s population growth Larger than World’s population growth

Population growth

197019751980198519901995200020052010

China Is by far leading the way in GDP growth for the period 1950-2010

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 1995. 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 IIIbWhat drives economic growth: population vs. income per capita improvement

Countries’ analysis

Created by the Forecasting Net

www.forecastingnet.com

Follow us on LinkedIn: Forecasting Net Group Like us on Facebook: Forecasting Net page

August 2013