The G4: The “Big Four” World Economies
Four Nations: India + China + US + EU = $62.5 Trillion USD of Annual Gross Domestic Product (PPP). Representing 55% of the world economy.
Setting The Stage For The 21st Century
Since the end of World War 2, where the allies emerged victorious, the world has largely had 1 economic power house, the United States. In 1950 the United States accounting for more than 27% of the world economy.
By 1980 Europe and Japan had rebuilt their economies and joined the United States, to become the three major economies of the world.
Unfortunately due to increasing bureaucracy, high taxes and poor policy decisions in the 1990’s and 2000’s Europe and Japan began to decline economically, just as China and India were reforming their own economies and beginning to rack up consistent annual growth rates. Setting the stage by 2008 for the “big four” economies of the world to emerge.
The Emergence Of The Big Four Economies As Of 2015
These rankings have dramatically shifted the past decade with China’s rise.
In 1st place is China, at $19.3 trillion USD, who continues to grow aggressively at 6.5% and in purchasing power terms has recently surpassed both the US and EU economies. Though the long lasting negative demographic effects of the 1 child policy, may limit its time at the top as the 21st century marches on.
In 2nd place is the EU, at $19.2 trillion USD, who has maintained its position largely by adding member states to its ranks (now 28) the past two decades. While the EU’s growth rate is the slowest of the Big Four, at 1.80% the past 20 years, and just 0.84% the past 9 years, it risks falling in the ranks.
In 3rd place is the US, at $17.9 trillion USD, who despite being the smallest in population of the Big Four (320 million), has seen amazingly consistent economic growth of more than 3.2% annually, the past 67 years.
In 4th place is India, at $7.9 trillion USD, who despite having the smallest economy of the Big Four, is now its fastest growing member, at 7% annually. India also boasts the highest population growth rate and for that reason will soon surpass China as the world’s most populous country and in the coming decades has a good shot at moving up the Big Four economy rankings.
Why This Matters To You
First, its worth updating your world view. These four nations, for a long time to come, will compete for the 4 top spots in the global economy. Better understanding these 4 markets, represents a short cut to accessing more than half the world’s economic activity.
Second, if you are thinking about your company’s international expansion, these are THE four markets that matter most deeply to your success. Ask yourself if your company understands these 4 cultures, languages, and business ecosystems enough to effectively compete in them.
A Few Predictions
The rankings will continue to shuffle in the coming years, due to the following predictions I see supported in the data.
- Despite a recent slow down, China will continue growing faster than the US and EU and thus will maintain its dominance in the rankings for decades to come.
- In the near term the US may edge out the EU for the 2nd place spot based on consistently higher economic growth rates. Should the US allow more immigration this process will be faster.
- Only by the EU adding additional member states (which it is on track to do) may delay its shift to 3rd in the rankings. This is one of the driving factors in the “European Project” maintaining relative size, in order to maintain global relevance in world affairs is often cited by EU politicians.
4. India will continue growing quickly, and with favorable population demographics will soon pass China as the world’s most populous nation. At some point in the next 25 years it will pass the EU for the 3rd spot, then pass the US for the 2nd spot, and finally after 40 or 50 years surpass China for 1st spot. Thus in the second half of the 21st century, India will after a 300 year hiatus return to its historical rank as the world’s largest economy.
5. Lastly it is predicted based on demographic trends that the African Union will finally rise to become a world leading economy in the later half of the 21 century as it grows from 1 to 4 Billion people by 2100, making up 40% of the earth’s population. The most critical factor is when the AU begins more aggressively adopting economic reforms and consistently drives growth. So while the 21st century will be predominately a Chinese and then Indian century, the 22nd century looks like it will be the African century.