As the west recovers and emerging economies start to struggle, the pattern of growth is reversingby George Magnus / October 17, 2013 / Leave a comment
Published in November 2013 issue of Prospect Magazine
The new European Central Bank headquarters under construction in Frankfurt © Rex/Action Press
Something unusual is happening in the world economy. Over the summer, economic forecasters have become more optimistic about the prospects for economic growth in the western world for the first time in four years. But in emerging and developing countries, there are new concerns about weakening economic growth and instability. This about-face in the fortunes of richer and emerging countries wasn’t in the script we have been reading in recent years. Even though rich countries are by no means out of the woods yet, some things are starting to go right. By contrast, China and many of its emerging market peers are slowing down for more than temporary reasons. Many could easily get stuck in a so-called “middle income” trap and fail to become yet more prosperous.
A pendulum shift back to advanced countries?
The end of a long recession in Europe, and the broader western economic upturn, including in Japan, comprises unequivocally positive news, even though caveats abound. All recessions end eventually, and the west still faces a long, hard slog to regain control over and lower public debt, find new drivers of growth and employment, and develop coping mechanisms to deal with the consequences of ageing societies.
For now, though, the cyclical trend is improving. The OECD, a group that represents more than 30 advanced and developing economies, said in its Interim Economic Assessment, published in September, that momentum in the global economy was starting to shift towards the rich world, and away from emerging markets. This view corroborates widely followed economic data, and surveys of business and consumer co…