Asia vs. the World
Since the Industrial Revolution, the West, defined here as western and central Europe and the four main offshoots of Europe (the United States, Canada, Australia and New Zealand) has dominated the global economy to an extent never seen in human history. However, even in the period where Western economic power was at its greatest, Western leaders were aware of the vast economic potential of Asia.
After a period of economic decline that coincided with the rise of the West, Asia’s economic recovery began in Japan, where the Industrial Revolution first took hold in Asia. After the Second World War, a number of Asian countries developed export-oriented manufacturing economies that allowed these countries to quickly approach the wealth levels achieved in the West. However, it was the reconnection of China and India to the world economy that has led to the dramatic shift in economic power that we see today. Simply, a combination of the world’s largest regional population and the fastest growing regional economy is making Asia the center of growth for the global economy. The question now is, will this trend continue and, if so, will the coming decades belong to Asia.
Without question, we are in the midst of the greatest shift in the global economic balance of power since the Industrial Revolution. Prior to the Industrial Revolution, the vast populations of China and India meant that their economic scale was far greater than anyone else’s as humans and animals provided for most of the energy of that period. After the Industrial Revolution began in Britain in the 18th century, it was the West that quickly overtook Asia in terms of economic output and wealth levels. In the 19th century, it was Europe’s largest countries that dominated the global economy, led by Britain. In the 20th century, it was the largest of Europe’s offshoots, the United States, that became the dominant power in the global economy.
Today, the West remains the leading economic power by many measures, including in terms of output and wealth levels. However, as growth has slowed significantly in most countries in the West in recent decades, it is faced with a rising Asia that threatens the West’s domination of the global economy that it has enjoyed for more than two centuries.
Interestingly, Asia’s economic expansion was launched by developing export industries catered to serve the vast markets of the West. This allowed for manufacturing industries to flourish across the region, many of which have overtaken their Western rivals. Now, as wealth levels have risen, Asia’s vast internal market is rapidly becoming another key driver of growth in the region. As home to nearly 60% of the world’s population, Asia’s market potential dwarfs that of any other region. Moreover, Asia now accounts for 40% of total global economic output and has recently surpassed the West in terms of economic output for the first time since the early 19th century.
Examples of this are everywhere. For example, two-thirds of all of the steel produced in the world comes from Asia. Meanwhile, more than half of all of the automobiles produced in the world today are produced in Asia, with China growing from a small automotive producer 25 years ago to a country that produces more than twice as many vehicles as the next largest producer. Moreover, production levels in Asia continue to rise in most manufacturing industries, even as growth levels slow in many of the region’s leading economic centers.
As long as economic growth rates in Asia continue to exceed the global average, as they currently do by a wide margin, Asia’s impact on the global economy will continue to rise and economic power will continue to shift to Asia. This growth continues to be led by the region’s two giant emerging markets, China and India, who despite recent economic troubles and questionable economic data are the two economies with the largest growth potential in the coming decades thanks to their massive populations and expanding middle classes. Likewise, other large emerging markets in Southeast and South Asia will also play a key role in Asia’s rising economic power.
Of course, the region will also face a number of challenges as it once again becomes the center of the global economy. Demographically, many of the region’s most powerful economies face the prospect of aging populations and declining workforces, both of which will strain the economies of China, Japan and a number of other countries. Resource depletion and environmental degradation are two other problems that the region is facing, in part due to the region’s rapid economic expansion in recent decades. Meanwhile, the potential for political unrest and outright conflict remains high in many areas of Asia and this could also derail the region’s economic progress in the coming years. Nevertheless, if Asia can successfully deal with these threats, there is little doubt that Asia’s role in the global economy will continue to grow in the coming years and decades as the region emerges as the unquestioned center of the global economy.