28 March 2021

The Winners and Losers of the 21st Century, So Far

The 21st century has already had its fair share of dramatic events.

  • The 9/11 terrorist attacks shocked what was at the time the world’s sole superpower.
  • The Global Financial Crisis led to a dramatic shift in global economic power, first to emerging markets and then, more precisely, to Asia.
  • The Covid-19 pandemic was the world’s greatest health crisis since the Spanish Flu a century earlier.

Altogether, these dramatic events led to a series of significant economic, political and social changes that have reshaped our world in a relatively short period of time. These changes have benefitted some countries, while causing a great deal of trouble for others. Therefore, measuring the winners and losers of the first two decades of the 21st century can help to reveal just how the world has been reshaped.

Measuring just which countries and regions have been the biggest winners and losers of the first two decades of the 21st century is obviously a contentious undertaking, for selecting the criteria for such a measurement is certainly hard to agree upon. Undoubtedly, the performance of the country’s economy, particularly in terms of its success or failure in generating growth and wealth, has to be considered. At the same time, history has shown us that those countries and regions that are able to take the lead in technological innovation are typically those that outperform their rivals and partners, so we must also look at technological innovation as a criteria for measuring the success or failure of a country or region. Living standards are another area in which countries and regions can measure their progress against other parts of the world, although this area can be rather subjective. Finally, whether or not a country’s global influence has expanded or waned is another useful criteria for measuring the success of a country thus far in the 21st century.

Using these criteria. It is relatively easy to determine that most of the countries that have made the greatest gains in the 21st century so far are located in Asia. Of these, China’s rapid economic growth, it massive spending on technological innovation, its rising wealth levels and its emergence as the world’s second superpower clearly make that country the biggest winner of the current century. Likewise, other parts of Asia, such as South Korea and Vietnam, also have performed well in all or most of these categories, particularly when South Korea is compared to other developed economies and Vietnam is compared with other emerging markets.

Outside of Asia, there are far fewer countries that have made major gains in all or most of these categories. The United States has outperformed most other developed economies in terms of growth, wealth and technological innovation, but it has been a tough two decades politically for the world’s leading power, while rising inequality in the US has resulted in worsening living standards for tens of millions of people in that country. Elsewhere, there are a few countries such as Turkey, Poland and Australia that have also made significant gains in most of these categories so far this century, but the list of these countries is relatively short.

As for those countries and regions that have struggled mightily in the first two decades of the 21st century, there are a number of common factors. One of these is a lack of economic competitiveness. Another is a lack of economic diversification. Both of these factors have made it difficult for a majority of the world’s economies to generate significant growth, particularly when they have to deal with more competitive and diversified rivals such as China and the United States. Finally, an inability to keep up with the US, China, South Korea and other more technologically-advanced countries has also spelled trouble for many countries this century. Some regions that have fallen behind in terms of competitiveness, diversification and technological advancements are Southern Europe, Latin America and many countries in the Middle East and Africa. Each of these regions has recorded much lower rates of economic growth than had been hoped for at the start of this century, due largely to these aforementioned factors.

We have learned many lessons about the global economy over the first two decades of this century. For example, there is now little doubt that Asia has emerged as the leading driver of growth in terms of economic output, international trade and foreign investment, and given its vast size, this trend is likely to continue for some time to come. Meanwhile, recent years have reminded us of the paramount role that competitiveness and a strong position in high-growth industries plays in the performance of an economy over a prolonged period of time. For those countries and regions that have failed to modernize, diversify and improve their competitiveness, time is running out. With population growth slowing dramatically and with productivity growth trending downwards, those countries and regions that fail to modernize, diversify and become more competitive face a future of long-term stagnation and decline. We are just a little more than 20% through this century, but it is already apparent which countries and regions are in the best position to win or lose in the decades ahead. For those that have lost ground in the previous two decades, a quick turnaround is needed, lest they continue to lose ground to the more successful rivals.