Where the Global Economic Center of Gravity is Moving and Why?

Researchers at the London School of Economics calculated the economic center of gravity of the world by using Gross National Product (GDP) as a measure of the mass or weight of a country and using the world map as a physical object.

Based on the calculations, the center of gravity in 1950 was in the Atlantic Ocean. Today the center of gravity is over southern Russia and moving eastward, as shown in the map below.

Shortly after the industrial revolution of the 19^th century, Europe and North America begun dominating the overall global economic activity and shifted the global GDP center of gravity westward consistently since 1850. By 1950, Europe and the United States combined GDP accounted for more than 50 per cent of the world’s production, and China and India combined GDP had fallen to less than 8 percent of world’s GDP. Japan was about to take over the economic lead in Asia.

A Major economic transformation started during the 1980’s. Population growth had declined in Europe and North America but increased significantly in China, India and other Pacific Rim emerging markets. China and India saw their GDP levels grow at very high rates, pushing them closer and closer to the advanced economies. Today, China is the second-largest world economy and together with India they already account for 20 percent of the world’s GDP. Most economists believe that by the year 2025 China will surpass the United States and will become the largest world economy.

As the graph shows, China will soon regain the economic dominance it had 700 years ago at the expense of the economic powers of the developed countries, and will once again lead the world in industrial revolution, new technology development, medical advancements and military strength.

The western economies have good reasons to fear Asia and China in particular. China could once again dominate the world’s economy and might use its economic and military strength to threaten its neighbors, Taiwan and Japan, and to control the world’s political and economical agenda.

As much as this recent trend is solid – and there are many reasons to believe that it will continue in the decades ahead – there are also reasons to be cautious, for this is not the first time in history that we see emerging markets doing well for a good number of years before a serious crisis stops their development. The economic center of gravity pendulum might shift back westward, if Europe and the United States will be able to use their innovative minds to create a new economic revolution.

We certainly live in interesting times.