Developing nations will undoubtedly be powerful before they are really rich. The population imbalance – about 6bn in middle and lower income countries, 1bn in developed economies – means these countries will still be relatively poor when they account for the majority of the world’s gross domestic product and resource use. That conclusion is inescapable. The question is: when will the economic balance tip?
By some measures, the moment has already passed, or will in a few years. The rich consume less food, even though their diets include more of the expensive stuff, proteins and fats; there are just so many more poorer people. For investors and policymakers, the industrial shift matters most. Some of that has already happened: more steel, mobile phones and concrete were purchased or produced in 2010 in developing than in developed economies. Car production was just about evenly divided. And at purchasing power parity (PPP), poorer countries accounted for 48 per cent of global GDP, according to the International Monetary Fund.
PPP comparisons, which adjust for unrealistic exchange rates, tend to flatter the economies of poorer countries. In effect, the adjustments value services about equally everywhere but services cost less in poor countries. At market exchange rates, the non-rich share of world GDP comes to about 38 per cent.