THE world economy is returning to normal, dominated by Asia, after an aberration of a few hundred years. But for Australians, it will not feel anything like normal.
For the past 2000 years, it was normal and natural that Asia made up most of the world economy. When Christ was born, three-quarters of the globe's economic activity took place in Asia.
It's hard to imagine today, but India was the richest country, alone making up a third of the world economy, bigger even than the US in this century. Second was China, making up another quarter. Western Europe made up just one-tenth, according to research by the late economic historian Angus Maddison.
A thousand years later, nothing much had changed because Asia was home to most of the world's people.
This relationship between the size of a population and the size of an economy broke down only with the acceleration of the Industrial Revolution. Asia's share of the world economy fell below 50 per cent only in the 1840s.
And it just happens that most of Australia's modern history has occurred during this brief aberration. The technology gap has closed. Today we are living through the return to the normal and natural state of world affairs.
As China and India make their comeback, they are building with such intensity they are like giant economic whirlpools sucking vast quantities of commodities into an insatiable vortex.
The Australian Treasury has pointed out that, in the next phase, they will start to demand tremendous quantities of services, too, and high-end manufactured goods. These trends bode well for Australian miners and farmers and for Australian service industries.
But the rising Asians are the masters of low- and mid-priced manufactures, so the outlook for Australian firms there is bleak.
The question for a government is whether to try to stand against history or accommodate it. This raises a key point: how long will the Asian-driven boom run? If it's a few years, a government can hold the status quo.
The economist Ross Garnaut has pointed out that the first wave of economic success stories in postwar Asia, led by Japan, grew at breakneck speeds until they reached levels of per capita income roughly half those of the countries at the forefront.
Today they enjoy per capita incomes of about $50,000. With China at less than $5000 and India under $2000 the precedent suggests that, even if there are interruptions to growth, this boom is still in its early stage.
For Australia, it will be a chance to prosper. But it will also be among the most disruptive events since World War II. Treasury modelling published in today's Herald, projecting 170,000 lost manufacturing jobs this decade, is an example. The government has started to brace for change, funding skills and training. But the projections only hint at the scale of the change to come.
Source: http://www.smh.com.au
For the past 2000 years, it was normal and natural that Asia made up most of the world economy. When Christ was born, three-quarters of the globe's economic activity took place in Asia.
It's hard to imagine today, but India was the richest country, alone making up a third of the world economy, bigger even than the US in this century. Second was China, making up another quarter. Western Europe made up just one-tenth, according to research by the late economic historian Angus Maddison.
A thousand years later, nothing much had changed because Asia was home to most of the world's people.
This relationship between the size of a population and the size of an economy broke down only with the acceleration of the Industrial Revolution. Asia's share of the world economy fell below 50 per cent only in the 1840s.
And it just happens that most of Australia's modern history has occurred during this brief aberration. The technology gap has closed. Today we are living through the return to the normal and natural state of world affairs.
As China and India make their comeback, they are building with such intensity they are like giant economic whirlpools sucking vast quantities of commodities into an insatiable vortex.
The Australian Treasury has pointed out that, in the next phase, they will start to demand tremendous quantities of services, too, and high-end manufactured goods. These trends bode well for Australian miners and farmers and for Australian service industries.
But the rising Asians are the masters of low- and mid-priced manufactures, so the outlook for Australian firms there is bleak.
The question for a government is whether to try to stand against history or accommodate it. This raises a key point: how long will the Asian-driven boom run? If it's a few years, a government can hold the status quo.
The economist Ross Garnaut has pointed out that the first wave of economic success stories in postwar Asia, led by Japan, grew at breakneck speeds until they reached levels of per capita income roughly half those of the countries at the forefront.
Today they enjoy per capita incomes of about $50,000. With China at less than $5000 and India under $2000 the precedent suggests that, even if there are interruptions to growth, this boom is still in its early stage.
For Australia, it will be a chance to prosper. But it will also be among the most disruptive events since World War II. Treasury modelling published in today's Herald, projecting 170,000 lost manufacturing jobs this decade, is an example. The government has started to brace for change, funding skills and training. But the projections only hint at the scale of the change to come.
Source: http://www.smh.com.au
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