West may fall in economic might

If economics were a restaurant, the menu would be changing in the next several decades. Peking Duck and curried lamb with jasmine rice might be more popular than French onion soup and Wienerschnitzel. Russian borscht would still be on the menu, but less prominently placed.

"The world center of gravity" is shifting toward the South and toward Asia, says Walter Russell Mead, senior fellow at the Council on Foreign Relations. He predicts the emergence of "a less and less Eurocentric world" by the end of 50 years, even if the European Union makes significant political and economic progress.

This means positions of power and prestige may have to be more widely shared. Fewer Europeans will likely be taking top jobs in such institutions as the International Monetary Fund and the World Trade Organization. China and India may join the prestigious annual Economic Summit, whose participants now include the Group of Seven industrial countries (the US, Germany, Japan, France, Britain, Italy, and Canada) plus Russia. Unless there is an economic disaster, though, living standards in Europe and other industrial nations should continue to rise.

As for the United States, it is "not likely to lose much economic strength," Mr. Mead figures. And Russia, dismissed by many analysts at the end of the cold war as too chaotic to be a major economic power, is coming back, but "it's hard to see it becoming much more important."

Charles Kupchan, another senior fellow at the Council on Foreign Relations, says, "The general story over the next 10 years will be the diffusion of economic power and centers of economic activity." These centers won't outrank the US, but will emerge as focal points in world affairs.

At the moment, the US, EU, and Japan together account for about 80 percent of the output of all industrial nations, nearly 50 percent of world output. Their slice of the world economic pie will likely decline over the coming decades as faster-growing developing nations, such as India, South Korea, and China, build more clout.

A recent study by the EU Commission projects the EU's share of world production falling from 18 percent to 10 percent by 2050 as its population ages and shrinks. Japan is expected to suffer the same demographic fate, with its share declining from 8 percent to 4 percent. The US share will rise from 23 percent to 26 percent. (See chart at right.)

Because of American pique at France's attitude to the war in Iraq, there is speculation that the US may seek change in the G-7 to punish President Jacques Chirac. Harald Malmgren, a Washington economic consultant, talks of the US convening a G-4 meeting of finance ministers, with representatives of the dollar, sterling, the yen, and the euro - and France, Germany, and Italy represented only by a single European official.

Meantime, China is fast becoming the manufacturing workshop for much of the world. With its 1.2 billion people and a rapidly expanding economy, the country produces 11 percent of the $45 trillion in total global output in terms of purchasing power parity, a method of measuring what the domestic currency will actually buy in the way of goods and services. The US accounts for twice that percentage.

In addition, Americans are now buying many clothes and other manufactured goods from China. India provides US high-tech industries with both personnel and software. As the relative importance of these countries' national economies evolves, export and import competition may stiffen for US firms.

One major geoeconomic change in the world occurred with the crumbling of the Soviet Union in 1991. It ended the cold war and left the US the world's only superpower. Though Russia, the core of the Soviet Union, still has its nuclear might, its economy collapsed as it strove to make the transition to a market economy "cold turkey."

Under its closed communist economy, the Soviet Union was never a major influence on economic affairs outside the Soviet bloc. Since the bloc's collapse, Russia's role has diminished even further. In 1998, Russia was hit by a debt crisis and devaluation of the ruble.

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