The Great Factor-Price Equalization, Again
By Arnold Kling
Rodrik (pointer from Mark Thoma) is writing about the past twenty years.
For the first time ever, developing countries as a group grew have been growing faster than industrial countries. Not only that, as the figure makes clear, the growth differential between the two groups has been widening in favor of the poor countries.
Read the whole thing.
Taylor talks about the future.
In 2009, the U.S. is the world’s largest economy. By 2050, U.S. economy will be about 2.5 times as large–and is projected to be in third place in absolute size, behind China and India. What other countries move up the rankings notably by 2050? Brazil, Mexico, Indonesia, Turkey, Nigeria, and Vietnam. To my 20th century mindset, some of those countries just don’t seem like global economic heavyweights. Time to start adjusting my mind to the coming realities.
This is based on projections made by PwC (They seem to have rebranded themselves away from Price Waterhouse Coopers–I am not sure when or why).
Again, I want to suggest that there is a connection between this trend and the stagnation of median incomes in the United States, and even to the decade-long drop-off in employment here. New patterns of trade are developing that are reducing the advantage that a person enjoys merely for being located in the United States. There still are advantages, as evidenced by the excess supply of people who wish to immigrate herte. However, the Great Factor Price Equalization is underway, thanks to the fall of Communism, the rise of the Internet, and sporadic progress in institutional development in the emerging-market countries.
Incidentally, if there were justice in the world, Timothy Taylor’s blog would be one of the top economics blogs. His posts represent my ideal of what an economics blog should be. Boycott the mudball-throwers. Read Conversable Economist instead.