In the past decade we have witnessed many changes in the world of economics that it’s easiest to compare them to a roller coaster. From expansion of computer and web industries, rise of some third-world countries to the economic collapse that we still feel effects from. It became somewhat expected to see USA and China at the very top of GDP ratings, however these trends might not show the reality in the best way. Changes in demographics, discovering new resources, fight for environmental sustainability and security gave to some countries wind in the back, while putting some other in a not very favorable position.
United States of America and China have been two countries with the largest economic product for many years – USA with $18,124.7 billion and China with $10,380.4 billion predicted GDP for 2015. In addition, their national products are growing annually by approximately $700 billion for the US and $900 billion for China. Even though these numbers show that these countries are the leading in the world of economics, the trends are changing and the predictions for the future are not the best.
On the other hand, the United States seem to be willing to accept all Chinese (and immigrants in general) who are bringing ideas and potential opening of new businesses. From economic stand point, immigration is always good because it creates greater competition on the labor market, which creates jobs. In the decades before, US was the main destination of Latinos looking for better life and “dreaming the American dream”. However, this trend has changed. Better living standard and higher economic growth made countries such as Mexico more attractive for domestic population to stay. Nevertheless, this is not the worst thing that is happening to the United States. This country experienced baby boom during 80’s and 90’s, which explained higher enrollment in colleges between 2000 and 2010. In 1999 there were 15.2 million college students enrolled in the US and in 2010, 20.4 million. Nevertheless, last year many schools re-opened their application processes because they accepted less students than it was expected. Students are more and more entering business after high school. The potential solution to attracting more students would be lowering prices of higher education in this North American country that has been planned by President Obama.
Experiencing economic difficulties usually forces countries to find some alternatives, which in this case seems to be green technology. Green technology refers to production of reusable energy resources. They can be obtained on different ways, using wind, solar energy or wind. United States have been the leaders in research of green technology, which allowed drastic cuts of production costs. For instance, in 1977, use of sustainable energy resources did not seem like a potential source of energy, since the costs of solar cells were as high as $76 while today their price is just $0.30. As a result of this decrease in prices of green energy it is becoming more and more popular in various countries. This innovation is going to be very important for the economic growth of ‘sunny’ states, Arizona or Texas, and countries, such as Greece, Egypt or Australia. In the same time, entrepreneurs are starting to get more and more interest in investing in such energy sources causing the governments to decrease levels of subsidy that can be used for other projects.
Although there is a significant increase in production of green energy, we must not forget famous Kyoto Protocol from 1992. In this document members of the UN set boundaries for how much their emission of CO2 needs to be decreased. Let me remind you that one of the countries that didn’t sign the agreement was the US, with an excuse that it may harm their economy. Keeping this on mind, it was expected that USA sticks with the same level of pollution or even to increase it, however, data shows that US industry managed to decrease CO2 emission obtained from fossil fuels by 17% and that there is a chance that this percentage will rise up to 20% by 2020. Firstly, this change occurred as a consequence of inflation in the price level of gas – from $1 in 90’s to $4 these days. Secondly, discovery of large resources of natural gas, allowed American to adjust and decrease usage of fossil fuels. In the same time, China is being world’s largest polluter. This country still uses fossil fuels in order to support its gigantic industry. Same trends are in other developing countries. Facing growing interest in their markets and industry, countries such as India, don’t regulate CO2 emission in the most effective way.
So far we have seen that major world economies are struggling to sustain the economic growth as well as the potential they are facing, however, it is worth mentioning economic performance of large developing economies. Term BRIC (later changed to BRICS) was introduced by economist Jim O’Neil that referred to countries experiencing rapid economic growth at the turn of the century. BRICS refer to Brazil, Russia, India, China and South Africa. At the time when the term was introduced (2001) these countries were considered to be not only economically developing countries, but also potentially influential. However, today the image is a little bit more different. We have already spoken about China and its economy, but other members of the pact such as Russia and Brazil are not doing so well.
Russia has been experiencing economic contraction namely due to the war with Ukraine and sanctions that were put on this country. Even though, the sanctions influence Russian economy a lot, domestic production flourishes as the demand for goods and services is still the same this 143-million-people-large country. In addition, long administration processes, legal system and political instability don’t seem very attractive for foreign investors. Brazil is in the similar situation. Their growth is on low 0.3% for 2015, which shows struggles in their economy. Overspecialization and poor human resources are slowing down this export-based economic growth.
Even though South Africa was not initially considered as a large developing economy it caught up. Good business environment and vast amount of natural resources, allowed this country to become a leading African economy. Similarly to South Africa and China, India is facing a rapid economic growth in the past decade. Cheap and competitive labor market, joined with natural resources allowed the second largest nation in the world to have rapid growth in the past few years.
These changing trends in the world economies are not only showing their performance and living standard, but also show the situation in politics. Smaller economies are largely dependent on these export-based economies, as they get both commodities and final goods and services from these economic giants.