Gwynne Dyer: Global economic predictions that ignore climate change could be spectacularly wrong

    1 of 1 2 of 1

      The economists, the statisticians and the investment bankers have done their work, and everybody in the financial world now has more or less the same picture of the future in their minds. The predictions are so consistent that even the general public thinks it knows where the trends are leading us: Asia and Latin America up, Europe and North America in a holding pattern, Africa and the Middle East down. But maybe the predictions are wrong.

      Goldman Sachs started the game almost a decade ago with its study predicting that the BRICs, the four largest emerging economies (Brazil, Russia, India, and China), would overtake the rich countries of the G7 (the United States, Japan, Germany, Britain, France, Italy, and Canada) some time in the 2030s. The world’s economic centre of gravity, the study implied, was shifting from the West to Asia.

      Hardly anybody disputes this model any more; the pundits just differ on the details, like when China’s economy will pass that of the United States. As soon as 2020, said PricewaterhouseCoopers. 2027, says the latest Goldman Sachs prediction. 2035, says the Carnegie Institute. As late as the mid 2040s, according to Karen Ward’s recent study for HSBC. But they all agree it’s going to happen.

      Ward’s study, “The World in 2050”, is particularly interesting for two reasons. One, because it is more realistic about China, whose economy is currently the biggest bubble in world history. And two, because it offers predictions for the world’s 30 biggest economies, not just the top 10.

      China’s economy, at US$25 trillion annually, is only a couple of trillion ahead of the United States in 2050. (All calculations are in constant dollars of the year 2000.) Then there is a long drop to India at US$8 trillion and Japan at US$6 trillion—and no other country reaches US$5 trillion.

      Places five to 11 are mostly filled by the rest of the G7 countries, with only Brazil and Mexico breaking into the magic circle. The rest of the top 20, however, are almost all developing countries (Turkey, South Korea, Russia, Indonesia, Argentina, Egypt, and Malaysia), with only Spain and Australia from the developed world. So in this model, Asia and Latin America really are taking over, with 11 out of the top 20 slots.

      Now, you can quibble with bits of this, like categorizing Russia as an emerging economy. In terms of infrastructure, average education level and birth rate, Russia is clearly a developed country. But if these predictions are roughly correct, then it is definitely Asia and Latin America up, and Europe and North America (plus Japan) in a holding pattern.

      And are Africa and the Middle East really down? Up and down are purely relative, of course, and there are certainly some large African countries with quite respectable projected growth rates, like Nigeria and South Africa. But despite the world’s highest population growth rates, no African country’s economy makes it into the top 20 by 2050.

      Of the Middle Eastern countries only Egypt scrapes in at No. 19, just ahead of Malaysia (which has only a third of Egypt’s population). Most of the non-oil economies face virtual stagnation, and there are big question marks over the claimed oil reserves of a number of the oil states. Africa and the Middle East down.

      It’s only a game: only the very brave or the very foolish would base major investment decisions on such a long-term extrapolation of current trends. But it’s the sort of thing that the strategists and the geopolitics experts love—and it could be wrong. Not just wrong in detail, but utterly, spectacularly wrong.

      All of these predictions assume that global conditions will remain essentially unchanged for the next 40 years. That is highly unlikely.

      The predictions are not simple-minded straight-line extrapolations. They all assume, for example, that China’s economy, which has grown at 10 percent for the past 20 years (and therefore doubled in size every seven years), will drop to about half that growth rate (doubling only every 14 years) well before 2050. But they do assume that energy—especially oil—will remain plentiful and relatively affordable for the next 40 years.

      Even more implausibly, they also assume that global warming will not cause serious disruptions in the world’s economies over the next two generations. Yet there is already enough warming locked into the system by past, present, and near-future emissions that severe disruption is virtually guaranteed, especially in the tropical and sub-tropical parts of the planet.

      The old-rich countries of the G7 are all in the temperate zone, which may get away with relatively minor damage from global warming in the period to 2050. All the big “emerging” economies except Russia and Argentina are located wholly or largely in the tropics and/or the sub-tropics. That means they will almost certainly suffer very serious disruption, including huge losses in food production.

      This is monstrously unfair. Just when the poorer countries finally start to catch up economically with their former imperial masters, the warming caused by two centuries of greenhouse gas emissions by the rich countries knocks them back yet again. Which may also knock all those predictions that the emerging economies will soon overtake the developed ones into a cocked hat.

      Gwynne Dyer is a London-based independent journalist whose articles are published in 45 countries.

      Comments

      We're now using Facebook for comments.

      20 Comments

      NoLeftNutter

      May 25, 2011 at 11:20am

      Gwynne, the predictions that are the most unlikey here are the CAGW catastrophies that you, Al Gore and the Hockey Stick team keep dreaming up. Climate changes, it's not our fault, get over it. CO2 is not poison, it's plant food.

      McRocket

      May 25, 2011 at 1:02pm

      What would be so wrong if climate change ended humanity? What does humanity do for the planet or the universe that would be SO horrible if it were gone? Nothing I can think of. In fact, I would guess that the planet and the universe would be better off without humankind.
      I am not saying that we should let humankind be extinguished - not at all.
      But what I am saying is that other then doing my individual part to pollute the planet as little as reasonably possible - I am not going to worry about it AT ALL.
      If humanity is advanced enough to save itself? Great. Fantastic. Maybe we are better then I think.
      But if humanity is too stupid/ignorant/childish to stop itself from exterminating itself - then they got everything they deserved and good riddance.

      Evolving chimp

      May 25, 2011 at 1:47pm

      Looks like the first poster is not just missing his left nut, but also a big chunk of his brain. To deny or ignore the massive amounts of science and direct observation about human-caused climate change is just loony. As for McRocket, I guess you don't have kids, but many of us care enough about the world to try to find and implement solutions to the problems we have created.

      Michael Castanaveras

      May 25, 2011 at 2:05pm

      McRocket, you're pretty nonchalant about mass famine, or even a major curtailing of your lifestyle. I'm sure you'll be the first in line to reduce your personal energy consumption by 60% to bring it down to worldwide sustainable levels. So get rid of your car, iPod, and flight vacation and we'll call it a square deal.

      10 8Rating: +2

      Mosby

      May 25, 2011 at 2:47pm

      We'll be lucky if we make it to 2050. Peak Oil has arrived. World oil production is currently in the plateau phase (were production fluctuates slightly above & below a constant number) which will last another several years, then it's all downhill from there.
      The downslope will not be smooth and gentle. It will be step-wise and catastrophic, as countries collapse and wars are constantly fought over ever-dwindling resources.
      We're heading back to the pioneering days of 1830, folks.

      petr aardvark

      May 25, 2011 at 3:02pm

      noleftnutter would happily keep his foot on the accelerator, while driving in the fog.. even if there may be a cliff up ahead.

      13 7Rating: +6

      Meme Mine

      May 25, 2011 at 6:56pm

      It's time we petitioned the courts to have the leaders of the false CO2 war brought to justice. We missed getting Bush for his war..........
      Who's with me?
      Thumbs up for prosecute or
      Thumbs down for more of the same.

      Etienne

      May 25, 2011 at 8:25pm

      Mosby has dropped the other shoe: peak oil. I think the central question for us today is whether Global Warming or Peak Oil is the more dire (dire, Dyer, get it? Oh, where have the lovers of true puns gone?) global threat. I'd love to see Gwynne examine the implications of the latter threat more closely (I found CLIMATE WARS an excellent examination of the former).

      I'd start with the work of Sam Foucher and Jeffrey Brown, whose ELM (Export Land Model) model is quite simply terrifying: basically, according to this model, oil-producing countries keep consuming an ever-growing share of their own production, which means that when their production goes down the amount of oil available for export falls far more quickly than production does. They calculate that by 2050 there will be practically NO oil left ANYWHERE for export: the present-day oil-producing countries that won't be needing to import oil in 2050 will merely be self-sufficient.

      There was a Quebec sci-fi comedy in the nineties, DANS UNE GALAXIE PRíˆS DE CHEZ VOUS [In a Galaxy near you, for the galloglottically-challenged (yes, I just invented the word) among you], about a future world where global warming had become so extreme that sunscreen lotion companies have taken up the space once occupied by oil companies, and where the United Nations asks the world's dominant superpower, Canada, to send a spaceship to find a new planet SIX MILLIARDS DE TATAS (Six billion retards/twits) could move to.

      Well, when you think about the world in 2050, where there's no oil to import (good-bye most of the First world) and where global warming has turned much of the farmland of the tropical and semi-tropical countries into desert (good-bye most of the Third), maybe Canada (potentially self-sufficient in oil, with plenty of unscathed farmland and plenty of other natural resources) will, by default, be the world's superpower.

      Moral of the story: true predictions are likelier to come from satirists than pundits. If you still doubt this, google the following THE ONION article: "Our long nightmare of peace and prosperity is over": read it, check the date, and see if you can find a more accurate prediction made *anywhere* in the so-called "serious" press.

      9 11Rating: -2

      Birdy

      May 25, 2011 at 9:41pm

      Global economic predictions WILL be spectacularly wrong.

      Whether they ignore or pander to the gullible social changelings and their precious climate change is meaningless because 99% of economists like Paul "I won a Nobel prize but I can't do grade 3 math" Krugman follow the 100% discredited Keynesian school of fail-onomics.

      seth

      May 26, 2011 at 9:15am

      You know I love reading business analyst (#1 rated financial commentator) Nobel prize winning Krugman kicking the butts of the oh so stupid fascist financial commentors we get these days. The Keynesian school gets it exactly right it was Birdly's Friedmanite/Harperite stupidity that gave and continues to give us the current depression/recession.

      Seems Birdy and his likes are the ones that can't do grade 3 math. Just look at the unemployment and welfare lines and the lucrative corporate bottom line and you see how effective is their odious philosophy.
      seth