Emerging markets in other developing countries are gaining global influence and

Question

Emerging markets in other developing countries are gaining global influence and global power. In 20 years, these countries will be the dominant force in global economics.

Will developed countries be able to maintain their competitive edge against emerging markets such as China or India? Why or why not?

What should change, if anything, in the economic policies in order to make the developed countries more competitive?

In your opinion, in terms of economic power and the GDP, who will be the global leader in 2050 and why?

Explanation / Answer

Developed countries have inherent reserves and strong currencies. It is true that India or China has a big market and leading emerging economies and growing at an increasing rate but developed nations have a capital endowment and huge foreign reserves. This provides a competitive edge to them over developing nations.

There is a need to change economic policies in developed nations. For example due to huge expenditure on pension funds, european countries suffered from debt crisis, It is vital to maintain government spending according to the revenue. Moreover, with strong fiscal policies it is possible to overcome unemployment and debt-GDP ratios in the developed nations.

In terms of GDP, China is the fastest growing economy but the recent rebalancing policy has decelerated its economic growth. In addition, lower oil prices /commodity prices and fed tapering have contagion effects on the emerging economies. Global environment affects the growth of the emerging economies. It is quite possible that emerging nations will lead the economy due to robust demand, maximum utilization of resources and with its young population and strong external sector.

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