Daniel Twining: Upending the New Global Order
The world has a new G-7. The Group of Seven once comprised the world's leading industrialized economies -- in North America, Europe and Japan. Now, the International Monetary Fund calculates that the combined gross domestic product of the seven biggest emerging powers exceeds that of the G-7 developed nations, on a purchasing power parity basis. This finding turns our mental map of the world upside down -- and requires American and Japanese foreign policies to navigate a new era.
The IMF calculates that China now has a slightly larger economy than the U.S., adjusted for purchasing power -- which takes into account relative price levels. This does not mean the end of America's global preponderance: the U.S. remains the largest economy at market exchange rates, and it is worth remembering that China had a larger economy than did Great Britain, even as that country dominated the globe in the heyday of empire. But it signals the rise of a peer competitor of the kind that Americans who came of age after the fall of the Soviet Union in 1991 have never known. It also highlights the risk that Japan will be sidelined by China's ascendance -- which is why Prime Minister Shinzo Abe's success in restoring Japan's economic vigor through his so-called three arrows economic reform program will be critical to the future of the entire region.
This article was first published on Nikkei Asian Review.com. Click here to view the article in its original format.
Daniel Twining is a senior fellow for Asia at the German Marshall Fund.
Photo credit: Government of South Africa.