THE ECONOMIC CENTRE OF GRAVITY: FROM EAST TO WEST AND BACK AGAIN

By Neel Shah

The economic centre of gravity refers to the geographical centre of all economic trade, taking into account the value of all trade across the world. This article will study how the economic centre of gravity has shifted from East to West, and how the trend is reversing to match the growth of the emerging powers in Asia. However, should the rapid transition be a concern?

A study of urbanisation by McKinsey Global Institute has suggested the centre of economic strength is shifting right by 140km per year, faster than ever before in history. This is mainly due to rapid urbanisation in China, India and south-east Asia. Although growth is not as significant in the megacities of Mumbai and Shanghai, in the emerging cities (such as China’s seventh largest city – Foshan) growth has prospered in recent years, prompting a shift in global economic power.

A brief history of economic power:

·        Circa 1 AD: the economy was centred in the Islamic empires of Central Asia, between the Roman empire of Europe and the Ancient Chinese empires.

·        Circa 1500 AD: the economic growth in Europe had been stunted through the Middle Ages, as in China, due to a lack of trade between East and West.

·        Circa. 1800s: the industrial revolutions begin in Europe, shifting the centre of economic trade leftwards towards Western Europe.

·        Early 1920s: the USA begins its emergence as an economic powerhouse, shifting the centre of trade further west towards North America.

·        1950s: China, under the new communist party, begins several reforms, creating growth in the East along with the pre-existing strong economy of Japan. This begins the shift back towards the East.

·        1970s-80s: mass deindustrialisation occurs in the West, with globalisation and cheaper costs in the East boosting the eastern economies of China, South Korea and Japan. This increases the pace of the shift eastwards.

·        2000 onwards: India begins its journey of rapid urbanisation, creating a strong economy in the second most populated nation in the world. This moves the centre of economic power away from Europe, back into Asia.

What does the future look like for global trade:

The emergence of China as a force to threaten the US has shown the re-emergence of the East, as the limits of colonialism have been lifted from Asia. In addition, the emergence of Asia and ASEAN (an organisation comprising of ten southeast asian countries) is bound to provide economic growth in the east, along with the strength of the economies of the Far East. This will be sped up by projects such as the new silk road.

However, the economic centre of gravity has yet to travel back south, towards Africa. Although this will take several years, since Africa is yet to recover from the burdens of colonialism on the economy, the southward shift is inevitable. One thing is clear, economic trade follows population changes and development, particularly through industrialisation.