SYDNEY, Nov 26: Western nations must prepare for a future dominated by China and India, whose rapid economic rise will soon fundamentally alter the balance of power, former World Bank chief James Wolfensohn has warned.
Wealthy countries were failing to understand the impact of the inevitable growth of the two Asian powerhouses, Wolfensohn said in the 2006 Wallace Wurth Memorial Lecture at the University of New South Wales at the weekend.
“It's a world that is going to be in the hands of these countries which we now call developing,” said Australian-born Wolfensohn, who held the top job at the global development bank for a decade until last year.
Rich nations needed to try to capitalise on the inevitable emergence of what would become the engine of the world's economic activity before it was too late, he said.
“Most people in the rich countries don't really look at what's happening in these large developing countries,” said Wolfensohn, who is now chairman of Citigroup International Advisory Board and his own investment and advisory firm.
Within 25 years, the combined gross domestic products of China and India would exceed those of the Group of Seven wealthy nations, he said.
“This is not a trivial advance, this is a monumental advance.” Wolfensohn said that somewhere between 2030 and 2040, China would become the largest economy in the world, leaving the United States behind.
By 2050, China's current two trillion US dollar GDP was set to balloon to 48.6 trillion, while that of India, whose economy weighs in at under a trillion dollars, would hit 27 trillion, he said, citing projections by investment bank Goldman Sachs.
In comparison, the United States’ 13 trillion dollar income would expand to only 37 trillion -- 10 trillion behind China.
“You will have in the growth of these countries a 22 times growth between now and the year 2050 and the current rich countries will grow maybe 2.5 times.” In light of these forecasts, it was clear that Western nations and Australia were not investing enough in educating the next generation to be able to take advantage of the coming realignment, he said.
“The fact that not enough of our young people are preparing themselves with knowledge, experience, residence and language to deal certainly with China, although India has the benefit of an English language, it does seem to me that it presents a formidable challenge.”
Wolfensohn pointed to both China's and India's recent substantial investments in Africa as an example of how the two emerging giants were exercising their increasing clout on the global stage.
“Within the last two weeks the world has been put on notice that Africa is no longer the basket case that everybody had historically thought it was but is now front and centre in terms of development by India and China.” The phenomenal rally by the two countries was a return to form rather than a novelty, he said, as they together had accounted for 50 per cent of global GDP from the 1500s until the industrial revolution reduced that to between five and seven per cent.—AFP