I read in The Economist Espresso this week that China´s economic growth may be “only” seven percent this year, down from 14% in 2007. At the same time most western economies struggle with close to zero or in recent years negative growth.
The picture below, from the World Economic Outlook database, shows the growth percentage in the worlds nations in 2013. It is true that the advanced economies have much higher gross national product per capita than the developing world, so a low percentage of growth in a western nation may anyway contribute to total global growth, however over the past decades this relation has changed substantially.
For example, in the 1980s the United States, long an engine of global growth, contributed about 1/3 to the worlds total economic growth. Now in the current times, the United States contributes about 1/7, whilst China now contributes 1/3.
Economic Complexity is like a game of Scrabble, says Ricardo Hausmann, the Director of the Centre for International Development and a Professor of the Practice of Economic Development at the John F. Kennedy School of Government at Harvard. The more letters you have, the more words you can make, the more capabilities a country has, the more diverse products it can generate.
Hausmann has concentrated his research efforts in two broad areas: the underlying determinants of macroeconomic volatility, financial fragility and crises; and the determinants of long run growth. In the video below from the World Economic Forum in January this year, Hausmann uses metaphors and metrics to explain the gap between rich and poor countries. I learned quite a lot watching this.
Below is a longer video with Hausmann, filmed at an interactive discussion about economic growth at the Harvard Kennedy School on May 16, 2014.
For the reader who wants to know more about Haussmann’s ideas, here is a link to his paper The Building Blocks of Economic Complexity.