Global Economics Southwards Shift

This article is reprinted from the Shanghai-based The China Academy.

  • China is the world’s leading industrial country with a 25.7% share value added, while the US holds only a 9.7% share.
  • The Global South has a 69.4% share, while the Global North has a 30.6% share.
  • BRICS10 has a 44% share and exceeds the G7.
  • The share of Japan, Germany, France, and the UK are also declining, whilst India is increasing.

As the countries of the Global North have faced prolonged declining economic growth, countries of the Global South, especially in Asia, have displayed a higher economic growth trajectory over the past thirty years.

As can be seen in Figure 39, at the end of the Cold War in 1993, the Global North accounted for 57.2% of the global GDP (PPP), while the Global South accounted for just 42.8%. Thirty years later, these proportions have definitively inverted: the share of the Global South has reached 59.4%, with the Global North holding at 40.6%.

The G7 (United States, United Kingdom, Canada, France, Germany, Italy, and Japan) is the core economic countries of the Global North bloc, and in 1993, these seven countries accounted for 45.4% of the global economy. Meanwhile, the most significant economies of the Global South, later known as BRICS (Brazil, Russia, India, China, and South Africa), made up only 16.7% of the global economy in that year. Among them, Russia had just emerged after the dissolution of the Soviet Union, and China was deepening its economic reforms and establishing a socialist market economy. Neither Russia nor China were competitors to the G7 at the time. Thirty years later, the BRICS countries accounted for 31.5% of the global economy, having surpassed the G7 (30.3%) as shown in Figure 40.

In August 2023, BRICS expanded by inviting six countries: Egypt, Ethiopia, Iran, United Arab Emirates, Saudi Arabia, and Argentina (although Argentina has now temporarily declined). BRICS10 (excluding Argentina) added 4% to BRICS’s share of the world GDP (PPP) as shown in Figure 41.

Over the past thirty years, the absolute leader of the Global North, the United States, has seen its share of the world economy slowly decline in PPP terms from 19.7% in 1993 to 15.5% in 2022. However, in the Global South, China’s rapid rise has been the most notable variable. In 1993, China only accounted for 5% of the world economy (Figure 42); by 2016, China’s economy had surpassed that of the United States in PPP terms; and by 2022, China’s share of the world economy had reached 18.4%. This marks the first time in over 600 years that a non-white dominated country has economically broken through the hegemony of the white imperialist countries. This economic reality led the US to urgently begin to try to suppress China’s rise.

However, it would be a mistake to view China as the sole source of growth for the Global South. Even without China, the economies of the Global South had surpassed the Global North by 2022 — with their respective shares of the global economy at 41% and 40.6% (Figure 43). The overall economic development of the Global South has enabled them to objectively have the capacity and to seek a more just international order, which is contrary to the wishes of the imperialist bloc of the Global North.

We have identified all 43 countries – whose share of the world GDP (PPP) amounts to 41.1% (Figure 44) – that are part of one or more of the three new non-imperialist controlled international organisations: BRICS10 (founded in 2009, expanded in 2010 and 2023), Shanghai Cooperation Organisation (founded as ‘Shanghai Five’ in 1996, expanded in 2001, 2017, and 2023), and the Group of Friends in Defence of the Charter of the United Nations (founded in 2021). The full list is provided in a later section.

Figure 45 shows the past decade’s average annual growth rate of GDP (PPP) per capita of the 21 largest economies in the Global South and the G7 countries. China’s growth rate (5.8%) continues to lead among major countries. Asia’s growth rate is generally higher than other countries in the Global South. The next five countries with the highest growth rates are Bangladesh (5.3%), Viet Nam (4.9%), India (4.6%), the Philippines (3.3%), and Indonesia (3.1%). Aside from the United States, the rest of the G7 countries have an average per capita growth rate of less than 1%. Regrettably, the largest economies in Africa and Latin America have experienced negative per capita growth: Nigeria and South Africa at -0.4%, and Brazil and Argentina at 0% and -0.7%, respectively.

Of course, we acknowledge that growth rates themselves can mask the intense class struggles within these countries, where the share of the growth is not nearly equitably distributed between capital and labour. However, it would be a mistake to ignore the growth rates and what their trend lines describe.

One of the most significant changes in the world economy of the last 20 years has been a dramatic shift in the geography of world industrial production.

The World Bank publishes the industry percentage of GDP using the current prices and current exchange rates, which this study refers to as the Current Exchange Rate (CER) method. Currently, we are unaware of any published industry percentages for GDP (PPP) calculations.

Figures 46 and 47 show changes in the percentage of industry value added in GDP for both CER and PPP terms over the last 18 years. It is likely that the figures of the industry value added world share are somewhere in between the CER and PPP. Subsequent charts in this series are shown only for the PPP method and have the same qualifications as made for the first series.

If there is evidence that industry has a significantly lower conversion than other elements of GDP, the PPP figures we have presented would overstate for the percentages for the Global South. We feel that despite this possible error the direction of this approach provides useful insights. The percentage composition of the GDP by sector depends on the price data used to measure the value added of each of them. The PPP conversion factors are statistical estimates based on baskets of goods and services for benchmark years that are further applied to the GDP for GDP (PPP) estimates.

What we see is that there is indeed a change in the base of the economy, with the Global South home to the majority share. Despite many predictions of a new post-industrial society, no major country has achieved modernisation without industrialisation.

The world share of industry value added of BRICS10 is now double that of the G7 (Figure 48).

The results show the following for industry valued added as a percentage of the world using GDP (PPP):

  • China is the world’s leading industrial country with a 25.7% share value added, while the US holds only a 9.7% share.
  • The Global South has a 69.4% share, while the Global North has a 30.6% share.
  • BRICS10 has a 44% share and exceeds the G7.
  • The share of Japan, Germany, France, and the UK are also declining, whilst India is increasing (Figure 49).

We used the World Bank industry percentage multiplied by the annual GDP (PPP) for each country for each year to derive a country-based industrial value added. We then used these to calculate the percentage of total world industry value added by each country and country grouping category. There are some limitations and complex issues regarding this methodology.

Some economists have tried to minimise this change. Some argue that US dollar monopolies and ownership of large multinational corporations mean GDP figures overstate the change. China, at a minimum, cannot be said to have all its production under the lock and key of the US. Even in India, it is a mistake to understate the significance of a growing big national bourgeoise (albeit large sections of it politically reactionary). Moving industrial production to the Global South could only have occurred with massive improvements in their infrastructure.

In his parting words to Russian President Vladimir Putin during his state visit in March 2023, Chinese President Xi Jinping said, ‘Right now there are changes – the likes of which we haven’t seen for 100 years – and we are the ones driving these changes together’. Eurasia is now centre stage for determining the future of the next period of human existence.

Source: The China Academy, March 15, 2024.