It’s generally accepted that building an economic super-power involves expanding your population and increasing productivity. Jim O’Neill, who invented the ‘BRIC’ acronym back in 2001, recognised the growing importance of highly populated countries, particularly China and India but also Indonesia and Nigeria, who were in the early stages of reform, urbanisation and industrialisation. He often talks about the “2Ps” as being the key to future economic success.
As Paul Keating reminded us last week: “the industrial revolution broke the nexus between population and GDP and that globalisation – with the transfer of capital and technology – has restored that nexus. Population is now again the principal driver of GDP. The fact that the Chinese population is four times that of the US is the key metric.”
In his entertaining address to the Munk Debate on China in 2016, Niall Ferguson opened with “I believe the 21st Century will belong to China because most centuries have belonged to China. The 19th and 20th centuries were the exception. 18 of the last 20 Centuries saw China, by some margin, as the largest economy in the world”.
The same could be said of India which benefits from younger demographics than China (over half the population is under age 25) but has so far taken longer to match the productivity gains achieved by China’s “top down” planned economy. As we move into the 20th year of the Asian Century, we will see more emphasis on population and productivity, with China and India leading the way.