Beware the thundering hooves in the east

Jul 18 2008 by Nicholas Craig, The Journal

ACCORDING to top-rated economists Goldman Sachs, the UK will be the world’s richest country in terms of wealth per person in 12 years’ time.

I can’t wait. We will be richer than the Americans in income per head – and the last time we could boast that was in 1870.

Around the world, however, it’s Asia that will continue to make the news. In 2020 the US will still have the world’s largest economy, but China will be snapping at its heels, having leapt past Japan. India will have passed France and be in place to pass the UK as the fifth largest economy, and Russia will have outperformed Italy.

Meanwhile, turning from Goldman’s glowing forecast to the current slowdown, it appears we are sustained by brics – that’s Brazil, Russia, India and China. Demand for goods is kept going by these four countries. The North East may still be moving forward in manufacturing and exports, but there are whispered words of caution when discussing potential outcomes in 2009.

Goldman’s optimistic economic template gives cause for some cheer, if not scepticism. The report also states that this will be the millennium of the middle classes.

In Asia there will about two billion more middle class people by 2025, with the same lifestyle, education and ambitions as those who drove Europe and America to unprecedented growth in the 19th Century.

It’s an extraordinary thought. By 2020 Goldman believes that 70% of Chinese will fit the middle class model, and that India will sprint from its present 5% to include the majority of its citizens by 2040.

What this means is that even if the forecast is right in saying that the UK will soon enjoy wealth per head that it hasn’t for 150 years, the ascendancy of Asia dilutes the power of the UK to influence policy and thought. We will have to operate and think in a different way for commercial success.

My own close association with Asia, in particular China, means that Goldman’s forecast comes as little surprise. The drive, co-ordinated approach and self-belief of the Chinese is remarkable. During my last visit to Beijing and Shanghai, the two cities were bound by the same ruthless ambition.

Both are poised for 21st Century power, alongside India’s teeming cities By 2050, the UK will also have been passed by Brazil, Russia, Indonesia and Mexico. Times are changing fast. Can we adapt?