Last week, the International Monetary Fund released its annual World Economic Outlook, this year entitled, “Tensions from the Two-Speed Recovery: Unemployment, Commodities, and Capital Flows.” The two speed recovery emerges from the different post-crisis status in developed countries and emerging markets. While the United States and Europe are facing the prospect of slowly recovering employment and growth, emerging and developing economies are expected to grow by 6.5 percent this year.
Developing countries are gathering mass in the world economy faster than expected. As the IMF notes, “In emerging market economies, by contrast [from developed economies], the crisis left no lasting wounds.”
While the IMF’s projections last year had Brazil, India, and China surpassing the United States in 2010, their combined economies became larger than the American economy in the middle of the recession, in 2009. And they are gathering speed, with just China and India combined estimated to become larger than the U.S. this year. If the trend continues, the International Monetary Fund estimates that China will become the largest economy in the world in 2016.
However, these trends are not cause for panic and protectionism, but instead an incentive to faster adjust U.S. policies to the current global economic outlook. Most future middle class consumption will come from developing countries. U.S. businesses and policymakers have to reconfigure their export strategies to take advantage of this growing trend. And the success of our export strategy, like the success of the next American economy overall, will be determined in our metropolitan areas.