Saturday, 16 February 2013

Through the (PWC) looking-glass

This post is a brief reaction to the PricewaterhouseCoopers report 'The World in 2050'. A recent update of this report included the prediction that Britain will fall out of the world's top 10 economies by 2050. 

The update consisted of new data for 2009 - 2011, the inclusion of Malaysia & Poland and tweaks to the method of analysis. 

Exciting stuff, isn't it?

Really, though, can the inclusion of Malaysia and Poland - neither of which come close making the top 10 - or two years' extra historical data explain fair Britannia's drop down the table? Or, otherwise, can a tweak in basic assumptions for measuring PPP growth make the difference?

And... I'm afraid the news is worse still: we've been ousted by the French. Sacré bleu.

My initial reaction is that none of the above factors are particularly relevant to the wider picture. By 2050 Germany, France and the UK are all bundled together in 9th, 10th and 11th place with projected GPDs at $5,822bn, $5,714bn and $5,598bn respectively. They might jostle for their positions at the 'bottom of the top', but they've got a far bigger fight on their hands if they want to claw back up from the division of yesterday's giants to that of tomorrow's.

The question is partly one of momentum. Malaysia, which I had the pleasure of visiting a year ago, has an atmosphere of momentum, optimism, risk-taking. Brazilians express a similar energy. This is not merely a matter of government regulations, maturing labour markets or uncompetitive wages - it's far more about underlying mood.

Perhaps we should look again at the words of the Bank of England's Martin Weale, who reminded us recently that British companies could be enjoying a competitively weak sterling, a good tax regime and huge emerging markets if they'd just take a little more risk. 

The first maxim of the economist, I was always told, is that gain and risk go hand-in-hand. We'd certainly be grateful for a little more gain. So, corporations of the United Kingdom unite - you have nothing to lose but your (already struggling) chains.

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