In the next few days at the International Monetary Fund and World Bank meetings in Hong Kong, one of the dominant themes will be this rebalancing of the world economy. A report by the World Bank last week put the point sharply by identifying five new economic powers, which it dubbed "the big five", whose share of world exports, currently about 9 per cent, would rise to more than 26 per cent by 2020.
This big five - China, India, Brazil, Indonesia and Russia - account for 46 per cent of the world's population and will account for half by 2020, so it is unsurprising that this group is forecast to account for a quarter of the world's exports. Nevertheless, it will represent a dramatic change from the present, particularly with regard to western Europe. At present this big five's exports are less than one third of the EU's; by 2020 the World Bank forecasts they will be 50 per cent greater. Within the present developed world only the US ranks among this group in terms of population (see the left-hand chart).
This process of world trade shifting to these "new" countries has already begun. The second chart shows how the hold of the Group of Seven over world exports is slipping. In the 1970s the G7 dominated world exports. Now Hong Kong has shot up the league to pass Canada, and China is just behind. Hong Kong is shown on the chart as a separate entity from China though, of course, it is in practice the principal outlet for Chinese- made goods, so I suppose the two should be added together, in which case they would pass France and become the world's fourth largest exporter.
But in a way the more remarkable thing is what has been happening further down the league. Look at the way those east Asian "tigers" have shot up the league. You can explain Hong Kong's performance in relation to the great hinterland of south China, but it is astonishing that fewer than 3 million people in Singapore can generate 2.5 per cent of world exports.
You cannot project Singapore's performance (or Taiwan's) for China because it is much easier for a unit of 3 million, or even 21 million, to generate export-led growth than it is for one of 1.2 billion. The world market will accept a surge of imports from tiny countries where it would not and could not accept a similar surge from a giant. Nevertheless, even if China and India advance at a fraction of the speed of Singapore, they will still become vastly more important, a point that the "big five" tale of the World Bank brings out.
It is easy to see the mechanics of the shift - the practical issues like the world market share of various types of export. What is quite hard to envisage is the secondary and tertiary effects. For example, though the big five will be more important in world trade, their economies will be qualitatively more like those of the present developed world. Their stock markets will be larger; many of their companies will be foreign investors in the same way that Japanese companies have large foreign manufacturing plants; there will be more joint ventures. In other words, though "they" will be more important relative to "us", they will be more like us. The world will be on a single global standard not just of finance, but in management techniques and to an increasing extent business ethics too.
This process will not be one way. Until now virtually all the technology transfer has been within the developed world, or from the developed world to the developing one. Increasingly, expect there to be transfers of technology from the new developed world to the old. Just as Japanese car manufacturers imported the idea of lean production from the US, refined and applied it, then exported it back not just to the US but to the UK and east Asia, so too will the Singapores and the Taiwans become exporters of ideas.
The idea of physical exports being the principal component of trade will gradually change. Trade is still, to a large extent, shipping goods around the world. But most years the proportion of world trade in physical goods shrinks, vis-a-vis the trade in invisibles. Japan exports now not so much by moving the cars around the world, but by moving the money and ideas with which the cars are made: manufacture is increasingly local.
Even where goods are shifted, the act of physical transfer may just be an electronic signal. For the moment items like pop videos and CDs are moved in physical form, though of course the value of the product is 99 per cent the information on the disc or cassette, rather than the item itself. But soon the sale will involve just the transfer of some digital signals and will appear as royalties or rights rather than exports.
So the rise of the big five as exporters will to some extent overstate their real importance. It will, for a while at least, overstate their influence on the world of ideas, for in the next 25 years they will be net importers of know-how. They may generate a quarter of world exports but that will not give them a quarter of world economic power. A lot of those exports will rely on foreign know-how and foreign money.
It will overstate their importance because physical exports will be less important in world trade than they are now. The various types of invisible exports - income flows from investments, payments for services, payments for intellectual property - will soon be larger than the flow of visible exports. Nevertheless, no one should doubt that a great shift in the balance of power is taking place. This is not just a once-and-for- all shift that, having happened, will stop. Look 25 years ahead and it is easy to see that the big five will be quite a lot more important. Look another 25 years, to the middle of the next century, and they will be more important still.
It is hard for people in any one age to regard the age in which they grew up as anything other than normality. So we regard the dominance of the G7 as normal. But on a long historical viewpoint the past two centuries have been abnormal, for power has been unduly centralised. The new, more evenly balanced, world is really more normal than the G7-centric world we still have - but will not have for much longer.
It so happens that last week China announced its own leap away from socialist dogma by abandoning state ownership of industry - as the Independent put it, "the world's ultimate privatisation". The Hong Kong meetings are in a way the launch pad for China to become the world's largest economy, but an economy - pretty much - operating on the same system as the rest of us.
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