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McKinsey’s Economic Centre of Gravity – Round Trip

July 1, 2012 Leave a comment

You may remember the post I did on the economic centre of gravity (ECG) by LSE’s Danny Quah. By economic centre of gravity he refers to the average location of the planet’s economic activity measured by GDP generated across nearly 700 identifiable locations on the Earth’s surface. Recently the McKinsey Global Institute showed how the economic centre of gravity – the geographic center of the world’s annual economic growth – has moved since AD 1 to a forecast year of 2025 – at a speed of 140kms per year.

Timeline:

1. Until 1700 China and India were about 60% of world GDP
2. British and American Revolutions which led to mass urbanisation and productivity gains ECG moved West
3. 1980’s-90’s it gravitates back to the East with the expansion of Japan and other asian economies. This is even with the Asian Crisis in 2000.
4. 2000 – 2010 sees a massive shift to the east with the impact of the Financial Crisis plus the continued growth of developing nations in the east.

McKinsey put the growth down the speed at which cities are growing especially in India and China. This has ultimately given rise to productivity and a growing consumer class. Much of this future growth (approximately 47%) will be driven by 440 developing world cities.

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WECG – World’s Economic Centre of Gravity

March 27, 2011 4 comments

Danny Quah of the London School of Economics (LSE) recently wrote a paper describing the dynamics of the global economy’s centre of gravity. By economic centre of gravity he refers to the average location of the planet’s economic activity measured by GDP generated across nearly 700 identifiable locations on the Earth’s surface.

In 1980 the WECG was located at a point in the middle of the Atlantic Ocean but by 2008 it had drifted to a location at about the same longitude as Izmir and Minsk, and thus east of Helsinki and Bucharest. Extrapolating growth in the 700 locations is projected by 2050 to locate between India and China. The graphic below shows, in 3 year intervals, the WECG 1980-2007 in black and projections for 2010 – 2049 in red. It is interesting to note how the WECG seems to move horizontally so does this suggest that the north-south divide will remain invariant? In looking at the actual data in Quah’s research, it shows that latitude declines from 66 degrees North to 44 degrees North by 2049. This might seem to imply that the south, like the east, is actually gaining considerable relative economic strength. If you are interested in Quah’s paper you can download it by clicking here.

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