Changing country sizes
August 6th, 2010
Today I want to look at four different views of the world. The first is based on population size, the second on recent GDP, the third on purchasing power adjusted GDP and the fourth on the World Stock market Index.
Judged by population, China and India are the two most important countries by far. China weighs in with 1.35 billion people, or 19.6% of the world total. India is not far behind, with 1.21billion or 17.6% of the total. In contrast the EU with 0.7 billion and the US with 0.3 billion are quite small, accounting for 10.6% and 4.6% of the world total respectively.
If we look at stated GDP, the position is rather different. The EU at 22.4% of world GDP and the US at 23.4% account for the majority of world output at current prices and exchange rates. China at 7.1%, Japan at 8.1% and India at 2% are less significant.
If you adjust GDP for purchasing power parity, to get some idea of what the output and money will buy, again the position changes. Whilst the EU at 20.6% and the US at 20.3% are still the largest, China at 12.5% and India at 5.1% are more significant.
Looking at the world share index, the US accounts for a dominant 42.5% and Europe for 26.1%. The US share is considerably higher than their share of GDP. China at 2.5% and India at 1.1% of the world index are nothing like their share in world output.
It is of course easy to explain these divergences. The US and EU are much richer per head, accounting for their higher output figures despite the smaller populations. The currencies of the developing world are currently undervalued, and the purchasing power parity figures adjusts for some of the distortion to output figures caused by current prices and exchange rates. The world share indices reflect the profitability of western companies, and the fact that more of the west’s economic output is undertaken by quoted companies whose values appear on stock exchanges.
Nonetheless, I can’t help feeling when trying to forecast the future that the view from the population and purchasing power adjusted output figures is a more realistic one than that from the unadjusted output and the stock market value figures.
Looking ahead, it seems likely that China and India will continue to grow faster than the US and EU. It also seems likely that they will bring more of their value onto the stock exchange, as more sectors are brought into the free enterprise system, and as more companies get quotes and grow.
I suspect the pie charts for 2015 and 2020 will look rather different from the current pie charts of the world index. I would expect to see emerging countries like China and India represent a much higher proportion of the world index.
Source : UNdata
Source: UNdata
Source: CIA World Factbook
Source: iShares
