Sep 14

　　Last year the combined output of emerging economies reached an important milestone: it accounted for more than half of total world GDP (measured at purchasing-power parity). This means that the rich countries no longer dominate the global economy. The developing countries also have a far greater influence on the performance of the rich economies than is generally realised. Emerging economies are driving global growth and having a big impact on developed countries' inflation, interest rates, wages and profits. As these newcomers become more integrated into the global economy and their incomes catch up with the rich countries, they will provide the biggest boost to the world economy since the industrial revolution.

　　Indeed, it is likely to be the biggest stimulus in history, because the industrial revolution fully involved only one-third of the world's population. By contrast, this new revolution covers most of the globe, so the economic gains—as well as the adjustment pains—will be far bigger.

　　Emerging countries are looming larger in the world economy by a wide range of measures. Their share of world exports has jumped to 43%, from 20% in 1970. They consume over half of the world's energy and have accounted for four-fifths of the growth in oil demand in the past five years. They also hold 70% of the world's foreign-exchange reserves.

　　There is also more than one definition of emerging countries, depending on who does the defining. Perhaps some of these countries should be called re-emerging economies, because they are regaining their former eminence. Until the late 19th century, China and India were the world's two biggest economies. Before the steam engine and the power loom gave Britain its industrial lead, today's emerging economies dominated world output.

　　Now they are on the rebound. In the past five years, their annual growth has averaged almost 7%, its fastest pace in recorded history and well above the 2.3% growth in rich economies. The International Monetary Fund forecasts that in the next five years emerging economies will grow at an average of 6.8% a year, whereas the developed economies will notch up only 2.7%. If both groups continued in this way, in 20 years' time emerging economies would account for two-thirds of global output (at purchasing-power parity).