In recent years, we have seen considerable changes in economic power from Japan in the 1980s and the Eurozone flattering to deceive. Now, we have China and the US as the two global powerhouses. There are also many other countries in between, such as Indonesia, which is expected to have one of the largest economies in the world going forward, India, and the UK (fluctuating in size and reputation in light of Brexit).

 

When considering global economic shifts, many factors must be considered, prompting more changes than many of us might appreciate.

 

Technological innovation

 

Technology is becoming a more influential element of global and individual economies. If we cast our minds back to the 18^th and 19^th centuries, the Industrial Revolution brought Britain to the forefront, followed by the USA and Germany. While these countries have all maintained a degree of power, today, it is the USA and China that lead the way.

 

Global trade

 

Those countries able to put themselves central to global trade stand a good chance of increasing their influence, power and reputation. For example, post-World War II, we saw the rise of the Japanese and South Korean economies, which began to play a more significant role in the global trading system. More recently, China's entry into the World Trade Organisation in 2001 has led to substantial economic growth, reforms and enhanced access for overseas partners.

 

Political stability

 

Unsurprisingly, political stability is central to the emergence of new economies going back decades and centuries. Aside from the stability this gives the local population, it creates an environment where local and international companies will look to invest/grow their operations. Conversely, an element of political instability could see international investors/companies looking elsewhere.

 

Overarching stable economies you tend to see proactive economic policies, protective but flexible regulations, and tax policies that actively encourage investment. The ability to create a competitive edge on the global stage, as we have seen with the likes of Hong Kong and Singapore in recent times, is important for those looking to expand their international reach.

 

Demographic changes

 

Changing demographics are often overlooked when considering the underlying strength and long-term potential for individual economies. A younger demographic tends to give an economic boost, as seen in India, while an ageing population can present funding issues in areas such as health. The impact of ageing populations is starting to be felt in many Western countries and Japan, which often requires a degree of innovation to avoid significant financial consequences.

 

Natural resources and green energy

 

In recent years, we have seen a significant shift between economies based on fossil fuels and those looking to the future with natural resources, and environmentally friendly energy supplies. In areas such as the Middle East, many states have pivoted to green energy as a means of offsetting the growing pressure on fossil fuels such as oil and gas.

 

Many countries are looking towards renewable energy technology, which is creating some exciting investment opportunities. While activists hope that future funding opportunities will be linked to a company's environmental record, at the moment, this is proving difficult to manage from a regulatory standpoint, although government/markets tend to find a way in the end.

 

Financial power

 

As we have seen with the US, when you mix a strong economy, influential financial markets and a currency often seen as a safe haven, financial power and dominance tend to follow. Even though the 2008 financial crisis began in the US, it soon became global and highlighted weaknesses across various economies. This is best described as survival of the fittest, nature's way of creating a new order of global economies.

 

Summary

 

While we look at the likes of the US and China as powerhouses of today and India and Indonesia as powerhouses of tomorrow, it's easy to forget the main factors that have influenced economic change over the years. As night follows day, other economies will emerge, countries will enhance their reputation, and take the lead in different areas such as renewable energy technology or AI. It will be interesting to see which other economies emerge in the short to medium term and their global influence.

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