Go east (and south), young man

By Jon Markman

Hey, 20-year-olds -- listen up! I realize the job market bites right now, you're worried about having enough money for holiday presents, Facebook has gotten tedious and there's nothing good to watch on TV except "Family Guy." It stinks to be you.

But it's not always going to be this way, and while all of your competitors around the country are cursing their luck for being ejected from college dorms into the worst economy since the Carter era, this is a good time to plot your future and prepare for a world of change as you peer way down the road at the prime of your working life in your 50s.

My guess is that the most significant event facing you over that time will be the long-awaited ascendance of China, India and Brazil to the top of the global industrial pyramid. And if you are not prepared for this, you will end up as road kill on the highway of history.

I realize that this is not the most novel idea in the world, but after a financial panic in the West and a recession everywhere else, it's becoming clear that the emerging countries are about to take their places at the forefront of change in ways that have been long predicted but also long delayed. Chinese, Indian and Brazilian banks were far less damaged by the credit crisis, so their governments -- corrupt and self-absorbed as they may be -- have found it easier to put monetary and financial stimuli to work faster.

This is not inconsequential. Every day that goes by now with U.S. and British banks failing to make loans to get U.S. entrepreneurs' factories, health care practices and retail chains expanding again is a day that their counterparts in Asia are using to build the lead in their own businesses.

China takes the lead

In the mid-1800s, British, German and French youths realized that their countries were in danger of being overtaken by the United States, and they left their homes and cultures to flood this country with a burning desire to build and succeed. Great fortunes were created from scratch, including those of steel maker Andrew Carnegie, a Scottish immigrant, and financier Joseph Seligman, from Germany.

These efforts will certainly be repeated now, despite the odds and language barriers, as American and European kids must migrate to Asia in search of opportunity at a time when the stakes and upside have never been higher.

Video: Bet on China or India?

Jim O'Neill, the Goldman Sachs supereconomist who's credited with coming up with the "BRIC" sobriquet for the key emerging markets of Brazil, Russia, India and China eight years ago, released a private report to clients last week that outlines the stunning pace of transformation in these countries. Even veteran observers were surprised by his conclusion that China's economy is on track to almost double that of the United States by 2050, at around $70 trillion in gross domestic product.

O'Neill figures the U.S. economy will have grown to only $40 trillion by then, from $14 trillion today. Trailing after us, not by much, he figures, will be India, at $35 trillion, the European Union at $25 trillion and Brazil at $15 trillion. With shrinking populations, Russia, Japan, France and Germany are expected to trail far behind. As a result, 2 billion people are expected to join the global middle class by 2030, or around 25% of the world's population.

After a recent 11-day trip to China, in which he walked for miles around cities and talked to government officials and business leaders up and down the political and financial spectrum, O'Neill concluded that China will actually take only 18 years to become the biggest economy in the world. (In the next year, it will overtake Japan to become the second-largest.)

For some perspective, Chinese GDP has already grown by $3 trillion since 2001. Looking at the dollar value of GDP of other countries back then, he points out that this growth was the equivalent of seven years of India's GDP, three of Italy's and two of France's, and of one-third of the United States' output.

To get to the next level, it needs to grow by 10% annually to around $21 trillion. Because some of that can be accomplished with currency appreciation, China needs only about 6% annual growth to get there.

Continued: Speak the language; buy the economy

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