Share of World GDP Tipping Faster Than American Perception

I've felt this disparity as I've traveled through many developing countries. Currency is a big part of their local people's concerns. Let's unfold how it may impact our business lives.

Impact on Outsourcing

As the cost of outsourcing to developing countries grows, we could see a significant change in the economics of labor.

If we assume a 50% increase in cost, for instance, a worker who currently costs $3/hour in USD would rise to $5/hour, and a $10/hour worker would become a $15/hour worker.

While this change would make global talent acquisition more expensive like from Upwork, it doesn't necessarily mean companies will stop seeking top talents from the international pool that's equally competitive salary wise.

The Decline of Western Powers in Global GDP PPP

It might come as a surprise to many, but the United States' share of global Gross Domestic Product (GDP) Purchasing Power Parity (PPP) is decreasing much more radpily.

In comparison, China has solidified its position in both real and nominal terms.

Other countries like Japan and Canada have shown relative stability, while the European Union (EU) has seen a significant drop, falling below the 19% threshold - a minimum to remain in the top three global economies.

The Implication of a Lower EU Share

However, a lower EU share in global GDP does not equate to loss of influence for European countries. For instance, their collective action on purchasing gas has recently impacted global gas prices, indicating that those above 10% share can still impact the market significantly. Their market still impacts the global supply. However, as we've known with the Ukrainian conflict, EU has little to say about the actual decision making in its resolution.

26% is the threshold necessary to influence the global politics. That's where US is at with their share of nominal GDP, which explains why they're obsessed with US dollar and SWIFT control.

Conclusion

It's a dynamic and changing world economic stage we are witnessing. Should these shifts continue, we may see a landscape where the Chinese Yuan carries much more influence, while the US dollar increasingly lose ground. Additionally, the dynamics of outsourcing could be set for significant change, with economic implications for both the western and developing world. The sense of prestige associated with being a top global economy is shifting.

As evidenced by the UK's exit from the EU in 2015, traditional power structures are being questioned, and only time will tell how these power shifts will redefine the global economic landscape.