April 1 being the day when people traditionally make fools of themselves, I thought I’d take a crack at what the world might look like after the new century is a quarter gone, say December 31, 2025 — this being about as far ahead as one can meaningfully speculate. Given the overall theme of these columns, I am of course not entirely optimistic, but neither is the picture wholly a bleak one. In this part 1 I look at the macroeconomic shape of the world in 2025, and in Tuesday’s Part 2 I will look at the microeconomic makeup of that world.

To benchmark, it’s worth looking at the last six 25-year periods, from 1850 to 2000, in terms of what they meant for world population and economic growth (figures quoted are from a study by J. Bradford deLong, of U.C. Berkeley)

The first thing to note, when you look at the statistics, is a steady acceleration in the rate of technological absorption into the world economy, and consequently in the pace of economic growth. Whereas the best 25 years of the nineteenth century, 1875-1900, managed world economic growth per capita of 1.85 percent per annum and the average for the century as a whole was 1.26 percent, all but one such period in the 20th century managed a growth rate greater than this. The average per capita economic growth rate for the century as a whole was 2.29 percent. There is no reason to suppose that this accelerating trend of technological diffusion has slowed, although one should be equally cautious in expecting it to accelerate much further.

Within this overall accelerating trend, however, there are considerable fluctuations. Some are caused by population growth, which from an average rate of well under 1 percent per annum in 1800-1925 accelerated sharply thereafter, to peak at 1.95 percent per annum in 1950-75. But of even more interest are the fluctuations in per capita economic growth itself. This was lowest in the 1925-1950 period, at 1.54 percent per annum, presumably suppressed by the Great Depression and World War II. But its peak came not in the era of globalization, 1975-2000, but in the preceding period, 1950-1975, when it hit a remarkable 3.37 percent per annum. This was not simply a recovery from the earlier period. Even over 1925-75 as a whole, world per capita economic growth was 2.45 percent, higher than the 2.29 percent in 1975-2000, and presumably much higher when the “slope” of accelerating technological change is taken into account.

From this we can draw the conclusion that globalization, greater integration of the world economy, is not necessarily a panacea — after all growth in 1975-2000 was far lower than in the more mercantilist 1950-75. In fact there seem to be two reasons for the contrast between the third and fourth quarters of the 20th century.

First, government spending in OECD countries increased from 31.3 percent of gross domestic product in 1960-75 to 43.3 percent of GDP in 1976-2000. This absorption of extra resources by the public sector caused a significant decline in economic growth.

Second, the greatest liberalization of tariffs came from 1948-73 and presumably therefore had its effect in the third quarter-century, so progress, in the Uruguay Round of trade talks and through the World Trade Organization, was more limited.

A further conclusion from this analysis is that the rapid rise in world stock markets in 1985-2000 appears wholly unjustified. Growth during that period was significantly lower than in 1950-75, so stock prices in 2000 should have also been lower than in 1975. On this basis, the stock market levels of 2000 look more and more like a “bubble” that will inevitably have to deflate before world growth can resume.

On the positive side, as least as far as the planet is concerned, world population growth is now firmly declining, and is projected to increase at only 1.02 percent per annum in the next 25 years, to 7.84 billion from 2000’s 6.08 billion. The annual population increase peaked at 87.4 million in 1989, and is projected to average around 70 million in 2000-2025. The problems of world hunger and despoliation of the environment, therefore, while remaining serious, are unlikely to become critical in the next 23 years.

Of course, world population increase will not be evenly spread. Geopolitically, it is important to not that, according to current U.S. Census estimates, India will have a population of 1.38 billion by 2025, more than 300 million above today’s population and only 87 million below China’s 2025 population of 1.46 billion. Other countries with rapid population growth include Indonesia, up 69 million from today to 301 million, Pakistan, up 66 million to 213 million and Nigeria, up 75 million to 204 million. Given the current poverty of all three nations, they are likely to be sources of both deep hardship and potentially serious unrest over the period.

Overall, growth is likely to be no higher in 2000-2025 than it was in 1975-2000 (and thus, lower than in 1950-75) and indeed, it may be significantly lower. A figure of 2 percent per annum would give a world GDP in 2025 of 86 trillion 1990 dollars, more than double 2000’s figure. A particular factor likely to depress world growth in the next 25 years is protectionism.

The free trade agenda that had been stunningly successful in the 1948-92 period culminating in the EU’s Single European Act and the formation of the World Trade Organization, became much more politically problematical in the middle 1990s, and now appears to have gone into reverse. Bush’s unilateral imposition of steel tariffs, which is being followed by an EU imposition of tariffs that was entirely unjustified as a competitive response to the U.S. move (because the European Union is not a significant exporter of steel to the United States) and the steady ratcheting up of agriculture subsidies since the failed U.S. “Freedom to Farm Act” of 1996, have significantly increased the rich world’s protectionism against the products of the middle income and poor countries.

This has happened in a period of roaring boom followed by mild recession. The level of protection that will be reached if, as I believe, a deep recession takes place in the near future doesn’t bear thinking about.

By 2025, therefore, the level of protectionism against developing country imports is likely to be substantially higher than it has been since 1960 or so — globalization will have gone into reverse. This will reduce output in particular in the advanced economies, which will find themselves deploying a greater and greater proportion of their resources in propping up politically important dinosaurs in the steel, textile, agriculture and other sectors.

Countries such as the East Asian “tigers” that rely for their prosperity on exporting to the advanced economies will also suffer. The huge behemoths of India and China, however, which have gone a long way to liberalize their internal markets, are likely to be very much less affected by the West’s protectionism, because of the rapid growth of their internal economies and their abilities, by adopting modern management and production techniques, to achieve economies of scale domestically.

It is thus more than likely, given the huge size and rapid growth rates in India and China, that the United States will be far less dominant in the world economy of 2025 than it is today, down perhaps from 25 percent of the total to 20 percent with Japan and even an enlarged European Union — both of which are expected to show low or no population growth — also much less important, and China and still more India much more important.

The “American Century”, the period when the United States is wholly dominant in the world of geopolitics, is likely to be much less than a century in length, maybe no more than 30 years, say, 1991-2021. By 2025, the United States will be at best primus inter pares and, perhaps more important, for the first time since the turning inward of the Ming civilization around 1430, the world’s agenda will no longer be set by peoples of European origin.

Given the failure of Europe in the 20th century to preserve the world’s peace, and the likely failure of the United States and Europe in the twenty-first century to preserve the world’s free economic order, this loss of dominance is likely to be well deserved. There is also however no question that the apparent easy Western dominance of the 1990s was a mirage, and that geopolitics in 2025 will be even more difficult and dangerous than it is today.

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(The Bear’s Lair is a weekly column that is intended to appear each Monday, an appropriately gloomy day of the week. Its rationale is that the proportion of “sell” recommendations put out by Wall Street houses remains far below that of “buy” recommendations. Accordingly, investors have an excess of positive information and very little negative information. The column thus takes the ursine view of life and the market, in the hope that it may be usefully different from what investors see elsewhere.)

This article originally appeared on United Press International.