Yesterday, I wrote about how Argentina has fallen from one of the world’s richest nations just 100 years ago, to a spending much of the last eight decades in decay. Once the world’s tenth richest nation, it has fallen quite a long way.
Set aside this so-called Argentina Paradox, however, and the list of wealthiest nations at the turn of the 20th century foreshadows some interesting ideas for today’s economy. At the top of the rich list of that era were the UK, the US, Germany, France, Australia, and Canada.
Interestingly enough, the US, Australia, and Canada all had ties to the UK. France is just across the English Channel. While the US and UK had an interesting, sometimes complicated relationship during the first several decades of the 1900s , the power of trade between the two can’t be denied. Australia, while given some limited independence, was still under British control. Having a history with and/or connection to Britain was a key component of economic success in this era.
Fast forward to today. The US is the only one of those economies with wealth superpower status. Nipping at its heels and soon to overtake it is China, which will usher in a new era of Asian dominance. While there’s no doubt places like Hong Kong and Singapore have and will benefit from Asian success, I’m talking about resources that feed China’s best.
Take Mongolia. I doubt most people know anything about it. But it’s rapidly becoming a huge success story on the back of China. Historically a nation of nomads with a livestock-based economy, it has recently turned to extracting minerals from it’s rich soil. Like yesterday’s tale of Argentina, Mongolia was once a aligned with the Soviets and, after their fall, was driven into deep recession at the hands of the People’s Revolutionary Party. They’ve since instituted market reforms and, with new foreign investment in mining, have been seeing GDP growth upwards of 17%. While some believe that growth could fall a few points this year, other analysts predict 18-20% growth for the next several years.
What makes an economy like Mongolia appealing is its natural connection to China and the ease of exporting across the border. They have a similar history, albeit for different reasons, with their neighbor to the north, Russia. Yes, a slowdown in China could hit resource imports, but Mongolia is currently the low-cost provider and, being right next door, I suspect China would opt to reduce imports from nations further afield first.
While Mongolia is determined to keep Chinese influence at bay with immigration and other restrictions, they will continue to strongly benefit from the developing world’s growing need for resources. As a frontier market themselves, there will be plenty of other development needed to keep up. Migration by semi-nomadic herders from the steppes to the city has created a population increase of 50% in the capital (and only substantial city) of Ulaanbaatar.
There’s no question China will be an economic superpower in the century to come. Just like 100 years ago, they will bring their partners along with them. Second only to Mongolia in exports to China is the equally mysterious country of Turkmenistan, with other “Stans” following behind. Understand that while the players may change, general principles usually don’t. To focus only on China’s “world’s factory” status to western economies is to ignore the other side of the equation in which today’s fastest developing nations have the potential to make their frontier (and perhaps unheard of) trading partners richer than ever.