Balance of Economic Powers

​After going through protectionism and weak integration, the global economy has become more interconnected and interdependent. Technological changes and innovations have played a vital role in this unprecedented fundamental transformation. At the beginning of the 18th century, the Industrial Revolution was among the most critical inflection points that set in motion this transformation. It triggered a spike in global productivity, prompting global trade to spread wider economic benefits to the trading countries.

The industrial revolution and innovations in the telecommunications sector also contributed to integrating the world economically. The global economy benefited from robust cross-border trade flows and a relatively free movement of capital to fund innovations and new businesses. Changes in the global economy corresponded with a better understanding of economic relationships and global development challenges. The Bretton Woods Agreement, signed in 1944, marked a turning point in the management of the global economy with the establishment of the International Monetary Fund and the World Bank.

These significant economic events enabled transformational export-led growth of developing countries. These countries raised their global competitiveness by improving their investment environment, increasing the public sector efficiency, and achieving productivity growth, resulting in a significant impact on the productive capacity of the private sector. As a result, the structure of the global economy shifted in favor of developing countries, especially emerging countries, as their contribution to the world's GDP increased. In contrast, the contribution of the G7 (the US, UK, Germany, Japan, France, Canada, Italy) to the global economy has decreased to 28% at present. This shift partly explains G20 is becoming a more appropriate alternative to the G7 as agreed upon at the third G20 meeting in Pittsburgh in the United States.

Countries that focused on improving their international competitiveness and more robust integration into the global economy achieved substantial economic gains. While empowering the private sector, the public sector set the criterion of its support to be the overall economic well-being of the citizens measured by sustainable growth of the economy and reduction in unemployment, leading to rising household incomes through productive employment, fair wages, and inclusivity.