China's economy just shrank 40%, according to the World Bank. India's did the same.

It's not a catastrophic pan-Asian depression, however. The Bank has recalculated the size of the world's economies based on new and evidently more accurate estimate of the effects of purchasing power, or how much people can actually buy. (Measured by exchange rates, economies in the developing world are typically much smaller, sometimes by a factor of three.)

By the older method, the world looked like this in 2005. China is rapidly closing in on the US, with the rest of the world relegated to secondary orbits around the two giants:

This is how the world looked in 2005 using the new methodology, after the Chinese economy has "lost" about $3.4 trillion (nearly the size of Japan, the world's third-largest economy), and India has been shorn of $1.4 trillion (the whole Brazilian economy):

The US is far more dominant, and Japan and Germany remain near-rivals to China in the size of their economies.

We can take two preliminary conclusions from this:

• The day when China will surpass the United States in economic power -- and the things that flow from it, such as military might -- may just have been pushed back by some years.
• It always pays to remember that models are not reality. They may help to explain it, but are often more about a way of seeing the world than about hard facts.

(Graphics generated with IBM's Many Eyes)

Image: BeketChai (Flickr)Social Technologies' Josh Calder spoke recently to Elisabeth Braw, a reporter for the Swedish newspaper Sydsvenskan, about poll results that revealed that more Americans feel their society is divided by class.

"Increasingly, more are feeling they are on the losing end of that divide," Calder notes.

He told Braw:

"The American mentality is that everybody is middle class and you lift yourself up through hard work, so these results are striking ... The division into 'haves' and 'have-nots' is a psychological phenomenon, but sometimes the loss they are feeling is very real, by the standard of a modern society."

Read the entire article (if you can read Swedish).

© 2007 Jupiterimages CorporationThe US media turned its glare this week on the normally unexciting Social Security office in Washington, where Kathleen Casey-Kirschling was signing up for retirement benefits. Casey-Kirschling is, as far as anyone knows, the first US baby boomer, thanks to her birth a few seconds after midnight on January 1, 1946--and, as the nation’s reporters gloomily predicted, potentially one of the last beneficiaries of a golden age of American retirement.

Casey-Kirschling’s own comment--“I’m thrilled to think that after all these years, I’m getting paid back the money I put in”--may never be echoed by younger members of her own generation, let alone by Generation X-ers or Millennials. Eighty million retiring boomers might drive both Medicare and Social Security into debt well before 2020. Meanwhile, most American companies have stopped the defined-benefit pension plans that provided safety nets for earlier generations of retirees.

But is the future really so grim? In one of a three-brief series about boomer retirement published by our Global Lifestyles multiclient project (GL-2006-6: Boomers in Retirement—A Financial Forecast), we reported that boomers are actually about 50% better off today, in absolute terms, than their parents were at the same ages, by the yardstick of assets and income. And when incomes are adjusted to account for the smaller average size of boomer households, they are 65% better off.

However, as boomers age we found that they are likely to diverge into three distinct tiers: about 20% who will be very well off in retirement (including a segment who will be very, very well off: the top 1% of boomers hold more wealth than the bottom 80%); a middle tier of about 50% of boomers who will muddle through on savings, retirement accounts, and home equity; and a vulnerable 25% or so who face seniorhood with few assets--and more exposure to the vagaries of Social Security that Casey-Kirschling has so neatly sidestepped. Many in this last group could see declines in their standard of living once they stop working.

Which is exactly why so many boomers intend to continue working--76%, according to a Merrill Lynch survey. The business implications of this surge in older workers are fascinating, as we detail in another brief (GL-2006-19: Boomers in Retirement—A Lifestyle Forecast). For one thing, older boomer workers are much more likely than average workers to become entrepreneurs or temporary employees. Many companies could find themselves with two large, divergent groups of employees: senior boomers and 20-something millennials, potentially with little in common.

In short, boomers look set to reshape the US workforce yet once more before they exit the national stage. Now if they could only do the same for healthcare….

It’s fascinating to watch the process of assimilation unfold. As the Hispanic population in America rapidly increases, not only are the Hispanics becoming more “American,” but Americans are becoming more Hispanic.

Some examples found in researching and writing a Global Lifestyles brief on American Rites of Passage:

• When I was growing up, our birthday parties had maybe a treasure hunt or other games. Now you can’t have a party for a young kid without stringing the piñata up in the backyard and letting everybody have a whack at it.
• People are putting up memorial tableaus along highways and roads all over the US. This began as a Mexican Catholic tradition and gradually spread from the Southwest across the country. Now they’re everywhere. In my town (in northern New Jersey), we had one up for three months after a crossing guard was killed by a car last fall.
• Quinceañera—the Latin American celebration of a girl's 15th birthday—is joining the Sweet Sixteen party as a teen rite. Now it’s gone mainstream and you can find quinceañera stickers on crafts sites like Creative Memories. A colleague even sent me a link to a magazine called Quince Girl—a planning and fashion guide for quinceañera that seems to be almost entirely in English, showing assimilation in action. 

We’re going to see more and more crossover of this kind of ethnic rite of passage in the years to come, and the rites will be Americanized in the process—a process that keeps American culture constantly evolving. (Image: sxc.hu)