The global economy is navigating an increasingly unpredictable and volatile path. Trade wars threaten the foundations of the international economic order, while intensifying geopolitical competition among major powers raises serious concerns about global security.
Yet, the global order built after World War II—and the accelerated economic integration that followed the fall of the Berlin Wall—provides reasons for a more balanced assessment. Contrary to the prevailing pessimism, not everything went wrong.
Over the past three and a half decades, the global economy has expanded dramatically, growing more than fourfold in nominal terms: from US$ 27.54 trillion in 1990 to approximately US$ 115 trillion today, according to World Bank and IMF estimates.
This achievement, while impressive, is not without precedent. Between 1950 and 1990, global GDP grew even more rapidly, increasing 6.75 times—from US$ 4.08 trillion to US$ 27.54 trillion. The post-war period, driven by strong development cooperation (notably the Marshall Plan), saw nominal GDP rise by 68% in the 1950s and an additional 80% in the 1970s.
However, nominal metrics only offer a partial view of the global economic transformation. The world has moved from a handful of sovereign states to nearly 200, each operating at very different stages of development. This complexity demands a broader lens—particularly one that accounts for differences in exchange rates and domestic price levels.
Measured in Purchasing Power Parity (PPP) terms, global GDP captures these nuances more effectively. From 1990 to 2025, global GDP in PPP terms surged from US$ 54.6 trillion to US$ 187.7 trillion—an increase of over 3.4 times. The previous forty years, from 1950 to 1990, recorded a 6.8-fold increase (from US$ 8 trillion to US$ 54.6 trillion).
In the 1950s, global GDP in PPP terms (US$ 8 trillion) was 96% higher than in nominal terms (US$ 4.08 trillion), reflecting post-war price disparities, fixed exchange rates, and limited trade. By the 2000s, this gap had narrowed to 33%. However, it widened again in the 2010s and peaked around 75% in the 2020s—due largely to the rise of emerging markets.
The exceptional economic performance of countries like China, India, Indonesia, Vietnam, and Bangladesh increased their share of global GDP (enhancing the weight of their currencies, even though most remain undervalued against the U.S. dollar). Meanwhile, advanced economies experienced a prolonged period of low inflation and sluggish growth.
In the aftermath of the COVID-19 pandemic, a mix of currency rebounds, higher inflation in developed economies, and slower growth in China and other emerging markets reduced the PPP–nominal gap to below 50%.
Throughout the entire 1950–2025 period, the United States remained the largest contributor to global GDP in nominal terms. In PPP terms, however, it was overtaken by China in the mid-2010s. China also climbed from 8th to 2nd place in nominal rankings between 1990 and 2010. India followed a similar trajectory—now the third-largest economy in PPP terms, having risen from 6th in the 1970s–80s and 4th in the 1990s–2000s. It currently ranks 5th in nominal terms.
Other emerging economies, such as Indonesia and Brazil, also appear earlier in PPP rankings due to lower cost-of-living levels.
This rise of emerging markets since the 1990s enabled a dramatic reduction in extreme poverty (defined as living on less than US$ 2.15 per day), with the number of people affected falling from 2 billion to 680 million—a reduction of 1.3 billion.
China alone lifted 750 million people out of extreme poverty, and India another 300 million. The remaining 250 million came almost in equal parts from Sub-Saharan Africa and the rest of the world.
This progress is even more remarkable when viewed in percentage terms. The global extreme poverty rate dropped from 38% in 1990 (with a population of 5.3 billion) to 8.5% in 2025 (with a population of 8.3 billion—60% larger). During this time, China’s population grew by 24%, India’s by 63%, and Sub-Saharan Africa’s by 130%.
So what is the source of today’s deep dissatisfaction with globalization?
The answer lies in the paradox of declining global inequality coexisting with rising national inequality—particularly in advanced economies. Rapid technological change, coupled with deeper global market integration, has widened income gaps within countries and placed immense strain on political systems. This discontent has fueled populist movements across the developed world—an issue I anticipated in Argentina 4.0: The Citizens’ Revolution (2013).
Data from multiple sources—Piketty’s World Inequality Database, OECD, IMF, and the World Bank—illustrate the trend: between the 1980s and the 2020s, the Gini coefficient rose 21% in the U.S., 20% in Germany, 44% in the U.K., and 7% in France.
This reality, in the context of leading powers competition, is getting globalization fragmented, feeding the rise of nationalism and protectionism.
The challenge is clear: how to reduce national inequality without dismantling the gains of global convergence to avoid a fragmented globalization scenario taking roots in our future.
Trade wars are not the answer. What’s needed is a more sophisticated policy agenda—one that leverages knowledge, innovation, and institutional reform. Strengthening national innovation systems, building resilient public institutions, improving the interaction between local pricing systems and public goods provision, and reducing transaction costs could unlock new waves of productivity.
It’s easier said than done—but unquestionably worth the effort. Rather than resorting to protectionism, the world should embrace a new era of institutional innovation and human capital mobilization, especially in the context of disruptive technological change, to face the challenges of the future with better chances of success.
