All over the news, the words "global recession" have been used to describe our current economic woes. And it's true - most countries have been negatively affected by the current downturn and in big ways. But some recently published research by the German insurance group Allianz shows that, despite the recession and perhaps even because of it, the gap between wealthy nations and poorer ones has closed a little. (For a background reading, see Global Trade And The Currency Market.)

IN PICTURES: 8 Ways To Survive A Market Downturn

A Bridge to Somewhere
A bridge is starting to be built over the wealth chasm between poor and rich nations, and it's being built with both the tools of industrial growth and with the misfortunes of recessions. In bad economic times, rich countries like the United States, Japan and countries in Western Europe lose large amounts of their assets. It's sort of a bigger-they-are-the-harder-they-fall type of process.

Since the dot-com bust in the early 2000s, global assets have been down, primarily among industrial nations. But around that same time, developing nations started making significant gains in their wealth. Asia, minus Japan, and Latin America have had increases of wealth by 12% every year since 2000 and Eastern Europe has seen increases of 16% each year. Compare that to the United States and Western Europe's gains of about 3% each year during that same time frame.

Investing Gone Wrong
Part of the narrowing of the gap is due to industrial nations having larger sums of money in investments. When the market takes a nose dive, a nation's wealth takes a big hit pretty quickly. Because assets are lost after this happens, people in richer nations tend to invest less money and use it instead to pay off mortgages and debts. This doesn't necessarily mean that no one in the developed nations is investing; Americans and Europeans still own the majority of stocks in the market. But while people in the richer nations are scrambling to figure out ways to reduce their debt, emerging financial markets in other countries are making economic headway.

IN PICTURES: 10 Biggest Losers In Finance

Why this is a Good Thing
Obviously, economic downturns aren't a good thing for a lot of people. They significantly hurt personal wealth, increase layoffs and spur defaults on mortgages - all of which can take years to rebound from. But for some countries, it's a time for them to catch up and even make some progress. Since 1990, the amount of people living on less than one dollar a day has decreased by over 25%, with the majority of that development coming in China.

As developing countries build and earn more assets, it opens up the possibility for them to invest more money in their own countries and, in turn, their own people. It provides opportunities for them to increase programs that can help reduce the economic inequalities among their citizens. Not only can more assets in developing nations help financial stability, but stronger economic nations help the global economy to be more robust. Developing nations have actually been one of the major forces helping in the overall recovery from the current crisis.

Still a Long Road Ahead
The wealth in the richest nations used to be 135 times more than other nations, but that figure has dropped to 45 times more. Although this is sizable decrease, North America, Japan and Western Europe still hold a large majority of the global assets. Over the next several decades, however, the shifting of wealth to these emerging economies is expected to increase, with developing nations producing more goods and services - accounting for an estimated 60% of the world's gross domestic product by 2030.

As we've seen over the past several years, global economics can change very quickly. We'll have to see if this narrowing gap trend continues. A few years down the road, those developing nations will hopefully have continued to close the gap and we'll all be a little better off. (For more, see Re-evaluating Emerging Markets.)

For the latest financial news, see Water Cooler Finance: Poverty Rates Increase – And So Do Millionaires.

Related Articles
  1. Economics

    Long-Term Investing Impact of the Paris Attacks

    We share some insights on how the recent terrorist attacks in Paris could impact the economy and markets going forward.
  2. Stock Analysis

    An Introduction To The Indian Stock Market

    Most trading in the Indian stock market occurs through its two exchanges – the Bombay Stock Exchange and the National Stock Exchange.
  3. Savings

    How Americans Can Open a Bank Account In Thailand

    Have your paperwork in order and be sure to shop around.
  4. Chart Advisor

    Copper Continues Its Descent

    Copper prices have been under pressure lately and based on these charts it doesn't seem that it will reverse any time soon.
  5. Forex Fundamentals

    How to Buy Chinese Yuan

    Discover the different options that are available to investors who want to obtain exposure to the Chinese yuan, including ETFs and ETNs.
  6. Trading Strategies

    How to Trade In a Flat Market

    Reduce position size by 50% to 75% in a flat market.
  7. Markets

    Will Paris Attacks Undo the European Union Dream?

    Last Friday's attacks in Paris are transforming the migrant crisis into an EU security threat, which could undermine the European Union dream.
  8. Markets

    Are EM Stocks Finally Emerging?

    Many investors are looking at emerging market (EM) stocks and wonder if it’s time to step back in, while others wonder if we’ll see further declines.
  9. Markets

    What Slow Global Growth Means for Portfolios

    While U.S. growth remains relatively resilient, global growth continues to slip.
  10. Economics

    How to Invest in the Philippines' Stock Market

    The Philippines offers more long-term growth potential than most economies around the world. Here's how to play it.
  1. How do mutual funds work in India?

    Mutual funds in India work in much the same way as mutual funds in the United States. Like their American counterparts, Indian ... Read Full Answer >>
  2. Do mutual funds have CUSIP numbers?

    The Committee on Uniform Securities Identification Procedures (CUSIP) number is a standardized identification system used ... Read Full Answer >>
  3. Is Mexico an emerging market economy?

    Mexico meets all the criteria of an emerging market economy. The country's gross domestic product, or GDP, per capita beats ... Read Full Answer >>
  4. Why should an investor include an allocation to the telecommunications sector in ...

    An investor should include an allocation to the telecommunications sector in his portfolio, because telecom offers an investor ... Read Full Answer >>
  5. What portion of the telecommunications sector will benefit most from continued growth ...

    The portion of the telecommunications sector that is projected to benefit most from the continued growth in the use of cellphones ... Read Full Answer >>
  6. What is the difference between a greenfield investment and a regular investment?

    A greenfield investment is a particular type of investment where an international company begins a new operation in a foreign ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  2. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  3. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
  4. Black Monday

    October 19, 1987, when the Dow Jones Industrial Average (DJIA) lost almost 22% in a single day. That event marked the beginning ...
  5. Monetary Policy

    Monetary policy is the actions of a central bank, currency board or other regulatory committee that determine the size and ...
  6. Indemnity

    Indemnity is compensation for damages or loss. Indemnity in the legal sense may also refer to an exemption from liability ...
Trading Center