[MUSIC] It's a sign of how short our economic vision and our view of history is to refer to India and China as emerging giants. Because they have been huge economies for many centuries and even millenia. This particular graph, which reflects the estimates of Angus Madison, who was a statistician very, very interested in historic statistics, estimates what the GDP of different countries might have looked like beginning in the year 1 AD. And so you can see that at that moment in time, India and China accounted for what looks like 80% of global GDP. Of course, it's hard to make an estimate going back more than 2000 years. But since their populations were so great, and since before the Industrial Revolution, it was population that determined your size, you can see clearly that actually they diminished in recent times. Particularly the colonial period reduced the size of India and you can see that this diminishing size relative to other countries, that doesn't mean they diminished in absolute terms, but relative to global GDP they became smaller, begins to reverse itself in the post-war period. Particularly starting in the 70s when, as we'll see, both of these countries set on a more modern growth path. At the present time, on the right-hand side of this graph, you see that China has come to occupy a much larger size in global GDP. And India is also expanding, even though the largest economy is the United States down at the bottom. If we look at right now, this moment in time and take a snapshot of GDPs, and no adjustments made to the GDP, we just measure everything that they've produced at their prices in one year and then we put it into US dollars, this particular pie chart shows that the United States is about 25% of global GDP and China is right behind. And then we find, moving down, we have to pass several countries until we come to India which is the seventh largest economy in the world at the present time. But if we actually take GDP and adjust it for something that we call purchasing power parity. Something you would have learned about in the economic policy making course, where what we do is we say, let's make all prices equal in every country around the world, right? So let's raise Chinese and Indian prices to the level of US prices, so we can actually measure the volume of what they're producing. Then, if we do this, we find that China has actually surpassed the United States in terms of the volume of its GDP. That doesn't mean the value of its GDP is larger. And actually the value of your GDP is what gives you power in the world, but China has surpassed the United States in the volume of its GDP, and India moves up to right behind the United States. And ahead of Japan, Germany and a lot of the other large countries that we're used to thinking of as the largest GDPs in the world. So that we get China, the United States, and then India, being the largest GDPs in the world in terms of purchasing power parity. [MUSIC]