Primary, secondary and tertiary economies

In this post we look at the GDP (gross domestic product) of the largest 20 nations. We first divide the these nations into primary (commodities), secondary (manufacturing/services) and tertiary (IT, advanced manufacturing, consumer) nations. We then group these nations into a simple trading model between primary, secondary and tertiary nations. Without further ado, here are the top 20 nations GDP based on 2007 data. Note the list reflects my simple categorisation based on the nations primary role. All nations are ultimately primary, secondary and tertiary producers at different levels.

Primary Producing Nations (predominantly):

• Canada USD$1.43 trillion
• Brazil USD$1.31 trillion
• Russia USD$1.29 trillion
• Australia USD$0.91 trillion
• Mexico USD$0.89 trillion
• Turkey USD$0.66 trillion
• Indonesia USD$0.43 trillion
• Saudi Arabia USD$0.38 trillion
• Iran USD$0.29 trillion
• South Africa USD$0.28 trillion
• Argentina USD$0.26 trillion
• Venezuela USD$0.24 trillion
• TOTAL: USD$8.38 trillion

Secondary Producing Nations (predominantly):

• China USD$3.25 trillion
• India USD$1.10 trillion
• South Korea USD$0.96 trillion
• Taiwan USD$0.38 trillion
• Thailand USD$0.25 trillion
• TOTAL USD$5.94 trillion

Tertiary Producing Nations (predominantly):

• European Union USD$16.83 trillion
• United States USD$13.84 trillion
• Japan USD$4.38 trillion
• TOTAL USD$35.057

The following graphic illustrates the relative size of these three trading blocks.

What to draw from this? Well, in my humble opinion we can divide all spending into either consumer or government spending. Consumer spending includes housing, energy, food, and discretionary retail spending; plus commercial spending related to meeting consumer markets. For example Boeing building 787 aircraft is ultimately consumer spending as the end user of that product are consumers. Government spending on the other hand is either consumer spending (healthcare, education) or nation building (infrastructure, defence).

My point here is that consumer spending is a huge part of tertiary nations' GDP. Any hiccup to western consumer spending brought about be rising food, energy or credit costs, combined with reduced employment prospects based on recessionary fears is a big issue. Can the primary and secondary nations de-couple from tertiary nations and become power world economy? These countries were very coupled on the way up, will they couple as the west heads south?

Based on this simple analysis it would seem they will stay coupled on the way down. A western recession (US, EU, Japan) is a global recession. Keep a close eye on what happens in the US and EU economies as an indicator for your local economy.

For the record, the GDP of the top 35 nations is shown below along with their cumulative contribution to global GDP. Note again how important western 'credit ladden' nations are to this picture.