A host of remarkable events and development milestones highlighted the year 2010 – China passed Japan to become the world’s second largest economy, France decided to work more, the UNDP published its 20th Human Development Report, Russia came under intense public criticism from a fallen billionaire and the renegade news source WikiLeaks, to name just a few. Read on to explore Global Sherpa’s full list of top 10 world news stories, including a couple of more personal honorable mentions at the end.

1. China Passes Japan to Take Second Spot in List of World’s Largest Economies

China surpassed Japan to become the world’s second largest economy behind the U.S. in the second quarter of 2010. Despite many years in the making, the event still served as a powerful symbol of China’s reemerging role in the world economy and global political system. China’s economic accomplishment owes not only to decades of sustained, rapid economic growth and industrious progress but also to a prolonged period of economic stagnation in Japan during which Japan’s GDP as a percentage of U.S. GDP fell from a high of 71 percent in 1995 back to about 34 percent today, nearly the lowest share in the past 25 years since 1985. (As noteworthy to some may have been discovering Japan’s lengthy tenure as the world’s second largest economy.) The chart below from the Economist Intelligence Unit graphs the sizes of China’s and Japan’s GDP’s as percentages of U.S. GDP over the period 1985-2010. (Click on the image to see a larger version.)

Barring a surprising turn of events, China’s current development path along with the country’s historical great power status and impressive demographics suggest it’s only a matter of a time before China replaces the U.S. as the world’s largest economy. For all but the last few hundred or so years of the past two millennia, China laid claim to being the world’s greatest power. With a population that works out to roughly four times that of the United States, China has nearly unmatched human capital and domestic demand at its disposal.

The main question seems to be when rather than if the reversal takes place. The answer is a function of relative GDP growth rates in China and the U.S. and unanswered questions about how much China’s yuan currency will appreciate relative to the U.S. dollar going forward. At around 40 percent of U.S. GDP today, China’s economy still has a ways to go, but a relative growth advantage of say five to seven percent per year could eclipse that difference quickly. An interesting, interactive chart from the Economist lets users make their own predictions by testing the effects of inputting different economic growth rates for the U.S. and China.

China’s renewed economic and political power fueled a number of high profile issues over the course of the year, including large natural resource investments in Africa and elsewhere, an increasingly aggressive stance on disputed territorial claims and the rights to natural resources in the South China Sea, and a shortage of access to rare earth inputs that enable everything from solar panels to guided missiles. To read more about how China supplanted the U.S. as nearly the sole global supplier of rare earths and the resulting implications for U.S. foreign policy, see the related post Digging into the Rare Earths Predicament.

The far-reaching implications of China’s newfound economic might and global swagger were showcased in a host of high-profile media covers and stories. The May/June 2010 issue of Foreign Affairs featured a lead article by Robert Kaplan titled “China’s Grand Map – How Far Will Beijing Reach on Land and at Sea?” Economist covers devoted to China included “Buying Up the World – The Coming Wave of Chinese Takeovers” dated November 13-19 and a 14-page special report for the December 4-10 issue titled “The Dangers of a Rising China.”

2. Trial of Russian Billionaire Oil Magnet, Mikhail Khodorkovsky

The trial of Mikhail Khodorkovsky, former head of Russian oil giant Yukos, offered a glaring illustration of Russian leaders’ utter contempt for the rule of law and system of justice. No sooner than Khodorkovsky came to the end of an eight-year sentence for supposedly underpaying taxes on Yukos’ profits, he was charged with a new crime of stealing the oil produced by the company. According to the Economist, “the new case violates the [legal] principle of double jeopardy and also contradicts the first one.”

The new show trial seems even more intent than the first on locking up a political adversary and throwing away the key than it does on seeking any reasonable application of Russian laws or real justice. It’s not too surprising that someone who was once so close to the natural resources that lie at the core of power and influence in Russia should come in for such treatment. At the close of his trial, Khodorkovsky offered a bold public condemnation of the direction of Russian civil society and leadership.

In July, an NYT Op-Ed piece by none other than former leader Mikhail Gorbachev offered advance warning of the fallout from the Khodorkovsky trial and WikiLeaks’ controversial release of confidential U.S. diplomatic documents. On Day 4 of the NYT’s “State’s Secrets” series in late November, Khodorkovsky’s assessment was essentially corroborated in an article titled Below the Surface, U.S. Harbors Dim View of Putin and Russia.

Going forward, the U.S. and other western powers, particularly Germany and France, need to find a way to adopt a foreign policy and diplomatic stance toward Russia that is less at odds with the fundamental tenets of their national values, which also represent important sources of legitimacy and soft power.

On November 2, the courageous Russian newspaper Novaya Gazeta published the transcript from a face-to-face interview with Khodorkovsky and his former business partner, Platon Lebedev. Since 2001, four journalists of Novaya Gazeta, which is known for publishing articles critical of the Russian establishment, were mysteriously murdered. Among them was Anna Politkovskaya, a fearless, popular reporter who investigated Russia’s controversial response to separatist threats in Chechnya.

3. Haiti Hit by Largest Earthquake in Two Centuries and First Cholera Outbreak in 50 Years

The massive earthquake that devastated Haiti on January 12, 2010 was the worst quake to hit the region in 200 years. The disastrous event cost more than 250,000 lives and an estimated $7.2 to $13.2 billion. Much of the country’s capital, Port-au-Prince, was destroyed as hordes of Haiti’s people were trapped in the ruins of shantytowns, government buildings, and foreign aid offices. The quake killed 17 percent of the government’s workforce and destroyed all but one government ministry building. More than 1.5 million Haitians were displaced from their homes or left homeless.

October saw the first cholera outbreak in Haiti in 50 years. Hurricane Tomas raised the specter of spreading the disease to the densely populated capital. The especially tenuous living and health conditions brought on by the January quake and the host of other recent natural disasters in Haiti facilitated the transmission of the disease and make the country even more vulnerable to future health epidemics.

Given Haiti’s domestic situation, one of the best hopes for mitigating the effect of devastating natural disasters is outside assistance from more fortunate neighbors and friends. To learn more about helping Haiti and ways to donate money or time, contact these organizations: Red Cross, Doctors without Borders (Medecins Sans Frontieres), UNICEF, and the World Food Programme. Charity Navigator provides more information about charities and their relief efforts.

For more, see the related post Haiti Needs Our Help.

4. France Minimum Retirement Age Vote Leads to Massive Street Protests, Exposing the Implications of Aging in Developed Economies and the Waning Power of European Unions

France’s efforts to raise the country’s minimum retirement age from 60 to 62 and the full state pension age from 65 to 67 age drove millions of protestors to the streets for multiple, nation-wide protests. Through extended demonstrations that paralyzed large parts of the country for days, the French strikes instigated widespread fuel shortages, halted nearly all forms of transportation, closed schools, and, at one point, cost the country as much as an estimated 200 to 400 million euros ($280-$560 million) per day.

As President Sarkozy’s French government determined, there is little alternative to raising retirement ages to the point of being commensurate with how long people will be able to work and live in retirement. State benefit systems were designed when people did not live nearly as long and drew far fewer years of social security benefits. From 1960 to 2008, life expectancy at birth increased by 32.7 percent on average the world over. Aging populations and low fertility rates mean fewer working age people are present in the work force to support the ever-expanding pool of retirees. From 1950 to 2009, the world’s old age dependency ratio increased an average of about 35.6 percent.

The aggressiveness of French unions may also partly be a function of a desperate attempt to retain some level of influence as their relevance and power become increasingly tenuous. According to a Reuters special report on Europe’s unions, “Europe’s unions are less powerful, less influential, and less relevant than they have been for decades.”

For more information on the implications of aging societies, the waning influence of European trade unions, the French strikes over the minimum retirement age and the threat to the French way of life, see the posts Two Sides of Development: Life Expectancy and Aging, Just How Powerful are Unions in Europe?, French Say Non! to Change and try the French Labor and Leisure Quiz.

5. UNDP Publishes 20th Anniversary 2010 Human Development Report (HDR)

The year 2010 marked two important U.N. development milestones: the 20th anniversary of the first Human Development Report (HDR) in 1990 and the 10th anniversary of the UN Millennium Development Goals. According to the 2010 HDR, most people are much better off today than they were just a few years ago. From Italy to South Korea to China and India, large increases in Human Development Indexes (HDI) of 22 to 80 percent since 1980 mean peoples’ living standards benefit from higher incomes and longer life expectancies. With few exceptions, global progress has touched countries at all levels of development from Norway to Nepal. Norway retained the top spot in the overall HDI rankings as the world’s most developed country.

On the other hand, there is still much to be done to alleviate the remaining scars of multidimensional poverty and inequality. Large income and gender inequities lead to downward adjustments in countries’ average development levels ranging from a low of 6 percent for the Czech Republic to a high of 45 percent for Mozambique. More than one billion people still live in a state of “multi-dimensional poverty,” facing constant, acute shortcomings in their health, education, and living standards.

For more, see the related posts Analyzing Global Progress: Interpreting the 2010 UNDP Human Development Report and Index and Behind Norway’s #1 Prosperity Index Ranking.

6. 2010 Euro Crisis, Financial Bailouts, and Austerity Measures – Portugal, Ireland, Italy, Greece, Spain (otherwise known as the PIIGS)

From a financial perspective, 2010 could go down as the year of the bailout. In May, the Eurozone countries and the International Monetary Fund (IMF) approved a massive 110 billion euro loan bailout to save Greece’s financial system. The Greek crisis raised concerns that the financial contagion could spread to other countries that could pose a risk of default due to large government deficits, including Belgium, Ireland, Italy, Portugal, Spain, and the U.K. In 2010, Belgium’s public debt stood at fully 100 percent of GDP, which was still only good enough for third place on the list of Eurozone countries with the highest debt levels behind Greece and Italy. The European financial situation has deteriorated to the point that even the future of the Euro is at stake.

A host of severe austerity measures has become the prevailing European response to the ongoing financial crises. The recently elected conservative U.K. government of David Cameron seems to be driving home the most thorough package of aggressive budget cuts.

The jury is still out on whether these measures will have their desired effects. In other times, especially in places long overdue for substantial infrastructure improvements, an argument might have been made for just the opposite strategy – a Keynesian style demand approach to stimulating the economy. However, in the current environment of fear over growing budget deficits and the related liberal backlash, Keynes is effectively taboo even in the place of his birth. Nevertheless, considering the fragile state of national and global economies, there is a real risk that extensive job cuts and other austerity acts could potentially cause more harm than good.

7. South Africa Hosts 2010 FIFA World Cup

The 2010 FIFA World CUP served up a number of firsts. In addition to South Africa hosting the African continent’s first World Cup tournament, Spain finally brought home a World Cup gold medal, and a psychic octopus named Paul achieved a perfect record in predicting the outcome of Germany’s World Cup run. For more, see the related posts South Africa 2010 World Cup Quiz!, An Ode to Paul the Psychic Octopus, and Pulpo Paul, We’ll Miss You.

8. WikiLeaks Influences International Media and Rattles U.S. Diplomacy

WikiLeaks’ posting of “a cache of a quarter-million confidential American diplomatic cables,” mostly from the past 3 years, prompted the New York Times to run a nearly two-week long series called “State’s Secrets,” that explored U.S. diplomacy and foreign relations. The U.S. government quickly condemned WikiLeaks’ unauthorized disclosure and warned that it “put at risk not only the cause of human rights but also the lives and work of these individuals.” The incident sent U.S. Secretary of State Hillary Clinton and the U.S. State Department into a flurry of diplomatic damage control aimed at minimizing the adverse consequences for U.S. foreign relations and policy.

9. Mexico Drug Cartels

Mexico’s powerful drug cartels took center stage in the world’s war on organized drug crime. The media seemed to be filled with daily reports of the ever-growing audacity, violence, and collateral damage from the cartels’ escalating battles to consolidate and retain control over their highly lucrative operations. More than 2,000 people died from mostly drug-related violence in the Mexican city of Juarez alone in 2010.

The rise and far-reaching influence of Mexico’s drug cartels even spurred debate about whether the Mexican government had lost control of the country and the nation had become a failed state. Fortunately, despite the extent of corruption throughout Mexican political and security organizations, this characterization proved to be more an expression of the severity of Mexico’s drug problem than an accurate assessment of the state of Mexico’s governing apparatus. Recent events help bolster confidence in the Mexican authorities’ capacity to fight and stem the collateral damage from the warring drug cartels.

Mexico’s federal police recently arrested several top-ranking cartel leaders, including Arturo Gallegos Castrellon, leader of the gang Los Aztecas, who confessed to ordering most of the killings in Ciudad Juarez since August 2009. For more on Mexico’s efforts to fight the country’s drug cartels and rid its police forces of rampant corruption, see the article Battling Mexico’s Drug Cartels in the July/August 2010 edition of Foreign Affairs.

10. Environmental Performance Index, Biodiversity and Ecosystem Services

The year 2010 was the International Year of Biodiversity. The United Nation Environment Programme’s Convention on Biological Diversity (CBD) held its tenth biannual meeting in Nagoya, Japan. The highlights of the CBD included the release of findings from the Group of 8’s Economics of Ecosystems and Biodiversity (TEEB) project to study the economic impact of ecosystem services and changes in biodiversity. The TEEB study puts the annual value contributed by global wetlands at $3.4 billion and the annual loss of natural capital from ecosystems like forests at $2 – $4.5 trillion. Other recent estimates place the economic value of the benefits of maintaining the biodiversity of natural ecosystems at 10 to 100 times their costs.

The Environmental Performance Index (EPI) was updated and expanded from the prior 2008 study and used to rank 163 countries on 25 performance indicators. The top 25 performers included countries from Asia, Central and Latin America, and Europe. The EPI covers 10 Policy Categories (including agriculture, air pollution, biodiversity and habitat, climate change, the environmental burden of disease, fisheries, and forestry) that fall under one of two Objectives, Environmental Health or Ecosystem Vitality. More highly developed countries tend to score higher on Environmental Health, while less developed countries often perform relatively better on Ecosystem Vitality. Across 122 of the 163 countries in the index, nearly 1.5 billion people are at risk of health issues caused by drinking water from an unimproved, potentially contaminated source. (Click on the image to see a larger version.)

For more, see the related posts Biodiversity Saves Lives and Livelihoods and Scoring and Ranking the World’s Environmental Performance.

Honorable Mentions:

North Korea Stokes Tensions on the Korean Peninsula

China called for a resumption of the intermittent six-party talks between South Korea, North Korea, the U.S., Japan, Russia and itself to diffuse the growing tension on the Korean Peninsula. The risk of heightened conflict reached a new level when a North Korean artillery barrage “resulted in the first South Korean civilian casualties from North Korean weaponry since the 1953 armistice that halted the Korean War.” China seems to be seeking a strategically expeditious outcome that overlooks the long-time suffering of the millions of impoverished North Korean citizens and the inherently unstable alchemy of a divided Korean peninsula and unpredictable North Korean regime. China’s foreign aid is a key lifeline for North Korea’s leadership and tool for preventing a reunified Korea from tilting the regional balance of power against China. For more on China and North Korea, see the related post Review of Top World News and International Articles from the New York Times.

Canada Wins First Olympic Golds on Home Turf

In February, Vancouver, Canada, home to the Whistler Blackcomb ski area, played host to the 21^st Winter Olympics. After previously hosting the Winter Olympics in Calgary in 1998 and the 1976 Summer Olympics in Montreal, Canada won its first-ever Olympic gold medal on home soil with the men’s moguls event. By far the sweetest Canadian victory came when the Canadian men’s team captured gold over the U.S. team on the final day of the Games.

Chicago Blackhawks Win the Stanley Cup

The Chicago Blackhawks brought Lord Stanley’s Cup back to Chicago for the first time in 49 years. The team included players from Canada, the U.S., Slovakia, Finland, Sweden and France. After the season, Blackhawks fans were heartbroken to see the team trade away nine players in order to meet what felt like unfairly punitive salary cap requirements. Fans were left to wonder why such a fate has not seemed to befall teams in other sports that looked to be on their way to becoming sports dynasties.

German Rockers the Scorpions Announce Retirement

To the disappointment of a devoted worldwide fan base, heavy metal German rockers the Scorpions announced plans to retire at the conclusion of the tour to promote their 2010 album release Sting in the Tail. Since their start in 1965, the elder statesmen of hard rock released a total of 21 albums from 1972 to 2010 and sold between 100 and 150 million albums worldwide. Scorpions frontman and lead lyricist Klaus Meine credited the band’s performance at “Chicagofest” at Navy Pier in Chicago on August 10, 1979 for giving the band their big break in the U.S. Several years later, MTV referred to them as “The Ambassadors of Rock.” The Scorpions leave behind a legacy of rock anthems and favorites, including: Rock You Like a Hurricane, No One Like You, Raised on Rock, and Wind of Change (a ballad about socio-political changes in Eastern Europe at the end of the Cold War).

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Top 10 World News Headlines and Stories of 2010