Transcript Globalization, Risk and Inequality: Towards a Dynamic

Globalization, Risk and
Inequality: Towards a Dynamic
Approach to Sustainable
Growth
Brussels – 5th December 2007
‘Real’ versus ‘financial’
globalisation
• Some relevant facts first:
• Share of trade in GDP in major OECD
economies roughly constant.
• But increased sharply in emerging
markets.
• In major OECD areas manufacturing is
globalising, but shrinking share of overalle
economy.
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Exports as % of gdp
Real openess in the major OECD ares
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
Japan
U.S.
Eu 27
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Exports as % of GDP
Real openness in the 'BIC'
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
China
India
Brazil
An aside on ‘Bric’s
• Emerging economies are becoming a
force in manufacturing.
• But Russia is not among them!
Real Openess
40.00
35.00
Exports as % of GDP
30.00
25.00
Manufacturing
All goods
20.00
15.00
10.00
5.00
0.00
China
India
Brazil
Russia
2006
2005
2004
2003
2002
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Exports of goods as % of manufacturing output
Manufacturing is special
Real openess in the major OECD areas (manufacturing)
120.0
100.0
80.0
60.0
Japan
U.S.
Eu 27
40.0
20.0
0.0
Finance is also special
• Stock of financial assets increasing faster
than trade.
• But here large differences in level and
evolution:
• US much stronger financial globalisation.
• EU, Japan high, but not increasing.
• Emerging: low and stable (so far).
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Stock of total external assets (and liabilities) relative to exports
Financial globalisation
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Euro
US
Japan
China
India
Brazil
Impact of financial globalisation?
• In theory financial markets shout channel
savings (and investment) from (capital) to
(capital) poor.
• In reality over last decade flows have been
in opposite direction.
• Did emerging markets suffer?
Emerging markets prosper while
financing advanced economies
1995-1999
Growth
Advanced economies
Other emerging markets
Middle East
3.0
4.7
3.5
2000-2006
Sum of
current
account
Balances
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-395
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Growth
Sum of
current
account
Balances
2.5
-2258
6.4
1569
(=fx res)
5.1
755
(=SWF?)
Why did the US consume so
much?
• Basic reason for ‘over’ consumption in US
a liquidity glut coupled with transformation
of financial sector based on low price for
credit and new business model for banks.
• But banks might now be forced back to
basics.
• Reversing a process that build up over
several years in a few months is costly.
Outstanding Commercial Paper (US market)
Conclusion
• Emerging markets have benefited from
increasing ‘real’ globalisation.
• Financial globalisation has, so far, de facto
also been postive for emerging markets.
• Test will now come as markets for surplus
of emerging market manufacturing goods
is shrinking.