Transcript Why Globalisation Works - University of Nottingham

WHY GLOBALIZATION WORKS
Martin Wolf, Associate Editor & Chief
Economics Commentator, Financial
Times, London
Nottingham University
Nottingham
17th February 2005
Future of Globalisation
• Five Big Themes of the Book
– Technology and the market revolution
– Role of states
– Development record of the “second age of globalisation”
– Threats to globalisation
– Exploiting the opportunities of globalisation
2
Theme 1 – Centrality of markets
• Globalisation is integration of economies through
markets across frontiers
• It is enabled by technology and by liberalisation
• The 1980s and 1990s were a liberalisation revolution
• Globalisation followed
3
Theme 1 – Centrality of markets
FALLING COST OF TRANSPORT AND COMMUNICATIONS
120
100
80
60
40
20
0
1920
1930
1940
Ocean freight
4
1950
1969
Air
Transatlantic phone
1970
Satellite
1980
1990
Theme 1 – Centrality of markets
AVERAGE TARIFF RATES
30
25
20
15
10
5
0
France
Germany
Italy
1950
5
Pre-Uruguay Round
UK
Post-Uruguay Round
EU
US
Theme 1 – Centrality of markets
WEIGHTED AVERAGE TARIFFS IN CHINA
(per cent)
45.0%
40.0%
35.0%
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
1992
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1993
1994
1995
1996
1997
1998
2001
2002
Theme 1 – Centrality of markets
THE GROWTH OF WORLD TRADE AND OUTPUT 1970-2002
(volume with 1970=100)
1000.0
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70
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73
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00
20
01
20
02
100.0
Merchandise Exports
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Manufactured exports
Merchandise production
Manufactured output
Theme 1 – Centrality of markets
RATIO OF TRADE IN GOODS TO GOODS GDP
(per cent)
250.0%
200.0%
150.0%
100.0%
50.0%
0.0%
Thailand
Germany
Mexico
UK
Turkey
1990
8
2002
China
US
Japan
Theme 1 – Centrality of markets
RISE OF GLOBAL ECONOMIC INTEGRATION IN THE 1980s and 1990s
(per cent of global GDP)
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
FDI inward stock
Gross product of
foreign affiliates
Export of foreign
affiliates
1982
9
1990
2003
Export of goods and
non-factor services
Sales of foreign
affiliates
Theme 2 – Markets and States
• Markets need supportive states
• They need to be both strong and constrained
• The creation of such a state is difficult and the
achievement is rare
• Far more common are predatory, weak or even failing
states
• Good states are created by external regulatory
competition, constitutional change and moral reform
• The difference in quality of states is the world’s biggest
challenge
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Theme 3 – Record
• In many ways, there is too little globalisation, not too
much.
• Labour markets are less integrated than in the late 19th
century
• Capital markets are less good at moving capital to less
developed economies, because of monetary disorder
and poor property rights
• But trade and production are more integrated than
ever before, because of technology and liberalisation
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Theme 3 – Record
• Where globalisation has worked, predominantly in
Asia, it has been remarkably good.
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Theme 3 – Record
“Let China sleep, for
when she wakes, she
will shake the world.”
Napoleon Bonaparte
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Theme 3 – Record
ASIA'S SHARE IN WORLD GDP
(at PPP)
70
60
50
40
30
20
33
10
17
12
9
0
1820
Source: Maddison
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1870
1913
China
India
Japan
5
5
1950
1973
Other Asia
2001
Theme 3 – Record
GROWTH IN GDP PER HEAD 1820-1998
(annual average compound growth rates, per cent)
Region
182018701913-50 1950-73 1973-98
1870
1913
Western
0.95
1.32
0.76
4.08
1.78
Europe
Western
1.42
1.81
1.55
2.44
1.94
Offshoots
Japan
0.19
1.48
0.89
8.05
2.34
Eastern
0.64
1.15
1.5
3.49
-1.1
Europe
and former
USSR
Latin
0.1
1.81
1.42
2.52
0.99
America
Asia
-0.11
0.38
-0.02
2.92
3.54
(excluding
Japan)
Africa
0.12
0.64
1.02
2.07
0.01
World
0.53
1.3
0.91
2.93
1.33
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Theme 3 – Record
DECOM POSIT ION OF WORLD INCOM E INEQUALIT Y
(mean logarithmic deviation)
0.900
Source: Bourguignon and Morrison
0.800
0.700
0.600
0.500
0.400
0.300
0.200
0.100
0.000
1820
1850
1870
1890
1910
1929
1950
1960
1970
Inequality within country groups
Inequality between country groups
Total inequality
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1980
1992
Theme 3 – Record
INEQUALITY AMONG HOUSEHOLDS IN THE AGE
OF GLOBALISATION
(Mean logarithmic deviation)
0.920
0.900
0.880
0.860
0.840
0.820
0.800
0.780
0.760
0.740
Source: Sala-I-Martin
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0.720
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Theme 3 – Record
40%
900
30%
800
20%
700
10%
600
0%
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Rate
99
1
98
1
97
1
96
1
95
1
92
1
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1
89
1
87
1
85
1
82
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Number
SHARE OF WORLD POPULATION
1,000
2
50%
0
1,100
0
60%
0
1,200
0
70%
9
1,300
0
80%
0
1,400
0
90%
0
1,500
0
NUMBER
EXTREME POVERTY IN THE LONG RUN
(less than a dollar a day at PPP, in 1985 prices,
millions and world population share)
Theme 3 – Record
Regions
East Asia & Pacific
(Excluding China)
China
Europe and Central Asia
Latin America and
Caribbean
Middle East and North
Africa
South Asia
People living on less than $1.08 a day at
1981
1990
2001
767
161
606
1
36
472
95
377
2
49
284
72
212
18
50
9
6
7
475
462
428
Sub-Saharan Africa
164
227
314
Total
1,451
1,219
1,101
Total, excluding China
845
841
888
Sources: World Bank, World Development Indicators 2004
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Theme 3 – Record
Share of people living on less than $1.08 a day at
1993 PPP, in regional populations
Regions
1981
1990
2001
East Asia &
55.6%
29.6%
15.6%
Pacific
China
61.0%
33.0%
16.6%
Europe and Central
0.3%
0.5%
3.7%
Asia
Latin America and
9.7%
11.3%
9.5%
Caribbean
Middle East and
5.1%
2.3%
2.4%
North Africa
South Asia
51.5%
41.3%
31.1%
Sub-Saharan
41.6%
44.6%
46.5%
Africa
Total
39.5%
27.9%
21.3%
Total, excluding
31.5%
26.2%
22.8%
China
Sources: World Bank, World Development Indicators
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Theme 4 – Threats ahead
• Insecurity
• Instability
• Interests
• Ideas
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Theme 4 – Threats ahead
• Insecurity
– Then: huge conflicts among the great powers, leading to two
world wars
– Today: fear of terrorism, but the great powers are on the same
side, at least for the moment
– Risks ahead: rise of China, mega-terrorism and resource wars
– Assessment: risks manageable
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Theme 4 – Threats ahead
• The consensus is that oil supply can increase in the
years ahead
• But we still do not know what will replace it in the long
run
• The resource needs of Asian industrialisation are
enormous: half of global incremental demand for oil is
now from Asia, with China a bigger factor than the US
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Theme 4 – Threats ahead
UPS AND DOWNS OF OIL PRICES
(nominal and real price of oil)
120
100
80
60
40
20
0
70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04
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J
J
J
J
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Nominal
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Real (at 2004 prices, deflated by US CPI)
Theme 4 – Threats ahead
• Instability
– Then: the Great Depression
– Today: financial crises in emerging market economies, asset
price bubbles and global imbalances
– Risks ahead: dollar crisis and asset price crashes
– Assessment: risks manageable
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Theme 4 – Threats ahead
• Interests
– Then: national companies with the same interests as their
work force and no World Trade Organisation
– Today: multinational companies with internationally integrated
operations and interests at odds with their national work forces
and also the WTO
– Risks ahead: middle class anxiety as services become more
internationally tradable
– Assessment: risks manageable
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Theme 4 – Threats ahead
• Ideas
– Then: belief in socialism, planning and import substitution
– Today: collapse of socialism and worldwide move towards the
market and discordant group of anti-globalisation protesters
– Risks ahead: loss of faith in market, particularly if financial
system continues to be unstable
– Assessment: risks manageable
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Theme 5 – How to exploit opportunities
•
I have no blueprint for a new world. I think these are a
waste of time. But here are ten “commandments” that
bring together my main conclusions
– The market economy is the only arrangement capable of
generating sustained increases in prosperity
– Individual states remain the locus of political debate and
legitimacy. Supranational institutions gain their legitimacy
from the states that belong to them
– It is in the interest of states and their peoples to participate in
international treaty-based regimes that deliver global public
goods
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Theme 5 – How to exploit opportunities
– Such regimes need to be specific, focused and enforceable
– The WTO has strayed too far from its primary focus on trade
liberalisation
– The case for regimes covering investment and competition is
strong. But such regimes do not need to be global
– It is in the long-run interest of countries to integrate into
financial markets, but they should do so carefully
– It is necessary to accept renegotiation of sovereign debt as a
normal feature of the world economy
– Official development assistance need to increase
– Countries need to learn from their own mistakes, but also we
need the ability to rescue failed states
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