Transcript The Greatest Ever Economic Change

Introduction: The Greatest Ever Economic
Change
Inaugural Professorial Lecture
Douglas McWilliams, Mercers’ School Memorial
Gresham Professor of Commerce
September 2012
© Centre for Economics and Business Research ltd
Objectives
To introduce my Gresham lecture series and show how the
industrialisation of the emerging economies compares with
other previous major economic changes
Overview
The theme of the lecture series
Background – my master’s thesis on the first two electronics
plants in the Kuala Lumpur area
Growth in the smaller emerging economies of East Asia
Japan – the outlier
Comparison with the so-called discovery of the Americas
Comparison with the industrial revolution
Sneak preview of key points from the next 5 lectures
My master’s thesis 1973
• First two electronics plants in the Kuala Lumpur area
• Texas Instruments and Motorola
• Set in export duty free zones
• 60% of local expenditure was net social gain to the Malaysian
economy using World Bank criteria for cost benefit analysis
• Payoff periods 10 and 12 months respectively
MY CONCLUSION WAS THAT THERE WOULD BE MUCH
MORE OF THIS SORT OF INVESTMENT
Smaller East Asian economies* share of world
GDP (using the Maddison measure)
Maddison Data Archive at the Groningen Growth and Development Center at Groningen University
* Asean plus Taiwan
Japan share of world GDP (using the
Maddison measure)
Maddison Data Archive at the Groningen Growth and Development Center at Groningen University
China’s share of world GDP (using the
Maddison measure)
Maddison Data Archive at the Groningen Growth and Development Center at Groningen University
The greatest ever economic change?
Criteria
• Impact on world GDP growth
• Impact on GDP per capita
• Impact on changing economic advantage
• Impact on pressure on natural resources
The ‘discovery’ of the Americas
• Columbus sailed in 1492
• Massive movement of population, mainly from Europe
• Importation of many new plants and substances to Europe
• Genocide and conquest of indigenous peoples
• Impact of extraction of precious metals, especially silver
World GDP from year 1 to 1820
Millions of Geary-Khamis 1990 dollars
Maddison Data Archive at the Groningen Growth and Development Center at Groningen University
World GDP per capita from year 1 to 1820
Dollars per head (Geary-Khamis 1990 dollars)
Maddison Data Archive at the Groningen Growth and Development Center at Groningen University
The industrial revolution
• A range of technological changes affecting a wide range of
industries with mechanisation as a common theme
• Affecting agriculture, mining, transport as well as various
forms of manufacturing
• Combined with political, economic and legal changes – rule of
law, joint stock companies with limited liabilities, capitalism
and trade, representative government tending towards
democracy and a range of social changes aimed at
ameliorating the position of less privileged people in the
industrialising economies
Often called ‘The Great Transformation’
World GDP from year 1 to 1913
Millions of Geary-Khamis 1990 dollars
Maddison Data Archive at the Groningen Growth and Development Center at Groningen University
Western European GDP per capita from year
1 to 1913
Dollars per head (Geary-Khamis 1990 dollars)
Maddison Data Archive at the Groningen Growth and Development Center at Groningen University
Rates of world economic growth since 1900
Millions of Geary-Khamis 1990 dollars
Maddison Data Archive at the Groningen Growth and Development Center at Groningen University
Our slower growth in the West is now translating
into less good health and life expectancy
Hong Kong
Singapore
United Kingdon
GDP per capita,
2012 estimate
(1990 GearyKhamis dollars)
34,874
30,918
22,555
Annual hours
worked
2,287
2,307
1,625
Government
spending as share
of GDP
16.7
17.3
49.8
Top tax rate
15%
20%
50%
Life expectancy
82.2
81.0
80.1
The next 5 lectures this academic year
• Is growth in the emerging economies additional or will we grow
more slowly? – with Thras Moraitis and Michael McWilliams
Thursday Oct 15, 2012, 6pm Gresham College
• A new theory of economic growth – with Cebr colleagues Thursday
Nov 13, 2012, 6pm Gresham College
• How to make Western economies more competitive Thursday 24
January 2013, 6pm Gresham College
• Will there be a shortage of spending power (a modern
reinterpretation of Keynes)? Thursday 28 February 2013 6pm
Gresham College
• The winning and losing nations Thursday 21 March 2013 6pm
Gresham College
Also ‘Sorting out transport in London’ Wednesday1 May 2013 6pm
Museum of London
World outlook for GDP for large economies
Billions of US dollars, current prices at market exchange rates
Conclusion
• By a range of measures, the industrialisation of the emerging economies justifies
the title ‘the greatest ever economic event’
• Even though growth is likely to slow sharply in China, rising relative prices and a
rising exchange rate mean that it will become the world’s largest economy in the
2020s
• But rising population and a likely acceleration of economic growth when its
current troubles are over mean that India should eventually overtake China
around 2050
• One can get a glimpse of how the emerging economies will behave when they get
richer by looking at Singapore and Hong Kong
• These examples show the cost to the UK from maintaining the anti-business, tax
and spend approach – which has moved from affecting our relative wealth to
affecting our health as well
• If the UK does not reform its attitude to growth, to stop treating it as an optional
extra, then we will go down the same route as Greece, if a bit more gently
The Greatest Ever Economic Change
Contact:
Douglas McWilliams, Mercers’ School Memorial Gresham
Professor of Commerce
and Chief Executive, Cebr
[email protected]
020 7324 2850
© Centre for Economics and Business Research ltd