Transcript Economic Growth and Globalization since 1850

Economic Growth and
Globalization since 1850
The Age of Globalization
• Exponential change
Video: Did you know?
Shift Happens
I. Introduction:
A. Global time line
1850-1914
Industrialization and growth
of international trade
19181939
Interwar
years
1950-1990
Liberalization and Acceleration of
trade/
Development of Communist
Economic Model
B. Successive Shifts of Power
19th-21st Centuries
1850-1914
1914-1990
1990 -2014
• British Hegemony
• American Century
• Multipolar World
II. Stages of Economic Growth
• How did the world progressively enter
into a system of production of wealth?
A. 19th Century
Economic Growth since 1850
• Since 1850, continual acceleration of
technical progress and strong
economic growth
• Sustained demographic growth
• Inequalities in development continued
3 stages of Economic Growth
1. 1850-1945 Beginnings of Growth
2. 1945-1973 Exceptional economic
growth
3. 1973-2016 Another model of growth
Annual Growth Rate of World GDP
1820-1870
0.93%
1870-1913
2.11%
1913-1950
1.85%
1950-1973
4.91%
1973-1998
3.01%
1999-2008
3.10%
2009
-1.3%
2010-2014
3.7%
Source: OECD and World Bank
1st Stage: Beginnings of Growth
1850-1945
• From the mid-19th Century, western European
countries, facing rapid increase in population
growth, experienced a 2nd industrial revolution
strong growth = monetary abundance and new
technologies (railroads, automobiles, steel, textiles)
irregular growth = periods of rapid growth followed by
major recessions and depressions (1873-1896) (19291939)
Capitalism, well-established in the 19th c. in Europe,
contributed to this trend
Despite the rise in global population, economic growth
enabled improvement in standard of living. (buying
power x2 French workers)
Lithograph by Otto Bollhagen and Fritz Jacobsen, Krupp Factories in Essen, Germany in 1912
Capitalism in Crisis
Early signs of instability in 1929
The Mechanism of the Crisis
In October 1929, a violent storm descended upon Wall Street. The
intervention of the most powerful financial groups could not manage to
stop the avalanche of sales due to the general panic. […] The prosperity of
million of American households was built upon the gigantic structure of
overblown debt […] The speculation on stocks was spread over the entire
nation, encouraged by the loans that even the most famous banks easily
granted : a vast system of purchasing homes, furniture, cars and numerous
other items of domestic comfort also developed. All of that collapsed in an
instant; the formidable machine of production in the United States found
itself disorganized and paralyzed […] Twenty thousand local banks
suspended their payments. The system used to trade goods and services
between individuals collapsed […]
From 1929 to 1932, the collapse of the market resulted in an
implacable fall in prices which brought on a reduction in production
followed by general unemployment. The consequences of this economic
disorganization spread throughout the entire world. Unemployment and
the fall in production caused a general decrease in trade. Customs
restrictions were imposed everywhere in order to protect domestic markets
[…] Financial ruin and unemployment generalized from one end to the
other of the planet.
Source: Winston Churchill, Memoirs of the Second World War, 1948
The Limits of Capitalism
Series of financial/economic crises
highlighted the limits of capitalism and
the interdependence of the world
– Stock market crash 1929, end of period of
strong growth of US economy, warning to
speculators
– Collapse of 1st economy in the world
causes contraction of international trade
and massive increase in unemployment
around the world
2nd Stage: Exceptional World
Growth 1945-1973
• reconstruction of Europe and Japan
thanks to U.S. aid (strongest growth in
TRIAD)
• agricultural sector modernized in the
20th c.
• Service sector developed
• Industry remained motor of growth
(cheap oil, chain production, free trade)
• Mass consumption stimulated by higher
salaries and easy credit
After 1945, world growth rate
increased thanks to trade
•Stimulated by the gradual
liberalization of trade (Atlantic Charter,
GATT, WTO, etc)
•From 1970’s by acceleration of
globalization
3rd Stage: Another Model of
Growth 1973-2016
• The End of the Miracle
– Monetary crisis in 1971 (Bretton Woods)
– 2 oil crises in 1973 & 1979
– Working conditions of chain production
contested
– Production decreases
– Inflation & unemployment rise
• Change in Growth Patterns
– Excess debt and speculation result in new
crises in 2008 & 2012
– Very high growth rates obtained in BRICS
Recent Financial Crises and
Economic Recessions
• Financial crisis in 2008
– led to growing intervention of
international regulatory organizations
• IMF
• G20
• Economic recession in 2011-2012
– Caused by banks making risky loans
– Populations over-indebted
– Speculation on real estate market
Comparison of 1929 and 2008
Crises
GNP Growth (%)
1929-1932
2009
2010
World
-30
-0.6
+4.2
United States
-51
-2.4
+2.7
Germany
-23
-
-
Euro Zone
-
-4.1
+1
-57 %
-12%
+13.5%
International Trade
Unemployment rate
1929
1933
2007
2009
2010
United States
3.1
25.2
5
10
9.7
Germany
10
33
7.8
9.8
10.3
Change of Paradigm late 20th
/early 21st century
• Early 21st C. highest economic growth
rates in emerging countries
BRICS nations (Brazil, Russia, India,
China) + South Africa since 2011
– Known for rapid growth of their industrial
sectors
– Capitalizing on their advantages (e.g.
natural resources, labour, infrastructure)
– Strong state intervention
New Model of Sustainable
Development
• Limits of old model of industrial growth
spread by TRIAD
• Demographic giants (India & China)
have huge needs
• Production based on fossil fuels
causing pollution and global warming
• Economic growth must be reconciled
with the environment
Conclusion
Periods of Crisis have enabled
capitalism to adapt and for new
powers to emerge.
– Slowing down of growth in Europe
– Birth of multinational corporations
– Progression of international trade
– Appearance of new competition in
Europe (Germany) and outside of
Europe (BRICS)
The Global Power Shift
• TED Talk – Paddy Ashdown
Homework
• Read Globalization Chapter 34
Unfinished Nation
(chapter scanned on blog)
Watch the TED talk (Global Power Shifts)
and answer the questions.