Transcript Key trends in the global economy

Key trends in the Global Economy
Federico Steinberg
Outline
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Economic Globalization
Economic impact
 Political impact
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Social, economic and technological global trends
Governance of a multipolar global economy
A world in transition
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Convergence, interdependence and multipolarity
Societies are more democratic, older, more urban, more
unequal
More civil wars and less wars between countries
Increasing economic and geopolitical rivalry
From a rules based multilateral international system to
geoeconomic and political conflict
Crisis/transformation of global economic governance
institutions
From the Atlantic to the Pacific
What is economic globalization?
“A dynamic process of global economic
integration characterized by increasing freedom
in the movement of labor, goods, services,
technology, and capital”
(De la Dehesa, 2000).
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Increase in international flows of:
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Goods
 Services
 Capital
 Information
¿Migration?
Trade to GDP Ratio
The transformation of international trade:
MNCs, the breakdown of the production
process and New Global Value chains
Why did all this happen?
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Explanations:
- Ideas
- interests
- Institutions
- Technology
Is reflected in:
- Deep economic liberalization
- Incorporation of millions of people to the world
economy, especially in Asia
- Change in the balance of power
In theory, Economic globalization should imply…
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Greater economical interdependence
Better allocation of resources
Higher opportunities for growth
Faster nort- south technological transfer
Greater incentives for international cooperation
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But…
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New costs and risks…
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Less policy space for governments in economic policy:
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Short run adjustment costs:
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The Welfare State under pressure in rich countries
Unequal opportunities in poor countries
Higher unemployment/lower wages
Sectorial restructuring, relocation and outsourcing
Increased inequality (more on this later)
Greater economic insecurity:
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Microeconomic level: personal economic risks
Macroeconomic level: higher markets volatility and greater
exposure to external shocks
Is globalization something new?
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Ratios of commercial and financial integration similar
to the ones in 1900…BUT:
 New role of trade in services
 Intra-industrial trade
 Role of MNCs
 Higher financial interdependence:
Importance of the portfolio investment flows
 Frequency of crisis: México 1994/95, Asia 1997,
Brazil/ Russia 1998, Argentina 2001, CURRENT
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 Role
of emerging markets
The Catch up process …
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They are at the forefront of global growth
Leaders of a new virtuous narrative
Emerging markets re-emerge
Decline of the west / Rise of the
Rest
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And especially of China
A new world map
…and define a new international
order?
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Which we tend to overestimate
They will keep growing
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Especially Asia
An increasingly selective approach in investments
will be needed
Interdependence is still key
Fiscal
Consolidation
Debt purchase
Weak financial
systems
Developed
Economies
Exports
Uncertainty
Lack of trust
Unemployment
Political Tensions
Emerging
Economies
Political effects of Globalisation
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Diffusion of power in the global economy: Nation States
loose power vis a vis:
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Markets
International economic institutions
Non-state actors (MNCs, NGOs, mafias, ...)
 sovereignty is reduced
But :
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Nation States remain the key actors of the international system
Power losses by states are asymmetrically distributed
Demography
Ageing
+ 40
-30
-20
Demographic
giants turn into
economic giants
GDP PPP, 2016
SOCIAL TRENDS (II)
Ageing
Urbanization
Inequality
DESIGUALDAD ECONÓMICA ENTRE 1820-2008
GRÁFICO 1
Índice de Theil
1.00
0.90
0.80
0.70
0.60
0.50
0.40
0.30
0.20
0.10
0.00
1820 1830 1840 1850 1860 1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010
DESIGUALDADDENTRODE CADA PAÍS
DESIGUALDADENTRE PAÍSES
DESIGUALDADGLOBAL
FUENTE: Morrison y Murtin, 2011.
(a) Desigualdad medida como un índice de Theil, en el que valores más elevados corresponden a una distribución más desigual.
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Due to trade or technological change?
It speeds up opposition to globalization
Poverty is falling
Social trends (IV):
FALLING OF POVERTY AND NEW MIDDLE CLASSES
New opportunities for MNCs
 Important! Products must be tailored
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In sum
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More global markets
+
National economic policies
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Unequal distribution of the gains
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Reduction in sovereignty
=
CONFLICT
Need for new global rules
 Global Economic Governance
The governance problem
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Enormous economic interdependence due to
globalization, especially financial integration
and global value chains
Need for higher economic cooperation (global
problems require global solutions)
Decline of the west/rise of the rest
Divergent views of how to govern the global
economy
Rising discontent with globalization in advanced
countries
Global Governace
“Global governance refers to the creation of rules and the exercise of
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global power [...] As there is no global government, global governance
involves strategic interaction between entities that are not distributed
in a hierarchical manner. "Robert Keohane
Economic perspective: global governance focuses on the provision of
global public goods:
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No rival in consumption
Not excludable through the price system
With positive externalities and transboundary effects
WHICH?
In a multipolar world, without a hegemonic power, international
cooperation is needed to provide global public goods
Problems and challenges (I)
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Global governance could be democratic or not
Even if it is democratic, it has accountability
problems and often a democratic deficit
Therefore, the challenge is to establish a
democratic global economic governance able of:
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Taking advantage of the benefits of globalization and
reducing its adverse effects
Distributing more equally material benefits in order to
avoid a backlash against globalization
Problems and challenges (II)
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Global governance requires transfering
sovereignty
States resist this. Above all:
- US (Post Kyoto, ICC, ODA, etc.).
- Emerging countries (irresponsible stance?)
The European Union as a model for
supranational governance?
Problems and challenges (III)
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A legitimate (and
efective) leadership
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Long run vision
How to manage interdependency
Domestic problems
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No risk of global collapse
=
Difficult international economic cooperation
(G20)
Gradual accumulation of:
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Protectionist and monetary tensions
Currency wars?
Regional trade agreements which give rise to
rival blocs (TPP, TTIP). Or not?
Slight deglobalization. Or fast?
Low-intensity conflicts. Or not?
Conclusion
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A world in transition
The relative decline of The West
A multipolar economy
Risks and opportunities associated to
globalization