Globalisation and Growth Richard Kneller Leverhulme Centre for Research on Globalisation and Economic Policy
Pro-Globalisers Globalisation for Growth Richard Kneller Leverhulme Centre for Research on Globalisation and Economic Policy
Anti-globalisers Globalisation versus Growth Richard Kneller Leverhulme Centre for Research on Globalisation and Economic Policy
Globalisation Economy
Growth of What? • Gross Domestic Product (2006) – Japan 3, 946, 090 $million India 3, 729, 533 $million • Population – Japan 120 million India 998 million • GDP per capita (per person) (2006) – Japan $ 32, 647 India $ 3, 737
Two methods for countries to get rich Steal – Empire Building Buy - Invest
GDP per capita - World Income Distribution
GDP per capita - World Income Distribution
GDP per capita - World Income Distribution Industrial Revolution
GDP per capita - World Income Distribution US over takes UK
GDP per capita - World Income Distribution Rapid growth begins in Japan and spreads to the other South East Asian economies and eventually China
GDP per capita - World Income Distribution Incomes in Africa are stagnant
• Historically Successful (US, Europe) – high income levels, but slow growth The World Income – low initial income, rapid growth Distribution can be • Were Successful, No longer (Latin America) summarised by four – high initial income, slow often volatile growth • Never Successful of country (Sub-Saharan Africa) types slow often negative growth – low initial income, • Newly Successful (S. E. Asia, Ireland) • Together these lead to a world income distribution that has widened over time.
Globalisation and Growth Does globalisation explain why GDP person has grown quickly in some countries and why they are therefore rich? Has globalisation mattered more for growth in US Ireland Argentina Cote d’Ivoire
GDPpc rank Luxembourg Singapore Ireland Belgium Estonia Globalisation rank 1 2 3 4 5 Senegal Rwanda India Niger Bangladesh 89 90 91 92 93 147 161 118 172 138 1 17 2 13 42
Do countries grow faster if they become more globalised? Ireland YES UK Greece
Do countries grow faster if they become more globalised? China YES Cote d’Ivoire
Do countries grow more slowly if they close themselves off from the rest of the world? South Korea YES North Korea
Globalisation and Growth The Evidence looks convincing enough to suggest that globalisation matters. If you globalise faster than others you grow faster If you stop global engagement you grow more slowly But are we just picking winners – countries that have been successful What happens if we choose a different set of countries
US growth has been constant since 1870 Ln(GDPpc)
Does globalisation matter in the US? Growth NO International trade If globalisation mattered in a simple way, growth should trend up
Does globalisation matter in the US? Ln(GDPpc) Smoot-Hawley tariff of 1930 raised import tarrifs on 20, 000 goods. By 1933 income levels had dropped to where they were 28 years earlier YES
Does globalisation always work? Argentina has moved from anti to proglobalisation policies. Some have suggested that now too exposed NO to the world economy. Europe Argentina Anti-globalisation policies Pro-globalisation policies
Globalisation and Growth What about the very poor – Sub Saharan Africa They are as rich now as the UK/Italy were in 1500
Globalisation and Growth According to the data they would not have seen many differences in income levels in Malawi?
Globalisation and Growth What about the very poor – Sub Saharan Africa They are as rich now as the UK/Italy were in 1500 Did they attempt to globalise? Yes and it was economists who told them they should. Indeed it was imposed upon them
Growth in the average developing country Actual Predicted Economists asked what policies (including globalisation) have worked in the past and in Asian Tigers
Growth in the average developing country Predicted Actual They then imposed policy reform and predicted growth would rise
Growth in the average developing country Predicted In fact it fell Actual
Growth and Globalisation • Initial response by economists was to blame developing countries • Response now more measured, recognition that other factors matter • Together explains the position of antiglobalisers in US, France, Latin America, Africa
Is globalisation good for growth? • It matters for countries that are rich (the income frontier) • It can lead to fast growth for countries behind the frontier • Globalisation is no magic bullet • There are deeper problems that globalisation are not obviously the cause or cure of
Is globalisation good for growth? "Yeah but no need but Economists yeah but no like to be more but. . . ", Pollard Vicky
Questions
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