Download - Apresentacao Seminario Martin Wolf
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Globalisation, States and Markets
Economics Commentator, Financial
Times, London
Braudel Institute
Sao Paolo
4th October 2010
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Globalisation, states and markets
1. Towards a global economy
2. Globalisation and the state
3. The financial crisis and the state
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4. Global governance and the state
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1. Towards a global economy
Globalisation is integration of economies through
markets across frontiers. It is driven by technological change;
economic liberalisation; and
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Entry of billions into the world economy.
In the 1980s and 1990s there was a worldwide
liberalisation revolution, as communism, socialism,
planning and import substitution were abandoned
Globalisation followed
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1. Towards a global economy
THE INTERNET BECOMES ASIAN
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1. Towards a global economy
RISE OF THE MOBILE INTERNET
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1. Towards a global economy
TRENDS IN OPENNESS
100 MINUS THE TARIFF RATE
85
90
95
100
Source: IMF
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50
55
60
65
70
75
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Latin America and the Caribbean Developing Asia
Newly industrialized Asian economies Advanced economies
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1. Towards a global economy
PATTERNS OF CATCH-UP GROWTH
GDP PER HEAD RELATIVE TO US (2009 EK $s)
100.0%
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1.0%
10.0%
1950
1953
1956
1959
1962
1965
1968
1971
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
Japan South Korea China India
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1. Towards a global economy
We are in the midst of a huge global upheaval, driven
by technology, liberalisation and the entry of countrieswith huge labour resources into the world economy.
It is a labour shock, as opposed to the land shock of
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the 19th
century. It changes everything about our world: economics and
politics
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2. Globalisation and the state
Markets need supportive states
States must provide a range of essential public goods,
particularly security
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,
The creation of such a state is obviously difficult andthe achievement rare
More common have been predatory, weak or failingstates
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2. Globalisation and the state
The difference in size among states is not a problem,
except to the extent that big states have to provideglobal public goods and so must accept free-riding bysmall states
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But the difference in quality of states is a hugechallenge for the world
This not only creates great global inequality, but black
holes of disorder
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2. Globalisation and the state
The late Mancur Olson in Power and Prosperity,
defined the state as a stationary bandit. This wassuperior to a roving bandit. But it was still a bandit.
He argued that democracy would bring the stationary
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bandit under control. But it changes the nature of thebanditry rather than its existence.
The function and operation of the state always reflect
the interests of those who control it.
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2. Globalisation and the state
In considering contemporary states, we need to assess:
their historical roots and their nature.
As far as history is concerned, two factors are dominant:
Level of development, with richer societies more likely to be
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emocra c; an
Source of wealth, with resource-rich countries less likely to bedemocratic.
As far as the nature of the state is concerned, two forms are
particularly important: Welfare states and developmental states
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2. Globalisation and the state
Welfare states:
In the course of the 19th and 20th centuries, western statesbecame democratic.
Since property and income are more unevenly distributed than
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vo es, e we are s a e s an a mos nev a e resu . spointless to complain unless one believes one can (andshould) return to a limited franchise.
Over time, spending in contemporary advanced welfare states
rose from about 10 per cent of GDP in the early 20th
century(predominantly on defense) to 30-60 per cent of GDP, mostlyon transfers and social consumption.
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2. Globalisation and the state
Welfare states have proved compatible with economicsuccess and globalisation. But they face constraints:
Tax rates have reached politically acceptable limits;
Demographic change makes public spending increasinglyunaffordable; and
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income from capital and highly skilled people is increasinglymobile and so decreasingly taxable.
We are moving into an era of great pressure on welfare states.
At the same time, economic changes within the advanced
welfare states is creating growing inequality and insecurity. The financial crisis has exacerbated these tensions, but did
not cause them.
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2. Globalisation and the state
Developmental states:
Catch-up states have always been developmental states, tosome degree. This was true of the US and Germany in the19th century and Japan in the 20th
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as s an s a es ave een par cu ar y success udevelopmental states. Why?
Cultural traditions of strong bureaucratic states;
Sense of national purpose;
Extreme pragmatism;
Freedom of manoeuvre for the technocracy; and
High savings in the population.
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2. Globalisation and the state
Latin American states are welfare-developmental
hybrids
Brazil is an obvious example
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Low savings; and
High public spending;
Or are these premature welfare states?
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3. The financial crisis and the state
Ronald Reagan famously said that "The nine most
terrifying words in the English language are: 'I'm fromthe government and I'm here to help.
For the world and the advanced economies in
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,
growing confidence in markets and diminishingconfidence in states.
How much of this is now left after the financial system
the heart of the market economy had to be rescuedby governments?
So how did this happen and what does it mean?
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3. The financial crisis and the state
So why did we have this huge financial crisis?
1. Ideas: belief in efficient markets, inflation targeting and thegreat moderation;
2. Economics: emergence of huge global imbalances andextraordinar reserve accumulations low real and nominal
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interest rates and the reach for yield;3. Finance: innovation in the financial sector, to provide
notionally safe, high-yielding assets and failure ofcommission (risk-weighted capital ratios and reliance onratings) and omission (deregulation of securities and housingmarkets) in financial regulation.
Success bred excess and excess bred collapse
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3. The financial crisis and the state
THE RISE OF THE IMBALANCES
GLOBAL CURRENT ACCOUNT IMBALANCES
(as share of global gross domestic product)
2
3
Source: IMF, WEO April
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-3
-2
-1
0
1
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
US OIL DEU+JPN OCADC CHN+EMA ROW
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3. The financial crisis and the state
RISE OF FOREIGN CURRENCY RESERVES
RISE OF FOREIGN CURRENCY RESERVES ($m)
7,000,000
8,000,000
9,000,000
Other developing
Mexico
Brazil
Algeria
Saudi Arabia
Russia
Other industrial
20
-
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
, ,
31/01/1999
31/07/1999
31/01/2000
31/07/2000
31/01/2001
31/07/2001
31/01/2002
31/07/2002
31/01/2003
31/07/2003
31/01/2004
31/07/2004
31/01/2005
31/07/2005
31/01/2006
31/07/2006
31/01/2007
31/07/2007
31/01/2008
31/07/2008
31/01/2009
31/07/2009
31/01/2010
Australia
UK
Eurozone
US
Other Asia
Thailand
Malaysia
Hong Kong
Singapore
Korea
Taiwan
India
Japan
China
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3. The financial crisis and the state
FINANCIAL SECTOR DEBT EXPLOSION
SECTORAL RATIOS OF US DEBT TO GDP
100.0%
120.0%
140.0%
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0.0%
20.0%
40.0%
60.0%
80.0%
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
Households Non-financial Business All Government Financial Sectors
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3. The financial crisis and the state
The economic collapse has been large.
The rescue has been extremely expensive unprecedented fiscal and monetary action andcomprehensive socialisation of financial sector
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liabilities: It has worked.
But it has also changed the entire policy game.
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3. The financial crisis and the state
FISCAL FIREPOWER USED
FISCAL BALANCES OVER GDP
-2
0
2
23
-10
-8
-6
-4
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
Advanced economies Emerging and developing economies World
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3. The financial crisis and the state
FISCAL FIREPOWER LARGELY USED UP
PUBLIC DEBT OVER GDP
100
120
140Source: IMF WEO April
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0
20
40
60
80
1950
1953
1956
1959
1962
1965
1968
1971
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
2013
Advanced economies Emerging and developing economies World G7
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3. The financial crisis and the state
What, then, does this crisis mean for the future of the
state? I would propose four points:
It has revealed the contradictions in a lobal econom shared
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by market states and east Asian developmental state,especially when one of the latter is as huge as China
It has brought forward the fiscal crisis of the welfare states;
It has destroyed the legitimacy of the laissez faire approach tofinance; and
It has destroyed the prestige of the US and the west.
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4. Global governance and the state
The state is the basis of national order
It is also the only foundation of global order
Global governance is provided by co-operation among
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We need to provide global public goods, internaliseglobal externalities (climate change, for example) andprovide machinery for managing the world economy
This can be done via a combination of informal co-operation and formal specialised institutions
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4. Global governance and the state
The rise of the emerging countries and the financial
crisis has altered the context for global governance infundamental ways:
It has shifted the balance of power;
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It has increased resistance to globalisation, particularly inadvanced countries.
Results already include the rise of the group of 20, the
semi-decoupling of emerging economies andfundamental questions about the durability of the US-based global political and economic system
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4. Global governance and the state
In economic policy, some of the big challenges ahead
include: Rebalancing the world economy;
Adjusting exchange rates; and
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Restructuring the global monetary system.
All this needs to be done at a time of transition not just
between superpowers but between civilisations.
The West declines and Asia rises.
The chances of a breakdown have to be very high.
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5. Concluding points
I would like to leave you with four points:
Globalisation continues to transform the world in which we livein often surprising ways. The rise of Asia is the most importantfeature of this age of globalisation.
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ar e s eman governmen . u w a n o governmen s
best? We are watching another round in the long debatebetween welfare states and developmental states.
The financial crisis has dramatically increased the role ofstates, while also accelerating the fiscal stresses upon them.
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5. Concluding points
The financial crisis has also discredited the intellectualdomination of the West.
Global governance requires a very high level of co-operationamong states. The rise of Asia, particularly China, is going tomake this much more challenging than before.
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