Second thoughts on globalisation

Mark Thirlwell4 April 2007

Globalisation: good for growth . . .

Sources: IMF World Economic Outlook September 2006 database

1

2

3

4

5

6

7

1970 1975 1980 1985 1990 1995 2000 2005

World Trend 1970-2005

World real GDP growth

% change on previous year

Globalisation: good for growth . . .

Sources: IMF World Economic Outlook September 2006 database

1

2

3

4

5

6

7

1970 1975 1980 1985 1990 1995 2000 2005

World Trend 1970-2005

World real GDP growth

% change on previous year

Trend growth has risen by about one percentage point

(3.4% - 4.4%) between 1980 and

2007

. . . good for inflation . . .

Sources: IMF World Economic Outlook September 2006 database

0

5

10

15

1970 1975 1980 1985 1990 1995 2000 2005

AdvancedeconomiesDevelopingcountries

World consumer price inflation

% change on previous year

. . . good for inflation . . .

Sources: IMF World Economic Outlook September 2006 database

0

5

10

15

1970 1975 1980 1985 1990 1995 2000 2005

AdvancedeconomiesDevelopingcountries

World consumer price inflation

% change on previous year

The ‘Great Moderation’ in

inflation

. . . and good for China and India

Sources: IMF World Economic Outlook September 2006 database

0 5 10 15 20 25

Russia

Brazil

Italy

France

United Kingdom

Germany

India

Japan

China

United States

Ten largest economies, 2005

% of world GDP, PPP basis

0

5

10

15

20

25

1980 1985 1990 1995 2000 2005

India

China

%, PPP basis

Share of world output

. . . and good for China and India

Sources: IMF World Economic Outlook September 2006 database

0 5 10 15 20 25

Russia

Brazil

Italy

France

United Kingdom

Germany

India

Japan

China

United States

Ten largest economies, 2005

% of world GDP, PPP basis

0

5

10

15

20

25

1980 1985 1990 1995 2000 2005

India

China

%, PPP basis

Share of world output By 2005 China and India accounted for about 21% of world GDP at PPP rates

. . . and good for China and India

Sources: IMF World Economic Outlook September 2006 database

0 5 10 15 20 25

Russia

Brazil

Italy

France

United Kingdom

Germany

India

Japan

China

United States

Ten largest economies, 2005

% of world GDP, PPP basis

0

5

10

15

20

25

1980 1985 1990 1995 2000 2005

India

China

%, PPP basis

Share of world output

On the same basis, China was the

world’s 2nd largest economy, and

India in 4th place

Six rich country worries

• Scared by success

• Spooked by security

• Ill at east with inequality

• Troubled by trade

• Rattled by resource security

• Exercised by the environment

Remaking the world economy

Sources: Angus Maddison (2006)

0

10

20

30

40

50

60

1300 1500 1820 1913 1950 1973 2003 2030

India

China

%, PPP basis

Share of world output

Remaking the world economy

Sources: Angus Maddison (2006)

0

10

20

30

40

50

60

1300 1500 1820 1913 1950 1973 2003 2030

India

China

%, PPP basis

Share of world output Before the start of C19th globalisation,

China and India may have

accounted for half of world GDP

Remaking the world economy

Sources: Angus Maddison (2006)

0

10

20

30

40

50

60

1300 1500 1820 1913 1950 1973 2003 2030

India

China

%, PPP basis

Share of world output Before the start of C19th globalisation,

China and India may have

accounted for half of world GDP

On fairly conservative

assumptions, share back up to one third

by 2030

“Economists argue that in economic competition what counts are absolute not relative gains; to economists this is a self-evident truth. It is however, self-evident to almost no one but economists . . . they are blind to the fact that economic activity is a source of power as well as well-being. It is, indeed, probably the most important source of power, and . . . will be increasingly important in determining the primacy and subordination of states.”

“Why international primacy matters”

Samuel Huntington (1993)

Good for global inequality . . .

Sources: Bourguignon and Morrison (2002) and Sala-i-Martin (2006)

0.48

0.52

0.56

0.60

0.64

0.68

1820 1870 1910 1950 1970 1980 1990 2000

Bourguignon-Morrisson

Sala-i-Martin

Global Gini index

Index from 0 to 1: 0 indicates perfect equality, 1 perfect inequality

Good for global inequality . . .

Sources: Bourguignon and Morrison (2002) and Sala-i-Martin (2006)

0.48

0.52

0.56

0.60

0.64

0.68

1820 1870 1910 1950 1970 1980 1990 2000

Bourguignon-Morrisson

Sala-i-Martin

Global Gini index

Index from 0 to 1: 0 indicates perfect equality, 1 perfect inequality

Global inequality may have peaked

around 1980

. . . but not for national inequality

Sources: US Census Bureau

0.38

0.40

0.42

0.44

0.46

0.48

1970 1975 1980 1985 1990 1995 2000 2005

US Gini Index

Index from 0 to 1: 0 indicates perfect equality, 1 perfect inequality

. . . but not for national inequality

Sources: US Census Bureau

0.38

0.40

0.42

0.44

0.46

0.48

1970 1975 1980 1985 1990 1995 2000 2005

US Gini Index

Index from 0 to 1: 0 indicates perfect equality, 1 perfect inequality

2005 Gini index highest yet recorded

Does labour lose out?

96

97

98

99

100

101

102

103

104

105

106

1980 I 1985 I 1990 I 1995 I 2000 I 2005 I

Labour share of US national income

Index, 1992 = 100, nonfarm business sector

Sources: World Bank and US Bureau of Labor Statistics

0 200 400 600 800 1000

Nigeria

Pakistan

Bangladesh

Japan

Russian Federation

Brazil

Indonesia

United States

India

China

Ten largest labour forces, 2005

Millions

Does labour lose out?

96

97

98

99

100

101

102

103

104

105

106

1980 I 1985 I 1990 I 1995 I 2000 I 2005 I

Labour share of US national income

Index, 1992 = 100, nonfarm business sector

Sources: World Bank and US Bureau of Labor Statistics

0 200 400 600 800 1000

Nigeria

Pakistan

Bangladesh

Japan

Russian Federation

Brazil

Indonesia

United States

India

China

Ten largest labour forces, 2005

Millions

In 2005, China accounted for about

25½ % of the potential global

labour force, and India another 14½%

Reshaping world trade

Sources: WTO International trade statistics

0

1

2

3

4

5

6

7

8

1980 1985 1990 1995 2000 2005

Exports

Imports

China's share of world merchandise trade

% of total

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

1980 1985 1990 1995 2000 2005

India 's share of w orld 'other' commercial services exports

% of total

Reshaping world trade

Sources: WTO International trade statistics

0

1

2

3

4

5

6

7

8

1980 1985 1990 1995 2000 2005

Exports

Imports

China's share of world merchandise trade

% of total

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

1980 1985 1990 1995 2000 2005

India 's share of w orld 'other' commercial services exports

% of total

China now the world’s third largest

trading nation, accounting for 7% of exports, 6% of

imports

Reshaping world trade

Sources: WTO International trade statistics

0

1

2

3

4

5

6

7

8

1980 1985 1990 1995 2000 2005

Exports

Imports

China's share of world merchandise trade

% of total

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

1980 1985 1990 1995 2000 2005

India 's share of w orld 'other' commercial services exports

% of total

India’s share of ‘other’ commercial services exports up from 0.5% in 1996 to almost 4% by

2005

US-China trade tensions

Sources: US Department of Commerce

-250

-200

-150

-100

-50

0

50

1980 1985 1990 1995 2000 2005

US$ bn

US-China bilateral trade balance

US-China trade tensions

Sources: US Department of Commerce

-250

-200

-150

-100

-50

0

50

1980 1985 1990 1995 2000 2005

US$ bn

US-China bilateral trade balance

2006 bilateral deficit of US$232.5

billion

Resource hunger

Sources: BP Handbook of Energy Statistics 2006, Various

0

3

6

9

12

1980 1985 1990 1995 2000 2005

China India

Share of world oil consumption

% of total

0

15

30

45

60

75

90

China's contribution to global consumption growth

% share, selected commodities 2002-2005

Resource hunger

Sources: BP Handbook of Energy Statistics 2006, Various

0

3

6

9

12

1980 1985 1990 1995 2000 2005

China India

Share of world oil consumption

% of total

0

15

30

45

60

75

90

China's contribution to global consumption growth

% share, selected commodities 2002-2005

China is now the world’s largest

consumer of the major metals and the second largest

consumer of energy

Resource hunger

Sources: BP Handbook of Energy Statistics 2006, Various

0

3

6

9

12

1980 1985 1990 1995 2000 2005

China India

Share of world oil consumption

% of total

0

15

30

45

60

75

90

China's contribution to global consumption growth

% share, selected commodities 2002-2005

China is now the world’s largest

consumer of the major metals and the second largest

consumer of energy

More than 30% of growth in oil consumption; more

than 45% growth in aluminium, copper and

steel consumption; three-quarters of coal, tin and

nickel consumption growth

Environmental strains

Sources: EIA International Energy Outlook

0

5

10

15

20

25

1980 1985 1990 1995 2000 2004

India

China

Share of world CO2 emissions

%

0 5 10 15 20 25

Italy

South Korea

United Kingdom

Canada

Germany

India

Japan

Russia

China

United States

% of world total

Ten largest CO2 emitters, 2004

Environmental strains

Sources: EIA International Energy Outlook

0

5

10

15

20

25

1980 1985 1990 1995 2000 2004

India

China

Share of world CO2 emissions

%

0 5 10 15 20 25

Italy

South Korea

United Kingdom

Canada

Germany

India

Japan

Russia

China

United States

% of world total

Ten largest CO2 emitters, 2004

Share of CO2 emissions in 2004: 21.5%. But share

of cumulative emissions much lower (less than

10%)

Six developments to track

• Renewal of TPA in the US . . .

• . . . and the future of the Doha Round

• May’s SED in Washington

• China’s new economic model?

• IMF (quota) reform

• ‘Greening’ globalisation

Second thoughts on globalisation

Mark Thirlwell4 April 2007