the global economy and globalisation

8/13/2019 The Global Economy and Globalisation

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The Global Economy and Globalisation - 2002

Anthony StokesLecturer in Economics

Australian Catholic University, Strathfield.

While there is a great deal of talk about the 'lobal Economy' and 'lobalisation', theyare often s!oken of, as if everyone understands "hat is meant by the terms or,alternatively, as giant mysterious forces that control the "orld, that no one has anykno"ledge or understanding of. #he aim of this !a!er is to e$amine the 'lobalEconomy' and 'lobalisation' and to see "hat is ha!!ening in these areas.

#he lobal Economy

#he lobal economy is the "orld economy. %t is the economic activity going on in the"orld. %t is the combined economic activity that takes !lace in each individual economy!lus the activity bet"een countries. %t includes all !roduction, trade, financial flo"s,investment, technology, labour and economic behaviour in nations and bet"een nations.

#he estimated total out!ut of the "orld economy in &( "as valued at almost )**,billion US +%-, &&. A concern "hen dealing "ith the global economy is the sharingof this global out!ut. #he /uman 0evelo!ment 1e!ort +(222 estimated that in (223,456 of World 07 "as o"ned by the richest &6 of the global economy, "ith the!oorest &6 o"ning 8ust (6 bet"een them.

%s the lobal Economy ro"ing9

#he "orld economy has been gro"ing, averaging :.* 6 annual !ercentage gro"th duringthe (22;s. %n & it gre" by *.36 but according to the %- +&& global gro"thslo"ed to &.


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ra!h (. World 07

Source? %- +&&

#he global economy, like individual economies, goes through cycles of gro"th anddecline. #hese cycles are referred to as the %nternational @usiness Cycle. #he u!s anddo"ns of this cycle have a ma8or im!act on most of the economies in the "orld. #hestages of the cycle are the same as national business or trade cycles, see ra!h &.

ra!h &. #he %nternational @usiness Cycle.

What is lobalisation9

-or the !ur!ose of this !a!er and in light of the ne" /SC Economics Syllabus +&, %"ill define lobalisation as having t"o key as!ects.

(. #he actual movementacross nations of

#rade %nvestment #echnology

&

%

W7

BEA1S

U!s"ing

@oom

0o"ns"ing

#rough

0

1

2

3

4

5

1991 1992 1993 1994 1995 1996 1997 199 1999 2000 2001 2002

!ea"s


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-inance and Labour

&. #he ca#acity to move and the #otential movementacross nations of

#rade

%nvestment #echnology -inance and Labour

1. The actual movement across nations of Trade

#he level of global trade has been gro"ing dramatically since the end of World War %%.#he rate of gro"th in "orld trade doubled from 26 in the (25;s to &6 in the(23;s. %t continued to gro" by


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nations. A ma8or concern for develo!ing economies is their #erms of #rade, ie therelative !rices of e$!orts com!ared to im!orts >

E$!ort 7rice %nde$%m!ort 7rice %nde$

#he #erms of #rade for develo!ing economies fell on average by .46 !er annum,com!ared to an increase of .&6 !er annum in advanced economies, during the (22;s.#his follo"ed on from an annual decline of &.36 !er annum in the (24;s for develo!ingeconomies and a .46 increase !er annum for advanced economies +%-,(222. Whiletrade is increasing in the develo!ing countries the decline in the #erms of #rade can leadto a greater debt burden for the develo!ing economies and increased income transfers toadvanced economies.

2. International Investment

#his relates to investment by #ransnational Cor!orations +#DC's. #his is also kno"n as

%nternational 0irect %nvestment +%0%. %nternational direct investment continues togro" at a rate even faster than "orld trade. Annual outflo"s of foreign directinvestment e$!anded more than : times to reach US)(&3 billion at the end of thet"o decades to & and the stock of direct investment has more than trebled in thelast (< years. #here are a!!ro$imately 5, transnational cor!orations +#DC;s"ith over


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education or health care. #his in turn increases the !o"er and "ealth of those "ho largelyo"n the !ro!erty rights, the transnational cor!orations.

4. International Financial Flos

%nternational financial flo"s have gro"n most ra!idly of all, at ( times the rate of World07. Since the !hasing out of controls on foreign e$change trading in the (23;s,international financial flo"s have gro"n e$!onentially. %n (24 global foreigne$change trading "as ( times the value of "orld trade. %n (22


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-or"ard 1ate Agreements? #his is a contract bet"een t"o !arties to lock in a giveninterest rate or e$change rate starting at some time in the future for a set !eriod of time.-or e$am!le guaranteeing to lend )( million at 46 interest in 5 months time for (&months.ther hedging instruments include issuing debt securities and undertaking re!urchase

ra!h *? 0erivative #rading

An im!ortant !oint to note is the amount of foreign e$change traded in one day is theeuivalent of all the reserves of the "orld;s Central @anks. #his severely limits the abilityof Central @anks to influence the flo" of finance in the global economy and thus theim!act these flo"s can have on a nation's e$change rate, as "as seen in the Asiancurrency crisis in (223. #he amaGing rate of gro"th in the financial flo"s, and as a result

their ability to im!act on the global economy, can be seen in ra!h


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Source? @%S, Annual 1e!orts +various

!. The International "ovement of #a$our

#he international movement of labour has been gro"ing since the (25;s. About &.:6 ofthe "orld !o!ulation live outside their country of birth and (.


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@ank for %nternational Settlement +@%S,&nnual 'e%ort, various, @asle, S"itGerland, @%S.

@ryan, 0. and 1afferty . +(222, The (lo$al Economy in &ustralia, Sydney, Allen andUn"in.

%nternational onetary -und +(222>&&, World Economic Outlook, available athtt!?FF""".imf.orgF

1eserve @ank of Australia +various years,'eserve )ank of &ustralia )ulletin, Sydney,1@A.

#reasury +(222,Im%lications of the (lo$alisation of Financial "arkets, submission tothe /ouse of 1e!resentatives Standing Committee on Economics, -inance and 7ublicAdministration? %nuiry into the %m!lications of the lobalisation of %nternational-inancial arkets for acroeconomic 7olicy and the !eration of -inancial arkets,available at htt!?FF""".a!h.gov.auFhouseFcommitteeFef!aFifmFsubs.htm

United Dations 0evelo!ment 7ro8ect +(222, *uman +evelo%ment 'e%ort 1,,,,available at htt!?FF""".und!.orgFhdroF

%nternet 1esources

reenacre Educational 7ublications, htt!?FFhome!ages.ihug.com.auFHge!Feconomics.htm

International "onetary Fund, htt!?FF""".imf.orgF

-roductivity ommission, htt!?FF""".!c.gov.auF

The *ouse of 'e%resentatives /tanding ommittee on Economics0 Finance and -u$lic

&dministration0 htt!?FF""".a!h.gov.auFhouseFcommitteeFef!aFifmFsubs.htm

The *uman +evelo%ment 'e%ort, htt!?FF""".und!.orgFhdroF

The World )ank (rou%, htt!?FF"""."orldbank.orgF

The World Trade Organisation, htt!?FF"""."to.orgF

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http://www.imf.org/http://www.aph.gov.au/house/committee/efpa/ifm/subs.htmhttp://www.undp.org/hdro/http://homepages.ihug.com.au/~gep/economics.htmhttp://www.imf.org/http://www.pc.gov.au/http://www.aph.gov.au/house/committee/efpa/ifm/subs.htmhttp://www.undp.org/hdro/http://www.imf.org/http://www.wto.org/http://www.imf.org/http://www.aph.gov.au/house/committee/efpa/ifm/subs.htmhttp://www.undp.org/hdro/http://homepages.ihug.com.au/~gep/economics.htmhttp://www.imf.org/http://www.pc.gov.au/http://www.aph.gov.au/house/committee/efpa/ifm/subs.htmhttp://www.undp.org/hdro/http://www.imf.org/http://www.wto.org/

the global economy and globalisation

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