Presentation on theme: "Globalization and its effects"— Presentation transcript:
1 Globalization and its effects (some evidence)Jože P. DamijanUniversity of Ljubljana
2 Globalization Globalization: good or bad? Trade routes and the shrinking GlobeWhat defines globalization?Trade liberalization, capital account deregulation, IT rev.Why is it proceeding rapidly?EvidenceGlobal trade flowsForeign direct investment (FDI) flowsGlobalization: good or bad?
4 History of globalization Traits of globalization can be traced to as far back as the Roman EmpireThe Silk Road started in China, reached portions of the Parthian Empire and ended in RomeThe trade route helped to integrate the three economies of the Han Dynasty, Persian and Roman Empires.
5 History of Globalization The word "globalization" has been used by economists since 1981.The concepts only became popular in the later half of the 1990s.The first era of globalization (in the fullest sense) during the 19th century:rapid growth of trade between the European imperial powers, the European colonies, and the United States.After World War II, globalization was restarteddriven by major advances in technology, which led to lower trading costs.
6 Globalization Definitions World wide integration and deepening of economic activitiesIntegrated production and consumption systemsFacilitated by IT revolution, liberalization and deregulationUnprecedented mobility of goods, services, capital and peopleEvents all over the world strongly interdependenti.e. global financial and economic crisis
7 Drivers of Globalization open markets - it could not happen if import quotas or high tariffs prevented the sales.cheap air transport - the beat-up old Boeings that have become the tramp steamers of modern trade.modern telecommunications - the vegetables are delivered to order, i.e. messages must be sent to the farmers in a way that used to be possible only in advanced countries with good phone systems.
22 FDI trends in EU-NMS Top locations: HU, CZ, PL Latecomers: SK, BG, RO Source: UNCTADstat.
23 Summary of evidence Increased global openness for trade and FDI Three waves of export boomsecond one in Asia after 1985China export boom only after 1999FDI boombut a real boom only after 1998Exports and FDI trends highly correlatedServices trade increasing, but slower than goods
25 Effects of globalization Open economies grow fasterclear evidenceWhat about the effects on manufacturing and employment?Advanced vs. developing countriesOther effectsPoverty, unequalitylabor standards, child & women labor
26 Open economies grow faster Average growth rate in open econ. bigger by 3.3 pptSource: UNIDO
27 Clear differences between regions Fastest avg. growth in OECD, followed by Asia and Lat. Am, Africa slowSource: UNIDO
28 Fastest growing open economies Asian countries on topSource: UNIDO
29 Benefits of globalization Increased choice, lower pricesGreater potential for growthIncrease international economies of scaleGreater employment opportunitiesLed to massive increases in wealth for many countriesWorld poverty decreased
30 World poverty decreased Source: Worldbank/Poverty gap.
31 … however, mostly effect of China Source: Worldbank/Poverty gap.
32 Other benefits (1)Income inequality for the world as a whole is diminishingInfant mortality has decreased in every developing region of the worldLife expectancy has almost doubled in the developing world since World War IIHans Rosling: “200 years that changed the world”
33 Other benefits (2)Between 1950 and 1999, global literacy increased from 52% to 81% of the world.female literacy as a percentage of male literacy has increased from 59% in 1970 to 80% in 2000.The percentage of children in the labor force has fallen from 24% in 1960 to 10% in 2000.Similar increasing trends toward electric power, cars, radios, and telephones per capita, as well as a growing proportion of the population with access to clean water.
34 The flip side Developing countries Unregulated power of large, multi-national corporations, which damagethe democratic rights of citizens,the environment, particularly air quality index and rain forests,as well as national governments sovereignty to determine labor rightsright to unionize for better pay, and better working conditionswomen and child labor
35 The flip side Advanced countries (1) De-industrialization trendsThe shift to service work: the low cost of offshore workers enabled corporations to move production abroad.the laid off unskilled workers are forced into the service sector where wages and benefits are low, but turnover is high.widening economic gap between skilled and unskilled workers.The loss of these jobs has also contributed greatly to the decline of the middle class which is a major factor in the increasing economic inequalityEconomic instability
36 The flip side Advanced countries (2) Effects of globalization on wages in US (BLS study, 2001)in the period , 31% of those who lost a job due to trade were not fully re-employed.only 36% of the displaced workers were able to find a new job with matching or higher wages,55% were at best working for 85% of their former wages,and 25% were working for 70% or less of their former wageEffects on employment in US (BLS study, 2011)6 million jobs lost in U.S. manufacturing between 1979 and 2007 (from 19.6 to 13.7 million),more than half of it after 2001 (trade liberalization with China)
37 The flip side Advanced countries (3) Global imbalances in trade and capital flows starting in the latter half of the 1990sThese imbalances reflected a chronic lack of saving relative to investment in the US and other industrial countries,combined with an extraordinary increase in saving relative to investment in many emerging market nations.In turn,the increase in excess saving in the emerging countries (resulted from rapid economic growth reduced investment rates, large buildups in foreign exchange reserves, and substantial increases in revenues by exporters of oil and other commodities) …resulting in large capital inflows for more than a decade in the US and some other advanced… made the foundations of the current global financial crisisBen Bernanke (2009)
38 Global shift Has globalization shifted global political powers? From US to China?Chinese Professor Ad: "Now They Work for Us"