1. TAMÁS NOVÁK Global Business Environment Globalisation, future trends

2. The current world background We are seeing a huge shift in relative economic power thanks to rise of China and India. Countries with 2,500 million Asian inhabitants are now enjoying fast growth and rising living standards. This is exerting a big increase in demand on world commodities: – Coal for power stations. – Oil for transport. – Grains for animal feedstuffs and for alternative fuels. – Metals for manufacture. – Gold and precious metals for the adornments of success – Iron ore for steel production. We are witnessing a shift in the terms of trade in favour of commodity producers. Commodity prices have risen sharply, giving windfall income gains to Middle Eastern oil producers, to Russia, and to Australia.

3. The current world background – At the same time as the surge in Asia is underway, the West has become heavily indebted. US and British consumers and governments have been especially heavy borrowers. – The Western banking system made large sums available for house purchase and for companies, including lending to those who will find it difficult to pay the interest. – These loans are now widely dispersed around the world’s financial system, thanks to securitisation and syndication. There is currently a crisis of confidence over this lending. – China has $2.0 trillion of reserves. The Middle Eastern countries and Russia are also building substantial investment funds from the proceeds of higher oil and gas prices. – A way has to be found to channel this wealth into the Western banks to recapitalise them, and into western investments to offset the Western balance of payments deficits. – China meanwhile is investing heavily in commodity production and mineral extraction in Africa.

4. The current world background The likely trends over the next decases include: – The continuing economic rise of India and China. – High commodity prices, coupled with the search for substitutes and new technologies by the US and the West. – The decline of Germany owing to population decline, along with much of the continent of Europe, and Euroland. – Continuing relatively strong performance of the Anglosphere amongst the richer countries, based on a freer approach to the movement of people, capital and ideas.

5. What is globalisation? The increase of goods and services which are traded over national borders and between continents. The pursuit of specialisation by cities/regions/countries that have a relative advantage in supplying particular goods and services. For example; textiles and DVDs from China; software from the USA; financial services from the City of London; cars from Germany. The manufacture of complex products by making components and sub assemblies in different countries and continents before final assembly. For example; vehicles/Airbus planes. The homogenisation of goods and services: MacDonald's food with a Coke, with a laptop running Microsoft programmes.

6. What is good about globalisation? – It delivers higher living standards to more people. – The more people specialise and trade the higher average incomes will be. – It spreads best practice and new ideas rapidly. – It allows many to enjoy global brands. – Large companies can put more money into research, innovation, sales, service.

7. What is good about globalisation? – Richer is cleaner – it is good for the environment. – It allows poorer countries to develop and cuts poverty. – Instant news and communications exposes tyrants and bad governments to more international pressure. – If you do not like the products of global companies you do not have to buy them.

8. What is bad about globalisation? Some say: – It is a new form of imperialism led by the United States of America. – It damages the environment. – It accentuates the gap between rich and poor. – It leads to exploitation of cheap labour and of developing countries. – It substitutes material values for more spiritual ones.

9. Is there an alternative to globalisation? – The main alternative to global capitalism (allied to democracy) tried in the twentieth century was communism. This too became a global creed. – It created a communist world which was poorer, dirtier and less free than the west. Many communists held global ambitions for their ideology. It collapsed in the USSR and Europe at the end of the 1980s through a series of popular revolts, and is being transformed by capitalist economics in China today. – Today the critics of globalisation have in mind a mixture of more localism, accepting lower incomes in return for a gentler, kinder society as they see it; and a new globalism, based on redistribution of income between the west and the rest through action by global institutions like the World Bank and UN, and increased aid budgets.

10. Is there an alternative to globalisation? – Encouraging local action means losing the benefits of international specialisation and slows down the transmission of new ideas. – Higher aid without freer trade can simply line the pockets of Third World Dictators and discourage poorer countries seeking to improve themselves. – Unless Government is reformed in the developing world many will still be subject to civil war, famine and denial of human rights.

11. Three models for world development The EU, the US, and China – The US has lighter regulation. – The EU has stronger and wider ranging regulation. – China has less regulation in lead sectors allied to Government control of the liberalisation process. – The US allows you to do what the law does not stop. – The EU allows you to do what they set out in law. – China allows you to do what suits those in power. – The USA globally engaged. – The EU is more introspective. – China invites in the best of the world in selected areas.

12. Estimated changes in percentage of global output

13. Increase in China and India’s GDP ($ Billions) by PPP and current prices

14. Population change – The US has a dynamic population, growing from live births and immigration. – The EU, excluding the UK and Ireland, has a falling population. Projected Total Population Millions20052050Change% change EU “ 27 ” 487472-15-3.1% USA299402+103+34.4% China1,3121,408+96 +7.3%

15. Projected Working Age (15-64) Populations (millions) EU “27” and others Millions20052050Change% Change Ireland2.3 3.6+1.3+56.5% UK39.7 41.0+1.3+3.3% France39.8 39.6-0.2-0.5% Netherlands11.0 10.1-0.9-8.2% Germany55.2 41.6-13.6-24.6% Austria5.64.8-0.8-14.3% Greece7.45.9-1.5-20.3% Spain29.824.3-5.5-18.5% Italy38.829.5-9.3-24% EU “27”302.7237.0-65.7-21.7% USA200.6248.3+47.6+23.8% Japan84.852.3-32.5-38.3% Russia102.365.9-36.4-35.5%