1. Robert J. Shapiro November 4 th 2008

2. The New Economics of Globalization The New Demographics of Nations Aging The New Geopolitics of a Sole Superpower The Forces Changing the Course of Nations

3. Global exchanges soar:  1990 – 2006, share of worldwide GDP traded across borders up from 18% to roughly 30%. 2005: 180 national economies trade over $12 trillion in goods and services (out of $42 trillion world GDP), the highest levels and the largest increases ever. U.S. imports top $2.2 trillion (2006), more than the GDP that year of all but five other countries. The New Landscape of Globalization

4. Traditional trade: Commodities from developing economies, manufacturing in advanced economies, and finished goods marketed among advanced economies. Modern globalization: FDI – driven networks of sophisticated operations around the world, to produce, market and sell everyone to the world. Globalization Versus Traditional Trade

5. Rapid modernization and growth, based on transfers of modern business organizations (FDI), investments in education and infrastructure, and reforms to allow more foreign and domestic competition. East Asia, versus Latin America, versus Africa: Case studies in the difference that public investment, macroeconomic stability, political stability, and FDI make. Impact on Developing Nations

6. Impact on Advanced Economies Ideas replace physical assets as main source of wealth and growth in developed economies: –US firms invest more in tangible assets than in physical assets; –1980: Market value of the physical assets of top 150 U.S. public companies = 75% of their stock value; 2004, this “book value” of the top 150 companies = 36% of the value of their shares. –Nearly two-thirds of the value of large companies now comes from what they know and the ideas and relationships they own. –Impact on US growth, productivity and incomes, versus Europe and Japan

7. Intense global competition holds down inflation and interest rates; When intense competition collides with rising fixed costs, the link between growth and job creation is weakened; Same combination weakens the link between productivity gains and wage progress Result: Globalization reduces job opportunities and income gains for all but those most adept in an ideas – based economy Impact on Advanced Economies – 2: The Case Study of the United States

8. Focus on education and infrastructure, like East Asia –1990s: 5% GDP to infrastructure (2 x EU) –Free university access –2005: 37% 25-34 year olds with post- secondary training, versus EU 27% Policies to draw FDI, like China –2004: Irish FDI stock, as share of GDP, 10 x Germany, 5 x France, 4 x UK Ireland: A Developed Economy Uses a Developing Nation Strategy

9. Is a global recession in the cards? The impact of a serious downturn in advanced countries on trade and FDI The impact on politics: Rising demands for economic security How governments should respond Will the Global Crisis Change These Dynamics?

10. The historical uniqueness of an unusually large generation followed by an unusually small one, now happening across the world. Why: The spread of basic modernization, changing roles for women & technological advances. Result in most places: Average age of national populations rising quickly Signs of aging populations: elderly populations growing 3%/year in most advanced countries. Why Ireland is different The New Demographics

11. The problem for Europe and Japan: 2005 – 2020, the number of elderly people will increase 35%-50%, as the working age, tax-paying cohort shrinks. Early costs of these changes:  Falling saving, investment, and growth rates  Fewer sources of revenues as demand for public goods rise sharply. Longer term challenges: The political battles over pensions and health care. The New Demographics -2

12. Impact for Different Countries Hit very hard: Japan, Italy & Russia The hard time facing France and Germany Why China will be less affected, even with the world’s fastest aging population

13. How Ireland and US can avoid many of these costs for a generation –Role of immigration –Role of public pension policy –Role of globalization-based economic policies Demographics and Prospects for Ireland and the US

14. How the combination intensifies inequality The crisis of financing health care  Fast–rising numbers of older people, meets, concentrations of serious illness in older people, and fast-rising costs to treat those conditions  The increasing role of regulation Ireland’s trump: The relatively small numbers of elderly Irish Demographic Shifts Meet Globalization

15. The effects on economic growth –Spectre of a generation of slow growth for Japan, Germany, France, Italy and others –Why the outlook is better for the U.S., China and Ireland Demographics Meets Globalization - 2

16. Historical anomaly of a sole military and economic superpower with no near peer – the United States. Iraq War: The test the superpower passed and then failed Importance of collaborative arrangements for on-going challenges – trade, finance, terrorism, drugs, climate The inescapability of US leadership The New Geopolitics

17. The New Geopolitics & Globalization The two poles of globalization –U.S. (Western Pole) – where new ideas are born and spread first. –China (Eastern pole) – the world’s production and assembly platform. US- Sino comity and conflicts The global challenges: –Energy and Climate Change –The new petro-politics – Russia, China and OPEC –Terrorism and Islamist fundamentalism

18. Its origin in globalization –The globalization of capital –Role of global competition in asset bubbles –The role of America market ideology Tensions between national and global solutions: Whither the EU? The outlook: How long and how bad? A World in Financial Crisis

19. Strategy combining public investments (the path of the Asian Tigers) and waves of foreign investments (see China) –Public education spending up 150% since 1985 –Tax and other preferences for foreign firms –Small welfare provisions –Geography (EU) and the value of low wages –Direct transfers focused on idea-based sectors – IT, pharmaceuticals, medical equipment, financial services –Language Why Ireland Has Succeeded

20. Can avoid the economic costs of aging population and the public pension crisis looming for other countries High growth rates will likely settle down Can Ireland end its “dual economy,” wean itself from dependence on FDI, and promote productivity spillovers to domestic firms, especially in services Implications of recent education, tax and health care policies on FDI and long term growth Unsettled: Competing with the accession countries The Future for Ireland