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Globalisation and Growth. Richard Kneller Leverhulme Centre for Research on Globalisation and Economic Policy. Pro-Globalisers. Globalisation for Growth. Richard Kneller Leverhulme Centre for Research on Globalisation and Economic Policy. Anti-globalisers. Globalisation versus Growth.
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Globalisation and Growth Richard Kneller Leverhulme Centre for Research on Globalisation and Economic Policy
Pro-Globalisers Globalisation forGrowth Richard Kneller Leverhulme Centre for Research on Globalisation and Economic Policy
Anti-globalisers Globalisation versusGrowth Richard Kneller Leverhulme Centre for Research on Globalisation and Economic Policy
Globalisation Economy
Growth of What? • Gross Domestic Product (2006) • Japan 3,946,090 $million India 3,729,533 $million • Population • Japan 120 million India 998 million • GDP per capita (per person) (2006) • Japan $ 32,647 India $ 3,737
THE WEALTH OF NATIONS
Two methods for countries to get rich Steal – Empire Building Buy - Invest
GDP per capita - World Income Distribution Industrial Revolution
GDP per capita - World Income Distribution US over takes UK
GDP per capita - World Income Distribution Rapid growth begins in Japan and spreads to the other South East Asian economies and eventually China
GDP per capita - World Income Distribution Incomes in Africa are stagnant
Historically Successful (US, Europe) • high income levels, but slow growth • Newly Successful (S.E.Asia, Ireland) • low initial income, rapid growth • Were Successful, No longer (Latin America) • high initial income, slow often volatile growth • Never Successful (Sub-Saharan Africa) • low initial income, slow often negative growth • Together these lead to a world income distribution that has widened over time. The World Income Distribution can be summarised by four types of country
Globalisation and Growth Does globalisation explain why GDP per person has grown quickly in some countries and why they are therefore rich? Has globalisation mattered more for growth in US Ireland Argentina Cote d’Ivoire
Do countries grow faster if they become more globalised? Ireland YES UK Greece
Do countries grow faster if they become more globalised? China YES Cote d’Ivoire
Do countries grow more slowly if they close themselves off from the rest of the world? South Korea YES North Korea
Globalisation and Growth The Evidence looks convincing enough to suggest that globalisation matters. If you globalise faster than others you grow faster If you stop global engagement you grow more slowly But are we just picking winners – countries that have been successful What happens if we choose a different set of countries
US growth has been constant since 1870 Ln(GDPpc)
Does globalisation matter in the US? International trade NO Growth If globalisation mattered in a simple way, growth should trend up
Does globalisation matter in the US? YES Smoot-Hawley tariff of 1930 raised import tarrifs on 20,000 goods. Ln(GDPpc) By 1933 income levels had dropped to where they were 28 years earlier
Does globalisation always work? Argentina has moved from anti to pro-globalisation policies. Some have suggested that now too exposed to the world economy. NO Europe Argentina Anti-globalisation policies Pro-globalisation policies
Globalisation and Growth What about the very poor – Sub Saharan Africa They are as rich now as the UK/Italy were in 1500
Globalisation and Growth According to the data they would not have seen many differences in income levels in Malawi?
Globalisation and Growth What about the very poor – Sub Saharan Africa They are as rich now as the UK/Italy were in 1500 Did they attempt to globalise? Yes and it was economists who told them they should. Indeed it was imposed upon them
Growth in the average developing country Actual Predicted Economists asked what policies (including globalisation) have worked in the past and in Asian Tigers
Growth in the average developing country Predicted Actual They then imposed policy reform and predicted growth would rise
Growth in the average developing country Predicted In fact it fell Actual
Growth and Globalisation • Initial response by economists was to blame developing countries • Response now more measured, recognition that other factors matter • Together explains the position of anti-globalisers in US, France, Latin America, Africa
Is globalisation good for growth? • It matters for countries that are rich (the income frontier) • It can lead to fast growth for countries behind the frontier • Globalisation is no magic bullet • There are deeper problems that globalisation are not obviously the cause or cure of
Is globalisation good for growth? "Yeah but no but yeah but no but...", Economists need to be more like Vicky Pollard