Topic 3 – Countervailing Forces to Globalization

1. Topic 3 – Countervailing Forces to Globalization A – Economic Development B – Inequalities C – War, Conflicts and Terrorism

2. A – Economic Development The Notion of Development Themes of Development Waves of Development The First Crisis of Globalization

3. The Notion of Development • What is development? • Development is a process. • Improvement of the welfare of the population: • Development is about people, not necessarily the economy. • Create an enabling environment for people. • Long term process. • Different societies can have different development goals: • Promote private accumulation of wealth. • National and collective interests. • Reducing national inequalities. • “Hard” (e.g. infrastructure) versus “soft” (e.g. education) approaches.

4. The Notion of Development • Development goals • Adequate food and water supplies. • Healthcare system. • Sanitation and disease control. • Employment opportunities. • Educational opportunities. • Rule of law and protection of rights and private property. • Access to housing. • Low environmental impact of society. • Conditions • Appropriate social, political, legal and economic conditions.

5. The Notion of Development Conditions Outcomes Social Political -Health -Education -Quality of life -Rights -Equity -Rule of law Physical capital Economic Human Capital -Employment -Surplus Development

6. The Notion of Development

7. The Notion of Development • Human Development Index (HDI) • Composite indicator developed in 1990 by the United Nations Program for Development (UNPD). • Comparative measure of development. • Ranges from 0 to 1: • The country having the highest score for a variable has a value of 1 and other countries are graded from how far they are from this best score. • Three major sets of variables: • GNI (Gross National Income) per capita. • Health index. • Education index.

8. Components of the Human Development Index

9. Share of the World GDP, 2011 (Current USD)

10. World Nominal GDP, 2007, 2011 (in billion USD)

11. Global Gross Domestic Product and Human Development Index, 2010

12. Measuring Development: Social Indicators

13. Life Expectancy

14. World Average Life Expectancy, 1950-2010

15. Life Expectancy at Birth, Selected Countries (Average for both sexes)

16. Total Fertility Rate, Selected Countries, 1995-2010 Replacement rate (2.1)

17. TFR among Developed Countries, 2005, 2010

18. Infant Mortality Rate, 2000

19. Adult Literacy Rate (% above 15 years), 2002

20. Percentage of Economically Active Children Aged 7-14

21. Themes of Development • Economic growth • Promotion of more advanced and intensive economic activities: • Education. • Investment. • Technical improvement. • New enterprises. • Economic development is always accompanied by economic growth. • Accumulation of a surplus (savings/profits) from individuals and enterprises. • Reinvestment of surplus: • Expansion of economic activities. • Creation of new activities. Growth Surplus Trade Industrialization State Intervention vs. Market Forces

22. Themes of Development • Industrialization • Increase the output of an economy: • Development of manufacturing capabilities. • Development of labor capabilities. • Additional capacity for innovation. • Agricultural productivity: • Important to support industrialization and urbanization. • Frees labor and induces demand. • Globalization and industrialization: • Importance of foreign agents (e.g. multinationals). • Global markets versus national demands.

23. Themes of Development • Trade • Reflects the openness of a country to outside influences. • Integration to the global economy. • International trade: • Major way to improve an economy. • Selling agricultural products, minerals and manufactured goods. • Import equipment, technologies, capital and know-how for expansion of the industrial sector. • External demand is the main drive towards the choice of what is being produced. • Dependency to foreign market is a drawback of relying strongly on external forces for development.

24. Themes of Development • State intervention and market forces • Development from above (State) and from below (market). • State intervention is dominant as a lever for development: • “Protection” of the national economy. • Subsidies and regulatory advantages. • Contemporary changes in a global economy: • Abolition of tariffs and custom limitations. • Increased involvement of the private sector. • Multinational corporations and deregulation. • Constant shift between the level and extent of State intervention versus market forces.

25. Common Problems Linked with Government Intervention

26. Public Sector Employment, 2005 (in 1,000s)

27. Government Impacts on Economic Growth

28. American Government Interventions and their Costs

29. Waves of Development Water power Textiles Iron Steam Rail Steel Electricity Chemicals Internal-combustion engine Petrochemicals Electronics Aviation Digital networks Software New Media Pace of innovation 1st Wave 2nd Wave 3rd Wave 4th Wave 5th Wave 1785 1845 1900 1950 1990 60 years 55 years 50 years 40 years 30 years (?)

30. The Five Waves of Development

31. Relationships between per Capital Income and Economic Employment Sectors

32. GDP Share of Manufacturing, Selected Countries, 1970-2011

33. U.S. Goods and Services Related Jobs, 1950-2008

34. Male Labor Force per Economic Sector, Selected Countries, 2000-2004

35. The First Crisis of Globalization CAUSES Monetary system (fractional reserve banking, fiat currencies) SYMPTOMS Debt, asset inflation CONSEQUENCES Misallocations (bubbles) Production Consumption Distribution

36. Business Cycles: The Impacts of a Credit-Driven Boom Credit-Driven Boom Recession QE Peak Depression Trough Expansion Recession Expansion

37. Blowing Bubbles: From Technology to Commodities Commodities / Trade Bubble Tech / Stock Bubble Housing Bubble

38. The Laws of Unintended Consequences