globalisation 2008

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Information about globalisation 2008

Published on February 24, 2008

Author: UpBeat


Trends in Globalisation and the World Economy:  Trends in Globalisation and the World Economy The Rt Hon John Redwood MP What is Globalisation? :  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, eg. 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, eg. Vehicles/Airbus planes. The homogenisation of goods and services – do we all want a MacDonald's washed down with a Coke, with a laptop running Microsoft programmes? What is good about Globalisation? :  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 It allows more people to live the Hollywood dream Creates the potential for footballers, pop and film stars and others to become fabulously rich What is good about globalisation? :  What is good about globalisation? Richer is cleaner – good for the environment Better medical knowledge – longer lives 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 What is bad about Globalisation?:  What is bad about Globalisation? Some say: It is a new form of imperialism led by the USA 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 Is there an alternative to Globalisation?:  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/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. Is there an alternative to Globalisation?:  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. 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. Slide8:  Which model of development works best? Index of Economic Freedom:  Index of Economic Freedom Three models for world development:  USA, EU and China US based on democratic challenge EU based on bureaucratic consensus China based on political repression allied to progressive Economic liberalism US lower taxes and more free enterprise EU higher taxes and more Government management China low taxes and great freedom in lead sectors only US lighter regulation EU stronger and wider ranging regulation China less regulation in lead sectors allied to Government control of Liberalisation process US allows you to do what the law does not stop EU allows you to do what they set out in law China allows you to do what suits those in power US globally engaged EU more introspective China invites in the best of the world in selected areas Three models for world development The political context – The US:  The political context – The US US - a settled constitution based on: Unified country following civil war Separation of powers between executive, legislature and judiciary Stable relationship between Member States and the Federal powerful government Most powerful country in world, capable of projecting its power Only serious political risk/threat is that of terrorism against the world’s superpower No likelihood of political instability or major change of system The Political Context – The EU:  The Political Context – The EU EU – a troubled and evolving constitution set up shortly after the end of World War II – now looking very old-fashioned A set of divided countries coming together No clear democratic control over executive or judiciary – a largely impotent Parliament with no power to tax or legislate on its own Unstable relationships – how many States? And what relationship should they have to the central government? Little power outside the borders of EU and no established way of supporting its foreign policy outside the EU area Serious political risks of instability as different countries, peoples and parties want very different degrees of centralisation and government interference in Member States’ affairs. Over the next fifty years, there will be massive changes in the relationships and power balances. Not immune to risk of terrorism – both internal and external. Risk of nationalist movements arising against the EU. The Political Context - China:  The Political Context - China One party state Main decisions made by Committee of the Political Bureau of the Communist Party Entered WTO arrangements 10th October 2000 Collective farming dismantled - rapid movement of people from rural to urban areas Pursuing the Hong Kong/Singapore model of economic development through liberalisation and foreign capital allied to an authoritarian political system Imbalance of Power – EU vs US:  Imbalance of Power – EU vs US The EU has a bigger military force in terms of numbers of service personnel, but it is very poorly armed and ill equipped to move outside the European territorial area. The US has a near monopoly of modern troop carriers by sea and air, especially when acting with the UK as its main ally Imbalance of Power EU v US:  Imbalance of Power EU v US The Rise of China:  The Rise of China China is currently the world’s sixth largest economy at market exchange rates and the second largest at purchasing power parity rates Treasury forecast: 3% of world output 1980 19% of world output 2015 G7 countries (USA, Canada, Germany, France, Italy, Japan, UK): 50% world output 1980 Estimated 33% of world output 2015 Population Change:  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 Millions 2005 2050 change % change EU “27” 489 473 - 16 - 3.3% USA 298 394 + 96 + 32.5% China 1,315 1,392 + 77 + 5.8% Projected Working Age (15-64) Populations (millions) EU “27” and others:  Projected Working Age (15-64) Populations (millions) EU “27” and others Source: United Nations, Population Division, World Population Prospects: The 2004 Revision, Eurostat Tax Burden in EU Countries as a Percentage of GDP:  Tax Burden in EU Countries as a Percentage of GDP Tax Burden in Developed Countries as a Percentage of GDP:  Tax Burden in Developed Countries as a Percentage of GDP Tax Burden in Developing Countries as a Percentage of GDP:  Tax Burden in Developing Countries as a Percentage of GDP Source: OECD, Revenue Statistics 1965-2005, 2006, Table A and Global Competitiveness Yearbook 2005 GDP growth rates comparisons EU/US:  GDP growth rates comparisons EU/US Growth Rates 2001 – 2005 % change:  Growth Rates 2001 – 2005 % change USA UK Eurozone Germany 10.67 9.88 5.47 2.42 Forecasts 2006-07 (OECD) 6.8 5.4 4.4 Growth rates 2001-06 11.4 10.43 5.71 UK Share of international financial markets:  UK Share of international financial markets UK US Germany % % % Cross border bank lending 20 9 11 Foreign equities turnover 43 31 3 Foreign exchange dealing 31 19 5 International Bonds 60 Hedge Fund assets 14 74 0 Likely developments - US:  Likely developments - US Fast growth Fast technology growth Economic policy geared to domestic requirements of large single market Interest rates and money growth to facilitate growth Free enterprise competition driven model Likely developments - EU:  Likely developments - EU Population reduction Slower and lop-sided technology growth influenced heavily by government Economic policy in flux, trying to adapt to the different national and regional markets of the Euro-land area Interest rates and money growth that are compromises for the different needs of different parts of the EU Government/cartel/regulation driven model in certain key sectors, linked to competition driven model in other parts Likely developments – China:  Likely developments – China Continued rapid growth in output and per capita incomes. Growth of large domestic market for cars, household goods and other manufactured products. China accounts for 76% of world exports of leather goods, 55% of textiles and 32% of radio, TV and communications equipment. These sectors will continue to advance. China will now liberalise engineering including vehicle manufacture, chemicals and pharmaceuticals. These sectors will now grow very quickly.China will overtake UK, Germany and Japan and become second largest world economy at market exchange rates in the next twenty years. Europe’s declining share of global output:  Europe’s declining share of global output Estimated Changes in Percentage of Global Output Source: IMF Consensus Forecast, HM Treasury Europe’s Labour Market Challenge:  Europe’s Labour Market Challenge Source: Eurostat and OECD At A Glance Source: Institut Francais des Relations International:  Source: Institut Francais des Relations International New entrants to EU:  New entrants to EU The Rt Hon John Redwood MP:  The Rt Hon John Redwood MP Author of ‘Superpower Struggles’ & ‘Just Say No!’

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