Threats to globalisation

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Threats to globalisation

  1. 1. Threats to Globalisation Geoff Riley A2 Economics – Summer 2010
  2. 2. The value of world exports
  3. 3. Who wrote the following? <ul><li>“ The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, in such quantity as he might see fit, and reasonably expect their early delivery upon his doorstep; he could at the same moment and by the same means adventure his wealth in the natural resources and new enterprises of any quarter of the world, and share, without exertion or even trouble, in their prospective fruits and advantages...The projects and politics of militarism and imperialism, of racial and cultural rivalries, of monopolies, restrictions, and exclusion...were little more than the amusements of his daily newspaper, and appeared to exercise almost no influence at all on the ordinary course of social and economic life, the internationalisation of which was nearly complete in practice.” </li></ul>
  4. 4. Has globalisation contributed to the crunch? <ul><li>Globalisation initially helped to usher in decade of low inflation </li></ul><ul><li>Rise in global growth and increase in the value of world trade </li></ul><ul><li>Positive sum game for many </li></ul><ul><ul><li>But rising trade imbalances including emerging market current account surpluses </li></ul></ul><ul><ul><li>And contributed to sharp rise in commodity prices </li></ul></ul><ul><li>Shift of income to ‘high saving’ countries </li></ul><ul><li>Rise in global savings led to fall in long term interest rates </li></ul><ul><li>Cheaper money stimulated: </li></ul><ul><ul><li>Property bubble </li></ul></ul><ul><ul><li>Search for higher yields among lenders (riskier) </li></ul></ul><ul><ul><li>The genesis of sub-prime? </li></ul></ul><ul><ul><li>Rising inflation in 2008 must not be discounted as a factor behind the current crisis </li></ul></ul>
  5. 5. Quarterly value of world trade
  6. 6. Volatile commodity prices in the world economy
  7. 7. Policy interest rates
  8. 8. China’s Mounting Surpluses
  9. 9. Gains from globalisation <ul><li>Traditional approach </li></ul><ul><ul><li>Exploitation of comparative advantage </li></ul></ul><ul><ul><li>Gains from specialisation and trade </li></ul></ul><ul><ul><ul><li>Higher output </li></ul></ul></ul><ul><ul><ul><li>Lower real prices </li></ul></ul></ul><ul><ul><ul><li>Welfare gains for all participants in trade and exchange </li></ul></ul></ul><ul><ul><ul><li>A “free lunch” welfare gain from a reallocation of scarce resources </li></ul></ul></ul><ul><ul><ul><li>Mutual gains from trade between nations </li></ul></ul></ul><ul><ul><ul><li>Falls in the costs of transport increase the opportunities for extended trade </li></ul></ul></ul><ul><ul><li>Every country has a comparative advantage in some type of economic activity </li></ul></ul>
  10. 10. Fault-Lines for a globalising world <ul><li>Globalisation and inflation </li></ul><ul><ul><li>1990s – the “great stability” (calm before the storm) </li></ul></ul><ul><ul><li>Surge in demand for and prices of commodities </li></ul></ul><ul><li>The paradox of inequality within countries </li></ul><ul><ul><li>Secular decline of Western manufacturing / structural U </li></ul></ul><ul><ul><li>Pressure on real wages / relative living standards </li></ul></ul><ul><ul><li>Globalisation has failed to benefit the poor people in many countries (e.g. agflation and absolute poverty) </li></ul></ul><ul><li>Changing balance of power in the world economy </li></ul><ul><ul><li>Politically unwelcome shifts in ownership </li></ul></ul><ul><ul><li>Politically unwelcome shifts in global production </li></ul></ul><ul><li>Widening global trade imbalances </li></ul><ul><ul><li>Consequences for capital flows </li></ul></ul><ul><li>Threats to the global commons </li></ul>
  11. 11. De-globalisation <ul><li>Steep slowdown in world economic growth </li></ul><ul><li>Unemployment worldwide will rise by around 30m above 2007’s level in 2009 </li></ul><ul><li>Sharp fall in global trade </li></ul><ul><li>Fall in net private debt and equity flows to developing countries </li></ul><ul><li>Worldwide FDI inflows shrank 21% in 2008 to $1.4 trillion </li></ul><ul><li>Partial reversal of migrant flows and also remittances </li></ul><ul><li>Evidence of a return towards economic nationalism </li></ul>
  12. 12. Tutor2u Keep up-to-date with economics, resources, quizzes and worksheets for your economics course.

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