Globalisation and Growth

1. Globalisation and Growth Richard Kneller Leverhulme Centre for Research on Globalisation and Economic Policy

2. Pro-Globalisers Globalisation forGrowth Richard Kneller Leverhulme Centre for Research on Globalisation and Economic Policy

3. Anti-globalisers Globalisation versusGrowth Richard Kneller Leverhulme Centre for Research on Globalisation and Economic Policy

4. Globalisation Economy

5. 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

6. THE WEALTH OF NATIONS

7. Two methods for countries to get rich Steal – Empire Building Buy - Invest

8. GDP per capita - World Income Distribution

9. GDP per capita - World Income Distribution

10. GDP per capita - World Income Distribution Industrial Revolution

11. GDP per capita - World Income Distribution US over takes UK

12. GDP per capita - World Income Distribution Rapid growth begins in Japan and spreads to the other South East Asian economies and eventually China

13. GDP per capita - World Income Distribution Incomes in Africa are stagnant

14. 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

15. 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

17. Do countries grow faster if they become more globalised? Ireland YES UK Greece

18. Do countries grow faster if they become more globalised? China YES Cote d’Ivoire

19. Do countries grow more slowly if they close themselves off from the rest of the world? South Korea YES North Korea

20. 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

21. US growth has been constant since 1870 Ln(GDPpc)

22. Does globalisation matter in the US? International trade NO Growth If globalisation mattered in a simple way, growth should trend up

23. 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

24. 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

25. Globalisation and Growth What about the very poor – Sub Saharan Africa They are as rich now as the UK/Italy were in 1500

26. Globalisation and Growth According to the data they would not have seen many differences in income levels in Malawi?

27. 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

28. Growth in the average developing country Actual Predicted Economists asked what policies (including globalisation) have worked in the past and in Asian Tigers

29. Growth in the average developing country Predicted Actual They then imposed policy reform and predicted growth would rise

30. Growth in the average developing country Predicted In fact it fell Actual

31. 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

32. 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

33. Is globalisation good for growth? "Yeah but no but yeah but no but...", Economists need to be more like Vicky Pollard

34. Questions