Presentation Transcript

1. Globalization International Trade Foreign Direct Investment Remittances Foreign Aid
2. Globalization Globalization- many interpretations Core economic meaning- the increased openness of economies to international trade, financial flows, and foreign direct investment. Concerns with globalization center around the unevenness of the process
3. Trade and Development: Key Issues How does international trade affect economic growth? How does trade alter the distribution of income? How can trade promote development? Can LDCs determine how much they trade?
4. Merchandise Export of Selected Countries:2005
5. Problems of Primary Exports Low income elasticity of demand for primary products Low price elasticity of demand and supply Export earnings instability
6. The Terms of Trade and the Prebisch-Singer Thesis Total export earnings depend on: Total volume of exports sold AND Price paid for exports Prebisch and Singer argue that export prices fall over time, so LDCs lose revenue unless they can continually increase export volumes Prebisch and Singer think LDCs need to avoid a dependence on primary exports
7. Traditional Argument for Trade All countries gain from trade World output increases with trade Countries will tend to specialize in products that use their abundant resources intensively International wage rates and capital costs will gradually tend toward equalization Returns to owners of abundant resources will rise relatively Trade will stimulate economic growth
8. Critical Assumptions Behind Traditional Trade Theory Fixed resources, full employment, and international factor immobility (skilled labor and capital) Fixed, freely available technology and consumer sovereignty Internal factor mobility and perfect competition Governmental non-interference in trade
9. Trade and Development Trade can lead to rapid economic growth under some circumstances Trade seems to reinforce existing income inequalities Trade can benefit LDCs if they can extract trade concessions from developed countries LDCs generally must trade Regional cooperation may help LDCs
10. South-South Trade and Economic Integration: Looking Outward and Inward Economic Integration: Theory and Practice The growth of trade among developing countries. Integration encourages rational division of labor among a group of countries and increases market size Provides opportunities for a coordinated industrial strategy to exploit economies of scale Trade creation Trade diversion
11. Regional Trading Blocks Regional trading blocs (economic unions) and the globalization of trade NAFTA MERCOSUR SADC ASEAN Local conditions matter Do blocs promote growth or retard the progress of globalization
12. The International Flow of Financial Resources Three sources: Private direct and portfolio investment Remittances of earnings by international migrants Public and private development assistance
13. Private Foreign Direct Investment and the Multinational Corporation Definition of MNC Recent growth of foreign direct investment (FDI)
14. FDI Flows:1980-2005
15. FDI Inflows to Developing Countries in Relation to Domestic Investment,1990–2003
16. Total Net Resource Flows to Developing Countries, 1990–2005
17. Private Foreign Investment: Pros and Cons for Development Traditional arguments in support of private investment: Filling savings, foreign exchange, revenue, and management gaps Four main arguments
18. Seven Key Disputed Issues about the Role and Impact of Multinational Corporations in Developing Countries
19. Seven Key Disputed Issues about the Role and Impact of Multinational Corporations in Developing Countries
20. Private Portfolio Investment: Boon or bane for LDCs? What is portfolio investment? Emerging-country stock markets
21. The role and Growth of Remittances Wage differences “Brain Drain” Uneven flow of remittances
22. Resource Flows to Developing Countries, 1990–2005
23. Top 20 Remittance Recipient Countries, 2004
24. Foreign Aid: The Development Assistance Debate Conceptual and measurement problems Amounts and allocations: public aid Official development assistance (ODA)
25. Official Development Assistance Disbursements from Major Donor Countries, 1985, 2002, and 2005
26. Official Development Assistance (ODA) by Region, 2005
27. Foreign Aid: The Development Assistance Debate Why donors give aid political motivations economic motivations: Foreign exchange constraints (two gap model) Growth and savings Technical assistance Absorptive capacity Self interest
28. Foreign Aid: The Development Assistance Debate Why LDC recipients accept aid The role of nongovernmental organizations (NGOs) The effects of aid
29. Conclusions: Toward a New View of Foreign Aid Dissatisfaction among donors and recipients may create the possibility for new aid arrangements Future aid is likely to be linked to market reforms and institutional capacity-building