Globalisation
and
Growth
Richard Kneller
Leverhulme Centre for Research on
Globalisation and Economic Policy
Pro-Globalisers
Globalisation
for
Growth
Richard Kneller
Leverhulme Centre for Research on
Globalisation and Economic Policy
Anti-globalisers
Globalisation
versus
Growth
Richard Kneller
Leverhulme Centre for Research on
Globalisation and Economic Policy
Globalisation
Economy
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
Two methods for
countries to get rich
Steal – Empire Building
Buy
- Invest
GDP per capita - World Income Distribution
GDP per capita - World Income Distribution
10.7
10.2
US
9.7
Singapore
9.2
Argentina
8.7
Japan
8.2
China
7.7
UK
7.2
Burkina Faso
6.7
Malawi
6.2
5.7
1500
1550
1600
1650
1700
1750
1800
1850
1900
1950
2000
GDP per capita - World Income Distribution
10.7
Industrial Revolution
10.2
US
9.7
Singapore
9.2
Argentina
8.7
Japan
8.2
China
7.7
UK
7.2
Burkina Faso
6.7
Malawi
6.2
5.7
1500
1550
1600
1650
1700
1750
1800
1850
1900
1950
2000
GDP per capita - World Income Distribution
10.7
US over takes UK
10.2
US
9.7
Singapore
9.2
Argentina
8.7
Japan
8.2
China
7.7
UK
7.2
Burkina Faso
6.7
Malawi
6.2
5.7
1500
1550
1600
1650
1700
1750
1800
1850
1900
1950
2000
GDP per capita - World Income Distribution
10.7
Rapid growth begins in
Japan and spreads to
the other South East
Asian economies and
eventually China
10.2
9.7
9.2
US
Singapore
Argentina
8.7
Japan
8.2
China
7.7
UK
7.2
Burkina Faso
6.7
Malawi
6.2
5.7
1500
1550
1600
1650
1700
1750
1800
1850
1900
1950
2000
GDP per capita - World Income Distribution
10.7
Incomes in Africa are
stagnant
10.2
US
9.7
Singapore
9.2
Argentina
8.7
Japan
8.2
China
7.7
UK
7.2
Burkina Faso
6.7
Malawi
6.2
5.7
1500
1550
1600
1650
1700
1750
1800
1850
1900
1950
2000
• Historically Successful (US, Europe)
– high income levels, but slow growth
The World Income
– low initial income, rapid growth
Distribution can be
• Were Successful, No longer (Latin America)
summarised
byvolatile
four
– high
initial income, slow often
growth
• Never Successful
(Sub-Saharan
Africa)
types
of
country
– low initial income, slow often negative growth
• Newly Successful (S.E.Asia, Ireland)
• Together these lead to a world income
distribution that has widened over time.
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
GDPpc rank
Luxembourg
Singapore
Ireland
Belgium
Estonia
Globalisation
rank
1
2
3
4
5
Senegal
Rwanda
India
Niger
Bangladesh
89
90
91
92
93
147
161
118
172
138
1
17
2
13
42
Do countries grow faster if they become
more globalised?
25,000
Ireland
23,000
21,000
YES
19,000
UK
17,000
Ireland
Greece
UK
15,000
13,000
11,000
Greece
9,000
7,000
5,000
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
4,000
Do countries grow faster if they become
more globalised?
3,500
China
3,000
YES
2,500
China
Côte d'Ivoire
2,000
Cote d’Ivoire
1,500
1,000
500
0
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
16,000
Do countries grow more slowly if they close
themselves off from the rest of the world?
14,000
South
Korea
12,000
YES
10,000
South Korea
North Korea
8,000
6,000
North
Korea
4,000
2,000
0
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
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
US growth has been constant since
1870
10.5
Ln(GDPpc)
10
y = 0.0187x + 7.7097
9.5
9
8.5
8
7.5
1870
1895
1920
1945
1970
1995
Does globalisation matter in the US?
International
NO
8
Growth
30
trade
25
3
20
1950
-2
-7
-12
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
15
If globalisation
mattered in a simple
way, growth should
trend up
10
5
Does globalisation matter in the US?
YES
10.5
10
9.5
9
Ln(GDPpc)
Smoot-Hawley
tariff of
1930 raised import tarrifs
on 20,000 goods.
By 1933 income levels had
dropped to where they were
28 years earlier
15
y = 0.0187x + 7.7097
10
5
0
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
-5
8.5
-10
-15
8
-20
7.5
1870
1895
1920
1945
1970
1995
25,000
20,000
Does globalisation always work?
Argentina has moved from anti to proglobalisation policies.
Some have suggested that now too exposed
NOeconomy.
to the world
15,000
Europe
Argentina
10,000
France
Germany
Italy - Italie
Argentina
5,000
Anti-globalisation
policies
Pro-globalisation
policies
0
1925
1945
1965
1985
Globalisation and Growth
What about the very poor
– Sub Saharan Africa
They are as rich now as the UK/Italy
were in 1500
Globalisation and Growth
According to the data they
would not have seen
many differences in
income levels in
Malawi?
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
Growth in the average developing country
3
2.5
Actual
Predicted
2
1.5
1
0.5
Economists asked what
policies (including
globalisation) have worked in
the past and in Asian Tigers
0
1960s
1970s
1980s
1990s
actual
predicted
4
Growth in the average developing country
3.5
Predicted
3
Actual
2.5
actual
predicted
2
1.5
1
0.5
They then imposed policy
reform and predicted growth
would rise
0
1960s
1970s
1980s
1990s
Growth in the average developing country
4
3.5
Predicted
3
2.5
2
actual
predicted
1.5
1
In fact it fell
0.5
Actual
0
1960s
-0.5
1970s
1980s
1990s
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 antiglobalisers in US, France, Latin
America, Africa
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
Is globalisation good for growth?
"Yeah
but
no
but
Economists need
yeah
but
no
to be more like
but...",
Vicky Pollard
Questions