A few myths and misconceptions regarding Globalization? Michel Henry Bouchet September 2013 www.developingfinance.org
Myths and Misconceptions 1. Globalization, i.e., the worlwide extension of the market economy, initiated a socio-economic take off for all Facts: Only a few countries took off (EU, US, Japan)
Source: R. Lucas M.H Bouchet- SKEMA (c) 2013
Myths and Misconceptions 2. Globalization, i.e., the worlwide extension of the market economy, is an everexpanding process Facts: Don t take it for granted! One can observe waves of globalization.
Globalization = New world + Old world Home bias
US Tradable industries share of employment % As Krugman observes, despite rising trade, a large majority of workers in America still produce goods and services that can t be traded: 60% of workers still work in the non-tradable sector NY Times 08/2013
Globalization stages: financial relations were truly globalized in the XIX and early XX century under the gold standard and the British world leadership.
Ratio of Exports / GDP in %
Global capital flows: don t take them for granted! McKinsey 2013 MH BOUCHET Global Finance-SKEMA 2013
Globalization is not a smooth ongoing process 1970-2012 23 variables 187 countries 3 parameters: economic, social + political KOF Zurich
Myths and misconceptions 3. Global connectivity leads to global convergence? Facts: Though trade, migration, communication and capital flows get increasingly transnational, they are still modest compared to the overall global stock of value added! Trade, labour and finance are still home-based and regionalized (40% of US imports have the same business firms at both ends of the cross-border transaction) Global trade openness= 32% FDI <3% global GDP
The end of Globalization? (Alan Rugman-2000) The global market place is a myth Trade and cross-border investment barriers are still high Majority of trade transactions are within regions There are just 500 MNCs competing in regional markets 80% of FDI takes place in regional blocks Triad region: North America + Europe + Japan MNCs are regionally based and locally operated
Intra-regional merchandise trade (WTO)
Myths and Misconceptions 4. Globalization means «laissez-passer»? Facts: trade protectionnism is still strong and probably growing since the inception of the global crisis: China, Brazil, Russia, Argentina, India, Indonesia WTO May 2012 Report: Accumulation of trade restrictions has become a major concern in G20 countries= >3% of world merchandise trade (tariff increases, import licences and customs controls, quotas, non-tariff barriers through national standards, government subsidies ) EU vs China Facts: FDI barriers remain strong to protect national industry: Argentina, Brazil, Canada, India, China, Russia, Indonesia, USA
Barriers to trade are creeping back up! G20 trade (85% of global GDP) The Economist-June 30th 2012 M.H Bouchet- SKEMA (c) 2013
Source: US GAO 02/2008
Myths and Misconceptions 5. Fast growing Emerging markets joined the globalization of economic, trade and financial markets and get fully «globalized» Facts: the number of countries truly «globalized» remains small. Even the BRICs are joining the global economy at small and uneven speed!
Measuring country globalization? Current account globalization (trade of goods & services) Capital account globalization (crossborder investment and financial flows) Socio-political globalization: migration, tourism, political and cultural influence
KOF 2013 Index of Globalization
Globalization Index: The Top 20 /62 ATKearney 1. Singapore 2. Ireland 3. Switzerland 4. US 5. Netherlands 6. Canada 7. Denmark 8. Sweden 9. Austria 10. Finland 11. New Zealand 12. UK 13. Australia 14. Norway 15. Czech Rep. 16. Croatia 17. Israel 19. Malaysia 20. Slovenia 25. France 52. Russia 54. China 62. Iran
Ernst & Young 2013 globalization ranking Biggest increase in cross-border integration is driven by technology, particularly global connectivity through broadband penetration and internet access, as well as increases in R&D trade The BRICS stay far behind the OECD China= 44 Brazil= 45 Russia= 48 South Africa= 52 India= 54
Trade openness indices (X+M/GDP%) France= 30% Brazil= 30% India= 15% USA= 15%
Conclusion Beyond the global crisis: the way forward for the globalized market economy? Can a different form of globalization be planned? With what goals and what mechanisms of regulation? How to promote global governance? How to boost development beyond GDP growth?