Fluent Essays

Read all readings, then write one page , double spaces MLADo not write a summary, write what you think after you read it.Guidelines for Responses You are assessed on your thoughtfulengagement with the material. Please do not post a summary. Your response should bring up substantive comments and questions with regard to thereading at hand and the broader themes in the class. You may choose to relate what you read to some part of your daily life, current events, orsome other situation, policy debate, etc.. Responses can be speculative, propose applications, or pose critiques. _dicken_2015_2_centre_shifts.pdf _wolf_2016_the_tide_of_globalisation_is_turning.pdf _dicken_2015_global_shift_ch10.pdf _sachs_2005_end_of_poverty_time.pdf easterly_2006_ch1_2.pdf Unformatted Attachment Preview Dicken, P. (2015) Global Shift: Mapping the Changing Contours of the World Economy. Seventh Edition. Guilford Press. Additional resources available: https://www.guilford.com/companion-site/Global-ShiftSeventh-Edition/9781462519552 Distributed from Library Course Reserves for in-course use only. Two THE CENTRE OF GRAVITY SHIFTS: TRANSFORMING THE GEOGRAPHIES OF THE GLOBAL ECONOMY CHAPTER OUTLINE The importance of taking a long view: the imprint of past geographies Roller-coasters and interconnections    The volatility of aggregate economic growth    Growing interconnectedness within the global economy     Trade has grown faster than output     FDI has grown faster than trade     Structural imbalances in the world economy Global shifts: the changing contours of the global economic map    Continuing geographical concentration within the global     economy – but a changing focus    The USA still dominates the global economy – though less    than it did Europe is still a major player – but its performance is highly uneven Emergence of the ‘transitional economies’ of Eastern Europe     and the Russian Federation   ‘Back to the future’: the resurgence of Asia    Japan     The four tigers China: rebirth of the dragon    Indian promise   Latin America – unfulfilled potential   The persistent peripheries The centre of gravity has shifted 02_Dicken-7E_Ch-02.indd 13 14 16 16 17 18 19 21 24 24 26 27 27 28 29 29 30 33 33 35 35 18/11/2014 11:01:03 AM PART ONE THE CHANGING CONTOURS OF THE GLOBAL ECONOMY 14 THE IMPORTANCE OF TAKING A LONG VIEW: THE IMPRINT OF PAST GEOGRAPHIES Particularly at times of economic turbulence and uncertainty, it is all too easy to be dazzled by eye-catching forecasts about the changing shape of the global economy, especially potential winners and losers. Today, for example, we are presented with predictions of the rise of new ‘miracle’ economies: BRICs, MINTs, CIVETS, MISTs.1 Such acronyms are seductive; people are always on the lookout for a catchy label, especially those responsible for them: notably investment bankers and business consultants. As we will see, some of these ‘acronym economies’ are more likely to be robust in the longer term than others. But we need to be careful in rushing to judgement, not least because of political uncertainties. After all, not so long ago, Yugoslavia was listed by the OECD as one of the world’s 10 leading newly industrializing economies. In fact, the global economic map is always in a state of ‘becoming’. It is always, in one sense, ‘new’, but it is never finished. Old geographies of production, distribution and consumption are continuously being disrupted and new geographies are continuously being created. The new does not totally obliterate the old; what already exists constitutes the preconditions on which the new develops. Today’s global economic map, therefore, is the outcome of a long period of evolution during which the structures and relationships of previous historical periods help to shape – though not to determine – the structures and relationships of subsequent periods. In that sense, we cannot fully understand the present without at least some understanding of the past. Indeed, traces of earlier economic maps – earlier patterns of geographical specialization or divisions of labour – continue to influence what is happening today. There are continuing debates over when we can first identify a ‘world’ or a ‘global’ economy. To some, this appeared during what has been called the ‘long sixteenth century’ (1450 to 1640)2 or with the ‘eighteenth century transition to an industrial world’.3 To others, the key period was the 1870s.4 Regardless, ‘by 1914 there was hardly a village or town anywhere on the globe whose prices were not influenced by distant foreign markets, whose infrastructure was not financed by foreign capital, whose engineering, manufacturing and even business skills were not imported from abroad, or whose labour markets were not influenced by the absence of those who had emigrated or by the presence of strangers who had immigrated. The economic connections were intimate …’5 Hence, over a period of 300 years or so, a global division of labour developed and intensified with industrialization, in which the newly industrialized economies of the West (led by the ‘Atlantic’ economies, notably the UK, some Western European countries, and later the USA) became increasingly dominant in a core–periphery configuration (Figure 2.1). Of course, over time, this structure became far more complex geographically. Some core economies declined to semi-peripheral status during the eighteenth century and new economies emerged, especially in the late nineteenth and early twentieth centuries. Figure 2.2 shows some of these dramatic changes, 02_Dicken-7E_Ch-02.indd 14 18/11/2014 11:01:03 AM THE CENTRE OF GRAVITY SHIFTS 15 Materials etc. Core Periphery Production of manufactured goods. Source of raw materials and foodstuffs. Market for manufactured goods. Manufactures Figure 2.1   A simple geographical division of labour: core and periphery in the global economy notably the steep decline of Asia and the emergence to unrivalled dominance of the USA, measured in terms of shares of global gross domestic product (GDP). The broad contours of this core–periphery global economic map largely persisted until the outbreak of the Second World War in 1939. Manufacturing production remained strongly concentrated in the core: 71 per cent of world manufacturing production was concentrated in just four countries and almost 90 per cent in only eleven countries. Japan produced only 3.5 per cent of the world total. The group of core industrial countries sold two-thirds of its manufactured exports to the periphery and absorbed four-fifths of the periphery’s primary products.6 This long-established global division of labour was shattered by the Second World War, which destroyed most of the world’s industrial capacity (outside North America). At the same time, new technologies were created and many existing industrial technologies were refined and improved. Western Europe United States UK Germany France Italy Asia (excl. Japan) Japan China India Latin America Africa \% of world GDP 40 30 1700 1820 1870 20 1913 10 1950 0 Figure 2.2   Global shifts in GDP, 1700–1950 Source: calculated from Maddison, 2001: Table B-20 02_Dicken-7E_Ch-02.indd 15 18/11/2014 11:01:04 AM PART ONE THE CHANGING CONTOURS OF THE GLOBAL ECONOMY 16 The world economic system that emerged after 1945 reflected both the new geopolitical realities of the post-war period and the harsh economic and social experiences of the 1930s. The major geopolitical division of the world after 1945 was that between the capitalist West (the USA and its allies) and the communist East (the Soviet Union and its allies). In the West the economic order built after 1945 reflected the domination of the USA. Alone of all the major industrial nations, the USA emerged from the war strengthened, rather than weakened: by 1950 the USA accounted for more than one-quarter of global GDP. It had both the economic and technological capacity and the political power to lead the way in building a new order, as, indeed, it did. The Soviet bloc drew clear boundaries around itself and its Eastern European satellites and created its own economic system (the CMEA – Council for Mutual Economic Assistance or Comecon) quite separate, at least initially, from the capitalist market economies of the West until its final break-up in 1989. ROLLER-COASTERS AND INTERCONNECTIONS Two particularly important features have characterized the global economy since 1950: the increased volatility of aggregate economic growth and the growing interconnectedness between different parts of the world. The volatility of aggregate economic growth The path of economic growth certainly does not run smooth. It is a real rollercoaster. Sometimes the ride is gentle, with just minor ups and downs; at other times, the ride is truly stomach-wrenching, with steep upward surges separated by vertiginous descents to what seem like bottomless depths. Booms and slumps are endemic. Figure 2.3 shows this roller-coaster pattern. The years immediately following the Second World War were ones of basic reconstruction of war-damaged economies. Rates of economic growth reached unprecedented levels; the period between the early 1950s and the early 1970s was seen as a ‘golden age’. In fact, it was more golden in some places than others, and for some people than others.7 But then, in the early 1970s, the sky fell in. The long boom went bust; the ‘golden age’ became distinctly tarnished. Rates of growth again became extremely variable, ranging from the negative growth rates of 1982 through to two years (1984 and 1988) when growth of world merchandise trade reached the levels of the 1960s once again. But then, in the early 1990s, recession returned. In 1994 and 1995, strong export growth reappeared. A similarly volatile pattern characterized the final years of the twentieth century. There was spectacular growth in world trade in 1997, followed by far slower growth in 1998 and 1999 (partly related to the East Asian financial crisis and to its contagious effects on other parts of the world). Then, once again, there 02_Dicken-7E_Ch-02.indd 16 18/11/2014 11:01:05 AM THE CENTRE OF GRAVITY SHIFTS 17 14 12 10 Average annual percentage change 8 6 4 2 0 –2 –4 –6 Exports –8 Output –10 –12 20 20 20 19 19 19 10 05 00 95 90 85 80 19 9 -7 70 19 -69 60 19 Figure 2.3   The roller-coaster of world merchandise production and trade Source: calculated from WTO International Trade Statistics, various issues was spectacular acceleration in world trade in 2000, followed by an equally spectacular bursting of the growth bubble, a problem certainly exacerbated (though not caused) by the 9/11 terrorist attacks on New York City and by the crisis in the IT (dotcom) sector of the so-called ‘new’ economy. High growth rates returned once again. Then, in 2008, seemingly without warning, the deepest recession since the late 1920s suddenly occurred, triggered by the turmoil in the global financial system. In 2009, global exports declined by 12 per cent, in 2010 they recovered to grow by 14 per cent, in 2011 export growth was 5 per cent, in 2013 it had fallen again to around 2 per cent.The rollercoaster is back with a vengeance. Even short-term forecasts are proving very difficult and frequently being revised. Growing interconnectedness within the global economy One major characteristic of global economic growth, therefore, is its inherent volatility. A second is the increasing interconnectedness of the global economy. Such interconnectedness has three major dimensions: 02_Dicken-7E_Ch-02.indd 17 18/11/2014 11:01:05 AM PART ONE THE CHANGING CONTOURS OF THE GLOBAL ECONOMY 18 •• trade has grown faster than output; •• foreign direct investment has grown faster than trade; •• serious structural imbalances in the world economy have emerged. Trade has grown faster than output Figure 2.3 shows that exports have grown much faster than output in virtually every year since 1960. In the second half of the twentieth century, world merchandise trade increased almost 20-fold while world merchandise production increased just over 6-fold. More and more production is now traded across national boundaries; countries are becoming more tightly interconnected through trade flows. This is reflected in the ratio of trade to GDP: the higher the figure, the greater the dependence on external trade. There is huge variation between countries in such trade integration. For example, international trade is bound to be more important for geographically small countries than for large ones, the result of a simple size effect (contrast, say, the USA with Singapore). However, in virtually all cases the importance of trade to national GDP has increased significantly, as Table 2.1 shows. Table 2.1   The increasing importance of trade for national economies (exports + imports as a percentage of GDP) 1960 1970 1985 1995 2000 2011 High income 23.7 27.1 37.3 39.8 52.0 60.0 Middle income By income group - - - 55.9 55.0 64.0 Upper-middle income 34.3 36.4 41.8 51.4 55.0 64.0 Lower-middle income - - - 58.7 53.0 63.0 - 34.6 41.8 60.5 45.0 67.0 Low income By region East Asia and Pacific 20.1 18.6 35.7 58.3 62.0 70.0 China 9.3 5.2 24.0 40.4 44.0 58.0 India 12.5 8.2 15.0 27.7 27.0 54.0 Latin America and Caribbean 25.8 23.4 30.8 35.6 44.0 49.0 Sub-Saharan Africa 47.4 44.3 51.0 56.1 66.0 71.0 World 24.5 27.1 37.1 42.5 52.0 61.0 Source: based on Kaplinsky, 2004: Table 1; World Bank, 2013 Figure 2.4 maps the network of world merchandise trade. It shows the strong tendency for countries to trade strongly with their neighbours: •• Europe is the world’s major trading region (39 per cent of the world total). Almost 70 per cent of that trade is intra-regional, that is between European countries themselves. Around 13 per cent of Europe’s exports go to Asia and 7 per cent to North America. 02_Dicken-7E_Ch-02.indd 18 18/11/2014 11:01:06 AM THE CENTRE OF GRAVITY SHIFTS 19 •• Asia is the second most significant trade region (29 per cent of the world total): 57 per cent of its trade is conducted internally while 12 per cent of its trade goes to Europe and 9 per cent to North America. •• North America (16 per cent of the world total) conducts around 38 per cent of its trade internally. Asia and Europe each account for 31 per cent of North America’s trade and Europe for 16 per cent. Europe North America CIS Total merchandise trade ($ billions) 7,000 2,500 1,000 500 External trade Middle East Internal trade Trade flows ($ billions) 700 350 Africa Asia S&C America 100 <20 <20 billion not shown Figure 2.4   The network of world trade by region Source: calculated from WTO, 2012: Table A2 FDI has grown faster than trade A second indicator of growing interconnectedness is that the growth of foreign direct investment (FDI) has outpaced the growth of trade. ‘Direct’ investment is an investment by one firm in another, with the intention of gaining a degree of control over that firm’s operations. ‘Foreign’ direct investment, therefore, is direct investment across national boundaries to buy a controlling investment in a domestic firm or to set up an affiliate. It differs from ‘portfolio’ investment, through which firms purchase stocks/shares in other companies purely for financial reasons. Although FDI grew very rapidly during the first half of the twentieth century, such growth was nothing compared with its spectacular acceleration and spread after the 02_Dicken-7E_Ch-02.indd 19 18/11/2014 11:01:06 AM PART ONE THE CHANGING CONTOURS OF THE GLOBAL ECONOMY 20 Index (1985 = 100) Index (1975 = 100) 400 300 Exports FDI 200 Exports FDI 300 200 100 1975 1980 1985 100 1985 1990 1994 60 Annual percentage change Exports FDI 40 20 0 –20 –40 1996– 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Figure 2.5   Growth of foreign direct investment compared with exports Source: calculated from UNCTAD World Investment Report, various issues end of the Second World War.8 Figure 2.5 shows that during the 1970s and into the first half of the 1980s the trend lines of both FDI and exports ran more or less in parallel.Then, from 1985 the rates of growth of FDI and exports diverged rapidly.With some exceptions, FDI grew faster than trade, though with very wide fluctuations since the onset of the global financial crisis in 2008. Divergence in growth trends between FDI and trade is extremely significant: it suggests that the primary mechanism of interconnectedness within the global economy has shifted from trade to FDI. However, these trends in the growth of FDI and trade are not independent of one another. The common element is the TNC. The number of TNCs has grown exponentially over the past three decades. In 2009, there were around 82,000 parent company TNCs controlling around 810,000 foreign affiliates.9 TNCs account for at least two-thirds of world exports of goods and services, of which a significant share is intrafirm trade. In other words, it is trade within the boundaries of the firm – although across national boundaries – as transactions between different parts of the same firm. The ‘ball park’ estimate is that approximately one-third of total world trade is intrafirm, although that is probably an underestimate. One calculation is that 90 per cent of US exports and imports flow through a US [T]NC, with roughly 50 per cent of US trade flows occurring between affiliates of the same [T]NC.10 02_Dicken-7E_Ch-02.indd 20 18/11/2014 11:01:06 AM THE CENTRE OF GRAVITY SHIFTS 21 Unlike the kind of trade assumed in international trade theory – that trade takes place on an ‘arm’s-length’ basis – intra-firm trade is not subject to external market prices but to the internal decisions of TNCs. Such trade has become even more important as the production networks of TNCs have become more complex and, in particular, as production circuits have become more fragmented and global. Such ‘disintegration of production itself leads to more trade, as intermediate inputs cross borders several times during the manufacturing process’.11 These are processes we will examine in detail in subsequent chapters. A further measure of global integration, therefore, is the relative importance of inward and outward FDI to a country’s economy, measured by its GDP. The relative importance of FDI to national economies has increased virtually across the board, a clear indication of increased interconnectedness within the global economy. In 2011, global FDI stocks were 30 per cent of world GDP (compared with only 10 per cent in the early 1990s).12 But, as in the case of trade, the relative importance of FDI to national economies is highly variable. Table 2.2 shows this for a sample of countries. In virtually all cases, inward FDI has increased greatly in relative importance. Structural imbalances in the world economy The flexing and fluxing global economic map is the outcome of the major global shifts that have occurred over the past few decades. It is made up of complex Table 2.2   Inward FDI as a share of GDP (\%) 1990 2012 Poland   0.2 47.3 Argentina   6.4 23.2 10.1 31.2 Chile 46.7 77.7 China   5.1 10.3 Hong Kong, China 262.3 552.8 India   0.5 12.2 Indonesia   6.9 23.4   1.9 12.7 21.7 43.6 1990 2012 Australia 24.8 39.0 Canada 19.4 35.9 Denmark   6.8 47.3 Brazil France   7.9 39.5 Germany   6.5 21.1 78.8 113.9 Ireland Italy   5.3 17.7 Japan   0.3   3.5 Netherlands 23.3 74.2 Korea Spain 12.7 47.0 Malaysia   5.2 71.7 Philippines Switzerland 14.0 100.7 Singapore UK 20.1 54.4   9.4 Sweden USA   6.7 12.4 78.5 252.3 Taiwan   5.9 12.5 26.2 Thailand   9.3 40.7 Vietnam   3.8 51.6 Czech Republic   2.5 69.6 Hungary   1.6 81.7 Source: based on data in UNCTAD, 2013a: Web Table 7 02_Dicken-7E_Ch-02.indd 21 18/11/2014 11:01:06 AM PART ONE THE CHANGING CONTOURS OF THE GLOBAL ECONOMY 22 interconnections, most notably those constituted through networks of trade and FDI. But such flows have created huge structural imbalances within the global economy. Figures 2.6 to 2.8 map the geography of trade surpluses and deficits in manufacturing, services and agriculture. The accumulated result of these three sets of trade ... Purchase answer to see full attachment