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Getting to the Future : The Principal Drivers of the Global Economy

Getting to the Future : The Principal Drivers of the Global Economy. The Principal Drivers of the Global Economy. Globalization Withering Away of the State Technology Demography – Human Capital Failed States Economic Growth. Globalization. An increasingly interconnected world:.

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Getting to the Future : The Principal Drivers of the Global Economy

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  1. Getting to the Future: The Principal Drivers of the Global Economy

  2. The Principal Drivers of the Global Economy • Globalization • Withering Away of the State • Technology • Demography – Human Capital • Failed States • Economic Growth Marvin Zonis + Associates, Inc. International Risk Consultants www.mza-inc.com

  3. Globalization • An increasingly interconnected world: • “As a result of very rapid increases in telecommunications and computer-based technologies and products, a dramatic expansion in cross-border financial flows and within countries has emerged. The pace has become truly remarkable. These technology-based developments have so expanded the breadth and depth of markets that governments, even reluctant ones, increasingly have felt they have had little alternative but to deregulate and free up internal credit and financial markets.” • Alan Greenspan, keynote address at the Cato Institute's 15th Annual Monetary Conference, October 14, 1997. Marvin Zonis + Associates, Inc. International Risk Consultants www.mza-inc.com

  4. Globalization • Globalization is not a new story: • “For several major industrialized countries, including the U.S., foreign trade—exports plus imports—has only recently surpassed the levels achieved in the 19th century. Capital flows are even less integrated. Current capital flows are still only about three-quarters of the levels achieved in the 1890s.” • Steve H. Hanke, Johns Hopkins University • economist Marvin Zonis + Associates, Inc. International Risk Consultants www.mza-inc.com

  5. Globalization Foreign Trade as % of GDP: Source: Forbes, August 24, 1998 Marvin Zonis + Associates, Inc. International Risk Consultants www.mza-inc.com

  6. The Withering Away of the State • March 24th, 1999: • The UK's highest court upholds Chileanex-President Augusto Pinochet's arrest • NATO strikes against Serbian targets in Yugoslavia begin Marvin Zonis + Associates, Inc. International Risk Consultants www.mza-inc.com

  7. The Withering Away of the State • Assault on state sovereignty from above – supranational organizations: • NATO • EU • WTO • IMF Marvin Zonis + Associates, Inc. International Risk Consultants www.mza-inc.com

  8. The Withering Away of the State • Assault on state sovereignty from below – regionalism: • Quebec and Canada • The Walloon and Flemish separatists and Belgium • Kurds and Turkey • East Timor and Indonesia • Corsica and France • Basques and Spain Marvin Zonis + Associates, Inc. International Risk Consultants www.mza-inc.com

  9. Global Inequality • Global inequality is widening – I: • “Some 3 billion people, half of the world's population live on the margin of subsistence, and the gap between the average incomes of the richestand poorest countries has widened to 70:1.” • – Secretary-General Kofi Annan in a message to the • International Conference on Development, June 24, 1999 Marvin Zonis + Associates, Inc. International Risk Consultants www.mza-inc.com

  10. Global Inequality • Global inequality is widening – II: • “If we do not have the capacity to deal with social emergencies, if we do not have longer-term plans for solid institutions, if we do not have greater equity and social justice, there will be no political stability. And without political stability, no amount of money will put together packages which will give us financial stability." • - James Wolfensohn, President, The World Bank Group, to the IMF-World Bank Meeting in Washington, 1997 Marvin Zonis + Associates, Inc. International Risk Consultants www.mza-inc.com

  11. Technology and the Digital Economy • Internet users per 1000 people (1998): Marvin Zonis + Associates, Inc. International Risk Consultants www.mza-inc.com

  12. Technology and the Digital Economy • Registered hosts on the Internet: Source: Matrix information and Directory Services Marvin Zonis + Associates, Inc. International Risk Consultants www.mza-inc.com

  13. Human Capital – Changing Demographics • Median age by major area, 1950, 1998 and 2050 (in years) Source: UN Population Division Marvin Zonis + Associates, Inc. International Risk Consultants www.mza-inc.com

  14. Human Capital – Rise in Median Age • Median Age 1985, 2000 and 2015 Source: UN Population Division Marvin Zonis + Associates, Inc. International Risk Consultants www.mza-inc.com

  15. Human Capital – Decline in Fertility Rates • Fertility rates 1985, 2000 and 2015 (births per woman) Source: World Bank and US Census Bureau Marvin Zonis + Associates, Inc. International Risk Consultants www.mza-inc.com

  16. Human Capital – Aging Population “According to current projections, in 2030 every third person in the member countries of the Organisation for Economic Cooperation and Development will be over age 60.” – UN, Division for Social Policy and Development Marvin Zonis + Associates, Inc. International Risk Consultants www.mza-inc.com

  17. Human Capital – Aging Population “Today, the ratio of working taxpayers to nonworking pensioners in the developed world is around 3 to 1. By 2030, absent reform, this ratio will fall to 1.5 to 1 - and in some of the fastest aging countries, such as Germany and Italy, it will drop all the way to 1 to 1 or even lower. The typical working couple will thus be required to fund the full cash pension and health-care needs of at least one anonymous retiree.” – Former U.S. Commerce Secretary Peter G. Peterson Marvin Zonis + Associates, Inc. International Risk Consultants www.mza-inc.com

  18. Human Capital – Global Aging • Consequences of Global Aging: • Change in consumption patterns • Changes to pension systems • Huge infrastructure for young and rapidly growing populations Marvin Zonis + Associates, Inc. International Risk Consultants www.mza-inc.com

  19. What Are the Emerging Markets? • High Growth – • AVERAGE GDP GROWTH ABOVE 4 PERCENT PER YEAR, 1987-1997: Marvin Zonis + Associates, Inc. International Risk Consultants www.mza-inc.com

  20. What Are the Emerging Markets? • Steady Growth – • AVERAGE GDP GROWTH BETWEEN 1 AND 4 PERCENT PER YEAR, 1987-1997: Marvin Zonis + Associates, Inc. International Risk Consultants www.mza-inc.com

  21. What Are the Emerging Markets? • Growth?? • AVERAGE GDP GROWTH BELOW 1 PERCENT PER YEAR, 1987-1997: Marvin Zonis + Associates, Inc. International Risk Consultants www.mza-inc.com

  22. What are the Emerging Markets? • The losers: • Countries whose average annual population growth is above their Average Annual Change in GDP (1987-1997): Marvin Zonis + Associates, Inc. International Risk Consultants www.mza-inc.com

  23. What Are the Emerging Markets? • Leading Growth Countries Since 1950: Sources: OECD,UN, Euromonitor Marvin Zonis + Associates, Inc. International Risk Consultants www.mza-inc.com

  24. What Are the Emerging Markets? • Failed States: • Symptoms of failed states – low GDP per capita and low economic growth: Source: ICRG Marvin Zonis + Associates, Inc. International Risk Consultants www.mza-inc.com

  25. The Major Financial Crises of Our Times: • Latin American Debt Crisis of 1982 • ERM Crisis of 1992 • Mexican Peso Devaluation of 1994 • East Asian Crisis of 1997 • Russian Crisis of August 1998 • Brazil Crisis of 1999 Marvin Zonis + Associates, Inc. International Risk Consultants www.mza-inc.com

  26. The Major Financial Crises of Our Times: East Asian Crises, 1997-1998 • Japanese Model of Economic Development • State guides economy and growth • State allocates resources • Export led growth • Unregulated Banking Systems • High Levels of Corruption • Common Industries • Investment Boom • Japanese slowdown • Chinese Devaluation, 1994 • Currencies Pegged to Dollar • Robert Rubin pushes for strong dollar, March-April, 1995 Marvin Zonis + Associates, Inc. International Risk Consultants www.mza-inc.com

  27. Then and Now • Then: • All emerging markets were treated alike. • Emerging markets were considered virtually equal bets. • Companies tended to ignore country risk, focusing on the financial and economic aspects of the deal. Marvin Zonis + Associates, Inc. International Risk Consultants www.mza-inc.com

  28. Then and Now • Now: • A Beauty Pageant • Differentiation of Emerging Markets countries on the basis of considerations of political risk. Marvin Zonis + Associates, Inc. International Risk Consultants www.mza-inc.com

  29. The Major Financial Crises of Our Times: • The countries that will emerge most successfully from the crises are the ones that will make the most deep seated structural reforms. Marvin Zonis + Associates, Inc. International Risk Consultants www.mza-inc.com

  30. Factors for Country Success • Stable Institutions • Democratic Politics • Policies • Human Capital • Market Economics • Globalization • Technology Marvin Zonis + Associates, Inc. International Risk Consultants www.mza-inc.com

  31. Factors for Success: Institutional Strength • Long Term Ratings: Marvin Zonis + Associates, Inc. International Risk Consultants www.mza-inc.com

  32. Factors for Country Success • Stable Institutions • Democratic Politics • Policies • Human Capital • Market Economics • Globalization • Technology Marvin Zonis + Associates, Inc. International Risk Consultants www.mza-inc.com

  33. Factors for Success: Human Capital • Women's activity rates for the age group 20-54 years in 1950, 1970, 1990 and 2010 Marvin Zonis + Associates, Inc. International Risk Consultants www.mza-inc.com

  34. The East Asian Crises, 1997-1998 • Prospects for the Future: • Asia’s Growing Labor Force Marvin Zonis + Associates, Inc. International Risk Consultants www.mza-inc.com

  35. Factors for Success: Human Capital • Adult illiteracy rate – 1995: Marvin Zonis + Associates, Inc. International Risk Consultants www.mza-inc.com

  36. Factors for Success: Human Capital • Literacy Rates, 1997: Source: ABC-Clio Marvin Zonis + Associates, Inc. International Risk Consultants www.mza-inc.com

  37. States in Decline Ethnic Distribution In The Former Yugoslavia Marvin Zonis + Associates, Inc. International Risk Consultants www.mza-inc.com

  38. Factors for Success: Human Capital Ethnic Distribution In Russia Marvin Zonis + Associates, Inc. International Risk Consultants www.mza-inc.com

  39. Factors for Success: Corruption • 1998 Corruption Perception Index Source: Transparency International Marvin Zonis + Associates, Inc. International Risk Consultants www.mza-inc.com

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