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Globalization and the BRIC ’ s Emergence – Understanding challenges and opportunities

Globalization and the BRIC ’ s Emergence – Understanding challenges and opportunities. The BRICs. Determinants of economic well-being. Environment and resources Geography, climate, disease and demography (human and animal) Human and non-human capital; Land Culture, philosophy and religion

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Globalization and the BRIC ’ s Emergence – Understanding challenges and opportunities

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  1. Globalization and the BRIC’s Emergence – Understanding challenges and opportunities

  2. The BRICs

  3. Determinants of economic well-being • Environment and resources • Geography, climate, disease and demography (human and animal) • Human and non-human capital; Land • Culture, philosophy and religion • Impact on motives, incentives and opportunities • Political and social institutions • Individual freedom vs. authoritarian control • Rule of law: extent of arbitrary confiscation or taxation • Order vs. anarchy: stimulate or retard economic expansion? • Markets: “The Division of Labour is Limited by the Extent of the Market” • Incentives to trade and save (requires protection of property rights) • Competition versus exercise of monopoly power • Extraction of surplus: what remains for capital accumulation? • Technologies and their application • Diffusion of new ideas and incentives for their application(Commercial links promoted the spread of new technologies) • Freedom to reap the rewards from investment (capital accumulation)

  4. Specificities of BRICS • Wide variation of production structures • heterogeneity of production systems • heterogeneity of demand • Shortage of capital and knowledge • Wide regional differences • gap between the most and the least developed regions enormous and still growing. • Wide income differences • extremely high open and hidden unemployment among unskilled workers • there may be shortages of skilled labour

  5. How to analyze the BRICs? • History • Politics • Culture • modes of insertion in globalization • FDI (scale and type very different) • Migration • source of both capital and skilled labour (Diasporas in China and India) • Brain Drain

  6. BRICs Fundamentals

  7. Size matters: geography and demography Sources: ONU, World Population Prospects; Instituto Brasileiro de Geografia e Estatística; China National Bureau of Statistics; Office of the Registrar General and Census Commissioner, India; Rosstat.

  8. Population Nominal GDP 2008 Density Area inhabitants total 2009 2 total per capita km 2 per km thousands Brazil 193.734 8.547.403 22 3.225 1.552.656 Mexico 105.699 1.958.201 54 948.476 6.397 China 1.345.751 9.560.961 134 4.348.303 1.474 India 1.198.003 3.287.263 331 626 1.252.903 Korea 48.333 99.268 480 888.023 14.266 Russia 140.874 17.075.400 8 984.927 4.047 South Africa 50.110 1.221.037 39 283.088 4.507 Source: UNCTAD Handbook of Statistics, 2009. Population, area, density, total and per capita GDP

  9. The BRICs: Population and GDP Source: EIU Country Reports; Nominal GDP converted to US $ billion for comparison

  10. Share of global GDP

  11. The BRICs: GDP per Capita Source: EIU 2011 Country Reports; GDP per Capita at PPP

  12. The BRICs: Growth Rates

  13. Distribution du PIB mondial (dollars internationaux de 1990) Source Maddison [2003] et Maddison [1995]

  14. PIB par habitant (dollars internationaux de 1990)

  15. Rates of Growth of World GDP, 1700-2003(annual average compound growth rates) Fonte: Maddison A., Chinese Economic Performance in the Long Run, OECD Development Centre, 2007.

  16. Eurasia: economic integration & development • Europe was in relative decline after collapse of Roman Empire • Dark Ages and Middle Ages, through to c1500 • Centuries of change, not stagnation but not sustained progress either • Contact with rest of world (Asia) via Middle East: upheavals of political & religious conflict, but trade continues too, even expands • East Asia: Chinese civilisation developed early relative to Europe • Subject to Mongol invasion & domination from 12th to 14th centuries • Sea-borne trade with south Asia, gradually extending westwards • Overland trade via “silk road”, the Levant and Venice • South Asia: long history of diverse civilisations • Subject to periodic invasions (e.g. Moghuls) overland from the west • Sea-borne trade via Arabia, the Levant and Venice • Development of the “European exception” (economic success) • A “great divergence” emerged, but when? Probably not until after 1500, some argue not until as late as 1800 (the “California School”)

  17. The divergencebetween the richestparts of China (Yangzidelta) and England occurredbetween 1750 and 1800 • Whatgave England/Europe the decisiveadvantagesover the Yangzidelta/China were • 1) Colonieswhichensured the supply of cotton, produced and processedwithcheepslavelabour • 2) Coal in locationsnear the industrialcenters • Therefore England couldescapethe landconstraint

  18. Pomeranz – pros and cons • Against “involution” thesis – diminishing marginal returns because of population increase (Philip C. Huang) • Since then: lively debates on issues of calculation and miscalculation • West was advanced in comparison to China: Education (indicator: book production) • China had coal and iron, not near Yangzi delta, but near Hankou, another industrial/entrepot city. • Moreover, transport was sophisticated in 18th c. China

  19. Per capita GDP, main areas and countries: (1990 PPP US$ billion) Source: Maddison A., Chinese Economic Performance in the Long Run, OECD Development Centre, 2007.

  20. GDP growth rate, main areas and countries: (1990 PPP US$ billion) Source: Maddison A., Chinese Economic Performance in the Long Run, OECD Development Centre, 2007.

  21. GDP structure (demand side)

  22. Growth Conditions • Sound, stable macroeconomic policies • Strong, stable political institutions • Openness • High levels of education • ‘Miracle’ conditions are not needed.

  23. Russia • As a single geopolitical entity, has existed for barely twenty years. • drastic political, economic and intellectual changes from the 1991 dissolution of the Soviet Union • Oil/natural resources dependence  Dutch disease • Kremlin China • Linear economic transformation since 1979 • SOE reform • Private entrepreneurship • FDI • Less clear-cut political transformation • Beijing • Local level

  24. Brazil • Internal cleavages  complex political economy • Military experience • Political alternance • More stable than it seems? India • Much greater diversity • A democratic miracle? • Economic transformation since 1991 • Political alternance • Less stable than it seems?

  25. China’s economic development Planned economy (1953-1978) Transformation to market oriented economy (1979-2004) New era of development (2005-present) 10% 9% 5% Approximate average GDP growth rate Source : National Statistics Bureau, http://www.stats.gov.cn/tjsj/ China Research Center for Public Policy , http://www.crcpp.org/cpipphtml/en/en_sum_report/2007-11/20/200711200940.html

  26. GDP structure (supply side)

  27. Social development

  28. Poverty measures: income and multidimensional

  29. Poverty Reduction in Brazil, China and India Headcount indices of poverty for a common international poverty line Survey-based Mixed method Source: Chen and Ravallion (2009).

  30. Most recent data Brazil 59.3 Russia 31.0 India 32.5 China 44.7 South Africa 57.8 Mexico 54.6 Korea, Rep. 31.6 USA 40.8 Japan 24.9 BRICS and selected countries: Gini index/ social unequality Is the highly unevenly distributed income a serious development problem for Brazil and South Africa? Is China increasing social unequality a problem for the future? Source: UNDP

  31. Rémunération totale horaire dans le secteur manufacturier, 2002-2008

  32. Households according to disposable income bracket in BRIC countries: 2002/2007‘000 households Source: Euromonitor International from national statistics

  33. Growth in volume of world merchandise trade and GDP (Annual % change, 2005-13)

  34. Growth in trade was strongest for Europe and Asia

  35. EU has retained its importance as “central” in the global trade network

  36. Asian intraregional trade has expanded rapidly since 1990

  37. The Diffusion of Key Global Trade Players

  38. Ratio of exports and imports of goods and commercial services to GDP, 2007 Source: WORLD TRADE DEVELOPMENTS

  39. Trade openness

  40. Poids des BRIC dans le commerce mondial de marchandises (%)

  41. Composition des exportations de biens et services en 2009

  42. China surpassing Japan as a more significant regional and global consumer

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