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Nottingham University Nottingham 17 th February 2005

WHY GLOBALIZATION WORKS Martin Wolf, Associate Editor & Chief Economics Commentator, Financial Times, London. Nottingham University Nottingham 17 th February 2005. Future of Globalisation. Five Big Themes of the Book Technology and the market revolution Role of states

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Nottingham University Nottingham 17 th February 2005

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  1. WHY GLOBALIZATION WORKSMartin Wolf, Associate Editor & Chief Economics Commentator, Financial Times, London Nottingham University Nottingham17th February 2005

  2. Future of Globalisation • Five Big Themes of the Book • Technology and the market revolution • Role of states • Development record of the “second age of globalisation” • Threats to globalisation • Exploiting the opportunities of globalisation

  3. Theme 1 – Centrality of markets • Globalisation is integration of economies through markets across frontiers • It is enabled by technology and by liberalisation • The 1980s and 1990s were a liberalisation revolution • Globalisation followed

  4. Theme 1 – Centrality of markets

  5. Theme 1 – Centrality of markets

  6. Theme 1 – Centrality of markets

  7. Theme 1 – Centrality of markets

  8. Theme 1 – Centrality of markets

  9. Theme 1 – Centrality of markets

  10. Theme 2 – Markets and States • Markets need supportive states • They need to be both strong and constrained • The creation of such a state is difficult and the achievement is rare • Far more common are predatory, weak or even failing states • Good states are created by external regulatory competition, constitutional change and moral reform • The difference in quality of states is the world’s biggest challenge

  11. Theme 3 – Record • In many ways, there is too little globalisation, not too much. • Labour markets are less integrated than in the late 19th century • Capital markets are less good at moving capital to less developed economies, because of monetary disorder and poor property rights • But trade and production are more integrated than ever before, because of technology and liberalisation

  12. Theme 3 – Record • Where globalisation has worked, predominantly in Asia, it has been remarkably good.

  13. Theme 3 – Record “Let China sleep, for when she wakes, she will shake the world.” Napoleon Bonaparte

  14. Theme 3 – Record

  15. Theme 3 – Record

  16. Theme 3 – Record

  17. Theme 3 – Record

  18. Theme 3 – Record

  19. Theme 3 – Record

  20. Theme 3 – Record

  21. Theme 4 – Threats ahead • Insecurity • Instability • Interests • Ideas

  22. Theme 4 – Threats ahead • Insecurity • Then: huge conflicts among the great powers, leading to two world wars • Today: fear of terrorism, but the great powers are on the same side, at least for the moment • Risks ahead: rise of China, mega-terrorism and resource wars • Assessment: risks manageable

  23. Theme 4 – Threats ahead • The consensus is that oil supply can increase in the years ahead • But we still do not know what will replace it in the long run • The resource needs of Asian industrialisation are enormous: half of global incremental demand for oil is now from Asia, with China a bigger factor than the US

  24. Theme 4 – Threats ahead

  25. Theme 4 – Threats ahead • Instability • Then: the Great Depression • Today: financial crises in emerging market economies, asset price bubbles and global imbalances • Risks ahead: dollar crisis and asset price crashes • Assessment: risks manageable

  26. Theme 4 – Threats ahead • Interests • Then: national companies with the same interests as their work force and no World Trade Organisation • Today: multinational companies with internationally integrated operations and interests at odds with their national work forces and also the WTO • Risks ahead: middle class anxiety as services become more internationally tradable • Assessment: risks manageable

  27. Theme 4 – Threats ahead • Ideas • Then: belief in socialism, planning and import substitution • Today: collapse of socialism and worldwide move towards the market and discordant group of anti-globalisation protesters • Risks ahead: loss of faith in market, particularly if financial system continues to be unstable • Assessment: risks manageable

  28. Theme 5 – How to exploit opportunities • I have no blueprint for a new world. I think these are a waste of time. But here are ten “commandments” that bring together my main conclusions • The market economy is the only arrangement capable of generating sustained increases in prosperity • Individual states remain the locus of political debate and legitimacy. Supranational institutions gain their legitimacy from the states that belong to them • It is in the interest of states and their peoples to participate in international treaty-based regimes that deliver global public goods

  29. Theme 5 – How to exploit opportunities • Such regimes need to be specific, focused and enforceable • The WTO has strayed too far from its primary focus on trade liberalisation • The case for regimes covering investment and competition is strong. But such regimes do not need to be global • It is in the long-run interest of countries to integrate into financial markets, but they should do so carefully • It is necessary to accept renegotiation of sovereign debt as a normal feature of the world economy • Official development assistance need to increase • Countries need to learn from their own mistakes, but also we need the ability to rescue failed states

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