introduction to globalisation
TRANSCRIPT
Globalisation and the British Economy
Mr. Bentley, Head of Humanities, DBS
What do we really know?
As we know, there are known knowns; there are the things we know we know. We also know there are known unknowns; that is to say, we know there are some things we know we do not know. But there are also unknown unknowns - the ones we don’t know we don’t know.
Donald Rumsfeld, US Defence Secretary, 2003
Globalisation & Britain
• Perspectives on globalisation
• The drivers of globalisation
• The rise of the BRICs
• Growth environment scores
• How is Britain affected?
• Winners and losers from globalisation
• Remaining competitive in a globalized world
What is globalisation?
What is globalisation?
Anti-globalisation protests
What is Globalization?
• Globalisation is the integration of economies through markets across frontiers (Martin Wolf)
• Globalisation is the “death of distance” – (Frances Cairncross)
• “The international integration of markets for goods, labour and capital” (Niall Ferguson, Historian)
The expansion of world trade
Export volumes measured at constant 2000 US dollars (trillion)World Exports of Goods and Services
Source: Reuters EcoWin
80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04
2000
US
D (
thou
sand
bill
ions)
0.50
0.75
1.00
1.25
1.50
1.75
2.00
2.25
2.50
“The World is Flat”
“The ability to click, connect and collaborate” (Thomas Friedman)
Forces driving globalisation
Drivers of globalisation
Technology and the death of distance
Global shift
Largest economies in 2003
USA
Japan
Germany
UK
France
China
Italy
India
Brazil
Largest economies in 2003
Largest economies in 2025
USA USA
Japan China
Germany Japan
UK Germany
France India
China UK
Italy France
India Russia
Brazil South Korea
Largest economies in 2003
Largest economies in 2025
Largest economies in 2050
USA USA China
Japan China USA
Germany Japan India
UK Germany Japan
France India Brazil
China UK Mexico
Italy France Russia
India Russia Germany
Brazil South Korea UK
The BRICsNew central players in the world
economy
Who are the BRICs?
• Brazil
• Russia
• India
• China
The rise of the BRICs – stat attack
• 2000-05: BRICs contributed 28% of global economic growth
• 2005: BRICs had 15% share of global trade, double the level of 2001
• 2005: BRICs held 30% of global reserves of gold and foreign currency
• 2005: BRICs received 15% of global foreign direct investment and took 3% of FDI outflows
• Since 2003, their stocks markets have increased by approximately 150%
Comparing China and India
Data is for 2003 unless stated India China
2003 population (billions) 1.0 1.3
2050 population (billions) 1.6 1.4
Gross investment (% of GDP) 23.3 43.9
Foreign direct investment ($bn) 3.6 53.6
Manufacturing exports (% of total) 49.7 86.0
Service exports (% of total) 32.3 9.7
Literacy rate (% of population) 65.4 86.0
Sources: World Bank Development Report, 2005
China’s rapid march forwardAnnual percentage change in real national output
Growth Rates for selected Countries
China Euro Zone United Kingdom [ar 4 quarters] United StatesSource: Reuters EcoWin
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q300 01 02 03 04 05
Per
cent
0
1
2
3
4
5
6
7
8
9
10
11
USA
Euro Zone
China
UK
Cameras and Colour TVsMonthly totals, million units per month
Production of Cameras and Colour TV Sets in China
Cameras Color TV setsSource: Reuters EcoWin
86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05
Uni
ts (
mill
ions
)
0
1
2
3
4
5
6
7
8
9
10
11
Colour TV Sets
Cameras
China’s export performanceAnnual percentage change
China, Export performance for total goods and services
Source: Reuters EcoWin
91 92 93 94 95 96 97 98 99 00 01 02 03 04 05
Per
cent
-5
0
5
10
15
20
25
Growth environment scoresGetting the conditions right
Conditions for achieving growth
GES
Economic stability
Political conditions
Technologicalcapabilities
Human capital
GES scores across countries
• High scores / ranking
• Sweden (3)
• USA (10)
• Germany (16)
• UK (21)
• China (53)
• Thailand (57)
• Russia (81)
• Brazil (95)
• India (97)
• Low scores / ranking
• Zimbabwe (170)
• Burundi (169)
• Liberia (168)
• Afghanistan (167)
• Nigeria (147)
• Pakistan (126)
• Indonesia (114)
• Turkey (112)
How does globalisation affect the UK economy?
Globalisation and the UK
• The UK is a highly open economy
• Strong trade links with other countries
• Open financial (capital) markets
– Bonds
– Equities
– Property
• We have a fairly open labour market – tolerant of inflows of workers from overseas
• Globalisation creates opportunities and threats
• The key is to be internationally competitive
Opportunities for the UK
• Cheaper imports from emerging market countries
– Keeps down inflation and interest rates
– Boosts consumer welfare
• Potential for increasing export sales
– Which markets are we best at?
• Opportunities for overseas investment
– Mergers and takeovers
– Direct investment (e.g. new factories overseas; out-sourcing)
• Opportunities arising from migration of labour
• Opportunities of rapid technological change
17%
44%39%
Out-sourcing: Marks & Spencer
54%
17%
29%
Sourcing of clothes by region (%)
04/05
05/06
Indian sub-cont Far EastUK & Europe
A world of low inflationAnnual % change in consumer prices, source: International Monetary Fund (IMF)
World Consumer Price Inflation
Source: Reuters EcoWin
88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05
Per
cent
per
Ann
um
0
5
10
15
20
25
30
35
Threats for the UK economy
• Threats to our manufacturing industries
– Low cost competition
– Lost jobs from out-sourcing
• Threats to jobs in service sector industries
• Structural unemployment
• May cause a widening of the rich-poor divide
• Social and economic tensions from migration
• Threats to the global environment – affects us all
• Inflationary risks from higher energy prices
Global oil pricesClosing daily price, US dollars per barrel of oil
Brent Crude Oil Prices
Source: Reuters EcoWin
01 02 03 04 05 06
US
D/B
arre
l
0
10
20
30
40
50
60
70
World Oil Demand - Projections
Per cent of total 2005
USA 25
Japan 6
China 9
Russia 3
India 3
Brazil 3
BRICs 18
Source: Goldman Sachs, “The World and the BRICs dream” March 2006
World Oil Demand - Projections
Per cent of total 2005 2025
USA 25 19
Japan 6 4
China 9 16
Russia 3 4
India 3 7
Brazil 3 4
BRICs 18 31
Source: Goldman Sachs, “The World and the BRICs dream” March 2006
Cars owned per 1000 people
2000 2005
USA 480 503
China 7 15
India 5 8
Brazil 137 150
Russia 140 189
Source: Goldman Sachs, “The World and the BRICs dream” March 2006
Cars owned per 1000 people
2000 2005 2025
USA 480 503 532
China 7 15 137
India 5 8 48
Brazil 137 150 351
Russia 140 189 492
Source: Goldman Sachs, “The World and the BRICs dream” March 2006
Gainers and losers in the UK from globalisation
Some summary thoughts
Some winners
Potential Winners
Businesses Businesses with leading global brands
Business services
Niche high value manufacturers
Suppliers of energy and utilities
Individuals Consumers of low cost imports
People with strong cross cultural skills
Some winners and losers
Potential Winners Potential Losers
Businesses Businesses with leading global brands
Business services
Niche high value manufacturers
Suppliers of energy and utilities
Mass market manufacturers
Multinationals without the right local partners and strategies in a global economy
Individuals Consumers of low cost imports
People with strong cross cultural skills
Low skilled workers in tradable sectors
Low and medium skilled workers in sectors open to migrant labour
How competitive is the UK?Competing in a global economy
Productivity and jobs
80
90
100
110
120
130
USA France Germany
Source: OECD
GDP per head Employment rate
Prosperity and EmploymentComparison, 2004Index, UK = 100
The productivity gap
90
100
110
120
130
140
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Source: ONS
US
France
UK
Germany
GDP per workerComparison, 1992-2004Index, UK = 100
Volatility of economic growth
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Germany
France
US
UK
Volatility of GDP growthComparison, 1992-2004Coefficient of variation
Source: DTI calculations on OECD data
Volatility of interest rates
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
US
Germany
France
UK
Volatility of short-term interest ratesComparison, 1992-2004Coefficient of variation
Source: DTI calculations on OECD data Note: since 1999 Germany and France have had the same interest rate
Not enough investment?
Business investment Comparison, 1992-2004Per cent of GDP in current prices
8
10
12
14
16
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
France
Germany
US
UK
Source: OECD
Too little research?
Business Enterprise Research Comparison, 1992-2003 Per cent of GDP
0.5
1.0
1.5
2.0
2.5
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Source: OECD except for the UK which is ONS
US
Germany
France
UK