globalisation & uk economy 2015
TRANSCRIPT
Globalisa(on and the UK Economy
What is Globalisa(on?
What is Globaliza(on?
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Globalisa.on is a process in which na.onal economies have become increasingly integrated and inter-‐dependent
Is Globalisa(on Inevitable?
Global trade has grown much less quickly in the years since the start of the world financial crisis in 2007-‐08
Some key features of globalisa(on
Trade to GDP ra.os are rising for most
countries
Expansion of Financial Capital Flows between
countries
Foreign Direct Investment and Cross
Border M&A
Rise of truly global brands – inc from emerging countries
Deeper specializa.on of labour –
components from many na.ons
Global supply chains & new trade and
investment routes
Changing global trade networks -‐ 1995
Changing global trade networks -‐ 2013
China’s new economic corridor plan
Mergers and Acquisi(ons Across Borders
Nissan, Sunderland Cummins Power Genera.on, Ramsgate
AkzoNobel, Ashington Siemens, Hull
Foreign direct investment into the UK
1. Encourages producers and consumers to reap benefits from deeper division of labour and economies of scale
2. Compe..ve markets reduce monopoly profits and incen.vize businesses to seek cost-‐reducing innova(ons
3. Enhanced growth has led to higher per capita incomes – and helped many of poorest countries to achieve higher growth and reduce extreme poverty
4. Advantages from the freer movement of labour 5. Increased awareness among consumers of challenges
from climate change and wealth/income inequality
Benefits of Globalisa(on
Many of the effects of globalisa.on are disrup.ve to established industries and organisa.ons
Poverty Reduc(on – A Major Benefit of Globalisa(on in the Long Run The percentage of people living in extreme poverty has fallen across all regions but progress in Sub-‐Saharan Africa has (un.l recently) been slower
MENA: Middle East and North Africa
1. Growing inequality leading to poli.cal & social tensions 2. Threats to the global commons e.g. irreversible damage to
ecosystems, land degrada.on, deforesta.on, water scarcity 3. Macroeconomic fragility – external economic and financial
shocks in region can rapidly spread to other centres …. Systemic risk – Financial cycles in world economy are more vola.le than real
economic cycles – but strong inter-‐connec.ons
4. Trade imbalances leading to calls for protec.onism and a move towards countries using managed exchange rates
5. Higher structural unemployment in countries where produc.on has shi^ed to lower labour cost na.ons
6. Less cultural diversity as global brands dominate
Disadvantages of Globalisa(on
Imbalances between countries Imbalances within countries
Trade imbalances i.e. current account surpluses and deficits
Rising income and wealth inequali.es
Unbalanced flows of foreign direct investment between countries
Large structural differences in unemployment rates
Imbalances in access to global markets, ideas, health & educa.on
Imbalances between rural and urban areas / different regions
Globalisa(on and Economic Imbalances
Imbalances between countries Imbalances within countries
Trade imbalances i.e. current account surpluses and deficits
Rising income and wealth inequali.es within countries
Unbalanced flows of foreign direct investment between countries
Large differences in structural unemployment rates
Imbalances in access to global markets, ideas, health & educa.on
Imbalances between rural and urban areas / different regions
Key Argument: Globalisa(on and Imbalances Globalisa(on and Economic Imbalances
Financial and Real Economic Cycles Financial & Economic Instability
Background on United Kingdom: (Pop 64.1m) (Data)
Recent Macroeconomic Data
Latest annualised GDP Growth (%) 2.6%
GDP per capita (US $, PPP standard) $35,013
Infla.on rate (%) 0.5%
Unemployment rate (% of labour force) 5.8%
Fiscal balance (% of GDP) -‐5.8%
Government debt (% of GDP) 91%
Yield on 10-‐Yr Govt Bonds (%) 1.5%
Investment (% of GDP) in 2012 15%
Background Informa(on
Currency unit £
Exchange rate system float
Current policy interest rate 0.5%
Trade surplus or deficit? Def
Current account balance (% of GDP) -‐4.4%
Main corporate tax rate (per cent) 21%
Global compe..veness ranking for 2014 9th
Economic Freedom Index Ranking 14th
Corrup.on Percep.on Ranking 14th
Other Indicators
Latest HDI ranking 14
% of popula.on living below their na.onal poverty line
n/a
Life Expectancy (years) 81.5
Rank for capacity to airact skilled talent 5th
Rank for Innova.on and sophis.ca.on 8th
Gini coefficient (Latest published es.mate) 36.5
Financial and Real Economic Cycles Does Britain benefit from Globalisa(on?
• Benefits from trade crea(on – Compara.ve advantage and economic efficiency – Impor.ng cheaper products / technology – Exports as a source of growth / economies of scale
• Increased contestability of domes(c markets • Freer flow of labour – the global baile for talent – Skilled immigra.on / inflows of human capital – Unemployment has been falling – now below 6%
• Investment opportuni(es for Bri.sh businesses – Inward FDI into the UK (a source of jobs and capital) – Overseas investment by UK businesses (adds to GNI)
Financial and Real Economic Cycles Costs of Globalisa(on for Britain
• Higher structural unemployment and more low paid jobs – E.g. loss of manufacturing output and jobs to lower labour cost centres – Hollowing-‐Out: Rise of lower-‐skilled jobs offering below average pay
• Increased exposure to external economic shocks – Increased inter-‐dependence and fragile global supply-‐chains
• Risks of widening income and wealth inequality – Higher-‐skilled jobs get a dispropor.onate reward – Downward dri^ of real incomes in millions of low paid jobs
• Environmental concerns from rapid global growth – Deforesta.on, water scarcity, carbon emissions – Global public bads e.g. risks of pandemics
• Increased economic and social imbalances – Regional imbalances in wealth and employment
The long-‐term padern of jobs growth in the UK, as in most other European countries, has resembled an hourglass: the share of mid-‐skilled jobs such as secretaries and machine operators has been squeezed by technology and globalisa(on, while the share of low-‐skilled jobs — for example, shop assistants — and high-‐skilled jobs, such as managers, has expanded. (Source: FT, Jan 2015)
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Globalisa(on and the UK Economy