1. Key trends in the Global Economy
Federico Steinberg

2. Outline Economic Globalization
Economic impact
Political impact
Social, economic and technological global trends
Governance of a multipolar global economy

3. A world in transition Convergence, interdependence and multipolarity
Societies are more democratic, older, more urban, more unequal
More civil wars and less wars between countries
Increasing economic and geopolitical rivalry
From a rules based multilateral international system to geoeconomic and political conflict
Crisis/transformation of global economic governance institutions
From the Atlantic to the Pacific

4. What is economic globalization?
“A dynamic process of global economic integration characterized by increasing freedom in the movement of labor, goods, services, technology, and capital”
(De la Dehesa, 2000).
Increase in international flows of:
Goods
Services
Capital
Information
¿Migration?

6. Trade to GDP Ratio

9. The transformation of international trade: MNCs, the breakdown of the production process and New Global Value chains

10. Why did all this happen? Explanations: - Ideas - interests
- Institutions
- Technology
Is reflected in:
- Deep economic liberalization
- Incorporation of millions of people to the world economy, especially in Asia
- Change in the balance of power

11. In theory, Economic globalization should imply…
Greater economical interdependence
Better allocation of resources
Higher opportunities for growth
Faster nort- south technological transfer
Greater incentives for international cooperation
But…

12. New costs and risks…
Less policy space for governments in economic policy:
The Welfare State under pressure in rich countries
Unequal opportunities in poor countries
Short run adjustment costs:
Higher unemployment/lower wages
Sectorial restructuring, relocation and outsourcing
Increased inequality (more on this later)
Greater economic insecurity:
Microeconomic level: personal economic risks
Macroeconomic level: higher markets volatility and greater exposure to external shocks

13. Is globalization something new?
Ratios of commercial and financial integration similar to the ones in 1900…BUT:
New role of trade in services
Intra-industrial trade
Role of MNCs
Higher financial interdependence:
Importance of the portfolio investment flows
Frequency of crisis: México 1994/95, Asia 1997, Brazil/ Russia 1998, Argentina 2001, CURRENT
Role of emerging markets

15. The Catch up process … They are at the forefront of global growth
Leaders of a new virtuous narrative

16. Emerging markets re-emerge

17. Decline of the west / Rise of the Rest
And especially of China

18. A new world map

20. …and define a new international order?
Which we tend to overestimate

21. They will keep growing Especially Asia
An increasingly selective approach in investments will be needed

22. Interdependence is still key
Developed Economies
Fiscal Consolidation
Weak financial systems
Unemployment
Debt purchase
Emerging Economies
Exports
Uncertainty
Lack of trust
Political Tensions

23. Political effects of Globalisation
Diffusion of power in the global economy: Nation States loose power vis a vis:
Markets
International economic institutions
Non-state actors (MNCs, NGOs, mafias, ...)
 sovereignty is reduced
But :
Nation States remain the key actors of the international system
Power losses by states are asymmetrically distributed

24. Demography

27. Ageing
+ 40
-30
-20

28. Demographic giants turn into economic giants GDP PPP, 2016

32. SOCIAL TRENDS (II)
Ageing Urbanization

33. Inequality

34. Due to trade or technological change?
It speeds up opposition to globalization

36. Poverty is falling

37. Social trends (IV): FALLING OF POVERTY AND NEW MIDDLE CLASSES
New opportunities for MNCs
Important! Products must be tailored

38. In sum More global markets + National economic policies
Unequal distribution of the gains
Reduction in sovereignty =
CONFLICT
Need for new global rules
 Global Economic Governance

39. The governance problem
Enormous economic interdependence due to globalization, especially financial integration and global value chains
Need for higher economic cooperation (global problems require global solutions)
Decline of the west/rise of the rest
Divergent views of how to govern the global economy
Rising discontent with globalization in advanced countries

40. Global Governace
“Global governance refers to the creation of rules and the exercise of global power [...] As there is no global government, global governance involves strategic interaction between entities that are not distributed in a hierarchical manner. "Robert Keohane
Economic perspective: global governance focuses on the provision of global public goods:
No rival in consumption
Not excludable through the price system
With positive externalities and transboundary effects
In a multipolar world, without a hegemonic power, international cooperation is needed to provide global public goods
WHICH?

41. Problems and challenges (I)
Global governance could be democratic or not
Even if it is democratic, it has accountability problems and often a democratic deficit
Therefore, the challenge is to establish a democratic global economic governance able of:
Taking advantage of the benefits of globalization and reducing its adverse effects
Distributing more equally material benefits in order to avoid a backlash against globalization

42. Problems and challenges (II)
Global governance requires transfering sovereignty
States resist this. Above all: - US (Post Kyoto, ICC, ODA, etc.). - Emerging countries (irresponsible stance?)
The European Union as a model for supranational governance?

43. Problems and challenges (III)
A legitimate (and efective) leadership
Long run vision

44. How to manage interdependency
Domestic problems + No risk of global collapse = Difficult international economic cooperation (G20)

45. Gradual accumulation of:
Protectionist and monetary tensions
Currency wars?
Regional trade agreements which give rise to rival blocs (TPP, TTIP). Or not?
Slight deglobalization. Or fast?
Low-intensity conflicts. Or not?

46. Conclusion A world in transition The relative decline of The West
A multipolar economy
Risks and opportunities associated to globalization