2 desafios sistema de comércio internacional

2 desafios ao sistema de comércio internacional
As nações são quase sempre melhores quando compram e vendem umas das outras.
Obrigado pela sua encomenda (foto: Paulo Whitaker / Reuters / Corbis)
Se há um ponto em que a maioria dos economistas concorda, é que o comércio entre as nações melhora o mundo. No entanto, o comércio internacional pode ser uma das questões políticas mais controversas, tanto internamente quanto entre governos.
Quando uma empresa ou um indivíduo compra um bem ou um serviço produzido mais barato no exterior, os padrões de vida nos dois países aumentam. Existem outras razões pelas quais os consumidores e as empresas compram no exterior que também os tornam melhores, o produto pode atender melhor às suas necessidades do que ofertas domésticas similares ou pode não estar disponível internamente. Em qualquer caso, o produtor estrangeiro também se beneficia fazendo mais vendas do que poderia vender somente em seu próprio mercado e ganhando moeda estrangeira (moeda) que pode ser usada por si ou por outros no país para comprar produtos estrangeiros.
Ainda assim, mesmo que as sociedades como um todo ganhem quando os países negociam, nem todo indivíduo ou empresa está em melhor situação. Quando uma empresa compra um produto estrangeiro porque é mais barato, é mais benéfico, mas o produtor doméstico (mais caro) perde uma venda. Normalmente, no entanto, o comprador ganha mais do que o vendedor doméstico perde. Exceto nos casos em que os custos de produção não incluem custos sociais como a poluição, o mundo fica melhor quando os países importam produtos produzidos com maior eficiência em outros países.
Aqueles que se percebem prejudicados pela concorrência estrangeira há muito tempo se opõem ao comércio internacional. Logo depois que economistas como Adam Smith e David Ricardo estabeleceram a base econômica para o livre comércio, o historiador britânico Thomas B. Macaulay estava observando os problemas práticos que os governos enfrentam ao decidir abraçar o conceito: “Livre comércio, um dos maiores bênçãos que um governo pode conferir a um povo, em quase todos os países, são impopulares. & # 8221;
Dois séculos depois, os debates comerciais ainda ressoam.
Por que os países negociam?
Em um dos conceitos mais importantes da economia, Ricardo observou que o comércio era impulsionado por custos comparativos, em vez de custos absolutos (de produzir um bem). Um país pode ser mais produtivo que outros em todos os bens, no sentido de poder produzir qualquer bem usando menos insumos (como capital e trabalho) do que outros países exigem para produzir o mesmo bem. A perspicácia de Ricardo era que tal país ainda se beneficiaria da negociação de acordo com sua vantagem comparativa - exportando produtos nos quais sua vantagem absoluta era maior e importando produtos nos quais sua vantagem absoluta era comparativamente menor (mesmo se ainda positivo).
Vantagem comparativa.
Mesmo um país que é mais eficiente (tem vantagem absoluta) em tudo o que faz beneficiaria do comércio. Considere um exemplo:
País A: Uma hora de trabalho pode produzir três quilos de aço ou duas camisas. País B: Uma hora de trabalho pode produzir um quilo de aço ou uma camisa.
O país A é mais eficiente em ambos os produtos. Agora suponha que o País B ofereça vender duas camisas do País A em troca de 2,5 quilos de aço.
Para produzir essas duas camisas adicionais, o País B desvia duas horas de trabalho de produzir (dois quilos) de aço. O país A desvia uma hora de trabalho da produção de duas camisas. Ele usa essa hora de trabalho para produzir três quilos adicionais de aço.
No geral, o mesmo número de camisetas é produzido: o País A produz duas camisas a menos, mas o País B produz duas camisas adicionais. No entanto, mais aço agora é produzido do que antes: o País A produz três quilos adicionais de aço, enquanto o País B reduz sua produção de aço em dois quilos. O quilo extra de aço é uma medida dos ganhos do comércio.
Embora um país possa ser duas vezes mais produtivo do que seus parceiros comerciais na fabricação de roupas, se for três vezes mais produtivo na produção de aço ou na construção de aviões, se beneficiará ao fabricar e exportar esses produtos e importar roupas. Seu parceiro ganhará com a exportação de roupas em que tenha uma vantagem comparativa, mas não absoluta, em troca desses outros produtos (veja o quadro). A noção de vantagem comparativa também se estende além dos bens físicos para o comércio de serviços - como escrever código de computador ou fornecer produtos financeiros.
Por causa da vantagem comparativa, o comércio eleva os padrões de vida de ambos os países. Douglas Irwin (2009) chama vantagem comparativa & # 8220; boas notícias & # 8221; para o desenvolvimento econômico. "Mesmo que um país em desenvolvimento não tenha uma vantagem absoluta em qualquer campo, ele sempre terá uma vantagem comparativa na produção de alguns bens," # 8221; e negociará lucrativamente com economias avançadas.
Diferenças na vantagem comparativa podem surgir por várias razões. No início do século XX, os economistas suecos Eli Heckscher e Bertil Ohlin identificaram o papel do trabalho e do capital, os chamados dotes de fatores, como um fator determinante de vantagem. A proposição de Heckscher-Ohlin sustenta que os países tendem a exportar bens cuja produção utiliza intensivamente o fator de produção relativamente abundante no país. Os países bem dotados de capital, tais como fábricas e maquinaria, devem exportar produtos intensivos em capital, enquanto os bem dotados de mão-de-obra devem exportar produtos intensivos em mão-de-obra. Os economistas de hoje acham que a dotação de fatores é importante, mas há também outras influências importantes nos padrões de comércio (Baldwin, 2008).
Uma pesquisa recente descobriu que os episódios de abertura comercial são seguidos por ajustes não apenas entre as indústrias, mas também dentro deles. O aumento da concorrência proveniente de empresas estrangeiras pressiona os lucros, obrigando as empresas menos eficientes a contratar e abrindo espaço para empresas mais eficientes. Expansão e nova entrada trazem consigo melhores tecnologias e novas variedades de produtos. Provavelmente, o mais importante é que o comércio possibilita uma maior seleção entre diferentes tipos de mercadorias (digamos, refrigeradores). Isso explica por que há muito comércio intra-setorial (por exemplo, países que exportam refrigeradores domésticos podem importar refrigeradores industriais), o que é algo que a abordagem de dotação de fatores não abrange.
Há benefícios claros de eficiência do comércio que resultam em mais produtos - não apenas mais dos mesmos produtos, mas uma maior variedade de produtos. Por exemplo, os Estados Unidos importam quatro vezes mais variedades (como tipos diferentes de carros) do que nos anos 70, enquanto o número de países que fornecem cada bem dobrou. Um benefício ainda maior pode ser o gasto de investimento mais eficiente que resulta do acesso das empresas a uma variedade e qualidade mais amplas de insumos intermediários e de capital (pense em lentes óticas industriais em vez de carros). Ao aumentar o investimento global e facilitar a inovação, o comércio pode trazer um crescimento sustentado.
De fato, modelos econômicos usados ​​para avaliar o impacto do comércio tipicamente negligenciam influências envolvendo transferência de tecnologia e forças pró-competitivas, como a expansão de variedades de produtos. Isso porque essas influências são difíceis de modelar e os resultados que as incorporam estão sujeitas a maior incerteza. Entretanto, onde isso foi feito, os pesquisadores concluíram que os benefícios das reformas comerciais, como a redução de tarifas e outras barreiras não-tarifárias ao comércio, são muito maiores do que o sugerido pelos modelos convencionais.
Por que a reforma do comércio é difícil?
O comércio contribui para a eficiência global. Quando um país se abre para o comércio, o capital e o trabalho se deslocam em direção às indústrias em que são usados ​​com mais eficiência. Esse movimento proporciona à sociedade um nível mais alto de bem-estar econômico. No entanto, esses efeitos são apenas parte da história.
O comércio também traz deslocamentos para as empresas e indústrias que não podem cortá-lo. As empresas que enfrentam ajustes difíceis por causa de produtores estrangeiros mais eficientes muitas vezes fazem lobby contra o comércio. Então faça seus trabalhadores. Eles freqüentemente buscam barreiras como impostos de importação (chamados tarifas) e cotas para elevar o preço ou limitar a disponibilidade de importações. Os processadores podem tentar restringir a exportação de matérias-primas para deprimir artificialmente o preço de seus próprios insumos. Por outro lado, os benefícios do comércio são difundidos difusamente e seus beneficiários muitas vezes não reconhecem como o comércio os beneficia. Como resultado, os oponentes são frequentemente bastante eficazes nas discussões sobre o comércio.
Políticas comerciais.
Reformas desde a Segunda Guerra Mundial reduziram substancialmente as barreiras comerciais impostas pelo governo. Mas as políticas para proteger as indústrias domésticas variam. As tarifas são muito mais altas em certos setores (como agricultura e vestuário) e entre certos grupos de países (como países menos desenvolvidos) do que em outros. Muitos países têm barreiras substanciais ao comércio de serviços em áreas como transporte, comunicações e, freqüentemente, o setor financeiro, enquanto outros têm políticas que acolhem a concorrência estrangeira.
Além disso, as barreiras comerciais afetam alguns países mais do que outros. Os países menos afetados são os países menos desenvolvidos, cujas exportações estão concentradas em produtos de baixa qualificação e mão de obra intensiva que os países industrializados costumam proteger. Os Estados Unidos, por exemplo, coletam cerca de 15 centavos em receita tarifária para cada US $ 1 de importações de Bangladesh (Elliott, 2009), em comparação com um centavo para cada US $ 1 de importações de alguns dos principais países da Europa Ocidental. No entanto, as importações de um determinado produto do Bangladesh enfrentam tarifas iguais ou menores do que produtos similarmente classificados importados da Europa Ocidental. Embora as tarifas sobre itens de Bangladesh nos Estados Unidos possam ser um exemplo dramático, economistas do Banco Mundial calcularam que os exportadores de países de baixa renda enfrentam barreiras em média metade novamente maiores do que aquelas enfrentadas pelas exportações dos principais países industrializados (Kee, Nicita e Olarreaga, 2006).
O comércio internacional dos árbitros da Organização Mundial do Comércio (OMC). Acordos concebidos desde 1948 por seus 153 membros (da OMC e seu antecessor Acordo Geral de Comércio e Tarifas) promovem a não-discriminação e facilitam a liberalização em quase todas as áreas de comércio, incluindo tarifas, subsídios, avaliação e procedimentos alfandegários, comércio e investimento em serviço. setores e propriedade intelectual. Compromissos sob esses acordos são aplicados através de um poderoso e cuidadosamente elaborado processo de solução de controvérsias.
Sob o sistema de comércio internacional baseado em regras, centrado na OMC, as políticas comerciais se tornaram mais estáveis, mais transparentes e mais abertas. E a OMC é uma das principais razões pelas quais a crise financeira global não desencadeou um protecionismo generalizado. No entanto, como visto mais recentemente nas negociações comerciais da Rodada de Doha da OMC, a instituição enfrenta grandes desafios para chegar a acordos que abram ainda mais o comércio global. Apesar dos sucessos, políticas comerciais restritivas e discriminatórias continuam sendo comuns. Abordá-los poderia render centenas de bilhões de dólares em benefícios globais anuais. Mas interesses limitados têm procurado atrasar e diluir novas reformas multilaterais. Um foco no bem maior, juntamente com formas de ajudar os relativamente poucos que podem ser adversamente afetados, pode ajudar a fornecer um sistema comercial mais justo e economicamente mais sensato.
Brad McDonald é Chefe de Divisão Adjunto no Departamento de Estratégia, Política e Revisão do FMI.
Referências.
Baldwin Robert E., 2008, Desenvolvimento e Teste de Modelos de Comércio da Heckscher-Ohlin: Uma Revisão, (Cambridge, Massachusetts: MIT Press).
Elliott, Kimberley Ann, 2009, "Abertura dos mercados para os países pobres: Já estamos lá?" # 8221; Centro de Desenvolvimento Global Working Paper 184 (Washington).
Irwin, Douglas A., 2009, Livre Comércio sob Fogo (Princeton, New Jersey: Princeton University Press, 3a ed.).
Kee, Hiau Looi, Alessandro Nicita e Marcelo Olarreaga, 2006, "Estimativa de índices de restrição ao comércio", & # 8221; Documento de Trabalho de Pesquisa de Políticas do Banco Mundial No. 3840 (Washington).
Atualizado: 29 de julho de 2017.
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A economia mundial no início do século XXI, comentários de Anne O. Krueger, primeira vice-diretora geral do FMI.
Observações de Anne O. Krueger.
Primeiro Vice Diretor Geral do FMI.
Na Palestra Anual Gilbert, Universidade de Rochester.
Boa noite e obrigada por essa gentil introdução, Ron. Tenho o prazer de estar de volta a Rochester depois de uma ausência mais longa do que gostaria.
Há cem anos, a economia internacional estava entrando no século 20 com o fluxo mais livre de bens, serviços e capital na história da humanidade. O século anterior havia testemunhado a expansão da produção e do comércio global e o aumento dos padrões de vida na Europa e na América do Norte em um ritmo nunca antes visto na história da humanidade. O século 20, em seguida, viu pouco mais de uma década de expansão contínua, seguido pela interrupção abrupta de comércio e laços financeiros durante a Primeira Guerra Mundial. Após alguns passos em direção a uma restauração da situação anterior à guerra, a economia internacional entrou em colapso durante a década da Grande Depressão, e continuou a ser fragmentada durante a Segunda Guerra Mundial. A tendência de séculos para a globalização havia sido revertida e, a partir de 1950, ou até 1960, a globalização e o grau de integração da economia mundial foram consideravelmente menores do que há cinquenta anos.
Desde então, é claro, tem havido um renascimento e intensificação sem precedentes da integração global, apoiada por mudanças técnicas, e por políticas econômicas internacionais resultantes da cooperação multilateral. Esses fenômenos se combinaram para resultar em barreiras muito reduzidas aos fluxos internacionais; maior aceleração na taxa de crescimento da produção mundial; a disseminação de padrões de vida que associamos à industrialização avançada a outras partes do mundo e à redução da pobreza e melhoria dos padrões de vida na maioria das outras partes do globo; e o surgimento de uma série de novos atores-chave na economia internacional.
Meu objetivo nesta palestra é apresentar um esboço amplo da evolução da economia mundial no século XX, com vistas a examinar onde estamos hoje. Argumentarei que as políticas econômicas internacionais foram fenomenalmente bem-sucedidas até agora e, em muitos aspectos, mudaram o contorno da própria economia mundial, principalmente para melhor. Ao mesmo tempo, porém, há uma série de desafios que, sem respostas apropriadas e oportunas, poderiam minar o progresso até o momento e desfazer muitos dos benefícios alcançados até agora.
Nos séculos 19 e 20, a mudança técnica desempenhou um papel importante. Mas, paradoxalmente, no século 19, foi o declínio dramático nos custos de transporte que permitiu a rápida expansão do comércio global e dos rendimentos reais, enquanto que na segunda metade do século 20, foi um declínio dramático no comércio induzido pelas políticas. barreiras que tiveram o mesmo efeito. E considerando que a reversão da globalização no início do século 20 resultou de hostilidades políticas, a maior ameaça ao sucesso econômico contínuo no início do século 21 parece ser o nacionalismo econômico.
Vou primeiro delinear as principais características da economia global por volta da virada do século XX e traçar sua evolução até a década de 1950. Dirijo-me então à estrutura da economia internacional e à estrutura de políticas que permitiram a evolução altamente bem-sucedida dos cinquenta anos subsequentes, focalizando primeiro as relações comerciais, depois as relações financeiras internacionais e, em terceiro lugar, a evolução diferencial dos setores industriais e mais pobres. países durante esse período. Com base nessa análise, observarei as tremendas melhorias no bem-estar econômico na maior parte do mundo que a globalização possibilitou e, em conclusão, identificarei os desafios que a economia global enfrenta hoje.
Há cem anos, observadores da cena internacional descreveriam a fenomenal globalização do século anterior, especialmente no período 1870-1914.
Até o século 19, os custos de transporte haviam sido altos o suficiente para desencorajar o comércio de baixo volume, mas as barreiras comerciais impostas por políticas (tarifas e outros impostos ou restrições às transações internacionais) haviam impedido ainda mais os fluxos comerciais. Para a maioria das commodities, os custos de transporte excederam o preço das mercadorias no país de origem, muitas vezes por uma margem substancial.
No início do século XIX, o Reino Unido liderou a redução de tarifas e muitos outros países europeus seguiram o exemplo em meados do século. Os custos de transporte também caíram drasticamente, mesmo na primeira metade do século. Douglas North, por exemplo, cita evidências de que os custos do transporte marítimo em cerca de 1850 eram apenas cerca de um terço do que tinham sido apenas trinta anos antes, quando o transporte sob vela ainda estava na ordem do dia. Embora o comércio internacional e o crescimento econômico tenham surgido como resultado desses fenômenos, foi realmente no final do século XIX, especialmente em resposta ao "incrível". declínio nos custos de transporte (a frase usada por O'Rourke e Williamson), que os volumes de comércio e as taxas de crescimento aceleraram. As últimas décadas do século 19 foram descritas como a "idade dourada". neste continente, estima-se que a renda per capita tenha dobrado entre 1.870 e 1.900. A era vitoriana tardia também foi considerada como um período de expansão na Europa, à medida que a renda per capita européia e os salários subiam a taxas ainda mais altas, embora de uma base mais baixa.
O boom do final do século XIX foi incentivado pela mudança técnica e pelas mudanças políticas nos países industrializados. A mudança técnica foi especialmente aparente com a introdução da eletricidade e suas aplicações, e incluiu comunicações (telefone e telégrafo), transporte e muito mais. A introdução da ferrovia levou a um declínio acentuado nos custos de movimentação de carga, e houve ainda mais quedas dramáticas nos custos do transporte marítimo após a introdução de navios a vapor. Os dados de O'Rourke e Williamson sugerem uma queda nos custos de transporte entre os EUA e a Europa de cerca de 80% do preço da commodity para menos de 20% durante esse período.
O declínio acentuado nos custos de transporte ocorreu em um momento em que a maioria dos países europeus tinha níveis tarifários mais baixos do que no início do século XIX. O Reino Unido tinha tarifas zero sobre agricultura e manufatura até 1914, e as tarifas holandesas e escandinavas também eram baixas. 1 2 O impacto da rápida queda dos custos de transporte, combinado com os níveis reduzidos de proteção, indubitavelmente levou a uma grande redução líquida de barreiras - tanto naturais quanto artificiais - ao comércio.
Como conseqüência, o comércio mundial cresceu rapidamente - a uma taxa anual de 3,4% entre 1870 e 1914, com crescimento não apenas de bens industriais, mas também de matérias-primas. Em muitos casos, os exportadores de commodities primárias eram colônias, cujas bases de produção não alcançaram desenvolvimento sustentado. 3.
Simultaneamente, a integração dos mercados de capitais mundiais prosseguiu rapidamente. No início do século 20, estima-se que os ativos de propriedade estrangeira tenham valor equivalente a cerca de 20% do PIB mundial. 4 O Reino Unido era, como é bem sabido, o banqueiro do mundo e, no seu auge, possuía 80% dos ativos estrangeiros globalmente. Suas saídas de capital foram de até 10% do PIB em alguns anos e tiveram uma média de 4,5% do PIB por ano entre 1870 e 1914. 5.
O crescimento da renda real, o crescimento do comércio mundial e a integração da economia mundial - tanto através da remoção de barreiras artificiais ao comércio como tarifas e redução de custos de transporte - estavam causalmente ligados. A queda nos custos das transações internacionais era em si uma função, em parte significativa, da mudança tecnológica. 6 Mas enquanto os salários reais e os padrões de vida aumentaram em todo o mundo, a taxa de crescimento foi muito mais rápida nos países industrializados. Até o início da década de 1700, estima-se que os padrões de vida não fossem significativamente diferentes entre as diferentes regiões geográficas do mundo. Mas no final do século XIX, o crescimento econômico foi suficientemente rápido nos "países industrializados". que o mundo havia se bifurcado em termos de padrões de vida e taxas de crescimento econômico. 7
A Primeira Guerra Mundial, no entanto, levou a uma reversão abrupta no grau de globalização. Como as rotas de transporte foram interrompidas e os países experimentaram diferentes graus de inflação em resposta às tensões diferenciais de seus gastos em tempo de guerra, a integração anterior da economia internacional foi amplamente revertida.
Apesar dos esforços para restaurar o status quo ante após a guerra, os desequilíbrios associados à sobrevalorização da libra esterlina após o retorno britânico ao Gold Standard em 1925, as reparações alemãs e outros desequilíbrios levaram a um lento progresso na década de 1920. No final daquela década, os mercados não estavam tão integrados quanto antes da guerra.
Mas a Grande Depressão reverteu mesmo esse progresso. Como é sabido, a renda real caiu drasticamente na maioria dos países, as taxas de desemprego aumentaram acentuadamente e os preços de bens e serviços caíram abruptamente. A resposta política intensificou as dificuldades: os anos 1930 foram caracterizados pelo aumento das barreiras comerciais (tanto tarifas e restrições não-tarifárias) e desvalorizações competitivas, muitas vezes referidas como "mendigar políticas vizinhas", e pela rápida queda dos volumes de comércio e preços de bens comercializados. À medida que cada país tentava reverter sua própria espiral descendente, impondo tarifas cada vez mais altas, desvalorizando sua moeda e outras medidas, de fato exportava parte de suas próprias pressões deflacionárias, apenas para ser atingido por pressões deflacionárias resultantes de ações semelhantes em outros países. . A Grã-Bretanha foi forçada a abandonar o padrão-ouro em l931, enquanto os Estados Unidos seguiram o exemplo em 1933 e, simultaneamente, experimentaram um "feriado bancário". como os bancos foram duramente atingidos por empréstimos inadimplentes em suas carteiras. Pior ainda, o Congresso americano promulgou a tarifa Hawley-Smoot no início dos anos 30, dando um nível médio de tarifa de 59% em 1932 nos Estados Unidos: o nível mais alto desde o século XIX. Como se tornou evidente, em retrospectiva, que o Ato Tarifário de Hawley-Smoot intensificou grandemente a Grande Depressão, em vez de compensá-la, o nome se tornou sinônimo de políticas unilaterais de países individuais que prejudicaram a si mesmos e a outros países, os chamados "mendigos". vizinho & quot; políticas.
No final dos anos 30, a recuperação estava em andamento, mas a Segunda Guerra Mundial começou e a rápida expansão se seguiu em resposta à demanda de guerra. É claro que os padrões de produção e comércio foram mais uma vez interrompidos, já que a produção de bens de consumo e de investimento exigidos em tempo de paz foram substituídos em parte significativa pela produção relacionada ao esforço de guerra.
A Situação no Fim da Guerra.
A economia mundial, de 1945 a 1946, estava muito menos integrada do que no final da Primeira Guerra Mundial, tanto por causa da própria guerra quanto por causa das medidas protecionistas e isolacionistas dos anos 30. Os Estados Unidos, o Canadá, a Austrália e alguns outros países industriais não devastados pela destruição em tempos de guerra estavam produzindo em níveis muito mais altos do que no final dos anos 30: mas a maior parte da Europa, União Soviética, China e Japão foram duramente atingidos. . Enquanto muitas economias nas áreas que não haviam experimentado a expansão industrial da era anterior não foram afetadas da mesma forma, era evidente que elas eram "diferentes". Assim, com a decisão da União Soviética e da China de isolar suas economias, a economia global foi efetivamente dividida em três. Havia os países industrializados: eles mesmos estavam divididos entre aqueles em que a produção havia caído significativamente durante a guerra e aqueles em que a estrutura de produção havia mudado, mas a produção aumentou. O segundo grupo era o & # 8212; como eles eram então chamados de & ldquo; & nd; subdesenvolvido & rdquo; economias. Muitos deles conseguiram exportar commodities primárias a preços elevados para os combatentes durante a Segunda Guerra Mundial e construíram grandes reservas de divisas (porque havia pouco para importar). Mas essas economias estavam todas fortemente concentradas na produção de matérias-primas agrícolas e minerais, com uma indústria manufatureira relativamente pequena produzindo principalmente bens de consumo intensivos em mão-de-obra de pequena escala, com padrões de vida muito baixos em contraste com os países industrializados. O terceiro grupo era as economias planejadas centralmente; até a década de 1990, a evolução deles era quase totalmente independente da do resto do mundo, e por isso deixo a história de lado por enquanto.
Quando o planejamento para a era pós-guerra começou durante os últimos anos da guerra, foi baseado em várias premissas: l) que os Estados Unidos emergiriam da guerra economicamente fortalecida e da economia proeminente; 2) que a Europa e o Japão foram economicamente devastados e precisariam de tempo e recursos para se recuperar; 3) que a repetição dos erros dos anos 30 deve ser evitada através da cooperação multilateral dentro de um quadro institucional apropriado; e 4) que a oferta de capital privado de longo prazo não seria retomada após a experiência da década de 1930.
Os planejadores do pós-guerra propuseram uma estrutura para a cooperação econômica internacional (assim como as Nações Unidas para a cooperação política) na qual haveria organizações internacionais para: l) cooperação monetária internacional; 2) reconstrução e desenvolvimento; e 3) comércio internacional de bens e serviços. A cooperação monetária internacional destinava-se a facilitar o comércio internacional induzindo a conversibilidade da moeda, evitando desvalorizações competitivas e possibilitando políticas financeiras internacionais coordenadas. Para esse fim, os Artigos do Acordo para o Fundo Monetário Internacional foram redigidos e subsequentemente ratificados por 38 países quando a Assembléia de Governadores do Fundo realizou sua reunião inaugural em março de 1946. Crucialmente, países com & quot; balança de pagamentos & quot; esperava-se que as dificuldades consultassem o FMI e ajustassem suas políticas domésticas, alterando as taxas de câmbio apenas em circunstâncias em que se concordasse com o FMI que havia "desequilíbrio fundamental". Os signatários dos Artigos também concordaram com a conversibilidade das moedas do Artigo VIII & # 8212; para transações em conta corrente. Como se verá, conseguir isso entre os membros do FMI foi uma conquista significativa, mas exigiu mais de 15 anos até que os principais países industrializados tivessem removido os regulamentos de controle cambial na medida necessária para cumprir o Artigo VIII.
Dada a presumida ausência de fontes privadas de capital, os planejadores do pós-guerra concluíram que o financiamento de longo prazo teria que vir de fontes oficiais, tanto para fornecer capital para acelerar a reconstrução dos países devastados pela guerra quanto para permitir taxas mais altas de investimento. de crescimento, do & quot; subdesenvolvido & quot; economias que de outra forma se materializariam. Como fonte de financiamento oficial de longo prazo, foi fundado o Banco Internacional de Reconstrução e Desenvolvimento, agora conhecido como Banco Mundial. 8.
A terceira etapa dos arranjos previstos foi para a cooperação multilateral para um sistema comercial internacional aberto. O Acordo Geral sobre Tarifas e Comércio, assinado em 1947, era visto como um acordo provisório que aguardava o estabelecimento da proposta Organização Internacional do Comércio (ITO), mas provou-se notavelmente durável na ausência de ratificação da Carta do ITO. As disposições do GATT previam um tratamento não discriminatório de todos os parceiros comerciais, para a eliminação de restrições quantitativas ao comércio e para fóruns nos quais os países poderiam negociar reciprocamente as reduções tarifárias e as disputas comerciais entre países poderiam ser resolvidas.
Os artigos do FMI e do Banco Mundial foram negociados em Bretton Woods em 1944, e as duas organizações começaram a funcionar em 1946. O GATT começou a funcionar em 1947 com uma primeira rodada de reduções tarifárias negociadas na época. O GATT e, mais tarde, a Organização Mundial do Comércio (OMC) incluíam duas disposições fundamentais: l) que os países membros não imporiam e / ou eliminariam as barreiras não tarifárias ao comércio 9; 2) que os países membros concederiam à "nação mais favorecida" status para seus parceiros comerciais do GATT / OMC, de modo que todos os parceiros comerciais enfrentassem as mesmas barreiras comerciais, a menos que houvesse um acordo comercial preferencial (as condições para as quais incluíam cobertura de todos os itens comerciais, tarifas zero entre os países PTA e um certo alcançar tarifas zero).
Quando a guerra terminou, no entanto, tornou-se evidente que o grau de devastação européia / japonesa era muito maior que o previsto, e os Estados Unidos emergiram ainda mais dominantes do que o esperado: em 1950, Maddison estima que os Estados Unidos produziam 27% produção real global e representaram mais de 14 por cento das exportações globais. Os EUA também detinha 54 por cento das reservas internacionais.
Embora, como foi dito, o GATT tenha alcançado sua primeira grande rodada de reduções tarifárias em 1947, as necessidades de reconstrução do pós-guerra, especialmente da Europa, foram muito maiores do que o previsto. Coube principalmente aos Estados Unidos apoiar os países europeus e de outros países em seus esforços de reconstrução (embora o Banco Mundial tenha estendido alguns empréstimos), primeiro através do "Ponto Quatro". ajuda, e depois através do Plano Marshall.
A recuperação econômica européia e japonesa foi incrivelmente bem-sucedida após os dois primeiros anos muito difíceis do pós-guerra. Os níveis de produção pré-guerra foram geralmente atingidos no início dos anos 1950 e foram apenas o início de um período de rápido crescimento sustentado. A partir de uma situação no final da década de 1940, quando a maioria das economias européias negociava acordos de pagamentos bilaterais entre si (ou usava o auxílio do Plano Marshall), eles passaram para acordos multilaterais de compensação. Simultaneamente, as reduções tarifárias estavam ocorrendo e as restrições quantitativas estavam sendo removidas.
Com as bases estabelecidas pelo Plano Marshall, regimes cambiais cada vez mais livres e reduções tarifárias (impulsionadas pelas reduções tarifárias multilaterais do GATT e liberalização intra-européia empreendidas no contexto do Plano Marshall), a economia mundial embarcou em um quarto de século de sustentada e crescimento econômico sem precedentes rápido. Enquanto os países em desenvolvimento - como eles vieram a ser chamados - cresceram, eles geralmente o fizeram sem se integrar com a economia mundial, e eu retornarei à sua história mais tarde.
Os países de crescimento mais rápido foram na Europa e no Japão. While the rest of the industrialized world grew rapidly, and at rates well above those achieved in the first half of the twentieth century, it was the phenomenal growth of Europe and Japan which led to the biggest changes in the world economy. In l950, it could fairly be said that the United States dominated; by the early l970s, Europe and Japan were also major players in the world economy.
During the golden quarter century, tariff reductions continued. The rate of growth of world trade averaged almost 8 percent per year from l950 to l973. Quite clearly, trade was an "engine of growth", just as it had been in the late l9th century, growing at about twice the rate of growth of world output. But whereas in the late l9th century, it was primarily reductions in transport costs that facilitated that growth, it was reductions in tariff and nontariff barriers to trade were the major stimulus to the growth of trade in the postwar years.
The very rapid economic growth of that era took place in a relatively non-inflationary environment. Most industrial countries had single digit rates of inflation. To be sure, individual countries did experience "balance of payments crises", and rates of growth fluctuated through recession and boom periods. Nonetheless, the world economy as a whole was relatively stable. Through the provision of financial assistance to countries in balance of payments crises, the IMF played an important role in enabling adjustment to take place without the disruption to the international system that had characterized the inter-war period. Many of the industrial countries—and many developing countries—took advantage of the IMF's lending facilities. Britain, in 1977, was the last major industrial country to borrow on a large scale from the Fund.
Part of that stability derived from the relative size and dominance of the American economy. From l950, when 79 percent of foreign exchange reserves of the industrial countries were held in gold, the American dollar assumed increasing importance. By l973, more than 90 percent of the foreign exchange reserves holdings of those industrial countries that reported such data were held in U. S. dollars. International prices, and settlements of accounts even between other countries, were predominantly denominated in U. S. dollars. But the underpinning of the Bretton Woods system, and the continuing downward movement of trade barriers were also major factors.
By l973, then, the industrial countries were still preeminent in the world economy: they are estimated to have produced 59 percent of world GDP and to have accounted for 64 percent of world exports, contrasted with 60 percent of world GDP and 61 percent of world exports in l950. Within the developed countries, though, the U. S. share had diminished as other countries had experienced more rapid growth.
But developing countries had also achieved growth rates (in part benefiting from the rapid growth of industrial country markets for their goods) higher than those experienced in the l9th and early 20 th century. Many of them had been former colonies; but whether former colony or previously independent, most of their governments put the goal of raising real incomes and rapid growth as their foremost objective. To achieve this, however, they adopted policies that insulated them to a major degree from the international economy. While the industrial countries were reducing trade barriers and freeing financial transactions, most developing countries were protecting (infant) domestic industries and restricting international transactions. Nonetheless, per capita incomes rose in most countries, and life expectancies, literacy rates, nutritional statuses, and other indicators of well-being improved significantly.
As contrasted with the immediate postwar period, then, by 1973 the global economy was characterized by the increased relative and absolute importance of international trade. Among industrial countries, there was much greater freedom of financial flows and, during the l960s, private capital flows between Europe and the United States began increasing rapidly. For developing countries, foreign aid—both bilateral and multilateral—and other official flows had increased, but their own payments regimes were still highly restrictive. Moreover, in many developing countries, growth rates were beginning to decline, as the costs of continuing to pursue inward looking "import substitution" policies increased. 10 Hence, they remained primary commodity exporters: although many had experienced growth of manufacturing, and the manufacturing share in GDP, almost all the increased output was destined for the sheltered domestic market. Even in primary commodities, the share of developing countries had dropped.
There had, however, been a few economies where economic policies had shifted away from the earlier "import substitution" policies toward a much more open economy. Some had gone so far as to rely on exports as an "engine of growth". Those economies, in East Asia, experienced sustained increased rates of growth unlike anything earlier witnessed in the global economy. The 4 "Asian tigers" were the most notable. South Korea, the largest of them, was typical, increasing exports at over 40 percent a year in the l960s, with rates of increase of real per capita incomes of 7-9 percent a year. By 1982, South Korea was one of the world's top 15 exporters, and it today ranks 11th in exports in the global economy.
But, as of l973, high growth rates among the East Asian economies had not made a significant difference to the structure of the world economy, as these rates had been experienced from a very low base. From a global perspective, the world was still divided into rich industrial countries and poor developing countries.
1973, however, marked a watershed in the global economy. Inflationary pressures had been rising, especially in the United States, and there was a commodity price boom in l972-3. By that time, the United States had been incurring a current account deficit for more than a decade spurred by a faster rate of American inflation (at a fixed exchange rate) and U. S. demand resulting from the Vietnam war expenditures. In l971, the United States announced that it was suspending the gold convertibility of the dollar. Hence, the Bretton Woods system, as founded (as a fixed, but adjustable, standard) and which had become a de facto dollar standard, was abandoned, and by 1973 floating exchange rates between the U. S., Japan and the major European currencies had become the order of the day.
But at that same time the "oil price shock" of l973-74 quadrupled nominal oil prices in a very short period of time. Many oil importing countries found their import costs greatly increased; some (mainly industrial) went into recession, while others (mainly developing) borrowed from private financial sources. It was the first large-scale access of developing countries to private capital markets and permitted the recycling (through banks in industrial countries) of oil exporters' current account surpluses to oil importers' current account deficits. That there were already floating exchange rates between major currencies certainly facilitated the adjustment.
After a recession following on the oil price shock, economic growth resumed in most industrial countries, and in oil importing countries. Indeed, for the rest of the decade after the l973-74 oil price increase, oil importing developing countries grew more rapidly than oil exporting developing countries. And, among developing countries, those—mostly in East Asia—that had switched to outer oriented economic policies experienced much more satisfactory rates of economic growth than those still relying on inner-oriented policies. It is also worth noting that this more rapid growth took place against a background of relatively low income inequality; and there was rapid progress in reducing poverty in these countries.
But by the early l980s, after the second major oil price increase, the world economy went into recession as the United States altered its monetary policy to contain, and subsequently permanently lower, its inflation. The resulting high nominal and real interest rates, combined with falling commodity prices (attributable to the recession) resulted in debt-servicing difficulties for many of the developing countries that had earlier borrowed to finance their increased oil import bills. Indeed, for heavily indebted developing countries, the l980s were a "lost decade" as debt-servicing difficulties and continuing adherence to inward looking policy stances resulted in negligible increases in per capita incomes, and declines in some cases.
By the late l980s, inflation was contained in most industrial countries, and debt was being restructured (the Brady Plan) in the heavily indebted developing countries. The oil price had peaked in real terms in l979, and fell sharply in l986. The stimulus from lower real oil prices and stable price levels resulted in a period of sustained growth of the industrial countries. Trade barriers among industrial countries continued to drop, as quantitative restrictions had been almost entirely eliminated and tariffs were being further reduced under the influence of successive rounds of trade negotiations under the GATT.
A new round of trade negotiations under the GATT was proposed in the late l990s, but not agreed upon until the Doha Round was inaugurated in November 2001. The new round faced several significant challenges, to which I shall return later.
The start of the final decade of the twentieth century coincided with another major shift, as the world adapted to the collapse of the Soviet Union, and the emergence of formerly centrally planned economies into the global economy. For most of the l990s, the "transition" economies were adjusting to their new economic structure, and adapting their economic policies for greater integration into the international economy. For present purposes, it is also important to note that the examples set by the East Asian countries seem to have had a significant influence on policy makers in other Asian countries, most notably China and India, as they, too, began reforming their policies.
The "lost decade" of the l980s, in turn, led a number of other countries to begin reducing their barriers to trade and other impediments to growth. Mexico, for example, embarked on a series of major economic policy reforms in the latter half of the l980s, anchoring them in the North American Free Trade Agreement, which permanently assured outward looking economic policies.
As reforms took place in country after country, and investment became more profitable, private capital flows—especially to "emerging markets", as the successful developing countries came to be known—increased enormously, eclipsing official capital flows in their magnitude.
But, as that happened, the vulnerability of some of the emerging markets to changes in investment flows increased dramatically. The first country to be affected by this was Mexico; its exchange rate policy did not adequately accommodate domestic credit expansion or the altered outer oriented trade stance, and in late l994, investors became reluctant to finance further current account deficits (the l994 deficit had been 7.6 percent of GDP). The ensuing capital outflow forced Mexican officials to take swift action, adjusting monetary and fiscal policy in the context of a large loan from the International Monetary Fund. Within three months there had been an effective nominal devaluation of 65 percent.
The l990s witnessed a number of other "capital account" crises. These differed from earlier "balance of payments" crises in which the IMF had supported adjustment in its member countries both in the fact that the immediate origin of the difficulty was a major change in the willingness of foreigners and domestic residents to hold domestic assets and in the fact that there was little time in which to decide on policy changes.
The latter part of the decade saw more capital account crises, including most notably South Korea, but other countries in east Asia and elsewhere. The South Korean situation was particularly shocking, as by that time the country was seen as a "newly industrializing country"; the crisis had been unanticipated, and was dramatic. As in Mexico and other cases, substantial borrowing (mostly from the International Monetary Fund) and policy adjustments stemmed the crisis. In the South Korean case, the l997 level of real per capita income had been re-attained within 6 quarters and by 2004, real GDP was almost 40 percent above its l997 pre-crisis level.
But to the world, it was clear that, to the earlier, current-account based, balance of payments difficulties, were now added capital account crises. At the turn of the 21 st century, one major challenge was seen as learning the appropriate lessons going forward as to the prevention of such crises, and, when they did occur, the appropriate policy responses for the country involved and for the international community.
While headlines were captured by the dramatic events in the former centrally planned economies and capital account crises, other events were going on that would, if trends persisted, alter the global economic landscape at the beginning of the 21 st century. The American economy experienced rapid growth, with more rapid rates of productivity increase than had earlier occurred. Moreover, those rates were achieved in the context of a prolonged period of sustained growth and price stability, minus the recessions that had accompanied growth in earlier decades.
Europe had begun a process of increasing integration with the opening of trade and financial flows under the Marshall Plan. The Treaty of Rome had started the process of movement toward an integrated internal market, undertaken within the context of lowered trade barriers from the multilateral trading rounds under the GATT. As additional countries joined the European enterprise, and policy harmonization deepened, the European Union emerged as a major force in the global economy with 38 percent of world trade and 26 percent of world GDP as of 2000. By contrast, after four decades of growth and rapidly rising living standards, the Japanese economy had entered a period of stagnation by around 1990, and Japanese growth remained sluggish a decade later, primarily as a consequence of the asset bubble of the late 1980s and the policy challenges posed both by the need for reform of the financial sector.
Despite the difficulties of countries such as South Korea, growth in developing countries accelerated during the l990s as a result of their policy changes and the supportive global environment. By 2000, developing countries as a group accounted for about 47 per cent of world GDP and a third of world trade. And, of course, the East Asian economies, in addition to Japan, were by 2000 large enough to be significant. Japan, as already noted, was a major economic entity by the l970s, but by the year 2000, South Korea, the ASEAN countries, and China, were also gaining share. India had embarked upon reforms and, in consequence, growth rates were beginning to accelerate.
The Global Economy at the Turn of the Century.
With the power of compound interest, many of the growth rates and changes that had occurred during the preceding several decades had, by 2000, basically altered the landscape of the international economy. Moreover, the experience of the years since the Second World War had taught a number of lessons which seem to be fairly widely accepted today. In this section, I review these changes and lessons, as a basis on which the challenges going forward can be assessed.
The Altered International Economy. What were the basic changes? The world was a much more open place. The internet, and access to it, had grown rapidly. There were further significant drops in transport and communications costs: in 2001, two economists from the Chicago Fed noted that in constant 1998 prices the cost of a three minute phone call from New York to London had been $293 in 1931 and had (by 2001) fallen to around $1 for a much better quality connection. In 2006 that same call costs just a few cents. Other technical changes, and above all the reduction in tariff and other barriers to trade, had played a role in opening up the global economy.
As mentioned at the outset, in the l9th century, reductions in costs of international trade had also spurred growth, the difference being that it had been the reduction in transport costs in the 19 th century, and the reduction in policy-related tariff and non-tariff barriers in the second half of the 20 th century that had enabled closer integration. For manufactured goods, at least, average tariff rates among industrial countries are now less than 5 percent; within areas such as the European Union, they are zero. With airfreight, the internet, and other changes, goods can be ordered from one part of the world and received elsewhere in a matter of hours, contrasted with the months the same transaction would have taken two hundred years ago. But while it would be difficult, if not impossible, to reverse technical change and the drop in costs of transport and communications, the same cannot be said for policy-induced trade barriers. I return to this in the next section, as a significant threat to continued strong global growth lies in risks that the trend toward trade and financial integration that has spurred growth may end or even reverse.
Increasing openness during the late 20 th century had, of course, resulted in greatly intensified international economic activity. Consequently, the relative importance of international trade in the world economy had greatly increased: from 5.5 percent in l950 to 17.2 percent in 2000, according to Maddison. Much more trade was in intermediate goods, as producers were able to locate each stage of the production process in the country or countries where costs of production were lower. And, whereas in l950 45 percent of merchandise exports were agricultural and 37 percent were manufactures, the composition of trade was radically altered, and trade in services grew in importance. By 1980, services trade constituted 15 percent of all goods and services trade, agriculture accounted for 12 percent and manufactures for 45 percent. The comparable numbers for 2004 show agriculture down to 7 percent, services up to almost 20 percent, and manufactures to 59 percent. In addition to trade flows, other international transactions had increased in importance: tourism, other services items, and capital flows. The fifty years had seen enormous improvements in living standards, not only in the developing countries, but even among the richest. The United States is estimated to have had a per capita income of just $13,000 in 2005 dollars in l950; by l975, that figure was $22,200; and in 2005, it was $41,900.
But just as the structure of the international economy had changed, so, too, had domestic economic policies. Increased macroeconomic stability within the industrial countries has already been highlighted; the global reduction in inflation rates has been a significant contributor to accelerated world growth. But, in addition, the shift toward more market-friendly policies (in developing countries and in some industrial countries) together with the transition from central planning has enabled more resilient economies and stronger responses of output and employment to changes in incentives, further accelerating growth.
That leads to the second major change: whereas in 1950 the United States was THE economic power, and by the mid 1970s Europe and Japan were clearly established as major global players, by 2000, emerging Asia—especially China and India, but also a number of other countries—had become a significant economic force in the international economy. Much of Europe, of course, is now in the European Union and has achieved an even higher degree of internal integration than that realized externally. And the emerging Asian economies are already so large as to have global significance and impact. Assuming that their relatively high rates of economic growth persist, they will become increasingly important in the years to come.
For India and China and many other developing countries, living standards—while still low contrasted with developed countries—have increased remarkably. This is reflected not only in per capita income numbers, but in other indicators of well-being. Over the past half century or so, infant mortality rates have fallen sharply in most developing countries. In China, for example, the infant mortality rate fell from 150 deaths per 1000 births in 1960, to 30 in 2003.
Perhaps the most telling statistic is life expectancy. In general, life expectancy in developing countries has risen at an astonishing pace.
Since 1960 life expectancy in the developing countries has risen at roughly double the rate in the richest. The gap between life expectancy in industrial and developing countries has narrowed from around 30 years in 1950, to around 10 years today.
For a few countries—most notably those in East Asia—living standards have risen so markedly that they are now beginning to close the absolute, as well as the relative, gap in income levels.
And, significantly, most of the transition economies of the former Soviet Union and Eastern Europe are realizing above-average rates of economic growth and integrating into the world economy.
At the same time, however, some other countries are still extremely poor and, indeed, their relative (and in some cases, absolute) position has even worsened. The poor economic performances of many Sub-Saharan African countries are well known. It is frequently forgotten that, after the Second World War, observers and all systematic estimates placed Sub-Saharan Africa real per capita incomes well above those of most Asian countries other than Japan. The juxtaposition is remarkable. Ghana, for example, was estimated to have a per capita income of around US$ 1,874 (in 2000 prices at purchasing power parity rates) in l956 whereas Korea's was US $1,347. In 2003, Ghana per capita income level was $2,114, only 13 percent above the level in l956. By contrast, Korea's per capita GDP was nearly 13 times its 1956 level, at $16,977. And the same holds true for many other Sub-Saharan African countries relative to Asian countries.
Thus, while many—in East Asia, South Asia, the Middle East and Latin America—have seen major progress with regard to living standards and poverty reduction (while still having a considerable distance to go if they are to "converge" with the developed countries), there remains an important challenge with regard to the poorest countries, to which attention returns below. No longer can the "developing countries" be seen as a homogeneous group: some have become "newly industrial", some have "emerged", and many more have significantly better standards of health and nutrition than they did fifty years ago; but a few have been left, or even fallen further, behind.
A third major change has been the rapid increase in integration of global financial markets. In 1952, only seven countries (U. S., Canada, and five Latin American countries) had free exchange rate regimes for current account transactions as set out in Article VIII. Today, 164 countries have accepted Article VIII obligations, while capital account transactions are much freer than they were.
Lessons. We have learned a lot over the past half century, much of it emanating out of experience. Perhaps the most important lesson—at least in terms of the degree to which thinking has had to change—has been the importance of economic policies in affecting relative and absolute economic performance. The relative roles of markets (via incentives and within an appropriate legal framework) and the private sector is better understood and appreciated than was the case fifty years ago. The importance of institutions, infrastructure, and other governmental functions is also increasingly recognized.
Out of all this has come increased appreciation of the importance of open markets—for promoting competition and technical change with consequent increases in productivity and in enabling higher rates of economic growth than is feasible in relatively more closed economies. And it has been recognized that growth rates can be much more rapid under appropriate policies than had earlier been thought. [In his review of the twenty five years from 1950, David Morawetz noted that per capita income growth in developing countries as a whole had "exceeded both official goals and private expectations." . The most rapidly growing countries have grown at rates that were regarded as unthinkable fifty years ago.] Thus, governments desirous of rapid economic growth can undertake changes that can enable significant acceleration of growth. But, at the same time, it has also been seen that growth is not inevitable, and, indeed, that retrogression is possible, not only in the event of dire external circumstances, but more often because of domestic economic policies inimical to a well functioning economy.
A second lesson, or perhaps a corollary of the first, is the importance of macroeconomic stability. In the early postwar years, it was generally thought that some degree of inflation would be the inevitable cost of full employment in the industrial countries (the Phillips curve), and that inflation might even accelerate development in developing countries. Inflation at moderate levels was thought to be manageable. It was regarded by governments and many academics as a useful tool to circumvent budgetary constraints.
It is perhaps only with hindsight that we can truly appreciate the costs of the worldwide inflationary surge that we experienced from the 1970s onwards. In the 1970s and 1980s, governments in both industrial and emerging market countries discovered that the more tolerant of inflation they were, the more likely inflation was to trend upwards, and the smaller the trade-off, if any, perceived between more unemployment and more inflation. It is those countries that have pursued policies aimed at reducing and controlling inflation that have experienced more rapid—and sustained—growth.
Earlier efforts to document negative effects of inflation on growth proved unsuccessful. But, as inflation has been overcome in country after country, there is mounting evidence that price stability itself enables better resource allocation and investment decisions, and, in so doing, is conducive to more rapid economic growth.. The Fund has worked with its member countries to advance the process of lowering inflation, especially through our surveillance work. Through annual Article IV consultations with members, the Fund to identify policy weaknesses and successes. Where governments are seeking to implement appropriate polices we can be supportive; where we identify policy shortcomings we can try to persuade the authorities of the need for reforms.
Our surveillance work is greatly strengthened by the Fund's unique cross-country insight. Our ability to monitor closely the economies of all 184 members enables us to identify what works and what doesn't. It helps inform our research as we seek to improve our understanding. Our membership gains directly from that: they can benefit from experience elsewhere when shaping their own policy framework to their national concerns and priorities.
There is plenty of evidence that overly expansionary policies are equally damaging. A good recent example is the case of Peru when Alain Garcia became President in 1985 and ran a highly expansionary fiscal and monetary policy. Real GDP expanded by 12 and 7 per cent in the following two years. But by that time, there was a large current account deficit (which reached 5 percent of GDP in 1990, the year Garcia left office); Peru had incurred huge foreign debts (foreign debt as a percentage of GDP had risen from 73 in l985 to l65 three years later); and the party had to end. At that point, real GDP fell by 9 and 13 percent in the next two years. While Peru had experienced an expansion of real output in l986-87, there was no sense in which it was "growth": four years later, per capita incomes were lower than they had been at the beginning of the boom.
Yet another lesson has to do with the recognition that relative sizes and importances of different trading countries will change in the future. We can no more take today's relative importances in world trade and in world GDP as indicative of the future than were the l950s relativities. The immediate challenge is twofold. First, more needs to be done to recognize the increased roles of the rapidly growing economies—especially in Asia—and to adjust the international economic and financial framework accordingly. But, second, we must also ensure that any adjustments to the international economic framework also make it more flexible, able to adapt easily to future changes in relative economic performance and influence.
In l964, Harry Johnson gave a series of lectures at Sir George Williams University in Montreal on the international economy. He entitled it The World Economy at the Crossroads. His theme, then, was the necessity and desirability of further liberalization of trade and payments systems, and the need to incorporate developing countries into the global system (interestingly, he said nothing about the centrally planned economies). In light of subsequent events, he was prescient.
Much the same strictures could be made today. The enormous success of the global economy in delivering higher living standards to most cannot be questioned. But , as is evident from the past, we cannot rest on our laurels. On one hand, retrogression is possible. And, on the other, failing to address remaining challenges could also undo a considerable amount of the progress that has been made.
The open international trading and financial system is clearly a key to future global economic growth. Aided by falling costs of long distance transactions and trade liberalization, trade has served as an engine of growth for the past half century, just as it did in the 19th century. The integration of financial markets has furthered the process. And the benefits are there for all to see.
But the current Doha Round of trade negotiations has encountered serious resistance. Instead of recognizing that economic growth has not solved all ills but has created an environment that can make it easier to address remaining problems, some have come to see so-called globalization as the source of difficulties, rather than as the enabler that it has been for today's prosperity. Narrow sectoral interests respond defensively to threats while policymakers fail to take account of the benefits that flow from a more open trading system.
The Doha Round has faced formidable challenges that weren't present to the same extent in earlier rounds of trade negotiations. Some of these are a direct result of the rapid integration of the global economy. The WTO now has 149 members, all with their own priorities and interests that have to be reconciled in the final agreement: the first round of trade negotiations under the auspices of the GATT in 1947 had only 23 signatories. Moreover, the Doha negotiations are far more complex, encompassing agricultural trade and services: until the 1990s, agriculture had been excluded from multilateral trade negotiations.
But the complexity can make it easy to lose sight of the fact all countries have much to gain from an agreement. A successful outcome to the Doha Round will ensure the continued expansion of trade and so underpin future global growth. Of course, developing economies are anxious to safeguard their interests, as are all participants in the negotiations. But it is developing countries that have most to gain from further trade liberalization, in part because their remaining trade barriers are highest.
We need to see a successful Doha outcome because of the great benefits it will bring to the global economy. We also need an agreement because without one there is justifiable concern that protectionist pressures will be strengthened and so begin to unravel progress made in the past. Standing still is not a practicable option: the choice is between moving forward with further trade liberalization, which will further boost world trade growth; and moving back as strengthened protectionist pressures bring the risk of slower growth in world trade, and consequently slower growth in world GDP than would otherwise be the case.
One consequence of the complex challenges now facing multilateral trade negotiations has been an increase in the number of preferential trading arrangements that are being negotiated. It can be tempting to see a bilateral approach as an easier substitute for complex multilateral negotiations. And bilateral free trade agreements, and the development of regional trading blocs, can be a useful boost to international trade if undertaken in the context of multilateral trade liberalization. But they are not an alternative to multilateral liberalization and if seen as such will hinder progress on the multilateral front.
The second challenge as we look forward is for the international financial system. Here, two issues are crucial at the current juncture. The first is the need to give Asia appropriate weight in the international financial system, including in the IMF itself. The Fund management's position on this issue is clear. We recognize that Asia has a powerful and legitimate claim to greater weight in the Fund than allowed for under the current rules. Asia has a voice, of course: it wields considerable influence in Fund discussions. But it is clearly under-represented. This issue is firmly on the agenda of the Fund's shareholders ahead of the next Annual Meetings, in Singapore next year.
At the same time, there is a pressing need to strengthen the mechanisms for resolving global imbalances. This is more than just a case of tackling the U. S. current account deficit, or structural reform in Europe and Japan, or addressing low domestic consumption in Asia. The current imbalances in the global economy are complex in their origins and require action on several fronts at once if they are to be resolved without undermining global economic stability and growth. There is a clear opportunity for strengthened multilateral surveillance by the IMF to play a central role in this process.
Applying many of the lessons from the financial crises of the 1990s has already strengthened the global economy. It is now generally recognized, for example, that flexible exchange rate regimes have an important role in enabling smooth adjustment to changing domestic and international circumstances. It is also clear that foreign direct investment and strengthened financial sectors can both help to reduce the vulnerabilities associated with private capital flows.
The third challenge for the future is, in a sense, domestic. Whenever growth is rapid there are those left behind because they are not able, in the short term, to benefit from the increased opportunities that growth brings. Over the medium and longer term, of course, education has a crucial role to play. Access to high quality education for all is important both at the individual level—where it enables individuals to reap the benefits associated with a rapidly growing economy—and at the national level, since without a well-educated workforce growth will eventually be restricted.
To address short-term needs, however, other measures besides improving the provision of education will be needed. Social safety nets are vital. But they need to be well-targeted, to benefit those most in need. Subsidies that mainly help the middle classes, for example, are ineffective, expensive and can undermine fiscal discipline and so, in turn, macroeconomic stability. Safety nets that distort incentives too much will undermine growth.
Putting well-targeted and affordable safety nets in place is a particular challenge for emerging market and developing countries—though many industrial countries have welfare systems that are unduly distortive. But all industrial economies and a growing number of developing countries face another challenge to domestic economic policy: demographic change. As populations age—very rapidly in some countries-public pension systems are coming under increasing strain. As the elderly dependency ratio rises, and fewer workers support an increasing number of older retired citizens, measures will be needed to ensure that fiscal policy remains on a sustainable path. In industrial countries action is needed sooner rather than later in order to avoid a fiscal crunch. In emerging market countries, there may be more time in some cases, but the challenges are greater: public pension schemes, while more limited, are already expensive and unsustainably generous. For all countries, therefore, confronting demographic challenges means ensuring more efficient government spending and, most important, means ensuring that economies are flexible and so able to respond to the challenges in a way that does not undermine growth.
The final challenge is for countries left behind or retrogressing, and is in some ways the most daunting. The Millennium Development Goals agreed by the United Nations in 2000 have highlighted the extent to which some countries have fallen behind. Experience over the past half century has taught us that ultimately it is domestic policy reform that will determine whether those countries that have yet to integrate with the global economy in any meaningful way can begin to share in the benefits of global growth. Without policies that enable these countries to integrate more successfully into the global economy, their citizens will remain poor—and, indeed, will in some cases become worse, rather than better, off. Improved governance, an end to corruption, policies aimed at achieving macroeconomic stability are essential for the sustained growth that will make poverty reduction possible. Without such policy reforms, the scope for help from the international community will be restricted.
Yet the international community—bilateral and multilateral donors alike—has a vital role to play in helping these countries. Aid transfers continue to be vital of course. But so too is capacity-building, policy advice and technical assistance. Much of the IMF's work with these countries involves assisting the reform process, for example, by enabling them to implement public expenditure management and by improving tax administration. And countries need assistance from the international community if they are to be able to absorb increased aid flows in ways which do not further undermine economic progress.
Let me briefly conclude.
The past half century has been a period of extraordinary growth for the world economy. Most citizens in most countries are far better off today than could have been imagined in the early postwar years. The pace of technological change has been, and continues to be, remarkable. Globalization has brought enormous benefits. And there are strong reasons for expecting this process to continue.
But at the same time there is no room for complacency. The last great period of globalization, at the end of the 19 th century, ended in disaster, with the First World War. Progress was reversed and recovery from that setback took many decades.
A reversal this time may not be likely, but it is not impossible. Much of what has been achieved is a consequence of greatly improved domestic economic policies and, above all, the strength, durability and adaptability of the multilateral economic framework put in place in 1945. There have been many challenges to this framework over the years, all of which have ultimately demonstrated its underlying strength.
But the challenges we face today are, I believe daunting, not least because their seriousness is not fully recognized. The world trading system is at a crucial juncture. A successful outcome for the Doha Round will strengthen it greatly: failure would do much to undermine it. The complex problem of global imbalances must be addressed if the risk of a disorderly unwinding is to be avoided. And the problems of those countries that have yet to share in the benefits of globalization cannot be ignored.
Tackling these problems will consolidate and increase the gains already reaped from globalization. Ignoring them would be, at best, foolhardy.
1 O'Rourke and Williamson p. l7.
2 Tariffs in many countries reached their lowest levels around l870 or l880 as some countries responded to the reduced prices of imports due to falling transport costs with higher levels of protection. See O'Rourke and Williamson p.95.
3 There appears to have been rapid growth of industry in some developing countries; India seems to have had a twenty year period of sustained growth of industry in the late l9th century. None of these bursts of growth seems to have been sustained, however.
4 Obstfeld and Taylor, p.55.
5 Obstfeld and Taylor, p. 60.
6 O'Rourke and Williamson p. 35 ff.
7 Japan was always an outlier in this regard.
8 Today, the World Bank consists of the IBRD, the International Development Association (which provides loans at concessional rates and grants to poor countries that cannot access private capital markets), and several other affiliated entities.
9 There were two exceptions—one to enable a county to "safeguard its external financial position and its balance of payments" and one for "infant industry protection" in developing countries. Subsequently, the GATT articles were amended to permit preferential treatment for developing countries by industrial countries in their trade regimes.
10 See Anne O. Krueger "Trade Policy and Economic Development: How We Learn", American Economic Review , Vol. 87, No. l, March 1997, Pp. 1-22.
One hundred years ago, observers of the international scene would have described the phenomenal globalization of the preceding century, especially in the period 1870-1914.
Until the 19 th century, transport costs had been sufficiently high to discourage all but high value—low volume trade, while policy-imposed trade barriers (tariffs and other taxes or restrictions on international transactions) had further impeded trade flows. For most commodities, transport costs exceeded the price of goods in the country of origin, often by a substantial margin.
In the early l9th century, the United Kingdom provided leadership in reducing tariffs, and many other European countries followed suit in the middle of the century. Transport costs also fell dramatically, even in the first half of the century. Douglas North, for example, cites evidence that ocean shipping costs by around 1850 were only about a third of what they had been barely thirty years earlier—when shipping under sail was still the order of the day. While international trade and economic growth picked up as a result of these phenomena, it was really in the late l9th century, especially in response to the "amazing" decline in transport costs (the phrase used by O'Rourke and Williamson), that trade volumes and growth rates accelerated. The last decades of the 19 th century were described as the "gilded age" on this continent, as per capita incomes are estimated to have doubled between l870 and l900. The late Victorian era was likewise regarded as a boom period in Europe as European per capita incomes and wage rates rose at even faster rates, albeit from a lower base.
The late nineteenth century boom was encouraged by technical change and by policy changes in industrial countries. Technical change was especially apparent with the introduction of electricity and its applications, and included communications (the telephone and telegraph), transport, and much more. The introduction of the railroad led to a steep decline in the costs of moving freight, and there were further dramatic drops in the costs of ocean shipping following the introduction of steamships. Data from O'Rourke and Williamson imply a drop in costs of transport between the U. S. and Europe from about 80 per cent of the price of the commodity to less than 20 percent during that period.
The sharp decline in transport costs came at a time when most European countries had lower tariff levels than earlier in the 19 th century. The U. K. had zero tariffs on agriculture and manufacturing until l914, and Dutch and Scandinavian tariffs were also low. 1 2 The impact of rapidly falling transport costs, combined with the reduced levels of protection, undoubtedly led to a major net reduction in barriers—both natural and artificial—to trade.
As a consequence, world trade grew rapidly—at an annual rate of 3.4 percent between 1870 and 1914, with growth not only in industrial goods but also in raw materials. In many instances, the primary commodity exporters were colonies, whose manufacturing bases did not achieve sustained development. 3.
Simultaneously, integration of world capital markets proceeded rapidly. By the early 20 th century, it is estimated that foreign-owned assets were about equal in value to about 20 percent of world GDP. 4 The United Kingdom was, as is well known, the world's banker and at its peak, owned 80 percent of foreign assets globally. Its capital outflows were as much as 10 percent of GDP in some years, and averaged 4.5 percent of GDP per year between l870 and l914. 5.
The growth of real incomes, the growth of world trade, and the integration of the world economy—both through the removal of artificial barriers to trade such as tariffs and through reduced costs of transport—were causally linked. The drop in costs of international transactions was itself a function, in significant part, of technological change. 6 But while real wages and living standards rose throughout the world, the rate of increase was much faster in the industrial countries. Until the early l700s, it is estimated that living standards were not significantly different between different geographic regions of the world. But by the end of the nineteenth century, economic growth had been sufficiently rapid in the "industrial countries" that the world had bifurcated in terms of living standards and rates of economic growth. 7.
The First World War, however, led to an abrupt reversal in the degree of globalization. As transport routes were disrupted and countries experienced different degrees of inflation in response to the differential strains of their wartime expenditures, the earlier integration of the international economy was largely reversed.
Despite efforts to restore the status quo ante after the war, disequilibria associated with the overvaluation of the pound sterling following the British return to the Gold Standard in 1925, German reparations, and other imbalances led to slow progress in the l920s. At the end of that decade, markets were not as integrated as they had been prewar.
But the Great Depression reversed even that progress. As is well known, real incomes dropped dramatically in most countries, unemployment rates rose sharply, and prices of goods and services fell abruptly. The policy response intensified the difficulties: the l930s were characterized by rising trade barriers (both tariffs and non-tariff restrictions) and competitive devaluations, often referred to as "beggar they neighbor policies", and by rapidly falling volumes of trade and prices of traded goods. As each country attempted to reverse its own downward spiral by imposing ever-higher tariffs, devaluing its currency, and other measures, they in effect exported part of their own deflationary pressures, only to be hit by deflationary pressures resulting from similar actions in other countries. Britain was forced off the gold standard in l931, while the United States followed suit in l933 and simultaneously experienced a "banking holiday" as banks were hard hit by nonperforming loans in their portfolios. Worse still, the American Congress had enacted the Hawley-Smoot tariff in the early l930s, giving an average tariff level of 59 percent in 1932 in the United States: the highest level since the 19 th century. As it became evident with hindsight that the Hawley-Smoot Tariff Act had greatly intensified the Great Depression, rather than offsetting it, the name became synonymous with unilateral policies of individual countries that harmed themselves and other countries, so called "beggar-thy-neighbor" políticas.
By the late l930s, recovery was underway, but then the Second World War began and rapid expansion ensued in response to wartime demand. Of course, output and trade patterns were once again disrupted, as production of consumer and investment goods demanded in peacetime were replaced in significant part by production related to the war effort.
The Situation at the End of the War.
The world economy as of 1945-46 was far less integrated than it had been at the end of the First World War, both because of the war itself and because of the protectionist and isolationist measures of the l930s. The United States, Canada, Australia, and a few other industrial countries not devastated by wartime destruction were producing at levels much higher than they had been in the late l930s: but most of Europe, the Soviet Union, China, and Japan were hard hit. While many economies in the areas that had not experienced the industrial expansion of the earlier era were not similarly affected, it was evident that they were "different". So with the decision of the Soviet Union and China to insulate their economies, the global economy was effectively split into three. There were the industrial countries: these were themselves divided between those where production had fallen significantly during the war, and those where the structure of production had shifted but output increased. The second group were the—as they were then called—"underdeveloped" economias. Many of these had been able to export primary commodities at high prices to the combatants during the Second World War, and had built up large reserves of foreign exchange (because there was little to import). But these economies were all heavily concentrated on producing raw materials, both agricultural and mineral, with a relatively small manufacturing industry producing primarily small-scale labor-intensive consumer goods, with very low standards of living by contrast with the industrial countries. The third group was the centrally planned economies; until the l990s, their evolution was almost entirely independent of that of the rest of the world, and so I leave their story aside for now.
When planning for the postwar era began during the latter years of the war, it was based on several premises: l) that the United States would emerge from the war economically strengthened and the preeminent economy; 2) that Europe and Japan were economically devastated and would need time and resources to recover; 3) that a repetition of the mistakes of the l930s should be avoided through multilateral cooperation within an appropriate institutional framework; and 4) that the supply of long-term private capital would not resume after the experience of the 1930s.
The postwar planners proposed a framework for international economic cooperation (as well as the United Nations for political cooperation) in which there would be international organizations for l) international monetary cooperation; 2) reconstruction and development; and 3) international trade in goods and services. International monetary cooperation was intended to facilitate international trade by inducing currency convertibility, preventing competitive devaluations, and enabling coordinated international financial policies. To that purpose, the Articles of Agreement for the International Monetary Fund were drawn up, and subsequently ratified by 38 countries by the time the Fund's Board of Governors held its inaugural meeting in March l946. Crucially, countries with "balance of payments" difficulties were expected to consult with the IMF, and to adjust their domestic policies, altering exchange rates only in circumstances where it was agreed with the IMF that there was "fundamental disequilibrium". Signatories to the Articles also agreed to Article VIII—convertibility of their currencies for current account transactions. As will be seen, achieving this among IMF members was a significant achievement, but it required more than 15 years before even the major industrial countries had removed exchange control regulations to the extent necessary to comply with Article VIII.
Given the presumed absence of private sources of capital, the postwar planners concluded that longer term financing would have to come from official sources, both to provide capital to accelerate the reconstruction of the war-devastated countries and to enable higher rates of investment, and therefore of growth, of the "underdeveloped" economies than would otherwise materialize. As a source of longer-term official finance, the International Bank for Reconstruction and Development, now generally known as the World Bank, was founded. 8.
The third leg of the envisaged arrangements was for multilateral cooperation for an open international trading system. The General Agreement on Tariffs and Trade, signed in 1947, was seen as a interim arrangement pending the establishment of the proposed International Trade Organization (ITO), but proved remarkably durable in the absence of ratification of the ITO charter. The GATT arrangements provided for nondiscriminatory treatment of all trading partners, for elimination of quantitative restrictions on trade, and for fora in which countries could reciprocally negotiate tariff reductions and in which trade disputes between countries could be settled.
The IMF and World Bank Articles were negotiated at Bretton Woods in l944, and the two organizations began functioning in 1946. The GATT began functioning in l947 with a first round of tariff reductions negotiated at that time. The GATT, and later the World Trade Organization (WTO) included two key provisions: l) that member countries would not impose and/or would eliminate nontariff barriers to trade 9 ; 2) that member countries would grant "most favored nation" status to their GATT/WTO trading partners so that all trading partners would face the same trade barriers unless there was a preferential trade arrangement (the conditions for which including coverage of all trade items, zero tariffs between the PTA countries, and a certain timetable for achieving zero tariffs).
When the war ended, however, it became evident that the degree of European/Japanese devastation was much greater than anticipated, and the United States emerged even more dominant than expected: as late as 1950, Maddison estimates that the United States produced 27 percent of global real output and accounted for over 14 percent of global exports. The U. S. also held 54 percent of international reserves.
Although, as stated, the GATT achieved its first major round of tariff reductions in l947, the postwar reconstruction needs, especially of Europe, were far greater than had been anticipated. It fell primarily to the United States to support the European and other countries in their reconstruction efforts (although the World Bank did extend some loans), first through "Point Four" aid, and then through the Marshall Plan.
European and Japanese economic recovery was stunningly successful after the first two very difficult postwar years. Prewar output levels were generally attained by the early l950s, and were only the start of a period of sustained rapid growth. From a situation in the late l940s when most European economies traded through bilateral payments arrangements with each other (or used Marshall Plan aid), they moved to multilateral clearing arrangements. Simultaneously, tariff reductions were taking place and quantitative restrictions were being removed.
With the groundwork laid by the Marshall Plan, increasingly free exchange regimes and tariff reductions (spurred both by the GATT multilateral tariff reductions and intra-European liberalization undertaken in the context of the Marshall Plan), the world economy embarked upon a quarter century of sustained and unprecedentedly rapid economic growth. While developing countries—as they came to be called—grew, they generally did so without integrating with the world economy, and I shall return to their story later.
The most rapidly growing countries were in Europe and Japan. While the rest of the industrialized world grew rapidly, and at rates well above those achieved in the first half of the twentieth century, it was the phenomenal growth of Europe and Japan which led to the biggest changes in the world economy. In l950, it could fairly be said that the United States dominated; by the early l970s, Europe and Japan were also major players in the world economy.
During the golden quarter century, tariff reductions continued. The rate of growth of world trade averaged almost 8 percent per year from l950 to l973. Quite clearly, trade was an "engine of growth", just as it had been in the late l9th century, growing at about twice the rate of growth of world output. But whereas in the late l9th century, it was primarily reductions in transport costs that facilitated that growth, it was reductions in tariff and nontariff barriers to trade were the major stimulus to the growth of trade in the postwar years.
The very rapid economic growth of that era took place in a relatively non-inflationary environment. Most industrial countries had single digit rates of inflation. To be sure, individual countries did experience "balance of payments crises", and rates of growth fluctuated through recession and boom periods. Nonetheless, the world economy as a whole was relatively stable. Through the provision of financial assistance to countries in balance of payments crises, the IMF played an important role in enabling adjustment to take place without the disruption to the international system that had characterized the inter-war period. Many of the industrial countries—and many developing countries—took advantage of the IMF's lending facilities. Britain, in 1977, was the last major industrial country to borrow on a large scale from the Fund.
Part of that stability derived from the relative size and dominance of the American economy. From l950, when 79 percent of foreign exchange reserves of the industrial countries were held in gold, the American dollar assumed increasing importance. By l973, more than 90 percent of the foreign exchange reserves holdings of those industrial countries that reported such data were held in U. S. dollars. International prices, and settlements of accounts even between other countries, were predominantly denominated in U. S. dollars. But the underpinning of the Bretton Woods system, and the continuing downward movement of trade barriers were also major factors.
By l973, then, the industrial countries were still preeminent in the world economy: they are estimated to have produced 59 percent of world GDP and to have accounted for 64 percent of world exports, contrasted with 60 percent of world GDP and 61 percent of world exports in l950. Within the developed countries, though, the U. S. share had diminished as other countries had experienced more rapid growth.
But developing countries had also achieved growth rates (in part benefiting from the rapid growth of industrial country markets for their goods) higher than those experienced in the l9th and early 20 th century. Many of them had been former colonies; but whether former colony or previously independent, most of their governments put the goal of raising real incomes and rapid growth as their foremost objective. To achieve this, however, they adopted policies that insulated them to a major degree from the international economy. While the industrial countries were reducing trade barriers and freeing financial transactions, most developing countries were protecting (infant) domestic industries and restricting international transactions. Nonetheless, per capita incomes rose in most countries, and life expectancies, literacy rates, nutritional statuses, and other indicators of well-being improved significantly.
As contrasted with the immediate postwar period, then, by 1973 the global economy was characterized by the increased relative and absolute importance of international trade. Among industrial countries, there was much greater freedom of financial flows and, during the l960s, private capital flows between Europe and the United States began increasing rapidly. For developing countries, foreign aid—both bilateral and multilateral—and other official flows had increased, but their own payments regimes were still highly restrictive. Moreover, in many developing countries, growth rates were beginning to decline, as the costs of continuing to pursue inward looking "import substitution" policies increased. 10 Hence, they remained primary commodity exporters: although many had experienced growth of manufacturing, and the manufacturing share in GDP, almost all the increased output was destined for the sheltered domestic market. Even in primary commodities, the share of developing countries had dropped.
There had, however, been a few economies where economic policies had shifted away from the earlier "import substitution" policies toward a much more open economy. Some had gone so far as to rely on exports as an "engine of growth". Those economies, in East Asia, experienced sustained increased rates of growth unlike anything earlier witnessed in the global economy. The 4 "Asian tigers" were the most notable. South Korea, the largest of them, was typical, increasing exports at over 40 percent a year in the l960s, with rates of increase of real per capita incomes of 7-9 percent a year. By 1982, South Korea was one of the world's top 15 exporters, and it today ranks 11th in exports in the global economy.
But, as of l973, high growth rates among the East Asian economies had not made a significant difference to the structure of the world economy, as these rates had been experienced from a very low base. From a global perspective, the world was still divided into rich industrial countries and poor developing countries.
1973, however, marked a watershed in the global economy. Inflationary pressures had been rising, especially in the United States, and there was a commodity price boom in l972-3. By that time, the United States had been incurring a current account deficit for more than a decade spurred by a faster rate of American inflation (at a fixed exchange rate) and U. S. demand resulting from the Vietnam war expenditures. In l971, the United States announced that it was suspending the gold convertibility of the dollar. Hence, the Bretton Woods system, as founded (as a fixed, but adjustable, standard) and which had become a de facto dollar standard, was abandoned, and by 1973 floating exchange rates between the U. S., Japan and the major European currencies had become the order of the day.
But at that same time the "oil price shock" of l973-74 quadrupled nominal oil prices in a very short period of time. Many oil importing countries found their import costs greatly increased; some (mainly industrial) went into recession, while others (mainly developing) borrowed from private financial sources. It was the first large-scale access of developing countries to private capital markets and permitted the recycling (through banks in industrial countries) of oil exporters' current account surpluses to oil importers' current account deficits. That there were already floating exchange rates between major currencies certainly facilitated the adjustment.
After a recession following on the oil price shock, economic growth resumed in most industrial countries, and in oil importing countries. Indeed, for the rest of the decade after the l973-74 oil price increase, oil importing developing countries grew more rapidly than oil exporting developing countries. And, among developing countries, those—mostly in East Asia—that had switched to outer oriented economic policies experienced much more satisfactory rates of economic growth than those still relying on inner-oriented policies. It is also worth noting that this more rapid growth took place against a background of relatively low income inequality; and there was rapid progress in reducing poverty in these countries.
But by the early l980s, after the second major oil price increase, the world economy went into recession as the United States altered its monetary policy to contain, and subsequently permanently lower, its inflation. The resulting high nominal and real interest rates, combined with falling commodity prices (attributable to the recession) resulted in debt-servicing difficulties for many of the developing countries that had earlier borrowed to finance their increased oil import bills. Indeed, for heavily indebted developing countries, the l980s were a "lost decade" as debt-servicing difficulties and continuing adherence to inward looking policy stances resulted in negligible increases in per capita incomes, and declines in some cases.
By the late l980s, inflation was contained in most industrial countries, and debt was being restructured (the Brady Plan) in the heavily indebted developing countries. The oil price had peaked in real terms in l979, and fell sharply in l986. The stimulus from lower real oil prices and stable price levels resulted in a period of sustained growth of the industrial countries. Trade barriers among industrial countries continued to drop, as quantitative restrictions had been almost entirely eliminated and tariffs were being further reduced under the influence of successive rounds of trade negotiations under the GATT.
A new round of trade negotiations under the GATT was proposed in the late l990s, but not agreed upon until the Doha Round was inaugurated in November 2001. The new round faced several significant challenges, to which I shall return later.
The start of the final decade of the twentieth century coincided with another major shift, as the world adapted to the collapse of the Soviet Union, and the emergence of formerly centrally planned economies into the global economy. For most of the l990s, the "transition" economies were adjusting to their new economic structure, and adapting their economic policies for greater integration into the international economy. For present purposes, it is also important to note that the examples set by the East Asian countries seem to have had a significant influence on policy makers in other Asian countries, most notably China and India, as they, too, began reforming their policies.
The "lost decade" of the l980s, in turn, led a number of other countries to begin reducing their barriers to trade and other impediments to growth. Mexico, for example, embarked on a series of major economic policy reforms in the latter half of the l980s, anchoring them in the North American Free Trade Agreement, which permanently assured outward looking economic policies.
As reforms took place in country after country, and investment became more profitable, private capital flows—especially to "emerging markets", as the successful developing countries came to be known—increased enormously, eclipsing official capital flows in their magnitude.
But, as that happened, the vulnerability of some of the emerging markets to changes in investment flows increased dramatically. The first country to be affected by this was Mexico; its exchange rate policy did not adequately accommodate domestic credit expansion or the altered outer oriented trade stance, and in late l994, investors became reluctant to finance further current account deficits (the l994 deficit had been 7.6 percent of GDP). The ensuing capital outflow forced Mexican officials to take swift action, adjusting monetary and fiscal policy in the context of a large loan from the International Monetary Fund. Within three months there had been an effective nominal devaluation of 65 percent.
The l990s witnessed a number of other "capital account" crises. These differed from earlier "balance of payments" crises in which the IMF had supported adjustment in its member countries both in the fact that the immediate origin of the difficulty was a major change in the willingness of foreigners and domestic residents to hold domestic assets and in the fact that there was little time in which to decide on policy changes.
The latter part of the decade saw more capital account crises, including most notably South Korea, but other countries in east Asia and elsewhere. The South Korean situation was particularly shocking, as by that time the country was seen as a "newly industrializing country"; the crisis had been unanticipated, and was dramatic. As in Mexico and other cases, substantial borrowing (mostly from the International Monetary Fund) and policy adjustments stemmed the crisis. In the South Korean case, the l997 level of real per capita income had been re-attained within 6 quarters and by 2004, real GDP was almost 40 percent above its l997 pre-crisis level.
But to the world, it was clear that, to the earlier, current-account based, balance of payments difficulties, were now added capital account crises. At the turn of the 21 st century, one major challenge was seen as learning the appropriate lessons going forward as to the prevention of such crises, and, when they did occur, the appropriate policy responses for the country involved and for the international community.
While headlines were captured by the dramatic events in the former centrally planned economies and capital account crises, other events were going on that would, if trends persisted, alter the global economic landscape at the beginning of the 21 st century. The American economy experienced rapid growth, with more rapid rates of productivity increase than had earlier occurred. Moreover, those rates were achieved in the context of a prolonged period of sustained growth and price stability, minus the recessions that had accompanied growth in earlier decades.
Europe had begun a process of increasing integration with the opening of trade and financial flows under the Marshall Plan. The Treaty of Rome had started the process of movement toward an integrated internal market, undertaken within the context of lowered trade barriers from the multilateral trading rounds under the GATT. As additional countries joined the European enterprise, and policy harmonization deepened, the European Union emerged as a major force in the global economy with 38 percent of world trade and 26 percent of world GDP as of 2000. By contrast, after four decades of growth and rapidly rising living standards, the Japanese economy had entered a period of stagnation by around 1990, and Japanese growth remained sluggish a decade later, primarily as a consequence of the asset bubble of the late 1980s and the policy challenges posed both by the need for reform of the financial sector.
Despite the difficulties of countries such as South Korea, growth in developing countries accelerated during the l990s as a result of their policy changes and the supportive global environment. By 2000, developing countries as a group accounted for about 47 per cent of world GDP and a third of world trade. And, of course, the East Asian economies, in addition to Japan, were by 2000 large enough to be significant. Japan, as already noted, was a major economic entity by the l970s, but by the year 2000, South Korea, the ASEAN countries, and China, were also gaining share. India had embarked upon reforms and, in consequence, growth rates were beginning to accelerate.
The Global Economy at the Turn of the Century.
With the power of compound interest, many of the growth rates and changes that had occurred during the preceding several decades had, by 2000, basically altered the landscape of the international economy. Moreover, the experience of the years since the Second World War had taught a number of lessons which seem to be fairly widely accepted today. In this section, I review these changes and lessons, as a basis on which the challenges going forward can be assessed.
The Altered International Economy. What were the basic changes? The world was a much more open place. The internet, and access to it, had grown rapidly. There were further significant drops in transport and communications costs: in 2001, two economists from the Chicago Fed noted that in constant 1998 prices the cost of a three minute phone call from New York to London had been $293 in 1931 and had (by 2001) fallen to around $1 for a much better quality connection. In 2006 that same call costs just a few cents. Other technical changes, and above all the reduction in tariff and other barriers to trade, had played a role in opening up the global economy.
As mentioned at the outset, in the l9th century, reductions in costs of international trade had also spurred growth, the difference being that it had been the reduction in transport costs in the 19 th century, and the reduction in policy-related tariff and non-tariff barriers in the second half of the 20 th century that had enabled closer integration. For manufactured goods, at least, average tariff rates among industrial countries are now less than 5 percent; within areas such as the European Union, they are zero. With airfreight, the internet, and other changes, goods can be ordered from one part of the world and received elsewhere in a matter of hours, contrasted with the months the same transaction would have taken two hundred years ago. But while it would be difficult, if not impossible, to reverse technical change and the drop in costs of transport and communications, the same cannot be said for policy-induced trade barriers. I return to this in the next section, as a significant threat to continued strong global growth lies in risks that the trend toward trade and financial integration that has spurred growth may end or even reverse.
Increasing openness during the late 20 th century had, of course, resulted in greatly intensified international economic activity. Consequently, the relative importance of international trade in the world economy had greatly increased: from 5.5 percent in l950 to 17.2 percent in 2000, according to Maddison. Much more trade was in intermediate goods, as producers were able to locate each stage of the production process in the country or countries where costs of production were lower. And, whereas in l950 45 percent of merchandise exports were agricultural and 37 percent were manufactures, the composition of trade was radically altered, and trade in services grew in importance. By 1980, services trade constituted 15 percent of all goods and services trade, agriculture accounted for 12 percent and manufactures for 45 percent. The comparable numbers for 2004 show agriculture down to 7 percent, services up to almost 20 percent, and manufactures to 59 percent. In addition to trade flows, other international transactions had increased in importance: tourism, other services items, and capital flows. The fifty years had seen enormous improvements in living standards, not only in the developing countries, but even among the richest. The United States is estimated to have had a per capita income of just $13,000 in 2005 dollars in l950; by l975, that figure was $22,200; and in 2005, it was $41,900.
But just as the structure of the international economy had changed, so, too, had domestic economic policies. Increased macroeconomic stability within the industrial countries has already been highlighted; the global reduction in inflation rates has been a significant contributor to accelerated world growth. But, in addition, the shift toward more market-friendly policies (in developing countries and in some industrial countries) together with the transition from central planning has enabled more resilient economies and stronger responses of output and employment to changes in incentives, further accelerating growth.
That leads to the second major change: whereas in 1950 the United States was THE economic power, and by the mid 1970s Europe and Japan were clearly established as major global players, by 2000, emerging Asia—especially China and India, but also a number of other countries—had become a significant economic force in the international economy. Much of Europe, of course, is now in the European Union and has achieved an even higher degree of internal integration than that realized externally. And the emerging Asian economies are already so large as to have global significance and impact. Assuming that their relatively high rates of economic growth persist, they will become increasingly important in the years to come.
For India and China and many other developing countries, living standards—while still low contrasted with developed countries—have increased remarkably. This is reflected not only in per capita income numbers, but in other indicators of well-being. Over the past half century or so, infant mortality rates have fallen sharply in most developing countries. In China, for example, the infant mortality rate fell from 150 deaths per 1000 births in 1960, to 30 in 2003.
Perhaps the most telling statistic is life expectancy. In general, life expectancy in developing countries has risen at an astonishing pace.
Since 1960 life expectancy in the developing countries has risen at roughly double the rate in the richest. The gap between life expectancy in industrial and developing countries has narrowed from around 30 years in 1950, to around 10 years today.
For a few countries—most notably those in East Asia—living standards have risen so markedly that they are now beginning to close the absolute, as well as the relative, gap in income levels.
And, significantly, most of the transition economies of the former Soviet Union and Eastern Europe are realizing above-average rates of economic growth and integrating into the world economy.
At the same time, however, some other countries are still extremely poor and, indeed, their relative (and in some cases, absolute) position has even worsened. The poor economic performances of many Sub-Saharan African countries are well known. It is frequently forgotten that, after the Second World War, observers and all systematic estimates placed Sub-Saharan Africa real per capita incomes well above those of most Asian countries other than Japan. The juxtaposition is remarkable. Ghana, for example, was estimated to have a per capita income of around US$ 1,874 (in 2000 prices at purchasing power parity rates) in l956 whereas Korea's was US $1,347. In 2003, Ghana per capita income level was $2,114, only 13 percent above the level in l956. By contrast, Korea's per capita GDP was nearly 13 times its 1956 level, at $16,977. And the same holds true for many other Sub-Saharan African countries relative to Asian countries.
Thus, while many—in East Asia, South Asia, the Middle East and Latin America—have seen major progress with regard to living standards and poverty reduction (while still having a considerable distance to go if they are to "converge" with the developed countries), there remains an important challenge with regard to the poorest countries, to which attention returns below. No longer can the "developing countries" be seen as a homogeneous group: some have become "newly industrial", some have "emerged", and many more have significantly better standards of health and nutrition than they did fifty years ago; but a few have been left, or even fallen further, behind.
A third major change has been the rapid increase in integration of global financial markets. In 1952, only seven countries (U. S., Canada, and five Latin American countries) had free exchange rate regimes for current account transactions as set out in Article VIII. Today, 164 countries have accepted Article VIII obligations, while capital account transactions are much freer than they were.
Lessons. We have learned a lot over the past half century, much of it emanating out of experience. Perhaps the most important lesson—at least in terms of the degree to which thinking has had to change—has been the importance of economic policies in affecting relative and absolute economic performance. The relative roles of markets (via incentives and within an appropriate legal framework) and the private sector is better understood and appreciated than was the case fifty years ago. The importance of institutions, infrastructure, and other governmental functions is also increasingly recognized.
Out of all this has come increased appreciation of the importance of open markets—for promoting competition and technical change with consequent increases in productivity and in enabling higher rates of economic growth than is feasible in relatively more closed economies. And it has been recognized that growth rates can be much more rapid under appropriate policies than had earlier been thought. [In his review of the twenty five years from 1950, David Morawetz noted that per capita income growth in developing countries as a whole had "exceeded both official goals and private expectations." . The most rapidly growing countries have grown at rates that were regarded as unthinkable fifty years ago.] Thus, governments desirous of rapid economic growth can undertake changes that can enable significant acceleration of growth. But, at the same time, it has also been seen that growth is not inevitable, and, indeed, that retrogression is possible, not only in the event of dire external circumstances, but more often because of domestic economic policies inimical to a well functioning economy.
A second lesson, or perhaps a corollary of the first, is the importance of macroeconomic stability. In the early postwar years, it was generally thought that some degree of inflation would be the inevitable cost of full employment in the industrial countries (the Phillips curve), and that inflation might even accelerate development in developing countries. Inflation at moderate levels was thought to be manageable. It was regarded by governments and many academics as a useful tool to circumvent budgetary constraints.
It is perhaps only with hindsight that we can truly appreciate the costs of the worldwide inflationary surge that we experienced from the 1970s onwards. In the 1970s and 1980s, governments in both industrial and emerging market countries discovered that the more tolerant of inflation they were, the more likely inflation was to trend upwards, and the smaller the trade-off, if any, perceived between more unemployment and more inflation. It is those countries that have pursued policies aimed at reducing and controlling inflation that have experienced more rapid—and sustained—growth.
Earlier efforts to document negative effects of inflation on growth proved unsuccessful. But, as inflation has been overcome in country after country, there is mounting evidence that price stability itself enables better resource allocation and investment decisions, and, in so doing, is conducive to more rapid economic growth.. The Fund has worked with its member countries to advance the process of lowering inflation, especially through our surveillance work. Through annual Article IV consultations with members, the Fund to identify policy weaknesses and successes. Where governments are seeking to implement appropriate polices we can be supportive; where we identify policy shortcomings we can try to persuade the authorities of the need for reforms.
Our surveillance work is greatly strengthened by the Fund's unique cross-country insight. Our ability to monitor closely the economies of all 184 members enables us to identify what works and what doesn't. It helps inform our research as we seek to improve our understanding. Our membership gains directly from that: they can benefit from experience elsewhere when shaping their own policy framework to their national concerns and priorities.
There is plenty of evidence that overly expansionary policies are equally damaging. A good recent example is the case of Peru when Alain Garcia became President in 1985 and ran a highly expansionary fiscal and monetary policy. Real GDP expanded by 12 and 7 per cent in the following two years. But by that time, there was a large current account deficit (which reached 5 percent of GDP in 1990, the year Garcia left office); Peru had incurred huge foreign debts (foreign debt as a percentage of GDP had risen from 73 in l985 to l65 three years later); and the party had to end. At that point, real GDP fell by 9 and 13 percent in the next two years. While Peru had experienced an expansion of real output in l986-87, there was no sense in which it was "growth": four years later, per capita incomes were lower than they had been at the beginning of the boom.
Yet another lesson has to do with the recognition that relative sizes and importances of different trading countries will change in the future. We can no more take today's relative importances in world trade and in world GDP as indicative of the future than were the l950s relativities. The immediate challenge is twofold. First, more needs to be done to recognize the increased roles of the rapidly growing economies—especially in Asia—and to adjust the international economic and financial framework accordingly. But, second, we must also ensure that any adjustments to the international economic framework also make it more flexible, able to adapt easily to future changes in relative economic performance and influence.
In l964, Harry Johnson gave a series of lectures at Sir George Williams University in Montreal on the international economy. He entitled it The World Economy at the Crossroads. His theme, then, was the necessity and desirability of further liberalization of trade and payments systems, and the need to incorporate developing countries into the global system (interestingly, he said nothing about the centrally planned economies). In light of subsequent events, he was prescient.
Much the same strictures could be made today. The enormous success of the global economy in delivering higher living standards to most cannot be questioned. But , as is evident from the past, we cannot rest on our laurels. On one hand, retrogression is possible. And, on the other, failing to address remaining challenges could also undo a considerable amount of the progress that has been made.
The open international trading and financial system is clearly a key to future global economic growth. Aided by falling costs of long distance transactions and trade liberalization, trade has served as an engine of growth for the past half century, just as it did in the 19th century. The integration of financial markets has furthered the process. And the benefits are there for all to see.
But the current Doha Round of trade negotiations has encountered serious resistance. Instead of recognizing that economic growth has not solved all ills but has created an environment that can make it easier to address remaining problems, some have come to see so-called globalization as the source of difficulties, rather than as the enabler that it has been for today's prosperity. Narrow sectoral interests respond defensively to threats while policymakers fail to take account of the benefits that flow from a more open trading system.
The Doha Round has faced formidable challenges that weren't present to the same extent in earlier rounds of trade negotiations. Some of these are a direct result of the rapid integration of the global economy. The WTO now has 149 members, all with their own priorities and interests that have to be reconciled in the final agreement: the first round of trade negotiations under the auspices of the GATT in 1947 had only 23 signatories. Moreover, the Doha negotiations are far more complex, encompassing agricultural trade and services: until the 1990s, agriculture had been excluded from multilateral trade negotiations.
But the complexity can make it easy to lose sight of the fact all countries have much to gain from an agreement. A successful outcome to the Doha Round will ensure the continued expansion of trade and so underpin future global growth. Of course, developing economies are anxious to safeguard their interests, as are all participants in the negotiations. But it is developing countries that have most to gain from further trade liberalization, in part because their remaining trade barriers are highest.
We need to see a successful Doha outcome because of the great benefits it will bring to the global economy. We also need an agreement because without one there is justifiable concern that protectionist pressures will be strengthened and so begin to unravel progress made in the past. Standing still is not a practicable option: the choice is between moving forward with further trade liberalization, which will further boost world trade growth; and moving back as strengthened protectionist pressures bring the risk of slower growth in world trade, and consequently slower growth in world GDP than would otherwise be the case.
One consequence of the complex challenges now facing multilateral trade negotiations has been an increase in the number of preferential trading arrangements that are being negotiated. It can be tempting to see a bilateral approach as an easier substitute for complex multilateral negotiations. And bilateral free trade agreements, and the development of regional trading blocs, can be a useful boost to international trade if undertaken in the context of multilateral trade liberalization. But they are not an alternative to multilateral liberalization and if seen as such will hinder progress on the multilateral front.
The second challenge as we look forward is for the international financial system. Here, two issues are crucial at the current juncture. The first is the need to give Asia appropriate weight in the international financial system, including in the IMF itself. The Fund management's position on this issue is clear. We recognize that Asia has a powerful and legitimate claim to greater weight in the Fund than allowed for under the current rules. Asia has a voice, of course: it wields considerable influence in Fund discussions. But it is clearly under-represented. This issue is firmly on the agenda of the Fund's shareholders ahead of the next Annual Meetings, in Singapore next year.
At the same time, there is a pressing need to strengthen the mechanisms for resolving global imbalances. This is more than just a case of tackling the U. S. current account deficit, or structural reform in Europe and Japan, or addressing low domestic consumption in Asia. The current imbalances in the global economy are complex in their origins and require action on several fronts at once if they are to be resolved without undermining global economic stability and growth. There is a clear opportunity for strengthened multilateral surveillance by the IMF to play a central role in this process.
Applying many of the lessons from the financial crises of the 1990s has already strengthened the global economy. It is now generally recognized, for example, that flexible exchange rate regimes have an important role in enabling smooth adjustment to changing domestic and international circumstances. It is also clear that foreign direct investment and strengthened financial sectors can both help to reduce the vulnerabilities associated with private capital flows.
The third challenge for the future is, in a sense, domestic. Whenever growth is rapid there are those left behind because they are not able, in the short term, to benefit from the increased opportunities that growth brings. Over the medium and longer term, of course, education has a crucial role to play. Access to high quality education for all is important both at the individual level—where it enables individuals to reap the benefits associated with a rapidly growing economy—and at the national level, since without a well-educated workforce growth will eventually be restricted.
To address short-term needs, however, other measures besides improving the provision of education will be needed. Social safety nets are vital. But they need to be well-targeted, to benefit those most in need. Subsidies that mainly help the middle classes, for example, are ineffective, expensive and can undermine fiscal discipline and so, in turn, macroeconomic stability. Safety nets that distort incentives too much will undermine growth.
Putting well-targeted and affordable safety nets in place is a particular challenge for emerging market and developing countries—though many industrial countries have welfare systems that are unduly distortive. But all industrial economies and a growing number of developing countries face another challenge to domestic economic policy: demographic change. As populations age—very rapidly in some countries-public pension systems are coming under increasing strain. As the elderly dependency ratio rises, and fewer workers support an increasing number of older retired citizens, measures will be needed to ensure that fiscal policy remains on a sustainable path. In industrial countries action is needed sooner rather than later in order to avoid a fiscal crunch. In emerging market countries, there may be more time in some cases, but the challenges are greater: public pension schemes, while more limited, are already expensive and unsustainably generous. For all countries, therefore, confronting demographic challenges means ensuring more efficient government spending and, most important, means ensuring that economies are flexible and so able to respond to the challenges in a way that does not undermine growth.
The final challenge is for countries left behind or retrogressing, and is in some ways the most daunting. The Millennium Development Goals agreed by the United Nations in 2000 have highlighted the extent to which some countries have fallen behind. Experience over the past half century has taught us that ultimately it is domestic policy reform that will determine whether those countries that have yet to integrate with the global economy in any meaningful way can begin to share in the benefits of global growth. Without policies that enable these countries to integrate more successfully into the global economy, their citizens will remain poor—and, indeed, will in some cases become worse, rather than better, off. Improved governance, an end to corruption, policies aimed at achieving macroeconomic stability are essential for the sustained growth that will make poverty reduction possible. Without such policy reforms, the scope for help from the international community will be restricted.
Yet the international community—bilateral and multilateral donors alike—has a vital role to play in helping these countries. Aid transfers continue to be vital of course. But so too is capacity-building, policy advice and technical assistance. Much of the IMF's work with these countries involves assisting the reform process, for example, by enabling them to implement public expenditure management and by improving tax administration. And countries need assistance from the international community if they are to be able to absorb increased aid flows in ways which do not further undermine economic progress.
Let me briefly conclude.
The past half century has been a period of extraordinary growth for the world economy. Most citizens in most countries are far better off today than could have been imagined in the early postwar years. The pace of technological change has been, and continues to be, remarkable. Globalization has brought enormous benefits. And there are strong reasons for expecting this process to continue.
But at the same time there is no room for complacency. The last great period of globalization, at the end of the 19 th century, ended in disaster, with the First World War. Progress was reversed and recovery from that setback took many decades.
A reversal this time may not be likely, but it is not impossible. Much of what has been achieved is a consequence of greatly improved domestic economic policies and, above all, the strength, durability and adaptability of the multilateral economic framework put in place in 1945. There have been many challenges to this framework over the years, all of which have ultimately demonstrated its underlying strength.
But the challenges we face today are, I believe daunting, not least because their seriousness is not fully recognized. The world trading system is at a crucial juncture. A successful outcome for the Doha Round will strengthen it greatly: failure would do much to undermine it. The complex problem of global imbalances must be addressed if the risk of a disorderly unwinding is to be avoided. And the problems of those countries that have yet to share in the benefits of globalization cannot be ignored.
Tackling these problems will consolidate and increase the gains already reaped from globalization. Ignoring them would be, at best, foolhardy.
1 O'Rourke and Williamson p. l7.
2 Tariffs in many countries reached their lowest levels around l870 or l880 as some countries responded to the reduced prices of imports due to falling transport costs with higher levels of protection. See O'Rourke and Williamson p.95.
3 There appears to have been rapid growth of industry in some developing countries; India seems to have had a twenty year period of sustained growth of industry in the late l9th century. None of these bursts of growth seems to have been sustained, however.
4 Obstfeld and Taylor, p.55.
5 Obstfeld and Taylor, p. 60.
6 O'Rourke and Williamson p. 35 ff.
7 Japan was always an outlier in this regard.
8 Today, the World Bank consists of the IBRD, the International Development Association (which provides loans at concessional rates and grants to poor countries that cannot access private capital markets), and several other affiliated entities.
9 There were two exceptions—one to enable a county to "safeguard its external financial position and its balance of payments" and one for "infant industry protection" in developing countries. Subsequently, the GATT articles were amended to permit preferential treatment for developing countries by industrial countries in their trade regimes.
10 See Anne O. Krueger "Trade Policy and Economic Development: How We Learn", American Economic Review , Vol. 87, No. l, March 1997, Pp. 1-22.

2 challenges international trading system

O World Trading System.
Esta informação é para a sessão 2017/18.
Dr. Veronica Rappoport-Redondo NAB5.29.
Este curso está disponível no CEMS Exchange, MSc Global em Gestão, MSc Global em Gestão (CEMS MIM), MSc Global em Gestão (MBA Exchange), MBA Exchange, MPA em Política Européia, MPA em Desenvolvimento Internacional, MPA em Public Política e Gestão, MPA em Política Pública e Económica, MPA em Política Pública e Social, MPA em Impacto Social, Mestrado em Economia e Gestão, Mestrado em Gestão e Estratégia, Mestrado em Risco e Finanças e Mestrado em Administração Pública. Este curso está disponível com permissão como opção externa para estudantes em outros programas onde os regulamentos o permitem.
Conhecimento básico de Matemática e Economia.
O curso estuda um componente-chave da "globalização" processo: negociação, implementação e implicações dos acordos comerciais internacionais (ITAs). Estes incluem a Organização Mundial do Comércio e a rede de rápido crescimento de acordos comerciais regionais. Analisamos os desafios e oportunidades enfrentados por empresas envolvidas na economia global neste contexto. O curso baseia-se em pesquisas teóricas e empíricas recentes para obter informações sobre as motivações para ITAs e suas conseqüências para consumidores e empresas. Globalização - tendências na economia internacional e visão geral de suas causas e efeitos. As fontes do comércio internacional. Barreiras comerciais - restrições ao comércio internacional e suas conseqüências. A economia e a política dos acordos de comércio internacional. As regras, realizações e deficiências do sistema GATT / OMC. Os acordos comerciais regionais - motivação, implicações e tendências recentes. Os custos e benefícios da exportação para empresas individuais. Desafios e oportunidades para empresas nacionais e multinacionais na economia global.
10 horas de palestras e 10 horas de seminários na MT. 1 hora de palestras no ST.
Os estudantes neste curso terão uma semana de leitura na semana 6, de acordo com a política departamental.
Um exame simulado será realizado.
Robert Feenstra e Alan Taylor, International Economics, Worth Publishers, 2008. Kyle Bagwell e Robert W. Staiger, "The Economics of the World Trading System", "quot; MIT Press, 2004. A Organização Mundial do Comércio, "A OMC e os acordos comerciais preferenciais: da coexistência à coerência". World Trade Report, 2011. Bernard M. Hoekman, Aaditya Mattoo, Philip English (editores), "Development, Trade, and the WTO: A Handbook", "quot; Banco Mundial, 2002. Andrew Bernard, J. Bradford Jensen, Stephen Redding e Peter Schott, Firmas no Comércio Internacional, Journal of Economic Perspectives 21 (3), 105-130, 2007.
Exame (100%, duração: 2 horas) no período principal do exame.

Benefits of International Trade.
29 de junho de 2010 • Comércio internacional • pela EconomyWatch.
International trade has flourished over the years due to the many benefits it has offered to different countries across the globe. International trade is the exchange of services, goods, and capital among various countries and regions, without much hindrance. The international trade accounts for a good part of a country’s gross domestic product. It is also one of important sources of revenue for a developing country.
With the help of modern production techniques, highly advanced transportation systems, transnational corporations, outsourcing of manufacturing and services, and rapid industrialization, the international trade system is growing and spreading very fast.
International trade among different countries is not a new a concept. History suggests that in the past there where several instances of international trade. Traders used to transport silk, and spices through the Silk Route in the 14th and 15th century. In the 1700s fast sailing ships called Clippers, with special crew, used to transport tea from China, and spices from Dutch East Indies to different European countries.
The economic, political, and social significance of international trade has been theorized in the Industrial Age. The rise in the international trade is essential for the growth of globalization. The restrictions to international trade would limit the nations to the services and goods produced within its territories, and they would lose out on the valuable revenue from the global trade.
The benefits of international trade have been the major drivers of growth for the last half of the 20th century. Nations with strong international trade have become prosperous and have the power to control the world economy. The global trade can become one of the major contributors to the reduction of poverty.
David Ricardo, a classical economist, in his principle of comparative advantage explained how trade can benefit all parties such as individuals, companies, and countries involved in it, as long as goods are produced with different relative costs. The net benefits from such activity are called gains from trade. This is one of the most important concepts in international trade.
Adam Smith, another classical economist, with the use of principle of absolute advantage demonstrated that a country could benefit from trade, if it has the least absolute cost of production of goods, i. e. per unit input yields a higher volume of output.
According to the principle of comparative advantage, benefits of trade are dependent on the opportunity cost of production. The opportunity cost of production of goods is the amount of production of one good reduced, to increase production of another good by one unit. A country with no absolute advantage in any product, i. e. the country is not the most competent producer for any goods, can still be benefited from focusing on export of goods for which it has the least opportunity cost of production.
Benefits of International Trade can be reaped further, if there is a considerable decrease in barriers to trade in agriculture and manufactured goods.
Some important benefits of International Trade.
Enhances the domestic competitiveness Takes advantage of international trade technology Increase sales and profits Extend sales potential of the existing products Maintain cost competitiveness in your domestic market Enhance potential for expansion of your business Gains a global market share Reduce dependence on existing markets Stabilize seasonal market fluctuations.

Posted in International Trading.
South Korea, Vietnam Sign FTA.
The bilateral FTA upgrades the South Korea – ASEAN agreement by further cutting import duties, more than 90 percent of all their traded goods.
Check here for more.
Digital Single Market for Europe.
The Digital Single Market strategy is made up of three policy areas or ‘pillars’:
Please read more here.
ECB publishes its Euro Money Market Study 2014.
The European Central Bank (ECB) is publishing its biennial report entitled “Euro Money Market Study 2014”.
ICC Revises DOCDEX Rules.
The International Chamber of Commerce (ICC) has revised its DOCDEX rules, a dispute resolution mechanism specifically designed to address trade finance concerns.
Check here for more.
New ICC Cyber Security Guide.
The International Chamber of Commerce (ICC) has published a new straight-speaking guide to help companies of all sizes manage their approach to cyber security and mitigate threats posed by cybercrime.
Click here for more.
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Asian Infrastructure Investment Bank (AIIB)
The Asian Infrastructure Investment Bank ( AIIB ) is an international financial institution proposed by the government of China.
At least 47 countries and territories from five continents have applied to join the Beijing-led Asian Infrastructure Investment Bank as founding members.
Sweden and Kyrgyzstan were among the last to apply before the deadline, 31 March 2015, adding further weight to the regional financing body, which has seen its influence grow even before it officially starts operation.
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More Trade News in Brief Week 12 (16 – 22 March 2015)
* Switzerland, EU Ink New Savings Tax Pact.
Switzerland and the European Union (EU) have initialled an agreement on the automatic exchange of tax information (AEOI). Account data will be collected from 2017, with the first exchange scheduled for 2018.
See more clicking here.
* EU: Combatting Corporate Tax Avoidance.
The European Commission presented a package of tax transparency measures as part of its ambitious agenda to tackle corporate tax avoidance and harmful tax competition in the EU. A key element of this Tax Transparency Package is a proposal to introduce the automatic exchange of information between Member States on their tax rulings.
* China and US Telecoms Giants Lead Global Patent Activity in 2014.
According to the UN World Intellectual Property Organization (WIPO) annual review of international patent filings, a leading Chinese telecoms giant overtook a Japanese firm as the largest applicant last year, and China and the US together accounted for 87 per cent of the total growth in filings under WIPO’s Patent Cooperation Treaty (PCT).
Under that system, some 215,000 applications were filed in 2014, a 4.5 per cent increase over the previous year, WIPO said in a news release.
* WTO: Assistance in Food Safety, Animal and Plant Health.
Five agencies and their partners operating a programme to help developing countries meet international standards on food safety and animal and plant health have approved plans for 2015–2019 designed to further strengthen safe trade.
The decision will allow the Standards and Trade Development Facility (STDF) to continue to provide assistance to developing countries,

Trade, Economy, & Related Issues.
Author and Page information.
by Anup Shah This Page Last Updated Sunday, September 28, 2014 This page: globalissues/issue/1/trade-economy-related-issues. To print all information (e. g. expanded side notes, shows alternative links), use the print version: globalissues/print/issue/1.
One cannot separate economics, political science, and history. Politics is the control of the economy. History, when accurately and fully recorded, is that story. In most textbooks and classrooms, not only are these three fields of study separated, but they are further compartmentalized into separate subfields, obscuring the close interconnections between them.
This section attempts to highlight some of the misconceptions and unfairness in the current model for global trading, economics and the current form of overly corporate-led globalization. It attempts to provide a look at how this all has an impact on people around the world, especially the developing nations.
67 articles on “Trade, Economy, & Related Issues” and 10 related issues:
Global Financial Crisis.
Last updated Sunday, March 24, 2013.
Following a period of economic boom, a financial bubble — global in scope — burst, even causing some of the world’s largest financial institutions have collapsed. With the resulting recession, many governments of the wealthiest nations in the world have resorted to extensive bail-out and rescue packages for the remaining large banks and financial institutions while imposing harsh austerity measures on themselves.
Some of the bail-outs have also led to charges of hypocrisy due to the apparent socializing of the costs while privatizing the profits. Furthermore, the institutions being rescued are typically the ones got the world into this trouble in the first place. For smaller businesses and poorer people, such options for bail out and rescue are rarely available when they find themselves in crisis.
Plummeting stock markets at one point wiped out 33% of the value of companies, $14.5 trillion. Taxpayers bailed out their banks and financial institutions with large amounts of money. US taxpayers alone have spent some $9.7 trillion in bailout packages and plans. The UK and other European countries have also spent some $2 trillion on rescues and bailout packages. More is expected. Much more.
Such numbers, made quickly available, are enough to wipe many individual’s mortgages, or clear out third world debt many times over. Even the high military spending figures are dwarfed by the bailout plans to date.
This problem could have been averted (in theory) as people had been pointing to these issues for decades. However, during boom, very few want to hear such pessimism. Does this crisis spell an end to the careless forms of banking and finance and will it herald a better economic age, or are we just doomed to keep forgetting history and repeat these mistakes in the future? Signs are not encouraging as rich nations are resisting meaningful reform…
Causes of Poverty.
Last updated Sunday, September 28, 2014.
Poverty is the state for the majority of the world’s people and nations. Por que é isso? Is it enough to blame poor people for their own predicament? Have they been lazy, made poor decisions, and been solely responsible for their plight? What about their governments? Have they pursued policies that actually harm successful development? Such causes of poverty and inequality are no doubt real. But deeper and more global causes of poverty are often less discussed.
Poverty Facts and Stats.
Last updated Monday, January 07, 2013.
Most of humanity lives on just a few dollars a day. Whether you live in the wealthiest nations in the world or the poorest, you will see high levels of inequality.
The poorest people will also have less access to health, education and other services. Problems of hunger, malnutrition and disease afflict the poorest in society. The poorest are also typically marginalized from society and have little representation or voice in public and political debates, making it even harder to escape poverty.
By contrast, the wealthier you are, the more likely you are to benefit from economic or political policies. The amount the world spends on military, financial bailouts and other areas that benefit the wealthy, compared to the amount spent to address the daily crisis of poverty and related problems are often staggering.
Some facts and figures on poverty presented in this page are eye-openers, to say the least.
Structural Adjustment—a Major Cause of Poverty.
Last updated Sunday, March 24, 2013.
Cutbacks in health, education and other vital social services around the world have resulted from structural adjustment policies prescribed by the International Monetary Fund (IMF) and the World Bank as conditions for loans and repayment. In addition, developing nation governments are required to open their economies to compete with each other and with more powerful and established industrialized nations. To attract investment, poor countries enter a spiraling race to the bottom to see who can provide lower standards, reduced wages and cheaper resources. This has increased poverty and inequality for most people. It also forms a backbone to what we today call globalization. As a result, it maintains the historic unequal rules of trade.
Poverty Around The World.
Last updated Saturday, November 12, 2011.
Around the world, in rich or poor nations, poverty has always been present.
In most nations today, inequality—the gap between the rich and the poor—is quite high and often widening.
The causes are numerous, including a lack of individual responsibility, bad government policy, exploitation by people and businesses with power and influence, or some combination of these and other factors.
Many feel that high levels of inequality will affect social cohesion and lead to problems such as increasing crime and violence.
Inequality is often a measure of relative poverty. Absolute poverty, however, is also a concern. World Bank figures for world poverty reveals a higher number of people live in poverty than previously thought.
For example, the new poverty line is defined as living on the equivalent of $1.25 a day. With that measure based on latest data available (2005), 1.4 billion people live on or below that line.
Furthermore, almost half the world—over three billion people—live on less than $2.50 a day and at least 80% of humanity lives on less than $10 a day:
Today, around 21,000 children died around the world.
Last updated Saturday, September 24, 2011.
Around 21,000 children die every day around the world.
That is equivalent to:
1 child dying every 4 seconds 14 children dying every minute A 2011 Libya conflict-scale death toll every day A 2010 Haiti earthquake occurring every 10 days A 2004 Asian Tsunami occurring every 11 days An Iraq-scale death toll every 19–46 days Just under 7.6 million children dying every year Some 92 million children dying between 2000 and 2010.
The silent killers are poverty, easily preventable diseases and illnesses, and other related causes. Despite the scale of this daily/ongoing catastrophe, it rarely manages to achieve, much less sustain, prime-time, headline coverage.
World Hunger and Poverty.
Last updated Sunday, August 22, 2010.
Meaningful long-term alleviation of hunger is rooted in the alleviation of poverty, as poverty leads to hunger. World hunger is a terrible symptom of world poverty. If efforts are only directed at providing food, or improving food production or distribution, then the structural root causes that create hunger, poverty and dependency would still remain. While resources and energies are deployed to relieve hunger through technical measures such as improving agriculture, and as important as these are, inter-related issues such as poverty means that political solutions are likely required as well for meaningful and long term hunger alleviation.
Causes of Hunger are related to Poverty.
Last updated Sunday, October 03, 2010.
There are many inter-related issues causing hunger, which are related to economics and other factors that cause poverty. They include land rights and ownership, diversion of land use to non-productive use, increasing emphasis on export-oriented agriculture, inefficient agricultural practices, war, famine, drought, over-fishing, poor crop yields, etc. This section introduces some of these issues.
Solving World Hunger Means Solving World Poverty.
Last updated Sunday, October 24, 2010.
Solving world hunger in the conventional sense (of providing/growing more food etc) will not tackle poverty that leads to hunger in the first place. Further, there is a risk of continuing the poverty and dependency without realizing it, because the act of attempting to provide more food etc can appear so altruistic in motive. To solve world hunger in the long run, poverty alleviation is required.
Food Dumping [Aid] Maintains Poverty.
Last updated Monday, December 10, 2007.
Food aid (when not for emergency relief) can actually be very destructive on the economy of the recipient nation and contribute to more hunger and poverty in the long term. Free, subsidized, or cheap food, below market prices undercuts local farmers, who cannot compete and are driven out of jobs and into poverty, further slanting the market share of the larger producers such as those from the US and Europe. Many poor nations are dependent on farming, and so such food aid amounts to food dumping. In the past few decades, more powerful nations have used this as a foreign policy tool for dominance rather than for real aid.
Food Aid as Dumping.
Last updated Monday, October 31, 2005.
The way the food aid programs of various rich countries is structured may be of concern. In fact, food aid (when not for emergency relief) can actually be very destructive on the economy of the recipient nation. Dumping food on to poorer nations (i. e. free, subsidized, or cheap food, below market prices) undercuts local farmers, who cannot compete and are driven out of jobs and into poverty, further slanting the market share of the larger producers such as those from the US and Europe.
Myth: More US aid will help the hungry.
Posted Saturday, November 25, 2000.
With kind permission from Peter Rosset of the Institute for Food and Development Policy (or FoodFirst as it is also known), chapter 10 of World Hunger: 12 Myths , 2nd Edition, by Frances Moore Lappé, Joseph Collins and Peter Rosset, with Luis Esparza (fully revised and updated, Grove/Atlantic and Food First Books, Oct. 1998) has been posted here. It describes in detail the issue of food aid and the United States of America’s aid policies, the problems it causes and who it really benefits.
Corrupção.
Last updated Sunday, September 04, 2011.
We often hear leaders from rich countries telling poor countries that aid and loans will only be given when they show they are stamping out corruption.
While that definitely needs to happen, the rich countries themselves are often active in the largest forms of corruption in those poor countries, and many economic policies they prescribe have exacerbated the problem.
Corruption in developing countries definitely must be high on the priority lists (and is increasingly becoming so in the wake of the global financial crisis), but so too must it be on the priority lists of rich countries.
United Nations World Summit 2005.
Last updated Sunday, September 18, 2005.
The UN World Summit for September 2005 is supposed to review progress since the Millennium Declaration, adopted by all Member States in 2000. However, the US has proposed enormous changes to an outcome document that is to be signed by all members. There are changes on almost all accounts, including striking any mention of the Millennium Development Goals, that aim for example, to halve poverty and world hunger by 2015. This has led to concerns that the outcome document will be weakened. Developing countries are also worried about stronger text on human rights and about giving the UN Security Council more powers.
IMF & World Bank Protests, Washington D. C.
Last updated Friday, July 13, 2001.
To complement the public protests in Seattle, the week leading up to April 16th/17th 2000 saw the other two global institutions, the International Monetary Fund (IMF) and World Bank, as the focus of renewed protests and criticisms in Washington, D. C. The purpose of the mass demonstrations was to protest against the current form of globalization, which is seen as unaccountable, corporate-led, and non-democratic, and to show the link between poverty and the various policies of the IMF and the World Bank.
Economic Democracy.
Posted Sunday, November 26, 2000.
This next page is a reposting of a flyer about a new book from J. W. Smith and the Institute for Economic Democracy, whom I thank for their kind permission. The book is called Economic Democracy: The Political Struggle Of The 21st Century. Typically on this site, I do not advertise books etc, (although I will cite from and link to some, where relevant). However, in this case, I found that the text in the flyer provides an excellent summary of poverty's historic roots, as well as of the multitude of issues that cause poverty. (Please also note that I do not make any proceeds from the sale of this book in any way.)
Poverty Links for More Information.
Last updated Monday, April 28, 2003.
Links to other sites discussion issues on trade, the global economy, poverty and other related issues.
World hunger related links for more information.
Last updated Monday, December 10, 2007.
Links to web sites and articles that discuss world hunger, the relationship between populations and hunger, of poverty and hunger, agricultural issues, land rights and so on.
Third World Debt Undermines Development.
Last updated Sunday, June 03, 2007.
Causes of the Debt Crisis.
Last updated Sunday, June 03, 2007.
The causes of debt are a result of many factors, including:
The legacy of colonialism — for example, the developing countries’ debt is partly the result of the unjust transfer to them of the debts of the colonizing states, in billions of dollars, at very high interest rates. Odious debt, whereby unjust debt is incurred as rich countries loaned dictators or other corrupt leaders when it was known that the money would be wasted. South Africa, for example shortly after freedom from Apartheid had to pay debts incurred by the apartheid regime. In effect, South Africans are paying for their own oppression. Mismanaged spending and lending by the West in the 1960s and 70s.
In effect, due to enormous debt repayments, the poor are subsidizing the rich.
The Scale of the Debt Crisis.
Last updated Saturday, July 02, 2005.
Total debt continues to rise, despite ever-increasing payments, while aid is falling. Por exemplo:
The developing world now spends $13 on debt repayment for every $1 it receives in grants. For the poorest countries (approximately 60), $550 billion has been paid in both principal and interest over the last three decades, on $540bn of loans, and yet there is still a $523 billion dollar debt burden.
Debt kills. Some 11 million children die each year around the world, due to conditions of poverty and debt.
The Heavily In-debt Poor Countries Initiative is Not Working.
Last updated Thursday, August 30, 2001.
The Heavily In-debt Poor Countries (HIPC) initiative set up in 1996 by the rich nations through the IMF and World Bank calls for the reduction of external debt for the poorest countries through write-offs by official donors.
The IMF and World Bank have actually admitted that the HIPC initiative is backfiring in some cases and are confirming warnings that debt-relief advocates were making even before the scheme was launched. Difficult, and sometimes unfair conditions, are often associated with the initiative.
Debt Cancellation and Public Pressure.
Last updated Saturday, July 09, 2005.
As well as the admissions by some heads of international financial institutions such as the IMF that their various schemes are not working (as mentioned above), there have been some additional positive actions and decisions. The Jubilee 2000 initiative, for example, has been very beneficial here to raise awareness.
Various G8 Summits have seen promises of billions in debt-write off, but almost hardly are carried out, or contain a lot of spin. For example, a lot of debt relief promised may include moneys previously announced for such purposes, thus creating an impression of enormous write-offs. Bilateral debt relief also does not typically release actual money to be used for other purposes. Multilateral debt relief, however, could.
Debt and the Global Economic Crisis of 1997/98/99.
Last updated Wednesday, April 25, 2001.
The structural adjustment measures, global, unregulated free markets and lack of protection for emerging economies all contributed to the global economic and financial crisis in the late 1990s.
The Progress of Nations, 1999 report by UNICEF, suggests that debt is killing children. It is pointed out that as countries are diverting resources away from social provisions to repay debt, those most affected are the poor, especially women and children. UNICEF’s 2000 report says 30,000 children die each day due to poverty. That is just under 11 million children each year.
Debt and the Effect on Children.
Last updated Tuesday, July 04, 2000.
Debt and the Environment.
Last updated Friday, August 24, 2001.
At first glance, it may seem like separate issues, but environment issues and poverty/debt are very much related. Basically, the more the developing countries stay in debt, the more they will feel that they need to milk the earth’s resources for the hard cash they can bring in, and also cut back on social, health, environmental conservation, employment and other important programs.
Responding to environmental disasters is also made more difficult when the affected countries are in severe debt. Examples include Honduras and Nicaragua, where Hurricane Mitch devastated large parts of those countries, as well as Mozambique and Madagascar where floods have made hundreds of thousands of people homeless.
Tackling debt-related issues would also therefore indirectly help address environmental and other issues as well.
Free Trade and Globalization.
Last updated Sunday, March 24, 2013.
A Primer on Neoliberalism.
Last updated Sunday, August 22, 2010.
Global trading that allows all nations to prosper and develop fairly and equitably is probably what most people would like to see. Neoliberalism is touted as the mechanism for this. Margaret Thatcher's TINA acronym suggested that There Is No Alternative. But what is neoliberalism, anyway?
Criticisms of Current Forms of Free Trade.
Last updated Friday, March 31, 2006.
While internationalism and equitable global trading allowing fair development is probably what most people would like to see, the current model of corporate-led free trade and its version of globalization that has resulted, has come under criticism by many, many NGOs, developing nation governments and ordinary citizens.
The WTO and Free Trade.
Last updated Monday, July 02, 2007.
The World Trade Organization, (WTO), is the primary international body to help promote free trade, by drawing up the rules of international trade. However, it has been mired in controversy and seen to be hijacked by rich country interests, thus worsening the lot of the poor, and inviting protest and intense criticism.
WTO Doha “Development” Trade Round Collapse, 2006.
Posted Friday, July 28, 2006.
Supposed to be a Development round of trade talks, the almost five year-long Doha round collapsed at the end of July, 2006. The US found itself on the defensive as around the world blame was directed at the US, in particular by the EU. However, the EU has also been part of the reason for failure throughout the five years. This article looks at what happened at the end of 2006, and also introduces a collection of articles that were written at the time of each previous major WTO meetings from the initial Doha round in 2001 and since.
Deregulation or Protectionism?
Last updated Sunday, January 17, 2010.
Protectionism is often referred to as being a barrier to free trade. The word seems to conjure up negative images of isolationism and subsidizing industries that could otherwise not compete fairly against others. (This can help indicate why some industries would strongly support protectionism for themselves.) Complete deregulation allows corporations to benefit but at the possible expense of people in that nation or region if that deregulation means relaxation of environmental rules, health and educational services including control of natural resources and energy. (This hints at the powerful lure that the "freeing" of trade and liberalization of access to resources from regulation has to some proponents.) Neither seems to answer the notion of fairness, though. Often those nations that promote free trade for all, want protectionism for themselves.
Some Regional Free Trade Agreements.
Last updated Saturday, January 02, 2010.
There have been numerous regional free trade agreements. Some have been controversial, while others may be beneficial. Examples include the North American Free Trade Agreement (NAFTA), the Free Trade Area of the Americas (FTAA), US attempts at free trade agreements with African nations and so on. Critics argue that when these agreements include partners that have different levels of development, this will lead to unequal trade and favor the wealthier partners to the detriment of the poorer ones.
The Mainstream Media and Free Trade.
Last updated Sunday, July 14, 2002.
The mainstream media has been flooded by free trade proponents and heavily backed by those that will profit from it the most. This makes public debate more difficult.
Public Protests Around The World.
Last updated Monday, November 07, 2011.
The global financial crisis has spawned a global protest movement campaigning against things like inequality, corporate greed, lack of jobs, etc.
Although these protests have occurred for decades, they have typically been in the developing countries, or about the situation in developing countries.
As such, many Western nations, who have strongly influenced the conditions in developing countries, have typically not paid much attention to such protests, no matter how large (even the famous Battle for Seattle was more about violence than the underlying issues, for example). However, this time, the global financial crisis has hit the ordinary citizens of Western nations quite hard, and inspired by the Arab Spring and protests in Spain, a global movement seems to have sprung up.
WTO Protests in Seattle, 1999.
Last updated Sunday, February 18, 2001.
At the end of November 1999, Seattle saw major governments meet at a WTO ministerial meeting to discuss various trading rules. Seattle also saw free speech cracked down on in the name of free trade. Enormous public protests ensued. There were many differences in the perspectives of developing and industrialized nations on the current reality of free trade and how it affected them. It resulted in a WTO failure to agree on many issues, without adopting any resolutions. Developing countries were sidelined and one delegate even physically barred from a meeting.
General Agreement on Trade in Services.
Last updated Tuesday, July 24, 2001.
A similar agreement to the derailed Multilateral Agreement on Investment (MAI), the General Agreement on Trade in Services (GATS) at the WTO has a potentially wide ramification for the poor and developing countries.
Multilateral Agreement on Investment.
Last updated Wednesday, December 20, 2000.
We had a potential nightmare in the form of the Multilateral Agreement on Investment (MAI). An almost secret agreement about investment rights and opening up nations for freer trade. However many, many people feared that this would be accompanied by grave social and environmental consequences, due to the wording of the MAI text.
Corporações.
Last updated Monday, January 07, 2013.
The Rise of Corporations.
Last updated Thursday, December 05, 2002.
Today we know that corporations, for good or bad, are major influences on our lives. For example, of the 100 largest economies in the world, 51 are corporations while only 49 are countries. In this era of globalization , marginalized people are becoming especially angry at the motives of multinational corporations, and corporate-led globalization is being met with increasing protest and resistance. How did corporations ever get such power in the first place? What was the impact of giving corporations the same right as individuals in 1886 in the United States?
Corporations and Human Rights.
Last updated Thursday, September 19, 2002.
Large, transnational corporations are becoming increasingly powerful. As profits are naturally the most important goal, damaging results can arise, such as violation of human rights, lobbying for and participating in manipulated international agreements, environmental damage, child labor, driving towards cheaper and cheaper labor, and so on. Multinational corporations claim that their involvement in foreign countries is actually a constructive engagement as it can promote human rights in non-democratic nations. However, it seems that that is more of a convenient excuse to continue exploitative practices.
Pharmaceutical Corporations and Medical Research.
Last updated Saturday, October 02, 2010.
For a while now, pharmaceutical companies have been criticized about their priorties. It seems the profit motive has led to emphasis on research that is aimed more at things like baldness and impotence, rather than various tropical diseases that affect millions of people in developing countries.
Unfortunately, while a large market therefore exists, most of these people are poor and unable to afford treatments, so the pharmaceutical companies develop products that can sell and hence target wealthier consumers.
In addition, there is concern at how some pharmaceutical companies have been operating: from poor research and trial practice to distorting results, and politically lobbying and pressuring developing countries who try to produce generics or try to get cheaper medicines for their citizens.
Pharmaceutical Corporations and AIDS.
Last updated Sunday, June 02, 2002.
The AIDS crisis is one example that highlights the motives of some of the larger pharmaceutical corporations. When South Africa wanted to try and produce cheaper drugs to help its own people, by producing more generic and cheaper drugs, these companies actually lobbied the US government to impose sanctions on them!
Tax Avoidance and Tax Havens; Undermining Democracy.
Last updated Monday, January 07, 2013.
Through tax havens, transfer pricing and many other policies — both legal and illegal — billions of dollars of tax are avoided. The much-needed money would helped developing (and developed) countries provide important social services for their populations.
Some tax avoidance, regardless of how morally objectionable it may be to some people, is perfectly legal, and the global super elite are able to hide away trillions of dollars, resulting in massive losses of tax revenues for cash-strapped governments who then burden ordinary citizens further with austerity measures during economic crisis, for example. Yet these super elite are often very influential in politics and business. In effect, they are able to undermine democracy and capitalism at the same time.
As the global financial crisis has affected many countries, tackling tax avoidance would help target those more likely to have contributed to the problem while avoid many unnecessary austerity measures that hit the poorest so hard. But despite rhetoric stating otherwise, it does not seem to high on the agenda of many governments as you might think.
Corporations and the Environment.
Last updated Saturday, May 25, 2002.
Many industries such as the energy and fossil fuels industry leave many environmental problems in their wake. Because international lending schemes are tied with reforms that include cutting back on regulatory and safety measures such as health, education and the environment, problems can arise without many resources available to deal with them. While large corporations are able to profit, the costs from environmental and other damage has to be borne by the local population.
Responsabilidade social corporativa.
Posted Saturday, July 07, 2007.
Corporate Social Responsibility is a bit of a buzz word and some feel that it has been diluted from its original aims, while others are trying to find innovative ways to engage with businesses to be more responsible in their practices.
Corporate Influence on Children.
Last updated Saturday, June 02, 2001.
When companies see children as an enormous market with incredible purchasing power, it leads to a lot of advertising and marketing targeted directly at them. Some are concerned at the effect it has as children, teaching them to be consumers and overly conscious about materialistic things, perhaps even at the expense of human qualities from an early age.
Corporations and Worker’s Rights.
Last updated Sunday, May 28, 2006.
For many companies, the largest cost is often the work force. Hence, where profits are the bottom line, it is only natural for companies to seek out the cheapest labor possible. However, when international agreements are often designed to foster an environment where cheaper and cheaper labor is promoted, the workers themselves are often not paid enough to live on. When a nation tries to provide regulatory steps to improve workers conditions (which does mean more costs to the companies), multinational corporations naturally pick up and go to other places where there are less measures in place. In this way, improving working conditions will always be difficult, as it is not in the interest of the large companies.
Influence at the World Trade Organization.
Last updated Tuesday, May 15, 2001.
Transnational corporations are able to exert enormous influence in no less a powerful body as the World Trade Organization (WTO). These corporations are closely linked to the WTO decision-makers themselves.
Corporate Power Facts and Stats.
Last updated Saturday, November 12, 2011.
As transnational corporations grow in size and power, their influence and impacts affect more and more people. These stats provide an insight into the growing size and influence of corporations.
Consumption and Consumerism.
Last updated Sunday, January 05, 2014.
Creating the Consumer.
Last updated Wednesday, May 14, 2003.
This section looks at the rise of the consumer and the development of the mass consumer society. While consumption has of course been a part of our history, in the last 100 years or so, the level of mass consumption beyond basics has been exponential and is now a fundamental part of many economies. Luxuries that had to be turned into necessities and how entire cultural habits had to be transformed for this consumption is introduced here.
Children as Consumers.
Last updated Sunday, November 21, 2010.
The market for children’s products and food is enormous. Parents on the one hand have a hard time raising children the way they want to, while on the other hand, kids are being increasingly influenced by commercialism that often goes against what parents are trying to do.
Effects of Consumerism.
Last updated Wednesday, August 10, 2005.
Because consumption is so central to many economies, and even to the current forms of globalization, its effects are also seen around the world. How we consume, and for what purposes drives how we extract resources, create products and produce pollution and waste. Issues relating to consumption hence also affect environmental degradation, poverty, hunger, and even the rise in obesity that is nearing levels similar to the official global poverty levels. Political and economic systems that are currently promoted and pushed around the world in part to increase consumption also lead to immense poverty and exploitation. Much of the world cannot and do not consume at the levels that the wealthier in the world do. Indeed, the above U. N. statistics highlight that very sharply. In fact, the inequality structured within the system is such that as Richard Robbins says, some one has to pay for the way the wealthier in the world consume.
Last updated Sunday, January 05, 2014.
It is well known that tobacco smoking kills millions. But it also exacerbates poverty, contributes to world hunger by diverting prime land away from food production, damages the environment and reduces economic productivity. Second hand smoking also affects other people’s lives.
Despite many attempts to prevent it, a global tobacco control treaty became international law in 2005.
However, challenges still remain as tobacco companies try to hit back, for example, by targeting developing nations, increasing advertising at children and women, attempting to undermine global treaties and influence trade talks, etc.
Read “Tobacco” to learn more.
Wasted Wealth, Capital, Labor and Resources.
Last updated Sunday, September 23, 2001.
We are beginning to get just a hint of how wasteful our societies are. Sugar, beef, and bananas are just the tip of the iceberg in terms of examples of wasted industry and waste structured within the current system. Not only are certain wasteful job functions unnecessary as a result, but the capital that employs this labor is therefore a wasteful use of capital. As a result, we see waste and misuse of the environment, as well as social and environmental degradation increasing. Our industries may be efficient for accumulating capital and making profits, but that does not automatically mean that it is efficient for society. However, with such wasted labor what do we do? We can’t have such an enormous idle labor force, right? Well, as J. W. Smith points out, we should share the remaining jobs. This would also reduce our workweek. Something technocrats have kept promising us in rhetoric only!
Mathematics of Wasted Labor—an Example.
Posted Friday, September 07, 2001.
With kind permission from J. W. Smith, a part of the conclusion to Part I of World’s Wasted Wealth II (Institute for Economic Democracy, 1994) has been reproduced on this page. That part is titled The Mathematics of Wasted Labor . It is a vivid example of wasted and unnecessary labor using the United States as the case study. While the book was written back in 1994 and the numbers, facts and estimates are hence based on data from the early 1990s, the pattern and examples shown here are still very valid. His calculations suggest that with the elimination of wasted labor in the U. S. and sharing the remaining productive jobs between all those who can work, workers would need to work just 2.4 days per week!
Consumption and Consumerism Links and Resources.
Posted Friday, September 07, 2001.
Because this topic is vast, I cannot expect to write everything here! In addition, due to the overlapping and inter-related nature of so many issues, throughout this web site topics are presented which can also be looked at from this waste perspective. Such links as well as links to other web site, books and so on are presented here.
Desenvolvimento sustentável.
Last updated Sunday, September 28, 2014.
Sustainable Development Introduction.
Last updated Wednesday, November 18, 2009.
The idea of sustainable development grew from numerous environmental movements in earlier decades. Summits such as the Earth Summit in Rio, Brazil, 1992, were major international meetings to bring sustainable development to the mainstream.
However, the record on moving towards sustainability so far appears to have been quite poor. The concept of sustainability means many different things to different people, and a large part of humanity around the world still live without access to basic necessities.
Poverty and the Environment.
Last updated Saturday, February 12, 2005.
The causes of poverty and of environmental degradation are inter-related suggesting that approaching sustainable development requires understanding the issues from many angles, not just say an environmentalist or economics perspective alone.
Non-governmental Organizations on Development Issues.
Last updated Wednesday, June 01, 2005.
What does an ever-increasing number of non-governmental organizations (NGOs) mean? NGOs are non-profit organizations filling the gap where governments will not, or cannot function. In the past however, some NGOs from the wealthy nations have received a bad reputation in some developing nations because of things like arrogance, imposition of their views, being a foreign policy arm or tool of the original country and so on. Even in recent years some of these criticisms still hold. However, recently some new and old NGOs alike, have started to become more participatory and grassroots-oriented to help empower the people they are trying to help, to help themselves. This is in general a positive turn. Yet, the fact that there are so many NGOs popping up everywhere perhaps points to failures of international systems of politics, economics, markets, and basic rights.
Foreign Aid for Development Assistance.
Last updated Sunday, September 28, 2014.
In 1970, the world’s rich countries agreed to give 0.7% of their gross national income as official international development aid, annually.
Since that time, billions have certainly been given each year, but rarely have the rich nations actually met their promised target.
For example, the US is often the largest donor in dollar terms, but ranks amongst the lowest in terms of meeting the stated 0.7% target.
Furthermore, aid has often come with a price of its own for the developing nations. Common criticisms, for many years, of foreign aid, have included the following:
Aid is often wasted on conditions that the recipient must use overpriced goods and services from donor countries Most aid does not actually go to the poorest who would need it the most Aid amounts are dwarfed by rich country protectionism that denies market access for poor country products while rich nations use aid as a lever to open poor country markets to their products Large projects or massive grand strategies often fail to help the vulnerable; money can often be embezzled away.
This article explores who has benefited most from this aid, the recipients or the donors.
G8: Too Much Power?
Posted Monday, August 25, 2008.
G8 Summits: Empty promises each year.
Last updated Monday, August 25, 2008.
The G8, is made up of the seven most powerful economies of the world, (United States, Japan, Germany, France, UK, Canada, Italy) and Russia. Together they form a very powerful and influential (though informal) group of nations. For example, they accounting for almost 50% of the votes at the IMF and World Bank. At their annual summits they attract a lot of criticism, increasingly now in the mainstream, for failing the world’s poor. This section introduces the G8 with an overview of recent summits and their outcomes.
G8 Summit 2007.
Last updated Sunday, June 10, 2007.
The 2007 Summit has gained some media attention in its buildup, but issues around climate change, similar to the efforts seen in 2005 to water down draft texts, have surfaced again. Protesters are gathering, and while mostly peaceful a handful have clashed with police. Issues such as the excessive farm subsidies of the rich nations seem less likely to get discussed, even though it is crucial for many poor countries.
G8 Summit 2005—One Year On.
Posted Saturday, July 01, 2006.
One year on from the G8 Summit of 2005 that seemed to promise so much, what has been the status? It seems that some progress was certainly made. For example, significant debt cancellation has allowed some countries to offer enhanced or even free health services to all. Yet, there are still many concerns. The fancy accounting and spin used by some countries to paint a positive picture or give the impression that more assistance has been delivered than what actually has risks discrediting the process, impacting the poor once more. This short article explores some of these concerns.
G8 Summit 2005.
Last updated Sunday, July 10, 2005.
The G8 Summit in July 2005 looked to be historic because of promised debt relief for some poor countries in Africa as well as action on climate change. But behind the media and government spin, was this really the case? Climate change was also under discussion, but leaked drafts revealed an extremely watered down text suggesting limited or no responsibility on rich countries to take leadership, and even questions around the science of climate change.
Water and Development.
Last updated Sunday, June 06, 2010.
Issues such as water privatization are important in the developing world especially as it goes right to the heart of water rights, profits over people, and so on. This article looks into these issues and the impacts it has on people around the world.
Brain Drain of Workers from Poor to Rich Countries.
Posted Friday, April 14, 2006.
Brain drain is a problem for many poor countries losing skilled workers to richer countries. In healthcare, the effects can often be seen vividly. For example, in many rich countries, up to one third of doctors may be from abroad, many from Sub-Sahara Africa, while many African countries have as little as 500 doctors serving their entire population. Reasons for this brain drain vary, ranging from poor conditions domestically to attractive opportunities and active enticement from abroad.
World Summit on Sustainable Development.
Last updated Saturday, September 07, 2002.
This section introduces some of the issues on the international summit (August 26 - September 4, 2002) where thousands of delegates met to discuss various issues comprising sustainable development. Of course, there was a lot of controversy including differences between the global North and South on all sorts of issues such as corporate-led globalization, privatization of energy, water, health, etc. In addition there was also concern about motives and influences of large corporations on the outcomes of the Summit.
United Nations on Development Issues.
Last updated Wednesday, July 25, 2001.
The United Nations is the largest international body involved in development issues around the world. However, it has many political issues and problems to contend with. But, despite this, it is also performing some much needed tasks around the world, through its many satellite organizations and entities, providing a means to realize the Declaration of Human Rights. Unfortunately though, it is not perfect and is negatively affected by politics of powerful nations that wish to further their own interests.
Feira comercial.
Last updated Sunday, August 06, 2000.
Child Labor.
Last updated Monday, January 01, 2001.
The Banana Trade War.
Last updated Sunday, January 03, 2010.
Bananas are widely consumed. Yet, they represent a wide variety of inter-related issues, from environmental, economic, social, and political. Nations and regions, such as the US and EU have in the past battled in a trade war over how bananas are exported and imported, affected the poorest in the producing countries the most.
Trade, Economic Links For More Information.
Last updated Wednesday, July 25, 2001.
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