Globalization in an historical perspective It is all but a new phenomenon
a) Past great almost worldwide empires (Roman, Chinese, British)
b) Huge and long migration events (Barbarians, America…)
c) Trade exchange (Marco Polo and the silk road) What it is new
a) Speed and irreversibility
b) Technological revolution has drammatically reduced natural barriers
c) MNE and world-wide production organization
d) It (IT) has been changing our life
The Three Waves of Globalisation
I The fall II III
Capital stock
over GDP LDCs Export as % of the GDP
Migration
towards USA in million right scale
It is characterized by
strong growth in capital flows (green line),
solid growth of migratory flows (histogram)
almost doubling international trade (red line)
I wave: 1870-1914
Its drivers:
Policies of market liberalization and free trade
Technological changes that reduce transportation costs (from sailing ship to steam ship, telegrapf…)
World trade pattern
LDCs exported mainly primary commodities while advanced economies (USA and Europe) exported industrial products
Inter-industry trade trade between different industrial sectors
Despite the increase in technological progress and the reduction in transport costs (transport costs decreased by around 30%) there is a return to nationalism and
protectionism.
Natural barriers Legal barriers
In part a consequence of the great depression (1929 crisis)
and of the attempt to export unemployment by means of protectionism
During the interwar period: the fall
II wave: 1950-1980
International trade increased a lot (in 1970 went back to the 1913 level),
International capital flows grew less than international trade as well as migration.
Natural barriers The reduction of transportation costs went on (-30%)
Legal barriers
But with an important difference:
a) trade was liberalized mutual policies to reduce tariff on imports;
b) capital movements were controlled in many countries (Bretton Woods and fixed
exchange rate regime)
II wave: 1950-1980
Important
In this period some important international organizations were born
GATT, General Agreement on Tariffs and Trade with the aim to help and guide the process of reduction of trade tariff
IMF, International Monetary Found, with the aim of regulating the Bretton Woods systems and to help countries with economic
instability
World Bank, originally, its loans helped rebuild countries
devastated by WW II. Then the focus shifted to development, with a heavy emphasis on infrastructure such as dams, electrical grids, irrigation systems, and roads.
The globalization process regarded mainly DCs (market economy; the soviet block was excluded), In that period DCS experienced high rate of economic growth, high rate of convergence among countries, strong reduction of inequality, new countries found their route to development (Japan, South Korea)
The increase in trade among DCs generate an higher degree of specialization among countries a higher degree of concentrations among firms
Trade between DCs and LDCs remains of the traditional type: LDCs exported mainly primary commodities while DCs exported industrial products
Capital and migration flows was lower the I the I wave
II wave: 1950-1980
III fase: 1980 - oggi
Progresso tecnologico: information techonology e reti di teleconicazione
Perfezionamento nei sistemi di elaborazione delle informazioni
Ulteriore diminuzione dei costi di trasporto
Si assiste ad una radicale trasformazione della struttura del commercio internazionale non solo fra i PS
commercio intraindustriale (o intrasettoriale) Scambi fra gli stessi settori
Il rapporto commercio/PIL aumenta a livelli mai raggiunti in precedenza
Aumenta l’integrazione dei mercati internazionali
dei capitali e il movimento dei capitali
III wave: 1980 - today
The trade/GDP ratio increase to level never experienced in the past
Capital flows are liberalized almost everyway , markets are more and more integrated
Soviet block collapsed, market economy spreads allover the world
Almost all world countries joined the WTO (worls
trade organization)
III wave: 1980 - today
A new industrial revolution: micro-processors and IT
Further reduction in the in transportation costs Dramatic change in industrial and trade pattern:
the production process is allocated worldwide. it
give rise to intra-industry and intra-firm trade
Goods markets
Labour market
Capital market
Globalization: evidence
In dollari USA a valore corrente Mercato dei beni
II wave
III wave
Globalization evidence: Goods market
2009 crisis
Imports of goods (bilions of dollars, 2006)
Intra-regional
inter-regional
Labour market
Note: composition of immigrants : human capital
Effets on country of origin and country of destination It is quite less mobile
a) with respect to the past b) with respect to capital
Labor
Impact of labor migration from 1870-1919 on local labor force
Capital movements
It is the main feature of actual period of globalization
Policy of liberalizing capital movements
From DCs to DCs From DCs to LDCs
From LDCs to DCs From LDCs to LDCs
As in the past present also the previous waves
Completely new phenomenon
Technological change reduced the transaction costs
The reason of such a level of
integration
Capital movements
It is the main feature of actual period of globalization
Under the term capital movements there are various types of international capital flows different for
o duration: short period and long period flows and investments
o motivation: industrial and financial motivation
The most importan onres are:
Foreign direct investment (FDI)
International portfolio investment
Bamk loans
Foreign Direct Investment vs
Portfolio Investments Abroad
Foreign direct investment (FDI) is the flow of funding provided by an investor or a lender (usually a firm)
1.
to establish or acquire a foreign company or
2.
to expand or finance an existing foreign company that the investor already owns and/or controls
. ,Foreign direct investment is any flow of lending to, or purchases of ownership in, a foreign firm in which the investor (usually a firm) has (or gains) ownership of 10 percent or more of the foreign firm.
FDI
A firm that owns and controls operations in more than one country is a multinational enterprise (MNE).
The parent firm in the MNE is the headquarters or base firm, located in the home country of the MNE.
The parent firm has one or more foreign affiliates
(subsidiaries or branches) located in one or more host countries.
Who does use FDI ?
0 0,5 1 1,5 2 2,5 3 3,5 4 4,5 5
1970 1972
1974 1976
1978 1980
1982 1984
1986 1988
1990 1992
1994 1996
1998 2000
2002 2004
2006 2008 0
0,5 1 1,5 2 2,5 3 3,5 4 4,5 5
1970 1972
1974 1976
1978 1980
1982 1984
1986 1988
1990 1992
1994 1996
1998 2000
2002 2004
2006 2008
World FDI flows as % world GDP
They start growing at the and of eighties
They have a cyclical behaviour
FDI Inward
It is not just a DCs phenomenon
LDCs have received a growing part of the total FDI
Their quota increased strongly in the last years
- 500 000,0 1 000 000,0 1 500 000,0 2 000 000,0 2 500 000,0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
FDI inflows in milions of dollars
World Developed economies Developing economies
