Thursday, September 8, 2011

The History of Globalization 1950-2000’s

I was taking notes on this topic in an International Trade and Business class. Very good information, so I thought I would share and make this information available for everyone.

Here it is...

Per capita GDP – national output per person

In 1950 the US had half as many people as Europe and almost the same share of the world economy.

20% of the world’s population controlled more than 50% of the entire world economy. While the other 80% of world population only accounted for roughly 40% of the world economy.

China, India, and Africa all had about 4% of the world economy. Since China had 22% of world population and only 4% of the economy means, on a per person basis, China was poorer than both India and Africa.

Year 1950 % of World Population, Share of World GDP

US 6%, 27%

Western Europe 12%, 26%

USSR 7%, 10%

Latin America 8%, 8%

Japan 3%, 3%

China 22%, 4%

India 14%, 4%

Africa 9%, 4%

2006 % of World Population, Share of World GDP

US 5%, 22%

Western Europe not given, not given

USSR not given, not given

Latin America 9%, 8%

Japan 2%, 7%

China 20%, 10%

India 17%, 5%

Africa 12%, 2%

Please note that in 2006 Japan and China more than doubled their share of the global economy. India’s share increased as well. All emerging country’s share of the global economy increased between 1950 – 2006. All, except Africa. The global economy increased eight fold in this period of time, but the distribution of wealth is still majority owned and controlled by industrialized nations. These same industrialized nations use their large amounts of capital to continue to economically oppress the continent of Africa.

The Roots of Globalization

New Global Institutions

• WTO –World Trade Organization

• IMF – International Monetary Fund

Goal: “To foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty”

-1945 International Monetary Fund at Bretton Woods

• International Bank for Reconstruction and Development – World Bank

International Policy Changes

There was a change in the attitude towards international trade. Countries began to believe that if one country had economic relationships with another, they would be a much smaller chance of those countries going to was with one another. For example, the European Union, Germany is least likely to invade a country that it is financially dependent upon.

Changes inTechnology

Speed of travel and shipping of goods.

The spread of telephones, fax machines, then internet.

New global institutions, international policy changes, and changes in technology all brought the world much more inter-related.

By 2006 world population has doubled, but the approximate population shares between countries stayed relatively the same. The Global Economy grew almost 8-fold between the years of 1950-2005. The average economic world output per person almost tripled in 50 years. The World economy shifted towards Asia.

The wealth gas between the US and Asian countries (China, Japan, and India) shrunk. The wealth per person in the US was 10 times higher than the wealth person in Africa in 1950. By 2006 the wealth per person grew in the US 25 times more than the wealth per person in Africa. Remember, in the 1950’s numbers show Africa was higher than India and China. Now, we can no longer say that is the case.

Exports used to account for 7% of a given countries income in 1950. Now, 25% of a country’s income is made from exports. In the mid 2000’s, the US economy is attracting $700-800 billion a year from financial investors outside the US.

The Diminished Role and Power of the US

The extreme dominance of the US is diminishing. In China and India, the standards of living can double every 8-10 years. This type of growth is not only happening in China and India, but there are other East Asian countries, Brazil, and even some countries in Africa. Economic growth of the first 10 years of the 2000’s will probably be one of the fastest economic growths in human history. These enormous gains are also paired with enormous challenges. Challenges such as equality, lasting poverty, fairness, lack of food.

In the next few decades China will pass the US as the largest economy in the world. The Us will still be richer on a per person basis, but China has almost four times as many people of the US. If this type of economic growth continues, by 2040, China will be financially stronger than US, Western Europe, and Japan combined!

With these changes, global economic growth will no longer depend on the US, the US will no longer control the pace of change, the US will no longer control oil prices due to a much larger demand in developing countries, the US does not have overwhelming power in commercial technology, the US does not control the flows of international financial capital, US does not control the value of its own currency (controlled by buyer and sellers of financial markets). For the US there will be a long going loss of power and control of the world economy!