487 Zonis Lecture Sept 24 99

Getting to the Future: The Principal Drivers of the Global Economy : 

Getting to the Future: The Principal Drivers of the Global Economy

The Principal Drivers of the Global Economy: 

Globalization Withering Away of the State Technology Demography – Human Capital Failed States Economic Growth The Principal Drivers of the Global Economy

Globalization: 

Globalization “As a result of very rapid increases in telecommunications and computer-based technologies and products, a dramatic expansion in cross-border financial flows and within countries has emerged. The pace has become truly remarkable. These technology-based developments have so expanded the breadth and depth of markets that governments, even reluctant ones, increasingly have felt they have had little alternative but to deregulate and free up internal credit and financial markets.” Alan Greenspan, keynote address at the Cato Institute's 15th Annual Monetary Conference, October 14, 1997. An increasingly interconnected world:

Globalization: 

Globalization “For several major industrialized countries, including the U.S., foreign trade—exports plus imports—has only recently surpassed the levels achieved in the 19th century. Capital flows are even less integrated. Current capital flows are still only about three-quarters of the levels achieved in the 1890s.” Steve H. Hanke, Johns Hopkins University economist Globalization is not a new story:

Globalization: 

Globalization Foreign Trade as % of GDP: Source: Forbes, August 24, 1998

The Withering Away of the State: 

March 24th, 1999: The UK's highest court upholds Chilean ex-President Augusto Pinochet's arrest NATO strikes against Serbian targets in Yugoslavia begin The Withering Away of the State

The Withering Away of the State: 

Assault on state sovereignty from above – supranational organizations: NATO EU WTO IMF The Withering Away of the State

The Withering Away of the State: 

Assault on state sovereignty from below – regionalism: Quebec and Canada The Walloon and Flemish separatists and Belgium Kurds and Turkey East Timor and Indonesia Corsica and France Basques and Spain The Withering Away of the State

Global Inequality: 

Global inequality is widening – I: “Some 3 billion people, half of the world's population live on the margin of subsistence, and the gap between the average incomes of the richest and poorest countries has widened to 70:1.” – Secretary-General Kofi Annan in a message to the International Conference on Development, June 24, 1999 Global Inequality

Global Inequality: 

Global inequality is widening – II: “If we do not have the capacity to deal with social emergencies, if we do not have longer-term plans for solid institutions, if we do not have greater equity and social justice, there will be no political stability. And without political stability, no amount of money will put together packages which will give us financial stability." - James Wolfensohn, President, The World Bank Group, to the IMF-World Bank Meeting in Washington, 1997 Global Inequality

Technology and the Digital Economy: 

Internet users per 1000 people (1998): Technology and the Digital Economy

Technology and the Digital Economy: 

Registered hosts on the Internet: Source: Matrix information and Directory Services Technology and the Digital Economy

Human Capital – Changing Demographics: 

Median age by major area, 1950, 1998 and 2050 (in years) Source: UN Population Division Human Capital – Changing Demographics

Human Capital – Rise in Median Age: 

Median Age 1985, 2000 and 2015 Source: UN Population Division Human Capital – Rise in Median Age

Human Capital – Decline in Fertility Rates: 

Fertility rates 1985, 2000 and 2015 (births per woman) Source: World Bank and US Census Bureau Human Capital – Decline in Fertility Rates

Human Capital – Aging Population: 

“According to current projections, in 2030 every third person in the member countries of the Organisation for Economic Cooperation and Development will be over age 60.” – UN, Division for Social Policy and Development Human Capital – Aging Population

Human Capital – Aging Population: 

“Today, the ratio of working taxpayers to nonworking pensioners in the developed world is around 3 to 1. By 2030, absent reform, this ratio will fall to 1.5 to 1 - and in some of the fastest aging countries, such as Germany and Italy, it will drop all the way to 1 to 1 or even lower. The typical working couple will thus be required to fund the full cash pension and health-care needs of at least one anonymous retiree.” – Former U.S. Commerce Secretary Peter G. Peterson Human Capital – Aging Population

Human Capital – Global Aging: 

Consequences of Global Aging: Change in consumption patterns Changes to pension systems Huge infrastructure for young and rapidly growing populations Human Capital – Global Aging

What Are the Emerging Markets?: 

What Are the Emerging Markets? High Growth – AVERAGE GDP GROWTH ABOVE 4 PERCENT PER YEAR, 1987-1997:

What Are the Emerging Markets?: 

What Are the Emerging Markets? Steady Growth – AVERAGE GDP GROWTH BETWEEN 1 AND 4 PERCENT PER YEAR, 1987-1997:

What Are the Emerging Markets?: 

What Are the Emerging Markets? Growth?? AVERAGE GDP GROWTH BELOW 1 PERCENT PER YEAR, 1987-1997:

What are the Emerging Markets?: 

What are the Emerging Markets? The losers: Countries whose average annual population growth is above their Average Annual Change in GDP (1987-1997):

What Are the Emerging Markets?: 

What Are the Emerging Markets? Sources: OECD,UN, Euromonitor Leading Growth Countries Since 1950:

What Are the Emerging Markets?: 

What Are the Emerging Markets? Failed States: Symptoms of failed states – low GDP per capita and low economic growth: Source: ICRG

The Major Financial Crises of Our Times:: 

Latin American Debt Crisis of 1982 ERM Crisis of 1992 Mexican Peso Devaluation of 1994 East Asian Crisis of 1997 Russian Crisis of August 1998 Brazil Crisis of 1999 The Major Financial Crises of Our Times:

The Major Financial Crises of Our Times: East Asian Crises, 1997-1998: 

The Major Financial Crises of Our Times: East Asian Crises, 1997-1998 Japanese Model of Economic Development State guides economy and growth State allocates resources Export led growth Unregulated Banking Systems High Levels of Corruption Common Industries Investment Boom Japanese slowdown Chinese Devaluation, 1994 Currencies Pegged to Dollar Robert Rubin pushes for strong dollar, March-April, 1995

Then and Now: 

Then: All emerging markets were treated alike. Emerging markets were considered virtually equal bets. Companies tended to ignore country risk, focusing on the financial and economic aspects of the deal. Then and Now

Slide28: 

Then and Now Now: A Beauty Pageant Differentiation of Emerging Markets countries on the basis of considerations of political risk.

The Major Financial Crises of Our Times:: 

The Major Financial Crises of Our Times: The countries that will emerge most successfully from the crises are the ones that will make the most deep seated structural reforms.

Factors for Country Success: 

Factors for Country Success Stable Institutions Democratic Politics Policies Human Capital Market Economics Globalization Technology

Factors for Success: Institutional Strength: 

Factors for Success: Institutional Strength Long Term Ratings:

Factors for Country Success: 

Factors for Country Success Stable Institutions Democratic Politics Policies Human Capital Market Economics Globalization Technology

Factors for Success: Human Capital: 

Factors for Success: Human Capital Women's activity rates for the age group 20-54 years in 1950, 1970, 1990 and 2010

The East Asian Crises, 1997-1998: 

The East Asian Crises, 1997-1998 Prospects for the Future: Asia’s Growing Labor Force

Factors for Success: Human Capital: 

Factors for Success: Human Capital Adult illiteracy rate – 1995:

Factors for Success: Human Capital: 

Factors for Success: Human Capital Literacy Rates, 1997: Source: ABC-Clio

States in Decline: 

Ethnic Distribution In The Former Yugoslavia States in Decline

Factors for Success: Human Capital: 

Factors for Success: Human Capital Ethnic Distribution In Russia

Factors for Success: Corruption: 

Factors for Success: Corruption Source: Transparency International 1998 Corruption Perception Index