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Comparative Regional Economy <Lecture Note 3 > 12.04.16
CRE: North America, Europe and
East Asia
* Some parts of this note are summary of the references for teaching purpose only.
Semester: Spring 2012
Time: Monday 2:00-5:00 pm
Class Room: 115
Professor: Yoo Soo Hong
Office Hour: By appointment
Mobile: 010-4001-8060
E-mail: [email protected]
1
I. North America
2
3
The Landscape
 Canada
– Second largest country in the world.
– The longest non-militarized border in the world (8,900 km).
– Trade agreement since 1989.
– Several similarities but different societies.
 US
– Fourth largest country in the world.
– 48 continental (conterminous or contiguous) states.
 Mexico
– Longest border between a developed and a Third World country
– Border problems related to illegal immigration and drug traffic.
– Trade agreement since 1992.
– An advanced and a transitional (Third World) country.
4
Settling the Territory
 Colonization of the The North American Territory
– Colonized by three major colonial powers.
 Spain
– Occupied the south of the United States, including Florida, California,
Arizona, New Mexico and Texas.
– Part of the Spanish Empire of Mexico.
– Massive organization of the native labor.
 France
– Controlled the St. Lawrence, the Great Lakes and the Mississippi basin
– More interested in fur trade than in colonization.
 England
– Occupied the Atlantic Coast with 13 colonies (1620 and 1681).
– Strong emphasis on agriculture and economic development
– High population densities constrained by the Appalachians.
 Holland
– Bought Manhattan Island (New Amsterdam) for $24 (1626).
– Conquered by the British and renamed New York (1664).
5
Territorial Definition
 The Anglo-American cultural space
– Prominence of English institutions.
– Opposed to Latin America (Spanish and Portuguese cultural origin).
– A few exceptions:French Canada, Hawaii, US/Mexico border regions,
southeast Florida, First Nations and the Black population.
– Immigration is changing this space.
– English remains the language of power and business.
6
North America Economy
 Characteristics
-
Economies are very similar to Europe
-
Developed world: Have many industries
-
‘Clean Industries’- computer manufacturing, financial services, information and
communication
-
‘Dirty Industries’ - manufacturing automobiles, power, textiles, petroleum processing,
paper
-
North America is a major exporter of:
- Technology
- Consumer goods
- Information Systems
- Foodstuffs
7
North American Economic Integration
-
Although EU is undoubtedly the most successful and well-known integrative
effort, integration efforts in North America has gained momentum and
attention.
-
North American integration has an interest in purely economic issues and
there are no constituencies for political integration.
- U.S.-Canada Free Trade Agreement
- North American Free Trade Agreement (NAFTA)
8
Regional Economic Integration
in North America
9
 The North American Free Trade Agreement (NAFTA)
-
Dismantles trade barriers for industrial goods, agreements on
services, investments, intellectual property rights, and agriculture
-
Side agreements on labor adjustments, environmental protection, import
surges, child labor, minimum wages, productivity, and health and safety
standards
-
It promotes trade and economic growth by allowing free trade
between the 3 member countries (US, Canada, Mexico)
-
Supports trade and business around the world
NAFTA
Established in 1992
Implemented in 1994
World's largest free trade area
Tri-national (Canada, Mexico, and the United States) market area
Combined annual purchasing power of about $6.5 trillion
10
Characteristics of the North American Economy
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The North American Economy
 Enormous market, larger than the EU
 Vast income differences between Mexico on the one hand, and the U.S. and
Canada, on the other
– However, purchasing power parity gap is smaller
– On average, the North American market is very rich
 The North American economy is marked by numerous difficult policy
questions on migration and environmental and labor standards, for example
12
Trade Flows in North America
13
The North American Free Trade Agreement (NAFTA) of
1994
 Tariffs on about half of goods traded between U.S. and Mexico were
eliminated immediately
– Most dramatic changes in Mexico: average tariffs on U.S. goods fell
from 10% to 2.9% between 1993 and 1996, while U.S. tariffs on
Mexican goods fell from 2.07% to 0.65%
 NAFTA specified content requirements for goods subject to free trade
 NAFTA established a system of trade dispute resolution
 NAFTA reignited contention on trade policy in the U.S.
– Blue collar labor unions feared that jobs would migrate to south given
Mexico’s lower labor costs
– Environmental groups feared that (1) polluting U.S. and Canadian firms
would move to Mexico, and (2) pollution would increase along U.S.Mexico border
 Political opposition forced Canada, Mexico, and the U.S. to attach labor and
environmental side agreements to NAFTA
14
The Impact of NAFTA
 Local effects of NAFTA on trade and economy are dramatic, especially in the
U.S.-Mexican border
 Mexico’s economy is 5% of U.S. Economy so that NAFTA has had a very
modest impact on overall U.S. trade balance and current account or on jobs and
wages
 The growth in trade between all three NAFTA partners indicates increased
specialization, economies of scale, and efficiency
 The exact impact of NAFTA is hard to assess
– Bilateral trade has expanded already since 1989 thanks to Mexico’s
economic reforms.
– Mexico’s 1994–1995 peso crisis and recession caused U.S. exports to
decline momentarily to Mexico.
 Canada: trade with Mexico is growing, but still represents a small part of
Canada’s trade
 The U.S.: NAFTA has had local effects especially along the border, but had a
small impact on the overall U.S economy
 Mexico: NAFTA has had an important impact on trade flows and solidified
economic reforms
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Other Impacts of NAFTA
 NAFTA has boosted cooperation in North America on numerous fronts.
– Tri- and bi-lateral institutions have been created to address mutual
challenges
– Cooperation extends beyond labor, environment, and migration issues
to the area of business, sports, arts, and education
 In 2001 and 2002, summits proposing the expansion of NAFTA into the Free
Trade Area of the America’s (FTAA) were pursued, and meet with much
resistance.
16
Direction of US Trade
Source: Adapted from IMF, Direction of Trade Statistics Yearbook, 2003 and 2006
17
Direction of Canada’s Trade
Source: Adapted from IMF, Direction of Trade Statistics Yearbook, 2003 and 2006
18
Direction of Mexico’s Trade
Source: Adapted from IMF, Direction of Trade Statistics Yearbook, 2003 and 2006
19
Canadian Economy
 Canada’s 33 million people enjoy one of the highest standards of living in the
world.
– Gross domestic product in 2004 was around $994.1 billion, in US dollars
and at current exchange rates.
– Over the last 15 years, the rate of economic growth has deviated from 2–
4%.
 80 percent of manufacturing activity is located in Ontario and Quebec,
including the entire motor vehicle industry
– One-quarter of all Canada’s manufactured exports (and imports) are in
autos and auto-related products.
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Canada’s Business Environment
 Canada’s industrial climate:
– Characterized by private enterprise.
– Some industries, such as broadcasting and public utilities, are
government owned or subject to substantial government regulation.
– A trend toward privatization and deregulation.
– Firms that have been privatized include Canadair, the deHavilland
Aircraft Company, Canadian National Railway’s trucking division,
Fisheries Products International and Air Canada.
– Small business is a major part of the economy and accounts for
almost 80% of all new employment in manufacturing.
– The service and retail trade industries are characterized by a large
number of companies that vary in size.
– 70% of Canadians work in service industries.
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The 50 Largest Firms in North America
Note: These data were compiled using only the top 100 Canadian companies based on revenues for 2006. The data for foreign sales are limited and
some large companies that might otherwise be in the list might be excluded. Ipsco Inc. became a wholly owned subsidiary of SSAB, a Swedish steel
company. Intra-regional sales stand for a company’s home-region sales
Source: Authors calculations, individual annual reports, and “The Financial Post 500,” National Post, June 5, 2007
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Mexican Economy
 Mexico has the strongest economy in Latin America.
 Labour
– Relatively plentiful and inexpensive;
– Shortage of skilled labour and managerial personnel;
– Turnover is a serious problem;
– 40% of the labor force is unionized. In large operations, 80% of the labour
force is unionized;
– Three-tier minimum wage;
– At least 90% of the firm’s skilled and unskilled workers must be Mexican
nationals.
 The six major ones, in order of importance are:
– petroleum/chemicals;
– automotive;
– housing and household;
– materials and metals;
– food and beverage;
– semiconductors and computers.
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Prospect on the U.S. Economic Recovery
•
Net exports will contribute to growth and housing will stop being a drag by
mid-year; nonresidential construction has turned the corner.
•
The pace of consumer spending has also accelerated, thanks to a gradual
improvement in the employment outlook and diminished worries about a
double-dip.
•
Business optimism is the highest in three years and cash flow remains very
strong.
•
The new tax package will add around 0.6 percentage point to growth in
2011, but much of the recent rebound is not stimulus related.
•
Growth in the next few years will average 3% to 3.5%.
24
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Crisis Effects on US and Canada
−
US
• The recent trends show that the pace of growth averaged only ¼ %, well
below potential.
• Since the summer of 2007, declining residential investment has been a
major drag on output, inventories have been compressed, and consumption
has slowed.
• Current drags on growth include falling employment, tightening credit,
and declining net worth, as well as rising fuel and food prices.
− Canada
• Although the resource-intensive sectors have benefited from high
commodity prices, the lagged effect of past real appreciation of the
Canadian dollar, together with the US slowdown, has hit manufacturing hard.
• Risks still remain given the strong economic and financial linkages
with US.
25
Crisis for the US
- The new international situation has affected the United States. However,
US power remains strong and unmatched. Its per-capita GDP was $46,800
in 2008 and the US share of world trade was 14% for goods and 18%
for services. The population is growing faster in the US (with a
projected 10% increase by 2025) than in Europe.
- With President Barack Obama in the office, USA restored the luster of the
tarnished American model, repairing the enormous damage done to the
country’s image under the Bush administration. But the United States
moves into the new decade with two weaknesses.
26
- Globalization has eroded American power – and the power of the West as a
whole – in comparison to other international players now in the ascendant.
China is now a major potential competitor. The US is also laboring to repair
a decade of misguided policy. The two pillars of American power –
military supremacy and economic success – can no longer be taken for
granted.
- Strategically, the US may account for half of the world’s military spending,
but it has been unable to eradicate terrorism, emerge victorious from the
conflicts into which it has ventured or achieve progress in the Middle East.
- In this region, crucial to international security, the United States has virtually
no room for maneuver, constrained as it is by the legacy of decades of
American policy. In the Middle East, a power such as China
paradoxically has more leeway than the United States. In the economic
arena, the subprime crisis caused by the excesses of the financial system
and the American growth model produced one of the deepest recessions
since World War II.
27
-
This double-edged development should prompt the United States to
thoroughly reassess the effectiveness, legitimacy and credibility of its
leadership. US unilateralism has come and gone. The Obama
administration acknowledges the need for international cooperation to boost
world growth and address the strategic challenges of the coming decade.
-
The United States is widely perceived as being responsible for international
tensions (Russia, Iran, Middle East), the economic crisis and accelerating
climate change and the new American administration has decided to tackle
this legitimacy problem.
28
II. EU
29
The European Union:
 493 million people – 27 countries
Member states of the European Union
Candidate countries
Expansion of the European Union
-
May 2004
75 million customers
10 countries
-
January 2007
Bulgaria and Romania
29 million more customers
-
Total EU – current situation
480 million customers
27 countries
32
Eight Enlargements
1952
1973
1981
1986
1990
1995
2004
2007
 27 member countries of EU – as of April, 2011
-
Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia,
Finland, France, Germany, Greece, Hungry, Ireland, Italy, Latvia, Lithuania,
Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia,
Slovenia, Spain, Sweden, and the United Kingdom
 Candidate countries
- Croatia, Iceland, Macedonia, Turkey
34
21.6
0.5
0.4
Malta
0.8
1.3
2.0
2.3
3.4
4.3
5.3
5.4
5.4
7.7
8.3
Luxemburg
Cyprus
Estonia
Slovenia
Latvia
Lithuania
Ireland
Finland
Slovakia
Denmark
Bulgaria
Austria
9.0
10.1
Hungary
Sweden
10.3
10.5
10.6
11.2
Czech Republic
Belgium
Portugal
Greece
Netherlands
16.3
38.2
Romania
Poland
59.1
Italy
44.5
60.9
United Kingdom
Spain
63.4
France
Germany
82.4
How Many People Live in the EU?
Population in millions, 2007
497 million
GDP per Inhabitant: Spread of Wealth
GDP per inhabitants in Purchasing Power Standards, 2007
Index where the average of the 27 EU-countries is 100
280
144
131 129 127
123 121
118 117
113 113
104 102 100
94 89
87
79 77 75
67 66 63
58 56
53
Bulgaria
Romania
Poland
Latvia
Lithuania
Slovakia
Hungary
Estonia
Portugal
Malta
Czech Republic
Slovenia
Greece
Cyprus
EU-27
Spain
Italy
France
Germany
Finland
United Kingdom
Sweden
Belgium
Denmark
Austria
Netherlands
Ireland
Luxembourg
38 37
Two Productivity Gaps in EU
Gap 1: North vs. South; Gap 2: EU vs. US
GDP per hours worked (United States =100)
100
80
60
40
20
1950
EU15 North
1960
1970
EU15 Continental
1980
1990
EU15 South
2000
EU12
2010
BGR+ROM
Note: EU15 North = Denmark, Finland, Sweden, and the United Kingdom; EU15 Continental = Austria,
Belgium, France, Germany, and the Netherlands; EU15 South = Greece, Italy, Portugal, and Spain.
Source: World Bank staff calculations, based on Conference Board. 2011.
 (Un)employment
- Unemployment rates have increased further in a large number of Member
States after the financial crisis, reaching dangerous level (Spain, Ireland,
Slovakia, Portugal, France)
US
EU
US surpasses EU
(March 2009)
Figure 6 Harmonized unemployment rates, August 2007–October 2009
Source: OECD Labor Force Statistics
http://www.iie.com/realtime/?p=1059
38
Annual Average Growth of Trade as Part of GDP
Risk for the EU: Weakness and Marginalization
 Economy: A Major Player
- In 2007, EU accounted for 17,5% of world trade (42% when intra-EU
trade is included). With its population of nearly half a billion, it is
demographically smaller than Asia but it represents a far larger market
than the United States or Japan by any standard. With its enlargement to
27 members, the EU has become the world’s largest zone of democratic
stability and prosperity, with per-capita income of nearly €24,800.
- EU has indisputably lost ground within the international order. The 20082009 economic crisis hit Europe’s economies hard. In 2009, world
growth was driven by the Asian economies alone and a number of the
stability pact rules that are compulsory in the eurozone countries had to be
suspended. Europe’s population is also declining and ageing.
40
- These trends herald a decline of Europe’s ranking among the great
technological powers in terms of innovation and competitiveness. The
EU is in an alarming state of energy dependence: economically, the EU
relies on the three most unstable zones in the world – Russia, the
Middle East and Africa –to cover more than 60% of its oil and gas
needs, while its ability to exert political influence in these three
strategic regions is extremely limited.
41
 Politics: Risks of Marginalization
-
EU’s ability to wield influence in the emerging multi-polar world is
constrained by its weak political integration. The EU has no voice as
such in the major international economic and political institutions,
with the exception of the World Trade Organization (WTO), the United
Nations (UN), the International Monetary Fund (IMF) and the G20.
-
European states are often out of step with each other, even when they
have drawn up a common position ahead of time – as witnessed during
the difficult discussions, at various G20 meetings, concerning global
financial oversight.
42
 Western Europe
− Many countries in Western Europe are moving close to or into recession.
− Economic growth is being slowed by a number of factors, initially mainly
by rising oil prices but now increasingly by tightening financial
conditions.
− Although headline inflation is high, wages have generally remained subdued,
and slowing activity and rising unemployment fears should restrain demand
for pay hikes.
− The specific reform recommendations under the Lisbon Agenda that
concern the euro area as a whole appropriately emphasize accelerating
services market reform and financial integration since large parts of the
services sector remain unaffected.
43
 Emerging Europe
− A significant slowdown is expected.
− Weaker external demand, especially owing to the cooling of demand in
western Europe, and tighter external conditions are weighing on
investment and exports, while private consumption has slowed in the
face of soaring food and energy prices.
− Growth is expected to continue to decelerate markedly, including on
account of diminishing capital inflows and tighter financial constraints.
44
European Union (EU) - Aggregate Rankings
- Economies are ranked on their ease of doing business, from 1 - 183, with first place being the
highest. The ease of doing business index averages the economy's percentile rankings on 10
topics, made up of a variety of indicators, giving equal weight to each topic. The rankings are
from the Doing Business 2010:
- Reforming through Difficult Times report, covering the period June 2008 to June 2009.
* Singapore is shown as a benchmark
Source: Doing Business 2010
45
The EU Remains a Less
Integrated Market than the US
- Lower degree of price
dispersion for tradeables
between main US cities
than that between EU
capitals
-Lower degree of trade
integration in the EU than in
the US
35
30
25
Intra-trade in manufactured
products 2002
(intra exports as a percentag
e of GDP)
20
33.0
0.25
All Europe
0.20
Price dispersion in
tradeables
CPI-weighte
d
0.15
20.2
U.S.
19.0
15
0.10
10
0.05
5
0.00
1990
0
EU25
euro area
1992
1994
1996
1998
2000
United States
46
Labor productivity from a long run perspective
Labour productivity. Annual rate of growth. EU-25. 1995-2009 (percentage)
Source: TCB (2010) and EU KLEMS (2009).
•
The EU-25 is made up of a heterogeneous array of countries
•
The New Member States (EU-10) are the ones that have experienced the highest
rate of productivity growth.
•
In the EU-15 Ireland had the highest rate and Italy the lowest.
47
 An Economic and Social European Model?
− Different from the US model, a strategy would be to build a European
model based on solidarity, public services and public spending. The
European Union is a large closed area. The euro gives significant room to
lower the cost of capital. Europe may refuse fiscal and social competition
and may introduce harmonized taxation on persons, companies and capital
income.
− The Scandinavian example: it is possible to promote competitiveness
based on a strong social cohesion; on a high level of public spending;
on performing public education and health systems. An appropriate
management of social security and public services is a source of
social efficiency.
− At the world level, Europe has a special role, to work towards better
global governance, in term of development, fight against tax evasion,
speculation and financial instability.
48
 Enhancing Economic Growth in Europe
− The Brussels-Frankfort consensus dismisses the idea that a more active
macroeconomic management would boost European growth. However, in
2001, European growth did not come to a halt because of supply constraints,
which could have been disappeared under the effects of structural reforms.
− The current European economic policy dogmas are ‘sacred’. However, they
impede national governments policies, without providing the impulse
needed to support activity in slowdowns, or to boost growth durably.
− Active macroeconomic policy would allow for the detection of potential
factors constraining supply and for appropriate measures to be taken. It is
easier to undertake reforms in times of strong growth than in times of
economic stagnation.
49
Why the EU?
- To become a “United States of Europe” with one economic/political
system on par with the United States of America.
- For European nations to stop being their own worst enemies in trade &
politics.
- Vision + Infrastructure + Cooperation + Regionalism over nationalism +
Power Centralization = THE WORLD’S LARGEST ECONOMY &
MARKET (30% share of world gross product)
 Economic Advantages of the USA That the EU wants to Emulate.
-
One currency
One banking system
Uniform commercial laws
No tariffs between states
Federalism over states rights
These are referred to as the 4 EU freedoms: freedom of goods,
services, movement of labor & capital
50
EU Economic Potency
-
7% of the world’s population—28% of the global GDP (larger than the USA)
-
454M population & 60% more consumers than the USA
-
The 12 member nations using the Euro exclusively account for 67% of the
population & 74% of the EU GDP %
-
One third of the world’s 100 largest corporations are European
-
Population of 454M for EU, 1.5 times larger than U.S.
-
EU gross regional product of $12.5T vs. $11.7T for U.S
51
The Benefits of European Integration

Lowered incidence of war due to increased economic interdependency
The EU’s single market opens up a huge new sales opportunities
Merged EU corporations are becoming the largest in the world
Poorer member nations benefit from the economic pull of richer members
Democracy & capitalism are promoted in weaker EU nations
The Cost of European Integration
- Diminished national sovereignty of member nations
- Loss of national identity in in the EU’s uniform laws & standards
- Increased competition for corporations less protected from their crossborder rivals
- Increased organized crime enabled by removed border controls
- Head-butting among members over agricultural subsidies
52
Political Evolution of EU
- The economic unification of Europe began after WWII (1951) with 6 nations
(Belgium, France, Germany, Italy, Luxembourg, & the Netherlands) forming the
European Coal & Steel Community (the “Common Market”) to prevent another war
via trade cooperation.
- In 1957, the European Community (EC) was established by the Treaty of Rome,
which pledged cooperation towards “four freedoms”: free movement of goods,
services, capital, & people.
- Britain, Ireland, Norway, & Denmark joined the EC in 1972. Greece, Spain, &
Portugal joined in the 1980s.
- The European Union emerged in 1992 with the Maastricht Treaty.
- The Euro was adopted the sole currency of 11 EU members in 1999.
- New EU members in 2004 included: Estonia, Latvia, Lithuania, Poland, Czech
Republic, Hungary, Slovakia, Slovenia, Malta, & Cyrus. Bulgaria & Romania
joined in 2007.
53
EU POPULATIONS
•
•
•
•
•
•
•
•
•
•
Austria: 8M
Belgium: 10M
Cyprus: 1M
Denmark: 5M
Estonia: 1M
France: 60M
Finland: 5M
Germany: 83M
Greece: 11M
Hungary: 10M

2003 per capita incomes:
-
•
•
•
•
•
•
•
•
•
•
Italy: 58M
Ireland: 4M
Latvia: 2M
Lithuania: 3M
Luxembourg: 16M
Poland: 38M
Portugal: 11M
Spain: 42M
Sweden: 9M
UK: 60M
Germany: $27,600
Poland: $5,400
Romania: $4,084
Bulgaria: $3,735
Ukraine: $1,000 (potential future member)
54
EU Outliers
-
Four Western European have declined to join the EU: Iceland, Liechtenstein,
Norway, Switzerland
-
The 3 official candidates for the next round of enlargement: Croatia, Macedonia,
Turkey
-
Future potential candidates: Albania, Bosnia, Herzegovina, Montenegro, Serbia
-
The following 4 “micro-states “ lack formal membership status but are part of the
Euro-zone: Andorra, Monaco, San Marino, & the Vatican
-
16 of 27 EU members that have adopted (1999) the Euro as their official national
currency
-
“PIIGS”: Core EU govt. deficit nations Portugal, Ireland, Italy, Greece, Spain
55
 PIIGS governments are in financial jeopardy due to high social
welfare (vote-buying) deficits & the high value of the Euro. Their
rotten economies endanger the value of the Euro & the existence of
the EU.
- PIIGS economies are too poor to afford the Euro on their own (like
living in New York or Tokyo on a Waco income).
56
Economic Progress
- Lisbon agenda: for the EU to be the world’s strongest economy by 2010
- EU integration added only 1.3% to the region’s GDP during the 1990s, but since 1992,
EU output increased 2.2%, creating 2.75M new jobs.
- EU’s competitiveness has been limited by (1) Lower work hours vs. the USA; (2) High
welfare state benefits (3) Slow population growth
- $500B of trade between EU & USA annually
U.S. companies employ 6M EU workers vs. 4M Americans who work for EU
companies
- The per capita income of Ireland went from 62% of the EU average in 1981 to 121%
in 2002
57
EURO Damage by Greek Financial Crisis
- The EU’s efforts (in partnership with the IMF) in the first quarter of 2010 to provide
a financial bail-out for the 150% of GDP federal deficit of Greece caused the Euro
to drop about 20%. Currency traders inside & outside the EU recognize that “there
is no instruction manual for rescuing a euro-zone country nearing default.”
- Northern EU nations subsidize their use of the Euro & hence PIIGS social welfare
benefits.
- Germany & the USA have pushed the EU to create an emergency bailout fund to
use should any of the PIIGS go bankrupt.
-
EU & USA leaders worry that this fund will not be adequate & that the world
doubts the stability of the Euro & thus trade with the EU.
- Germany, France, & Italy are the big 3 economic powers in the EU, accounting for
70% of the region’s total GDP.
58
II. East Asia
59
• Large
degree of
variance
between
the
individual
economies
60
Territorial Map
61
Pacific Asian Development
 From Ashes to Riches
- How does Pacific Asia compares economically with other
regions of the world, now and then?
 Development Factors
- What were the major reasons behind the success of many
Pacific Asian countries?
 Globalization and Trade
-
What is the importance of the region in global trade?

Development Problem
-
What are some specific development problems the region is
facing?
62
 Geopolitical issues
– Around 1950, Pacific Asia was in ruins with limited development
prospects.
– Almost the whole continent was at war, revolution or under famine
between 1930 and 1960.
 China
– Wars
– 20 million Chinese killed during the war with Japan (1937-45) and the
civil wars (1920-37; 1945-49)
– China tried to invade Vietnam in 1979
– China - USSR border clashes (1965-1985).
– Demagogy
– 40 million died of starvation during the “Great Leap Forward” (1958-62).
– Around 10 million killed during the Cultural Revolution (1967-76).
63
 Southeast Asia
– Indochina War (1945-76)
– Involved guerrilla between Communists and non-Communists, including
France and the United States.
– France pulled out in 1958.
– United States pulled out in 1973.
– Hundred of thousands of refugees.
– Indonesia
– Invasion of East Timor in 1975.
– Ethnic clashes
– Around 500,000 ethnic Chinese were killed in 1965 during a failed coup
in Indonesia.
– Genocide
– About 1 million Cambodians (15-20% of the population) were killed by
the Khmers Rouges between 1975 and 1978.
64

Regional conditions (1960)
– Africa might have been better off than Pacific Asia.
– Japan had income 1/8 of the US.
– South Korea and Taiwan as poor as Sudan and Zaire (DR Congo).
– China was three times poorer than Taiwan.
– Hong Kong was a struggling, cheap labor-oriented colony facing
massive influxes of refugees from China.
65

Accelerated development
– From the 1950s, economic development accelerated.
– Led to the biggest accumulation of wealth in human history.
– Fastest rise in incomes for the largest number of people ever recorded.
– Between 1970 and 1990 number of very poor persons fell from 400
million to 180 million in East Asia.
– Population climbed by 425 million.
– Around 650 million people escaped poverty.
66
 Outcome
– Fast growth rate of the GDP per capita (1965-1990)
– 5% for Japan, the Four Tigers and several other Pacific Asian
economies
– 2.3% for the bulk of developed countries.
– In 1990, 10% of East Asians were very poor
– 25% for South America
– 50% for Africans and South Asians.
– Africa failed its combined GDP in 2000 was less than Switzerland.
67
From Ashes to Riches
1940
1950
1960
1970
1980
WWII
 Waves of Pacific Asian
Development
– First Wave, 1950s (Japan).
Korean War
– Second Wave, 1960s (The
Japan
Great Leap
Four Dragons).
Forward
– Third Wave, 1970s (Malaysia,
Four Dragons
Thailand, China and
Vietnam War
Indonesia).
Cultural Rev.
– Fourth Wave, 1980s (The
China, Malay., Thai., Indo.
Philippines and Vietnam).
– Fifth Wave, 1990s (Growth
Philippines, Vietnam
and recession).
1990
AFTA
Asian Crisis
2000
China joins WTO
68
Industrial Revolution and Time to Double National
Income
China
9 9
Korea
11
Japan
34
United States
United Kingdom
1780
47
58
1830
1880
Year
1930
1980
69
Development Factors

-
United States
Initial role
Marshall Plan also applied in Asia after WWII.
South Korea and Taiwan would not have survived without the support of the
United States
- Between 5 and 10% of the GDP in foreign aid in the 1950s.
- Direct aid ended at the beginning of the 1960s.
- Freed internal financial capacity and promoted savings
- Contemporary role
- The United States has become an important market for Asian
products.Supporter of the export-oriented development.
70
 High savings rates
– Savings were preferred over consumption.
– Ranges around 20 to 30% of GDP.
– Many societies offer little if any social security
– Responsibility of the individual / family to cover expanses such as health
care, education and retirement.
– Government mandatory saving and insurance policies.
– The average American has an income of about $40,000 a year
– The personal savings rate is about 1% (negative in 2006).
– The average Chinese earns around $1,500 per year
– The personal savings of 45% of his income.
– A poor Chinese saves more than a wealthy American.
71
 Abundance of labor
– Numbers do not guarantee industrialization, but an advantage in labor
intensive activities.
– Demographic growth help maintain low labor costs
– Exports are more competitive.
– Foreign investment is attracted.
– Productivity often grows faster than wages.
– Usage of women labor
– In the manufacturing sector.
– Notably 15-25 years old.
– Often account between 40 and 50% of labor.
– Lower wages and more disciplined.
72
 Globalization
– Development models vary greatly in the region.
– Diversity of economic and political systems.
– Convergence towards the capitalist model.
– Pacific Asia took advantage of the emerging global economy
– Opening of foreign markets.
– Liberalization of trade.
– Export-oriented development.
– Significant improvements in the welfare of the population.
– Development of international transportation
– Pacific Asia accessible a lower costs
– Containerization.
73
–
–
–
–
–
–
–
–
–
–
–
Foreign Direct Investments (FDI)
Related to the speed of development.
Massive transfers of technology and investment.
FDI are mostly undertaken as joint-ventures:
The foreign firm often provides capital and technology.
The Asian firm provides labor and raw materials.
About 60% of FDIs are occurring in the manufacturing sector.
United States and Japan:
Account for more than 50% of FDIs.
Japan massively investing in China; lower production costs.
China accounts for 50% of all FDIs going to developing countries.
74
–
–
–
–
–
–
–
–
–
–
–
–
Sub-contracting
High production / labor costs in developed countries:
Corporations looking at ways to reduce costs and compete.
A increasing share of production is done by sub-contracting.
Transfer of a manufacturing process.
Technology transfers
Mostly done by licensing (Taiwan, South Korea):
A firm has the authorization to use a technology.
Pays a royalty.
Asian countries have become innovators:
Japan and the Tigers first.
China: substantial potential for innovation.
75
–
–
–
–
–
–
–
–
–
–
–
–
–
Government and industrial development
Asian governments tend to be of small size:
Lower taxation on the society; less social safety nets.
Notable exceptions; China, Vietnam.
Often account for less than 20% of GDP (about 45% for the US).
Involvement of the government:
Defines the strategic orientation of the economy; Favor export-oriented
strategies.
Developing projects and providing financing (preferential loans).
Significant regulatory involvement (misallocations and some corruption).
Special economic zones:
Enclave where foreign corporations are given specific privileges (mainly
taxation).
Attract foreign investments, new industrial activities and technologies.
Hong Kong is a free trade zone since 1841.
76
–
–
–
–
–
–
–
–
–
–
–
Confucianism
Important imprint in most Pacific Asian societies.
Basis of most social structures, especially in the Chinese world.
Main values:
Hard work as a symbol of achievement.
Thriftiness.
Obedience to authority and respect of hierarchy.
Benevolent leadership.
Consensus, harmony and common interest.
Education as a tool of social promotion.
Possible to make accept difficult living conditions to justify future
development.
– Its importance is argued.
77
Development Factors (Synopsis)
Factor
United States
Savings
Labor
Globalization
Foreign direct
investments
Sub-contracting
Government
Confucianism
Initial role (1950s). Marshall Plan. Financial support. Military protection
(Japan, South Korea, Taiwan). Major market outlet.
High saving rates (about 30% of GDP). Availability of national capital.
Large labor pool. Wages kept relatively low. Reliance on women.
Development of skills through education.
Increased participation to international trade. Lower tariffs. Lower transport
costs.
Transfers of production and manufacturing capacities. Mainly from Japan
and the United States. Joint ventures. Transfer of technology.
Access to foreign markets.
Special economic zones. Export-oriented development strategies.
Mandatory savings.
Social order. Work ethics. Consensus. Respect of authority. Its role is
argued.
78
Trade and Globalization
– Colonial period
– Pacific Asian countries mainly traded commodities (notably raw
materials) with Europe.
– After WWII
– The United States became the major trading partner.
– Trade mainly involved labor-intensive manufacturing goods.
– Recent changes
– Emergence of Japan and China.
– Growing share of world trade.
– Increased intra-regional trade, especially between China and Japan.
– The USA still accounts for about 50% of the value of trade.
79
Development Problems
–
–
–
–
–
–
–
–
–
–
–
–
Questioning the “Asian Miracle”
Used to be called “Miracle Economies” by the World Bank.
Two crisis:
Financial crisis of 1997-98.
Financial crisis of 2008The Asian Financial crisis of 1997-98
The bursting of a bubble, mainly based on real estate.
Exacerbation of social problems.
Inequalities.
Loss of spending power.
Especially true in countries depending on imports (Indonesia).
Political unrest (fall of the Suharto government in 1998).
80
Development Problems
–
–
–
–
–
–
–
–
–
–
–
–
–
The role of governments
Governments regulate massively their economy:
Industrial control; the appeal of an export-oriented strategy.
Preferential loans.
Informal “Black” market: Avoid government regulation creating artificial
scarcity.
Corruption:
Where there is government there are misallocations.
Corruption is a form of misallocation (using public power to regulate,
coerce and confiscate).
Corruption becomes a source of income for low paid bureaucrats.
Cronyism (favoritism shown to friends and associates).
Lack of transparency.
Weak legal systems leaving limited recourse.
Institutions did not develop with the economy.
81
Development Problems
–
–
–
–
–
–
–
–
The currency leverage game (2000-2008)
Systematic positive export balance:
Increase of the value of a national currency.
Eventually exports slow down has they become more expensive.
Asian currencies should have increased substantially.
Maintaining the exports:
Continue the export-oriented system.
Japan and Korea bought large amounts of US securities to recycle their
foreign reserves (T-bills, bonds, stocks, etc.).
– China pegged its currency (Yuan) to the US dollar at 8.2 and also
purchased US securities.
– Inflated US assets (housing) and kept consumers buying.
– Transfer of wealth from the West to the East.
82
– The limits of the export-oriented model
– Pacific Asian development strongly dependent on exports to North
American and European markets.
– Correlated (“coupled”) with the dynamics of these markets.
– Decoupling thesis:
– Development of an internal market.
– Less dependency with North America and Europe.
– A business cycle with a large bust phase that began in 2008:
– Sharp drop in exports (China, Korea and Japan).
– The decoupling thesis turned out to be inaccurate.
– The export-oriented model is being questioned.
83
Assessment of the East Asian Economy
 Driven by continued rapid growth in China, economic recovery in
Japan, and strong growth in India, plus robust inflows of foreign investment,
average GDP growth across Asia of 7% is well ahead of the global average of
4.7%. Consumer demand is increasing as incomes rise across Asia, further
supporting economic growth in many states.
- China surpassed the United Kingdom and France to become the
world’s fourth largest economy in 2005 and remains the second largest
in purchasing power parity terms.
- Japan’s economy is recovering from its decade-long stagnation,
prompting the first interest rate rise—from a base rate of zero—in almost
six years.
- Despite recent corruption scandals, the South Korean economy is improving
as the service sector strengthens along with increasing consumer demand.
84
Trade Dependency
 Most Asian states are highly dependent on trade, particularly many
of the smaller Southeast and East Asia states. Asia accounts for 21% of
world exports, and intra-regional trade comprises 40% of Asia’s exports.
While export-driven expansion has greatly contributed to these states’
economic development, their high dependency on trade suggests
structural vulnerabilities, including susceptibility to global financial
shocks.
- China’s merchandise exports growth continued to expand by nearly
30% in 2005, but import growth was nearly halved at 17.6%.
- Though high in Northeast and Southeast Asia, intra-regional trade
and investment are significantly lower in South Asia, where lack
of complementarities in trade and cool political relations remain
stumbling blocks to regional integration.
85
Investment
 Investment is a crucial component of economic growth in Asia. While
investment in China is higher than in any other state in the region,
Russia, India, and Australia are also attracting increasing amounts of
foreign investment. Japan, South Korea, and China are leading
sources of FDI in developing Asia, particularly in Southeast Asia.
- Asia is attracting nearly 25% of global FDI. Inflows are highest in
China, Russia, and Asia’s newly industrialized economies—Hong
Kong, South Korea, Singapore, and Taiwan.
- In Southeast Asia, Thailand, Vietnam, Indonesia, and Malaysia have
relaxed foreign ownership controls to attract greater inward FDI.
- Inward FDI growth in Russia is rapid, totaling $14.1 billion in the first
half of 2006—almost equal to the $14.6 billion total gain in 2005.
86
Asia’s Success
 During 1980-2010, annual GDP growth in emerging Asia averaged 7
percent.
-
8-fold increase in GDP.
-
Accounts for ¼ of world economy.
-
Success based on outward-oriented growth. (E.g., China’s “reform and
opening up”).
-
But, over time, unduly reliant on external demand.
-
Need now to develop private domestic demand.
87
Global Imbalances Remain Sizable
Global Imbalances
(Percent of World GDP)
88
Asia is Highly Dependent on External Demand
Share of Export Value Added in GDP
(percent)
Selected Asia: Average Contribution to
Real GDP Growth
(percent of real GDP growth)
89
Exports are Concentrated in a Few Industries, and They
Influence Investment Patterns
Asia: Share of Medium and High-Tech
Exports in Total Exports
(percent; average over 2000-08)
Selected Asia: Share of Export Value
Added in GDP
(percent of GDP)
90
Chinese Export-led Growth may Face Constraints,
Highlighting Need for More Domestic Demand
Selected Asia: Export market share
(In percent of world exports)
China: Consumption and Disposable
Income
(In percent of GDP)
91
Future Direction
-
Asia’s growth remains generally export-dependent
-
But the rebalancing challenge varies across economies.
-
Some (in particular China) will need to boost consumption, others will have to
focus on investment. Many would need reforms to boost services-sector growth.
-
Comprehensive and coordinated reforms are needed to achieve successful
rebalancing in Asia and globally.
92
East Asian Regional Arrangements
Source: Asia Society Task Force Report
93
IV. Comparison
94
Income Level by Region and Country
World Bank Scheme- ranks countries on GNI/capita
95
World Nominal GDP, 2007
Mexico
Australia
South Korea
India
Russia
Brazil
Canada
Spain
Italy
France
United Kingdom
China (PRC)
Germany
Japan
United States
0
2
4
6
8
10
12
14
조
96
 GDP Growth
- Since 1975, EU economies have stopped catching-up with the US in
terms of GDP per head. Average per head GDP in EU is still 70% of the
US level.
- Since 1990, GDP growth has been lower in the European Union than in the
US, both in high and low growth periods.
97
Economic Performance
 Trade Balance
– A nation’s trade is an important indicator of the overall competitiveness
of its economy relative to the rest of the world.
– Although it is true that a growing share of trade involves foreign affiliate
sales or intra-firm trade, a nation’s trade deficit still reflects a nation’s
reduced competitiveness, even if it does not reflect a reduced
competitiveness of a nation’s firms.
– Europe vs. U.S.
•
In terms of trade balance,
EU-25 clearly leads US.
US Trade Balance with EU
Year
Balance ($ millions)
2010
-79,780
2009
-61,201
2008
-95,807
98
 Foreign Direct Investment Inflows
– FDI cannot only bring to a nation new higher-value added production but
also increased competitive forces that spur domestic firms to become more
innovative and productive.
– Europe vs. U.S.
•
•
•
EU-25 enjoys almost 50% more inward FDI (from outside Europe) than does US.
Some EU-10 nations (e.g. Poland) have about four times higher levels than US.
The reason, in part, is that as most of these nations have transformed to marketbased economies, they have made concerted efforts to attract FDI, facilitated by
a relatively educated workforce with relatively low wage levels.
FDI declined in most nations after the peak years of the end of the 1990s. But
FDI declined in EU-25 about 1/3 as much as it declined in US, where it declined
by almost 2/3.
99
FDI to NA and EU
100
Top FDI Hosting Countries
101
 Labour Productivity
- Despite the structural reforms implemented in the 1990s, with the single
market and the deregulation processes, labour productivity growth has been
decelerating in EU when accelerating in US.
- At the same time, potential labour force has grown more rapidly in the US
(1.3% per year versus 0.8%).
2007 = 100
Source: BLS LPC Database; ECB Labor Market Indicators.
102
-
The complexity inherent in globalization raises a new paradox: the EU’s
influence is predicated on unity, but unity alone no longer suffices.
-
For lack of a common foreign policy on major strategic issues, the EU
is unable to influence the course of events outside its borders:
member states are divided on Russia and the Middle East conflict,
incapable of taking action on Iran, and irresolute or silent on the other major
problems the world faces
-
The Euro-American partnership, specifically the Atlantic Alliance, still
serves as an excuse for Europeans to shirk their strategic
responsibilities and delegate their own regional security and global
stability to the United States, notwithstanding the fact that US power
alone is no longer sufficient to guarantee security or stability in a globalised
world.
103
EU, USA’s Share of Global Economy
104
Comparison of Europe vs. United States
 Overall Assessment
- U.S. ranks No. 4 in global competitiveness for year 2010-2011.
- Six of the top ten global competitive countries are from EU members.
105
Labor Productivity
Unit labor cost. Annual rate of growth, 1995-2009 (percentage)
5
4
3,67
3
2
1
0,69
1,93
1,74
1,73
1,91
1,04
0,47
0
-1
-2
-1,44
Eurozone-12
Unit labour cost
USA
Wages
Japan¹
Productivity
¹ 1995-2008 for this country.
Source: ECB (2010), EU KLEMS (2009) and Fundación BBVA-Ivie.
•
In the Eurozone-12 unit labor cost had a positive sign which originated in wages
growing at higher rates than productivity.
•
In the US unit labor cost growth rates were even higher despite its strong
productivity growth, while Japan experienced an improvement in its competitiveness
thanks to the slow rate of wages growth.
106
Impact of the Crisis on Growth
GVA. Annual rate of growth. 1995-2007 and 2007-2009 (percentage)
5
4
3
3,62
3,02
2,44
2,31
2
1,34
1
0,34
0
-1
-2
-1,05
-1,65
-1,87
-3
-4
-3,13
EU-25
EU-15
EU-10
1995-2007
USA
Japan
2007-2009
Source: TCB (2010) and EU KLEMS (2009).
•
The first 3 years of the crisis hit Japan harder than the EU or the USA
•
The contraction in terms of GVA was more intense in the EU-15 than in the USA,
while the New Member states maintained a positive growth rate
107
Impact of the Crisis on Productivity
Labor productivity. Annual rate of growth, 1995-2007 and 2007-2009 (percentage)
5
4
3,52
3
2
1,93 1,95
1,67
2,06
1,41
1
0,57
0,23
0
-1
-0,43
-0,46
E U -25
E U -15
Source: TCB (2010) and EU KLEMS (2009).
E U -10
1995-2007
USA
Japan
2007-2009
•
The US maintained its rate of productivity growth thanks to the intense reaction of its
labor market, while in the EU-15 it had a negative growth rate as a consequence of
labor maintenance.
•
In Japan productivity slowed down in spite of its strong labor contraction.
108
Sources of productivity growth
Labor productivity Growth by Source. 1995-2007 (percentage)
Labour composition
ICT capital deepening per hour worked
Non ICT capital deepening per hour worked
TFP
¹ The EU-15ex consist of Austria, Belgium, Finland, France, Germany, Italy, Netherlands, Spain and the United Kingdom.
² 1995-2006 for this country.
Source: EU KLEMS (2009) .
- The higher labor productivity growth in the USA as compared with EU-15 had
a double origin: a higher rate of ICT capital deepening and a higher rate of
growth of technical progress (MFP).
109
EU vs. USA in Competitiveness
- 61 of the top 140 global corporations are European vs. 50 for the U.S. & 29 in
Asia.
- 14 of the 20 largest commercial banks in the world are Euro; 3 of the top 5
engineering/construction firms; 5 of the top 10 food & drug retailers; 6 of
the top 11 telecommunications firms; 5 of the top 10 pharmaceuticals (with
the U.S. having the other 5)
- In a recent survey by Global Finance magazine, 49 of the 50 companies
judged best in the world were European.
- Europe now has a larger share of small-to-medium size entrepreneurial firms
(67% of the total Euro economy) than the U.S. economy (46%).
- The EU lags behind the U.S. in value-added to high tech products, number of
high tech patents, & % of workers with a high school degree. The U.S.
lags behind Europe in number of science/engineering college grads;
government-financed R&D; & in new capital raised.
- The U.S. consumes 1/3 more energy than Europe.
110
- European markets (especially in the “big 3” economies of Germany,
France, and Italy, which produce 1/3 of the EU’s entire regional GDP) are
over regulated and inflexible due to unions, high employee benefits,
and complex government regulations.
- Europeans seem to look to the future with more fear than hope. The core
fact is that the European model is foundering under the fact that billions
of people are willing to work harder than the Europeans are. The recent
Western European standard of living is about a third lower than the
American standard of living, and it’s sliding.
111
•
America’s population is rising more than twice as fast as the EU’s. In the
20th century, America’s population increased by 250% vs. just 60% in
France and Britain.
•
America has freer markets and U.S. companies capitalize on new
technology at a faster rate.
•
America spends twice as much as Europe on higher education.
•
ANGLO-SAXONs: High employment rates but significant economic
inequality
CONTINENTALS: Good at helping people avoid poverty (due to generous
social benefits), but sub-par job creation
MEDITERRANEANS: Sub-par performance in both elimination of poverty &
avoiding unemployment
NORDICS: Successful in both economic performance areas of poverty
reduction + achieving high employment
•
•
•
112
Where EU Leads America in Quality of Life
-
Better income distribution: High income Americans average 5.6 times more
income than low-income Americans vs. 3 times more in Northern Europe &
3.3 times more in Central Europe. Overall, the U.S. has the highest income
inequality of the 18 wealthiest nations
-
During the 1980s, the U.S. had the least growth (-0.3) in total workforce
compensation among developed nations
-
48M (mostly working) Americans currently lack health insurance, even
though America spends more on per person on health care ($4900) than
any other nation (primarily due to higher administrative costs associated
with a complex net of private insurers).
-
The premiums of corporate-provided health care policies are rising by about
12% annually, and Medicare recipients about 15%.
-
“America’s future Medicare costs will be a tsunami compared to the a mere
tidal surge caused by Social Security.”
113
Percentage of the Population Living on Less than $2
per Day, 1981-2002
100
90
80
70
60
50
40
30
20
10
East Asia
South Asia
Sub-Saharan Africa
0
1980
1985
1990
1995
2000
2005
114
19
70
19
72
19
74
19
76
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
Personal Savings Rate, United States and China
50
45
40
USA
China
35
30
25
20
15
10
5
0
115
National Savings Rates (as % of GDP)
Taiwan
2001
1995
Indonesia
South Korea
Thailand
Hong Kong
China
Singapore
0
10
20
30
40
50
60
116
Hourly Compensation in Manufacturing, 2004 ($US)
0
5
10
15
20
25
Germany
$22.87
$2.50
Japan
$21.42
Taiwan
$5.97
South Korea
$11.52
Singapore
China
35
$32.53
United States
Mexico
30
$7.45
$0.91
117
Value of Chinese Exports and Received FDI, 19832007 (Billions of $US)
1,400
90
Exports
80
FDI Inflows
1,200
70
800
50
600
40
FDI
60
30
400
20
200
10
0
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
0
1983
Exports
1,000
118
Share of Global Manufacturing Output, 1993-2003
India
Taiwan
2003
1993
ASEAN
South Korea
China
0
1
2
3
4
5
6
7
119
Share of World Goods Exports, Selected Countries,
1950-2007
20%
40%
18%
35%
16%
30%
14%
25%
12%
10%
20%
8%
6%
4%
2%
0%
15%
United States
Japan
Germany
China
Four large traders (Right axis)
10%
5%
0%
120
Exports and Import Partners
Source : Central Intelligence Agency, The World Factbook, 2006
121
Corruption Perception Index, Selected Countries,
2006 (10 = the least corrupt)
Myanmar
Indonesia
Vietnam
Philippines
Thailand
China
South Korea
Malaysia
Taiwan
Japan
United States
Hong Kong
Singapore
Finland
0
1
2
3
4
5
6
7
8
9
10
122
Yuan Exchange Rate (per USD), 1981-2008
9
Yuan per USD
8
7
6
5
4
3
2
1
2007
2005
2003
2001
1999
1997
1995
1993
1991
1989
1987
1985
1983
1981
0
123
Major Foreign Holders of U.S. Treasury Securities,
2008
Korea
Singapore
Thailand
Taiwan
Hong Kong
Brazil
Oil Exporters
Caribbean Banks
U.K.
Japan
China
0
100
200
300
400
500
600
700
Billions
124
Asia Outperforms Other Regions, all Expect Solid
Growth
Real GDP growth, period averages
10
8
6
%
4
2
0
-2
-4
1992 – 2001
2002 – 2007
Central and Eastern Europe
Developing Asia
Middle East and North Af rica
2008 – 2011
2011
Commonw ealth of Independent States
Latin America and the Caribbean
Sub-Saharan Af rica
Source: IMF WEO, October2010
125
Growth in Emerging / Developing Economies
GDP per capita growth rate, period
averages
Real GDP growth, period averages
8
7
7
6
6
5
4
4
%
%
5
3
3
2
2
1
1
0
0
-1
1992 – 2001
2002 – 2007
2008 – 2011
1992 – 2001
2002 – 2007
2008 – 2011
World
Advanced Economies
Advanced Economies
Emerging and Developing Economies
Emerging and Developing Economies
Source: IMF WEO, October 2010
126
Prospects on Growth in Europe and Japan
•
The pace of growth in Europe will be quite slow.
•
Fiscal austerity and sovereign debt/banking jitters will be major drags on the
recovery.
•
Export growth (thanks to a weaker euro) and stronger consumer spending
in Germany will provide some support to the recovery.
•
Northern Europe (with the exception of Ireland) will continue to see decent
growth, whereas Southern Europe will grow a little and some economies
(Greece and Portugal) will contract.
•
Japan’s recovery was unsustainably strong in 2010 (4.3%) and will
decelerate considerably to only 1.5% to 2%.
127
127
The United States Outpaces Eurozone and Japan
(Real GDP, percent change)
6
4
2
0
-2
-4
-6
-8
1996
1998
2000
2002
2004
United States
2006
2008
Eurozone
2010
2012
2014
Japan
128
A Multi-Speed World
9
(Real GDP, percent change)
6
3
0
-3
-6
-9
NAFTA
Other
Western Emerging MideastAmericas Europe
Europe N. Africa
2009
2010
2011
SubSaharan
Africa
2012
Japan
Other
AsiaPacific
2013-20
129
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