Abstract
Major changes have characterized the international economy since the ’70s. Asian growth, in China in particular, is changing the economic relations and development cooperation , with many emerging countries now becoming ‘new donors’. International finance has boomed to a level almost 10 times larger than world GDP ; however, financial crises are a recurrent phenomenon. Income distribution has been worsening in many countries: income and wealth are highly concentrated in the top 10% and top 1% of the population . Since the 2007 crisis, economic growth has slowed. Is this a secular stagnation? Large trade ‘imbalances’ and protectionist policies have emerged. Developing countries are experiencing huge migration outflows. All these economic forces can affect the long-run progress towards sustainable development.
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Notes
- 1.
On five imbalances UNCTAD (2017: 152).
- 2.
For a history of the ‘Flying Geese’ model, see Kasahara (2013).
- 3.
Emerging markets are important players in the world economy and in international cooperation, where they also constitute the main block of the so-called new donors.
- 4.
The emergence of new economic powers , or ‘new donors’, not members of the OECD-DAC , implies that many countries in Sub-Saharan Africa have the possibility to move beyond the economic relations of the post-colonial period, during which they maintained major economic links with the former colonial powers and with a limited number of other high-income countries.
- 5.
Between 1995 and 2012, South–South exchanges doubled their share in world trade.
- 6.
The incredible amounts achieved by financial markets have been called ‘The dance of the trillions’ (Palma 2009: 833).
- 7.
Remittances include only the officially registered ones, while hundreds of billions are assumed to enter developing countries in an unofficial way.
- 8.
More on this topic can be found in Vaggi (2018).
- 9.
The countries hit by the debt crisis of the eighties were: Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Mexico, Peru, Uruguay, Venezuela, Costa Rica, Jamaica, Cote d’Ivoire, Nigeria, Sudan, Yugoslavia, Poland, Hungary, Turkey, Algeria, Egypt, Morocco, Bangladesh, India, Pakistan, The Philippines, South Korea, Indonesia, Malaysia, Thailand and Portugal (Vaggi 1993).
- 10.
In Sub-Saharan Africa, the average GNI per capita declined from 1278 US$ (constant 2010 prices) in 1984 to 1123 US$ in 1998 (World Bank , World Development Report 1986 and 1999/2000).
- 11.
There are many similarities between some African countries today and some Latin American and Asian countries in the eighties and nineties, respectively.
- 12.
The story of the 1992 EMS collapse is more complicated than this; only the essential elements are highlighted here. On the financial crises , see also Moro and Beker (2015).
- 13.
However, the share of investments in GDP decreased from 35 to 25%.
- 14.
Thanks to large devaluations , most countries recovered rather fast; Malaysia, Thailand and the Philippines followed patterns similar to the Korean one, although the crisis was much deeper and longer in Indonesia (Vaggi 2002).
- 15.
The expression carrying trade can be found in the Mercantilist literature, where it refers to the physical transportation of commodities (Rubin 1929: 50–51).
- 16.
In the second part of the nineties, this mechanism already played an important role in bringing large capital inflows into emerging markets , namely, into Latin America.
- 17.
Blanchard et al. expect no major changes in nominal rates in the coming years, but they also stress the fact that forecasts of future global rates are very tricky (Blanchard et al. 2014: 106).
- 18.
- 19.
A criticism of the weak theoretical grounds of Piketty’s analysis is in Garbellini (2018).
- 20.
For a comment of Piketty’s book, see Milanovic (2014).
- 21.
Active fiscal policies can reduce ‘net inequality’, after taxes and transfers, with respect to ‘market inequality’, before state transfers; net inequality is positively correlated with economic growth (Ostry and Berg 2014). In Latin America, some successful policies have contributed to a decrease in inequality (Cornia 2014).
- 22.
In China, some regions along the coast have incomes per capita which are almost three times higher than those of internal regions.
- 23.
As Palma writes ‘about 80 per cent of the world’s population now live in regions whose median country has a Gini not far from 40’ (Palma 2011: 2, 10–12).
- 24.
This is the ratio of the first decile to the bottom 40% of the population, which derives from the observation that the share of income accruing to the five deciles from 5 to 9 is rather uniform across different countries (Palma 2011: 19).
- 25.
- 26.
Galbraith (2017) presents alternative views on the determination of the interest rate .
- 27.
Many contributors to the secular stagnation book by Baldwin and Teulings have remarked that low interest rates in the financial centres and for highly rated types of assets can easily lead to financial bubbles because of the search for high yields in emerging and marginal markets.
- 28.
Some emerging economies are now experiencing a decrease in their growth rates; Brazil, Russia and South Africa have had very low rates since 2012. Growth is slowing down in Indonesia, Turkey and in other emerging countries in East Asia.
- 29.
Gordon explains ‘secular stagnation’ in terms of the slowing down of the growth rate of labour productivity , which in turn is determined by a declining pace of technical progress , thereby generating a reduction in potential output (Gordon 2015).
- 30.
According to Solow , it is ‘time to rethink the way the credit mechanism mediates between savers and investors and puts credit to productive use’ IMF Finance and Development of June 2011: 51.
- 31.
Piketty compares the USA and UK, countries with low saving ratios (just above 7%), with Japan, whose saving ratio was close to 15%.
- 32.
Piketty seems to support the view that increased savings are due to demographic trends and to the so-called ageing society (Piketty 2014: 175).
- 33.
Remember that Piketty’s notion of capital is not physical capital as in Harrod (see Sect. 1.1 above) but includes all types of assets and is similar to wealth.
- 34.
Other counteracting factors are demography and technological change (Kuznets 1955: 8–9).
- 35.
Both in the USA and in the UK, the goods balance is much more negative than the trade balance and the current account , because both countries are very strong exporters of services, namely financial services.
- 36.
There are large differences within the Euro area: in 2018 in Germany and the Netherlands the current account surplus is close to 8 and 10% of GDP , respectively; other countries have either much smaller surpluses or small deficits. Between 2010 and 2018, Greece has been going through a financial crisis which bears many similarities to that of developing countries during the eighties.
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Vaggi, G. (2018). The Economy Strikes Back; Convergence, Divergence and Imbalances. In: Development. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-54879-1_3
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