The state of play in the current process of globalization – to start with

November 11, 2006

How to start a brand new blog on globalization and the current triumph of capitalism?

First, I invite you to read the About the author and What this blog is about pages, of course. This is in order to get a better idea of what this blog is meant to be about.

Second, why not start off with an overview of the current state of play in the global economy?

Despite terrorism, avian flu, high oil prices, instability in the Middle East and the collapse of the Doha Round, “globalization lives”, so star columnist Martin Wolf in the Financial Times recently:

World merchandise exports rose 9.5 per cent in 2004 and 6 per cent in 2005, in constant prices. Within this, Asian trade was particularly dynamic, with exports rising by 14 per cent in 2004 and 9.5 per cent in 2005…global FDI reached $946bn in 2005, which put it above the $875bn of 2001 for the first time since then. Inflows into emerging market economies reached $316bn in 2004 and then $399bn in 2005, well above the $289bn of 2001.

The continued rise in financial globalisation is astonishing.. the total international financial assets of the advanced economies jumping from less than $60,000bn in 2000 to close to $100,000bn in 2004. For emerging markets, the comparable rise is from a little over $5,000bn to close to $8,000bn.

The conclusion is stark: the underlying drivers of contemporary economic integration – falling costs of transport and, above all, communications, liberalisation of barriers to transactions across frontiers and the entry of billions of people into the world economy for the first time – continue to work their powerful effects.

Last September, in its fascinating in-depth Survey of the world economy entitled The New Titans, The Economist made its readership aware of the following:

  • Emerging economies (5.5 billion people) account already for half the world output

The survey’s first finding is that in 2005, measured at purchasing-power-parity (i.e. taking into account lower prices in developing economies), emerging markets made it to reaching the threshold of 50% of the world’s gross domestic product. The IMF is forecasting that in the next five years emerging economies will grow at an average of 6.8% a year, while the developed economies are expected to achieve 2.7%. “If both groups continued this way, in 20 years time emerging economies would account for two-thirds of global output”. It is expected that by 2040, China will be the world’s first economy (though not in per capita terms)

  • “the borderline between rich and poor has become more fluid”

Already,“the borderline between rich and poor has become more fluid”, says the report. “What determines whether an economy is “developed” or “developing?”, asks The Economist further. “Economies used to be categorised as developed if they were members of the Organisation for Economic Co-operation and Development (OECD), the so-called “rich man’s club”. But today, the OECD is something of a mixed bag. It includes poorer countries such as Mexico and Poland, yest excludes places such as Hong Kong, Singapore and the UAE, which have GDP per person similar to Italy’s”.

  • The (re-)emergence of Asia

Asia is definitely going to be the major beneficiary of this shift in the distribution of the world’s riches. However, this might not be the “emergence” of China and India, but simply a very simple and welcome “back to normal”. The Economist reminds us that China and India were until the late 19th Century the world’s largest economies.

  • A strong message: rich countries – “watch out”

The report give clear warnings to today’s rich economies: “If today’s rich world does not watch out, it could become tomorrow’s relatively poor world”. It warns particularly against protectionism – protectionism could “destroy the main source of wealth-creation in the 21st century” and “deny better living standards to hundreds of millions of people in the developing economies”. However, throughout the survey, it insists on the fact that rich-country workers, and increasingly the highly-skilled, are losing out in the global competition with cheaper emerging-economy workers whose skills are drastically improving. Indeed, “the entry of China, India and the former Soviet Union into market capitalism has […] doubled the world supply of workers, from 1.5 billion to 3 billion”.

  • Workers of this world, don’t count on your wages

Prices of manufactured goods have significantly gone down, to the overall benefit of the world’s increasing numbers of consumers. Yet, fellow workers of this world, do not count on your wages to finance your shopping binges. “The real weekly wage of a typical American worker in the middle of the income distribution has fallen by 4% since the start of the recovery in 2001”… And this while labour productivity – which is supposed to determine wages – has risen by 15% in the same period. “Real wages in Germany and Japan have also been flat or falling”. Yes, comrades, rather try and become shareholders in today’s big corporations – “Corporate America has increased its share of national income from 7% in mid-2001 to 13% this year.”

We are in the heart of the matter, global capitalism and class struggle…. To put it briefly and provocatively, what is happening now is what Karl Marx and Friedrich Engels already said in 1848 in the Communist Manifesto:

“The bourgeoisie cannot exist without constantly revolutionizing the instruments of production, and thereby the relations of production and with them the whole relations of society […] Constant revolutionizing of production, uninterrupted disturbance of all social conditions, everlasting uncertainty and agitation distinguish the bourgeois epoch from all earlier ones”.

This blog is set to be an exciting adventure for writer and hopefully reader alike!

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