OECD INSIGHTS OECD INSIGHTS O E C D IN S J EAN-Y VES H UWART LOÏC VERDI ER IG H T S ECONOMIC Economic Globalisation GLOBALISATION J E A N Origins and Although globalisation is as old as trade -Y itself, it remains controversial. Does it boost V Origins and Consequences Consequences E development or worsen inequality? Does S H it generate employment or destroy jobs? U W Does it damage the environment or offer means to A R preserve it? Does it cause fi nancial instability or make T investment more effi cient? L O Economic Globalisation: Origins and Consequences ÏC V from the OECD Insights series discusses these E R questions in relation to the recent crisis as well D IE as the history of global economic integration. It R examines how the accelerating interconnectedness of markets and national economies is affecting us all and assesses how globalisation is evolving in light of E recent events. C O Other titles in this series: N O Human Capital M Sustainable Development IC International Trade G L International Migration O Fisheries B A From Crisis to Recovery L I S From Aid to Development A T I O N On the Internet: www.oecd.org/insights Visit the Insights blog at www.oecdinsights.org ISBN 978-92-64-11189-9 01 2011 11 1 P -:HSTCQE=VVV]^^: 012011111cov.indd 1 09-Apr-2013 9:58:35 AM OECD INSIGHTS Economic Globalisation Origins and Consequences Jean-Yves Huwart and Loïc Verdier This work is published on the responsibility of the Secretary-General of the OECD. The opinions expressed and arguments employed herein do not necessarily reflect the official views of the Organisation or of the governments of its member countries. This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. Please cite this publication as: Huwart, J.Y. and L. Verdier (2013), Economic Globalisation: Origins and Consequences, OECDInsights, OECD Publishing. http://dx.doi.org/10.1787/9789264111899-en ISBN 978-92-64-11189-9 (print) ISBN 978-92-64-11190-5 (PDF) ISBN 978-92-64-11217-9 (HTML) Series: OECD Insights ISSN 1993-6745 (print) ISSN 1993-6753 (online) The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law. 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Requests for permission to photocopy portions of this material for public or commercial use shall be addressed directly to the Copyright Clearance Center (CCC) at [email protected] or the Centre français d’exploitation du droit de copie (CFC) at [email protected]. . Foreword International trade, migration and globalised finance are the ingredients of a cocktail named globalisation, the recipe of which we haven’t yet mastered and the taste of which we may, if we’re not careful, find bitter. Furthermore, these three ingredients are very unevenly dosed. Most countries want to strictly control international migration. They’re mak- ing timid efforts to organise international trade (booming since contai- nerisation) in major negotiations, while finance –globalisation’s most successful component– is still regulated very weakly. It’s an explosive mixture. Governments face widely-varying obsta- cles depending on migrants’ qualifications and country of origin, against the backdrop of a social question that’s becoming global. Trade growth creating both winners and, lest it be forgotten, losers is a source of tension. The economy’s excessive “financialisation” has emerged as the ideal culprit for a crisis whose extent we’re only now starting to measure, and runs the risk of distracting attention from a whole set of imbalances that have been growing over the past 20years. The danger lies in making globalisation responsible for most rich countries’ economic ills –offshoring, de-industrialisation, unem- ployment, rising income inequality, impoverished remote regions, and standardised lifestyles– and deluding us into believing that if we can reverse the phenomenon, we will solve all these problems. The truth is that no simple solution such as “deglobalisation” can respond to such complex phenomena. This book’s great merit is that it summarises currently available analyses and provides bench- marks against which we can evaluate the effectiveness of our judg- ments and policies in overcoming the growing fragility of individuals, companies, sectors, countries, and sometimes even entire regions. To support these benchmarks, the book provides an extensive his- torical overview that shows how empires and trade grew side by side. Where previously we had a centre and a periphery, today we are witnessing the emergence of a multi-centric world economy and the increasingly pronounced convergence of emerging countries, led by China, India and Brazil. 3 . While this convergence is specific to globalisation (on the upswing in the past 30years), it also applies to life expectancy, fer- tility and – quite spectacularly – education. Between the early1960s and2010, the literacy rate of the world population increased from under 60% to 82%. This crucial aspect of “immate- rial” globalisation is the combined result of generalised schooling, widespread communication networks and the proliferation of media for exchanging information. Our view of globalisation is very much influenced by the angle from which we approach it. Iwould like to emphasise three of the issues covered in this book. First, we must be very careful with the numbers we use to measure globalisation. Statistics are misleading. Trade is conducted by companies, not countries. Some of what fea- tures in international flows is only intra-firm trade stemming from a globally dispersed value chain, and some of what features in domes- tic flows stems from the activities of subsidiaries belonging to for- eign groups that have decided to shift from exporting to producing in the local market. Yet while this features in companies’ interna- tional activities, it mostly does not appear in international flows. Further, in the interests of objectivity, we need to retain a certain perspective on the extent of global economic integration. As MatthieuCrozet and LionelFontagné reminded us in Économie et statistiques (Economy and Statistics), published by the National Institute of Statistics and Economic Studies (INSEE) in2010: “In developed and emerging countries alike, the share of companies directly engaged in an international relationship is very much the minority, and rarely exceeds 20%. Moreover, most exporters have an extremely limited presence in global markets and are active only in a small number of neighbouring markets.” Finally, while most globalisation studies cover the legal economy, what do we know of the extent of the “dark side” of globalisation –the black market economy, offshore centres, etc.? As AlainBauer and XavierRaufer wrote in La face noire de la mondialisation (The Dark Side of Globalisation), published by the Centre national de la recher- che scientifique (CNRS) in2009, we must examine “how this criminal globalisation undermines economies, finances, and countries” if we are to implement effective policies to combat practices and organisa- tions that undermine democracies and equitable economies. 4 . It is up to each of us to observe and gauge, curiously and cautiously, the magnitude of the complex phenomenon of globalisation. Pascal Le Merrer Economist, professor at the École normale supérieure de Lyon, author of Économie de la mondialisation: opportunités et fractures (The Economics of Globalisation: Opportunities and Fractures) (de Boeck, Brussels, 2007) 5 . Acknowledgments The authors wish to thank BrianKeeley and PatrickLove for their editorial contribution and the following for their valuable advice and participation: AdrianBlundell-Wignall, BrendanGillespie, PrzemyslawKowalski, AndrewMold, RaedSafadi and PaulSwaim. We particularly wish to thank Katherine Kraig-Ernandes, Clare O’Hare-d’Armagnac, Jean Mispelblom Beijer and JanineTreves. The book was translated from French by RomydeCourtay and copyedited by PeterColes. OECD Insights Blog : http://oecdinsights.org. OECD Insights is a series of primers commissioned by the OECD Public Affairs and Communications Directorate. They draw on the Organisation’s research and expertise to introduce and explain some of today’s most pressing social and economic issues to non-specialist readers. 7