The consequences of the new international economic order on developing countries Plattsburgh, 30/08-02/09 Maria Negreponti-Delivanis
The consequences of the new international economic order on developing countries
Maria Negreponti-Delivanis
Introduction
The
21st century brings great upheavals upon the world in all its theoretical,
geopolitical, economic, social and institutional manifestations. Numerous
indications testify to the total overthrow of the balance of power on all
levels of the international order as imposed immediately after the end of the
Second World War, and preserved almost to this day. The Western world, along with
all the individual elements that have established its global dominance, is now
receding and another culture, with completely different characteristics is
rising,.
The
West had, in principle, ruled out this change in the world power balance, since it had
adopted (with little criticism) the absolute views of Francis Fukuyama (1989).
The well-known philosopher asserted that liberal democracy had prevailed
forever, and that following the dissolution of actual socialism, the whole
world would be obliged to embrace it. He also asserted that the development of less
advanced economies would be impossible under any system other than liberal
democracy. However, he was soon forced to allow serious doubts into his
unfounded, as it turned out, beliefs
(Francis Fukuyama, 2018), as there could be no doubt that China
The
invasion of China in the
formerly unperturbed world prevalence of the West, through the United States
It is, therefore,
generally accepted that the end of civilizations, each of which lasts around
200-250 years, is unavoidable and therefore, in principle independent of a
particular constitution, a prevailing worldview or individual acts or
omissions. Thus, out of the ashes of the Ancient Greek civilization the Western
culture was born, with the emergence of the dominant economic centers of Australia , Great
Britain , and the United States
This
article focuses on the interconnections that arise between the decline of the
West and the development of the least developed economies. Western retreat
brings to the fore emerging and developing economies preparing to occupy the
void of world leadership and, placing China China
The
rotation of global power which is already marginalizing the West, is caused and
causing sweeping changes on the international economic scene. Most of the
changes, to be analyzed in Part I, have probably accelerated the end of Western
sovereignty, and some of them represent the takeoff point of some emerging
economies. The consequences of these changes in the developmental dynamics of
emerging and then less advanced economies will be explored in Part II. The
interdependencies and processes of these changes have changed the world's
economic map and created founded growth hopes for developing countries.
Part
I. The end of the economic sovereignty of the West
There is an
inexhaustible number of catalytic developments in the internal and external
environment of modern economies that radically altered their mode of operation
and is not limited to the economic sphere but extends to many others. It is,
however, wrong to see these developments as independent, since they are mostly
interrelated, and it is easy to see the existence of causal relationships among
them. It is with no hesitation that I will choose globalization as the catalytic
change, which gradually caused most of the rest. An extreme form of
globalization, which has destroyed the smooth functioning of advanced
economies, but at the same time has been the engine of progress for some
emerging and developing economies, China US
in the 1980s, when the latter started nervously witnessing a drop in its rate
of growth, a loss of productivity compared to Germany
and Japan United States
A. Time for the developing economies
The ground for the
succession of the West by China
The world population is
expected to grow from 7.3 billion today to 8 billion in 2030, to 9 billion in
2050 and 11.2 billion in 2100. This increase, by about 50% of the world's
population by 2100, will be unevenly distributed as Europe and eastern Asia
will witness a decline in their population, while an increase is expected for the
US US
The most important and threatening prediction
for the advanced economies however, is that their population will grow older. Based
on the UN's median forecasts, the number of people over 65 will increase by
more than 600 million and will reach 2.5 billion in 2100, almost doubling
compared to today. Relative research concerning the OECD economies results in
the non surprising conclusion that the aging of their population will have
negative consequences on growth (Bloom, E. David). In fact, empirical surveys referring to American states
for the period 1980-2010 show that, when the proportion of the population over
60 years increases by 10%, growth per capita is reduced by 5.5% (Maestas. Mullen
et al).
B. Western mistakes favor developing economies
Apart from these demographic changes,
the weakening of the West, which has paved the way for developing economies to
rise on the world scene, there are also the unfavorable consequences of
globalization. These can be distinguished into economic and other consequences.
a) Economic consequences
aa) Peaking
inequalities in income and wealth distribution (Maria Negreponti-Delivani,
2018)
The adoption of globalization, which is the
final stage of capitalism, was since the beginning combined with an extreme
form of neoliberalism. The worst consequence of globalization is undoubtedly
the peaking inequality of distribution on all levels, which has intensified also
because individual neoliberal governments have been reluctant to intervene on
the grounds that disparities supposedly favor growth and progress (Negreponti-
Delivanis, 2019). Let me indicatively mention some unacceptably high
inequalities in the distribution of income and wealth. These multifaceted and
enormous distributional inequalities are certainly at the root of shocking
changes in modern economies.
* Let me start with the Gini index,
which measures personal distribution globally and has for the first time in
history reached 0.70, which means unprecedented inequality that no country has
ever witnessed in the past. Indeed, 1% of the wealthiest Americans were earning
around 10% of GDP in 1915, while in 2007 this figure was 24%. Regarding the
distribution of wealth, the evolution of inequalities is even more relentless,
since in the same period (1915-2007), the wealthiest 0.1% of households, climbed
from representing 9% of wealth, to 22%. In addition, according to a recent
study, 1% of adult citizens in America
* Let me continue with the
functional distribution, ie with the share of labor and capital in national
income, as measured by the Cobb-Douglas function. These shares remained
unchanged until the 1980s, that is until the establishment of globalization and
the developments following it. In 2010, the OECD collected a series of macroeconomic
data for its 15 Member States for the period 1976-2006, showing that, from 1976
to 2006, the share of wages, including indirect or social wages, represented
67.3% (2) of GDP in 1980, which roughly corresponds to the advent of
globalization, dropping by 10 percentage points in 2006, to representing 57.3%
of GDP (3). In addition, according to IMF estimates (4), the share of wages in
the G7 member countries fell by 5.8 percentage points over the period
1983-2006, and in particular by 8.8 points in the EU member states (5) ). This
reduction, estimated at 100 and $200 trillion, has been virtually deducted from
consumption, and to a considerable extent from investment as well (Rocard a).
This decline partly explains the slow economic growth of the West.
* It gets worse with each generation
A survey conducted in America
-In 1973, full-time income (adjusted
for inflation) amounted to $54,030, compared to just $51,640 in 2016.
-In 1967 the average salary
(adjusted for inflation) of a 25-year-old man was $33,300, compared to just
$25,000 in 2011.
- Wage levels in the US
-The general conclusion is that
since 1970, three-quarters of American workers have not improved their standard
of living. For 4 out of 5 employees, there has been no real progress. The
fruits of progress were reaped by 1% of the wealthiest Americans.
bb) Labor
under persecution
According to estimates, between 1999
and 2007 worldwide, labor productivity increased by 30%, while real wages by
only 18% (Artus and Virard). This sharp drop of the share of labor in favor of
profits, in the GDP of advanced economies, was accompanied by a wave of
reforms, which resulted in a reduction of worker protection measures. The
absence of state intervention, resulting from extreme neoliberalism, did
nothing to improve the increasingly worsening position of labor during this crucial
period, Thus, even from the point of the dominant neoclassical theory, there is
a significant "unorthodox"
decline in the share of labor, in favor of capital. This unfavorable
consequence for workers is first and foremost due to globalization, which has
forced the workers of advanced economies to compete with much lower wage rates
for workers in developing countries.
(cc) Other adverse economic
consequences of globalization
I will complete this paragraph with the adverse
economic consequences of globalization in the evolution of advanced economies,
with reference to:
* The unbridled operation of the stock market,
confirmed by a relevant IMF report, based on empirical research in 149
countries, for the period 1970-2010 (Furceri and Lungari). The stock market
recorded an increase of 150 times that of real figures in the period 1992-2007
(Le crack) as the rich do not invest in the real economy but either hoard their
profits or invest them in the stock market seeking fast and easy profits
(Dolan).
* More than double the tax burden on income, in
relation to that on business profits (6).
* The generalized application of austerity
policy (7).
* The tolerance or ineffective regulation of
tax havens, estimated to hold about half of the world's liquidity. The latter
is estimated at about $ 230 trillion, or about three times the world's GDP
(Rocard b).
* The government's abstention from the
implementation of redistributive policies (Negreponti-Delivanis 1977),
progressive taxes and the welfare state (Krugman), and from the pursuit of a full employment policy.
*Weakening competition and the rise of
monopolies, with the tolerance of giant businesses, who usually do not pay
taxes and, in general, do not respect the laws of capitalism. Indicatively, Apple
holds 62% of the US US
* A frantic privatization race, starting with
the demotion of the public sector and the abolishment of the interventionist
role of the state, in the belief that the existence of the invisible hand is
supposedly able to regulate everything.
b) Non-economic consequences
In this paragraph, I will briefly look
at some of the negative social and national consequences of globalization:
* Social
One of the most dangerous
consequences of globalization, social in principle, but with wider implications
for the economy and the functioning of institutions, is the decimation of the
middle class (Birdsall). Unfortunately, this is a troubling development, not
only for advanced but for some developing economies as well. Maintaining or
creating a middle class requires a daily income of at least $10 per capita, so
that its members are positioned approximately in the middle of the distribution
of income, able to plan their future and cope with conjunctural short-comings
such as loss of employment, health problems or the bankruptcy of a small
business without having to radically change their lifestyle. The importance of
the middle class for the economy lies in the fact that it possesses all the
specializations decisive for growth and
also encourages the basic economic propensities, but more importantly, that its
members show a steady preference for domestic goods and services that promote
growth. I will indicatively mention the case of America Pew Research Center
c)
Institutional / Ideological
aa) The abolishment of the Nation-State and national borders
Since the
1970s, a shift (Huntington ) towards
globalization which started in America
bb) Democracy receding
Liberal democracy no longer prevails in advanced economies as was
generally the case in the past. Note
that democracy was nowhere applied according to the specifications of ancient
Greeks, as it appears to be contrary to human nature and is recognized as a
property of the Gods (Bradatan). However, beyond this general observation, it
is certain today that authoritarianism is constantly gaining ground all over
the world. For 13 years, Freedom House, a non-profit American organization,
founded in 1941, has been observing leaks in the degree of dominance of the
democratic system, which have recently been witnessed in the case of America
cc) The problem of immigration
One of the most serious problems which Europe has
to deal with, although unsuccessfully, which is already dividing it, which is
manifested in many aspects and is at the
root of the creation of political parties which are difficult to classify as
extremer right or far left, is the refugee /immigration one. Unregulated hordes
of refugees / immigrants are constantly flowing from the Middle East, Africa
and South Asia through the Mediterranean to Europe .
For the years 2014, 2015 and 2016 it is estimated that this inflow amounted to
around one and a half million people.
The combination of an aging
population and a decreasing birth rate in Europe
with unbridled migratory flows lead to findings that predict its disappearance.
Please note the following (Meotti): The European population decreases by about
two million per year, and is constantly being replaced by a migrant population.
This substitution is described as follows (Coleman): "The suicidal decline
in European birth rates, combined with rapidly growing immigrants, will change
European culture." The decline in birth rates of native Europeans
coincides in fact with the institutionalization of Islam in Europe
and the renewal of Islamization of its
Muslims". According to estimates (United Nations), about 250 million
people live and work outside the country where they were born, of which about
78 million in Europe .
The wrath of the many losers, who
for fifty years remained on the sidelines of the advantages of the
international economic order, exploded against globalization and brought
populism to the forefront of populist parties that gradually flood the world.
Globalization has emerged as the main responsible for the peaking inequality of
income and wealth distribution that haunts the world. These right-wing and
left-wing populist and hybrid parties coincide in a number of common choices,
such as anti-globalization, nationalism, state interventionism, prosperity, enslaved
democracy, and opposition to the stock market.
Part II. The take off of China
Globalization
together with its unsuccessful economic choices and consequences, has greatly
weakened the West. The most dangerous of its consequences is undoubtedly the
inequality of distribution and wealth, which was analyzed in Part I of this
article. It is particularly important to note that, contrary to the chronic
neoliberal beliefs that distribution inequalities supposedly favor growth,
recent studies prove the incorrect foundation of these views and explain why
the problem of inequality has been addressed to date, only as a social one
instead of the economic problem which it mainly is. In particular, according to
a recent report (FMI), when the richest 20% of the population increases its
income by 1%, growth rates fall by 0.08% in the next five years, while a 1%
increase in the income of the poorest 20% of the population increases growth by
0.38% over the next five years. Similar are the findings of a recent report
(OCDE), which argues that rising inequality in the period 1990-2010 has led to
a 4.7% decline in growth in its member countries.
In this Part
II, I will first examine China
A.
China in the process of succeeding the US
During the 2008 crisis, China China
This weakening of
the West, due to its own bad choices, represents an addition to the inevitable
phenomenon of the rotation of civilizations, which is usually combined with
changes in international sovereignty, and has brought China to the fore. Furthermore,
some of the emerging economies have risen on a secondary level, participating
in the fast race for growth and going faster than the mature economies of the
West. Thus, globalization, while bringing about dramatic changes in the West,
in the 1970s was, at the same time, the great opportunity for China China China was the poorest economy in the world with
a per capita income 20 times lower than that of America China 's GDP per capita was only four times lower
than that of America America China is already targeting world leadership,
threatening the United
States 2016, in spite of the unfavorable influence of the
second major economic crisis in 2008. The World Bank estimates that in the
period 1981-2010, China managed to save 679 million citizens from absolute
poverty and simultaneously impose itself as a great power. The absolute poverty
rate in China 5 a
day thanks to globalization. This development is very positive for the
preparation of the development process of developing economies.
The driving force behind the Chinese miracle is
China's great ability to efficiently apply already known technologies, the
rapid shift of a significant part of its rural population to industry, the high
and long-term accumulation of capital, significant foreign direct investment, an
efficient public sector, the successful combination of communism and
capitalism, its well-thought-out interventions concerning the external value of
its currency, expansionary monetary policy, the rapid development of a strong
middle class (Chinese Society), alas combined with the restriction of civil
liberties with the choice of an enslaved democracy.
The awakening of the West came with great delay.
For a long time, the West rested assured that China China
B.
The Chinese Model of International Relations
Globalization has been the great opportunity,
not only for China , but also
for many developing economies of Asia, Africa and the Balkans, through China China 's
choices, diametrically different from those of the United States
Unlike the US ,
whose relationship with the economies it works with is competitive, for China China China China 's intention is to reorganize Asia on the basis of a system of political and economic
cooperation based on local development and implemented with the help of Chinese
investments. China China
C. The Great Growth Opportunity for
Least Developed Economies
a) Chinese globalization
At the time when, according to all relevant
indications, traditional globalization is bidding us goodbye, another form of globalization
is emerging, with unprecedented standards. It is Chinese globalization (Perlez
and Huang), known as "One Zone, One
Road China Marshall plan", as described
by the Chinese leader of Xi Jinping (Laos );
a globalization that is also combined with protectionism and whose content has
been designed as to favor metropolitan China China China China
is increasing its influence on Africa, Asia and Europe
by offering billions of dollars for infrastructure projects. The people of the developing
countries are willing to follow China ’s
lead, as they hope that the help and favorable loans offered by China China 's
unbridled expansive aspirations and accusing her at times for burdening the developing economies, especially
Africa , with unsustainable loans that they
will be unable to repay. Although China China 2016 in the Black
Continent. The West is virtually absent from this cosmogony. The large
infrastructure requirements of many countries linked to the new "silk
road" amount to $ 1.7 trillion per year. Alongside the silk road running
on the ground and through the sea, Xi Jinping is planning the "silk road
on ice". Although not close enough to it, China 's
ambitious project of the “New Silk Road” includes the Arctic .
Thus, China is planning to build ports there, as well as the necessary
infrastructure projects to make navigation there easier, especially now with
the ice melting.
The construction, of huge infrastructure
projects all over the world, even with losses for China China China Marshall plan,
which helped rebuild post-war Europe, and through which America acquired allies in Europe ,
and was imposed as the world's first power.
b) The objectives of
Chinese globalization promise the development of the least developed economies
The main objective of the new silk
road is to promote exports of Chinese industrial products, which is ensured by
the gradual development of developing economies.
With the establishment of the Asian
Infrastructure Investment Bank in 2013, China
Twenty Chinese cities are now
directly linked to Europe by rail, and the amount of cargo shipped there has risen
fivefold since 2013, as routes such as Cheddus - Prague China is also interested in Europe
and the Balkans for selling large quantities of its products. Investments to
Europe, and primarily to Germany China
intends to build the fastest road between China
and the Balkans, with a motorway starting in Belgrade-Nis (Serbia ) -Pristina Kosovo) -Dirrachio (Albania port of Piraeus to central and eastern Europe through Serbia China Hungary , Bulgaria , Greece ,
Romania , Poland , Bosnia and
Herzegovina , Serbia ,
Croatia , Slovenia , Albania ,
Northern Macedonia, Montenegro ,
the Czech Republic ,
Lithuania , Estonia Italy
should also be added to the latter, a member of the G7, which recently concluded
large-scale agreements with China ,
causing great concern in Europe and the whole
of the West. China
The West, among other, blames China China
Conclusion
It is impossible to assess whether the
unfortunate choices of the West accelerated the end of its world sovereignty,
but it is certain that this would have happened anyway. The very positive
development of these global power shifts is the opening perspective for rapid
growth of the least developed economies. The question is of course, whether
Western reactions to the loss of sovereignty will hinder the development of the
developing economies for a while. The trade war, which is both a technological as
well as a cold war and whose ultimate goal is to slow down China
If, the war is ultimately avoided, the
predicted developments are as mentioned in the main body of the present
article. For quite some time, there will be two globalizations in the world:
the receding traditional one and the rising Chinese. This duality will be
maintained until China
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Notes
---------------
(1) Although the US economy is evolving in a more satisfactory way
compared to Europe , because it did not follow
the extreme neoconservative monetary policy, there are still valid reasons for
concern about its near and distant future. The difficulties facing the US
(2) That is considered normal,
ie 2/3 the share of labor and 1/3 that of capital
(3) The Federal Reserve
figures are about the same: a decade ago, wages as a share in US GDP were 70
and now only 61. The very large difference was channeled towards the profits of
the very rich.
(4) March 2008
(5)
Commission
Eurpéenne
(6) The highest tax on returns
on investment amounts to 20%, while the highest tax on income amounts to 39.6%
(7) The Second UN Special
Report on Greece
(8) Not different from similar
trends in other advanced economies
The consequences of the new international economic order on developing countries Plattsburgh, 30/08-02/09 Maria Negreponti-Delivanis
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