with Chinese per-capita incomes now averaging just 8 per cent of those in Western Europe, Chairman Mao managed only to confirm China’s huge loss of global economic status.
In simple terms, then, the history of economic development over at least the last four or five hundred years has been a story of Western progress while other nations stagnated. By the beginning of the twentieth century, the world economy was completely dominated by the Western powers, who directly produced more than 50 per cent of the world’s GDP, a result of their rapid economic growth over many previous decades. By the mid-twentieth century, other nations just didn’t seem to matter: their shares of world income were tiny and their incomes per capita were minute. Across East Asia, for example, incomes per capita were less than one-tenth of those of the United States.
THE NEW FORCES OF GLOBALIZATION
While the progress of Western economies was, thus, hugely impressive compared with the competition, their progress did not depend purely on technology gains and the benefits of free markets, important though these sometimes were. There were three other vital ingredients. First, economies of scale made it more difficult for other countries to enter certain industries. Second, virgin lands with abundant raw materials and labour were discovered and exploited. Third,populations in other parts of the world were unable to stake meaningful economic claims. They were disconnected from the world’s productivity engines through the suppression of ideas, innovations and linkages with other nations, or by the violence meted out to them by the Western powers. Throughout its period of rapid economic development, then, the West was able to benefit from rent-seeking behaviour in all its forms.
Since the 1950s, however, there has been a remarkable change. Asia as a whole has delivered more than half a century of annual economic growth running at 3.5 per cent per capita, representing the fastest economic advance of any region in the entire economic history of the planet. China has overtaken Germany to become the third-biggest economy in the world and, on some measures, is ahead of Japan, thus making China second only to the US in economic terms. In just a handful of decades, China will probably also move ahead of the US to become the world’s dominant economic powerhouse. Other emerging nations are also growing rapidly. Their success is generating a new ‘gravitational pull’ in the world economy. No longer is the global economic agenda being set by the Western powers. The West’s influence is waning. New relationships are being forged which, over time, threaten to leave the West economically disadvantaged.
Globalization dramatically changes the ability of incumbent governments, companies and citizens in the West to continue benefiting from their earlier rent-seeking – or cheating – ways. Because capital can move around relatively easily, economies of scale can be created in an increasing number of countries (the US car industry is on its knees partly because of this enhanced capital mobility). There is only a finite amount of virgin territory to exploit and, in the absence of colonization (usually frowned upon these days), competing political interests may make the extraction of ever-increasing amounts of raw materials more and more difficult (as BP discovered in its Russian ventures). Most importantly, thepopulations of previously unsuccessful economies are now beginning to make their voices heard. China’s remarkable economic growth over the last thirty years hasn’t been enough to remove the majority of its population from poverty, but it now boasts a newly affluent middle class of roughly 300 million people.
For some, this isn’t a problem. Globalization is a natural feature of the economic landscape, leading to a happier, more contented, global community driven on by the ideas of the Enlightenment and the spread of liberal democracy. In this view of
In simple terms, then, the history of economic development over at least the last four or five hundred years has been a story of Western progress while other nations stagnated. By the beginning of the twentieth century, the world economy was completely dominated by the Western powers, who directly produced more than 50 per cent of the world’s GDP, a result of their rapid economic growth over many previous decades. By the mid-twentieth century, other nations just didn’t seem to matter: their shares of world income were tiny and their incomes per capita were minute. Across East Asia, for example, incomes per capita were less than one-tenth of those of the United States.
THE NEW FORCES OF GLOBALIZATION
While the progress of Western economies was, thus, hugely impressive compared with the competition, their progress did not depend purely on technology gains and the benefits of free markets, important though these sometimes were. There were three other vital ingredients. First, economies of scale made it more difficult for other countries to enter certain industries. Second, virgin lands with abundant raw materials and labour were discovered and exploited. Third,populations in other parts of the world were unable to stake meaningful economic claims. They were disconnected from the world’s productivity engines through the suppression of ideas, innovations and linkages with other nations, or by the violence meted out to them by the Western powers. Throughout its period of rapid economic development, then, the West was able to benefit from rent-seeking behaviour in all its forms.
Since the 1950s, however, there has been a remarkable change. Asia as a whole has delivered more than half a century of annual economic growth running at 3.5 per cent per capita, representing the fastest economic advance of any region in the entire economic history of the planet. China has overtaken Germany to become the third-biggest economy in the world and, on some measures, is ahead of Japan, thus making China second only to the US in economic terms. In just a handful of decades, China will probably also move ahead of the US to become the world’s dominant economic powerhouse. Other emerging nations are also growing rapidly. Their success is generating a new ‘gravitational pull’ in the world economy. No longer is the global economic agenda being set by the Western powers. The West’s influence is waning. New relationships are being forged which, over time, threaten to leave the West economically disadvantaged.
Globalization dramatically changes the ability of incumbent governments, companies and citizens in the West to continue benefiting from their earlier rent-seeking – or cheating – ways. Because capital can move around relatively easily, economies of scale can be created in an increasing number of countries (the US car industry is on its knees partly because of this enhanced capital mobility). There is only a finite amount of virgin territory to exploit and, in the absence of colonization (usually frowned upon these days), competing political interests may make the extraction of ever-increasing amounts of raw materials more and more difficult (as BP discovered in its Russian ventures). Most importantly, thepopulations of previously unsuccessful economies are now beginning to make their voices heard. China’s remarkable economic growth over the last thirty years hasn’t been enough to remove the majority of its population from poverty, but it now boasts a newly affluent middle class of roughly 300 million people.
For some, this isn’t a problem. Globalization is a natural feature of the economic landscape, leading to a happier, more contented, global community driven on by the ideas of the Enlightenment and the spread of liberal democracy. In this view of
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