Hand in hand with the trend toward globalization has been a fairly dramatic change in the demographics of the global economy over the past 30 years. As late as the 1960’s, four stylized facts described the demographics of the global economy.
The first was U.S. dominance in the world economy and world trade picture. The second was U.S.dominance in world foreign direct investment. Related to this, the third fact was the dominance of large, multinational U.S. firms on the international business scene. The fourth was that roughly half the globe – the centrally planned economies of the Communist world – was off limits to Western international businesses. As will be explained during the course.
All four of this qualities either havechanged or are now changing rapidly.
The Changing World Output and World Trade Picture
In the early 1960´s, the United States was still by far the world’s dominant industrial power. In 1963, for example, the United States accounted for 27 percent of world output, still by far the world’s largest industrial power but down significantly in relative size since the 1960´s (see table at the end ofthis article).
Nor was the United States the only developed nation to see its relative standing slip. The same occurred to Germany, France and the United Kingdom, all nations that were among the first to industrialized. This decline in the U.S. position was not an absolute decline, since the U.S. economy grew at a robust average annual rate of over 3 percent from 1963 to 2000 (the economies ofGermany, France and the United Kingdom also grew over this time period). Rather, it was a relative decline, reflecting the faster economy growth of several other economies, particularly in Asia. For example, as can be seen from table mencioned, from 1963 to 2000, Japan’s share of world output increased from 5.5 percent to 14.2 percent. Other countries that markedly increased their share of worldoutput included China, Thailand, Malaysia, Taiwan, and South Korea. By virtue of its huge population and rapid industrialization, China is emerging as a potential economic colossus.
By the end of the 1980’s, the U.S. position as the world’s leading exporter was threatened. Over the past 30 years, U.S. dominance in export markets has waned as Japan, Germany and a number of newly industrializedcountries such as South Korea and China have taken a larger share of world exports. During the 1960’s the United States routinely accounted for 20 percent of world exports of manufactured goods. But the U.S. share of world exports of manufactured goods had slipped to 12.3 percent by 2000. despite the fall, the United States still remained the world’s largest exporter, ahead of Germany and Japan.
In 1997and 1998 the dynamic economies of the Asian Pacific region were hit by a serious financial crisis that threatened to slow their economic growth rates for several years. Despite this their powerful growth may continue over the long run, as will that for several other important emerging economies in Latin America and Eastern Europe. Thus, a further relative decline in the share of world output andworld exports accounted by for by the United States and other long – established developed nations seems likely. By itself, this is not a bad thing. The relative decline of the United States reflects the growing economic development and industrialization of the world economy, as opposed to any absolute decline in the health of the U.S. economy, which entered the new millennium stronger than ever.If we look 20 years into the future, most forecasts now predict a rapid rise in the share of world output accounted for by developing nations such as China., India, Indonesia, Thailand, South Korea, and Brazil, and a commensurate decline in the share enjoyed by rich industrialized countries such as Great Britain, Germany, Japan, and the United States. The World Bank, for example has estimated...