Economía Global- Justin Jifu Lin

Korea-World Bank High Level Conference on

Post-Crisis Growth and Development
June 3, 2010 – June 4, 2010 Busan, Korea

Draft for comments only

A Global Economy with Multiple Growth Poles
Presenter: Justin Yifu Lin

Paper presented at the Korea-World Bank High Level Conference on Post-Crisis Growth and Development, co-organized by the Presidential Committee for the G-20 Summit and theWorld Bank with the support of the Korea Institute for International Economic Policy (KIEP).
The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the World Bank Group or those of the Executive Directors of the World Bank or the governments they represent.

A GLOBAL ECONOMY WITH MULTIPLE GROWTHPOLES Presentation for the Korea-World Bank High Level Conference on Post-Crisis Growth and Development June 4, 2010 Busan, Korea {Preliminary Draft of May 21, 2010} -----------------------Justin Yifu Lin 1. INTRODUCTION Globalization has been a powerful force for economic development over the last three decades. One of the historically largest declines in poverty was led by developing countriesthat successfully integrated into the global economy. 1 During a period when trade and financial flows across borders increased at a much faster pace than national GDPs, these countries used globalization as an opportunity to expand production and income opportunities in their home countries. International economic relations across countries multiplied dramatically over this period. Merchandisetrade as a proportion of GDP increased from about one-third in the mid 1980s to just over half of world GDP in 2008, and the increase was even larger for developing countries than for high income countries. Net foreign direct investment to developing countries (as a share of GDP) increased almost fivefold between the 1980s and the first decade of this century (from an average of 0.6 percent of GDPduring the 1980s to an average of 2.9 percent of GDP in 20002008). 2 As we emerge from the global economic crisis, however, we need to remind ourselves that globalization also means interdependence across nations. Over the last year-and-a-half, it showed that interdependence became the carrier of economic ruin. Systemic financial distress spread across many countries, and global trade linkscollapsed precipitously. One of the primary lessons of the recent global crisis is that in an interdependent world, it is necessary to have coordinated economic policy responses. We should remind ourselves of the severity of the situation at the start of the crisis. Equity markets were in a tailspin, there was the risk of bank runs in the world’s largest financial centers, and trade and industrialproduction plummeted. This all was occurring at a faster pace than in 1929, at the start of the great depression. Indeed, without a rapid international policy response, the global economy faced a looming depression.

1 2

See, for example, World Bank, 2002, Globalization, Growth and Poverty. Net FDI data is from the World Development Indicators catalog available at the World Bank’s Open Data website:http://data.worldbank.org/data-catalog

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The G20 served as a key policy coordination forum, and the coordinated actions of G20 members—along with the efforts of the international financial institutions and many non-G20 governments--have all helped avert a global financial meltdown and establish the basis for an incipient economic recovery. Central banks and governments in G20 economiesengineered financial rescues and rapid liquidity support. These were complemented by fiscal packages that enhanced aggregated demand and expanded social protection during the recession. There was an overall commitment on the part of the G20 to avoid trade protectionism that could have triggered a continued downward spiral in global trade flows. As financial markets recover back and growth resumes,...