Some analysts are predicting that the commodity price boom of the new millennium is something that has played itself out. Except for shale gas and its downward pressure on U.S. natural gas prices, however, natural resource-based commodity prices have remained high by historical records in the last few years, despite the feebleness of the recent global economic recovery.
New developments and curiosities from a changing global media landscape: People, Spaces, Deliberation brings trends and events to your attention that illustrate that tomorrow's media environment will look very different from today's, and will have little resemblance to yesterday's.
This week's Media (R)evolutions: China is an Internet Sleeping Giant.
In recent decades, Least Developed Countries (LDCs) have been using their natural-resources as collateral to access sources of finance for investment, countervailing the barriers they face when accessing conventional bank lending and capital markets. Depending on whom you ask, such financing models have been alternately vilified and sanctified in the global development debate.
The growth of China and India and their financial sectors are hard to ignore. In a recent working paper, Tatiana Didier and I study the extent to which firms in these countries use capital markets to obtain financing and grow.
Merchandise trade has become an increasingly important contributor to a country’s gross domestic product (GDP), particularly for developing countries. Before the global financial crisis hit in 2008, merchandise trade as a percent of GDP for low- and middle-income economies was 57 percent, about 5% higher than for high-income economies. This is very evident in Europe and Central Asia (ECA) where merchandise trade accounts for 73 percent of the developing region’s GDP. Many ECA countries including Hungary, Belarus, and Bulgaria have merchandise trade to GDP ratios above 100 percent (155, 136, and 114 percent respectively in 2011), meaning merchandise exports are a large contributor to their overall economy.
Is China, after a hiatus of 150 years, again the largest economy in the world? Not all sources of GDP data agree, but there is little doubt that China is either already now the largest economy, or it will, within a year, become so by overtaking that of the United States. Whichever the case may be, a long era when the American economy was the largest in the world and which began around 1860, is now reaching its end.
Data on gross domestic product (called now Gross Domestic Income) are available from three sources: the Maddison project, which is the only source for the long-run series of national GDPs, going back to 1820s; the World Bank or IMF annual data, going back to 1960; and Penn World Tables, produced periodically at the University of Pennsylvania, going back from their just-released version 8.0 to 1950 . All three sources produce GDP data in PPP (purchasing power parity) terms, which means that they adjust for differences in price levels between the countries. The easiest way to explain it is to say that PPPs try to account for each good and service using the same price for it around the world, so that a mobile phone, a kilo of rice and a haircut would each be valued the same in China as in the United States. Only thus can the real sizes of the economies, and the welfare of people, be truly comparable. These PPP data, in turn, are obtained through a massive worldwide project called the International Comparison Program, which is run every five to 10 years and collects more than 1,000 prices in all countries.
'Why is China Ahead of India? Implications for Europe and the US,' was the topic of a talk yesterday at the World Bank by Nobel winner Amartya Sen which was chaired by Kaushik Basu. In the span of just under two hours, Sen managed to pinpoint India's main Achilles Heel (primarily related to the low overall quality of education, poor health care and skewed energy and other subsidies), while weaving in references to Kido Takayoshi, Mao Zedong, David Hume, Mahatma Gandhi, Adam Smith, Jon Stuart Mill, Milton Friedman, Keynes, Marx and other thinkers and influencers.
Amartya's talk coincided with the publication of a New York Times op ed titled 'Why India Trails China' in which he stressed that one cannot wait to fix health and education only after reaching some modicum of overall prosperity. Indeed, proper health and education, which foster human capabilities, are an essential precondition to sustainable growth and the ability to compete successfully in an integrated world. India still needs to take these East Asian lessons fully on board.
In an earlier post, we highlighted a feature of the global pattern of investment in recent times: that since 2000, developing countries have gradually increased their share of global investment, moving from around 20 percent through much of the second half of the last century, to around 46 percent by 2010. The rapidity of this rise notwithstanding, the natural question is whether this trend will continue into the future.
Answering this question---on changing patterns of global investment---is one of the main concerns of the most recent edition of the Global Development Horizons report, entitled Capital for the Future. In order to frame the question, the report considers how different countries will distinguish themselves in the global economy and, consequently, how by doing so they will provide investment opportunities that would attract financing from the pool of global saving.
Successful industrial parks can drive economic competitiveness (Credit: World Bank, Flickr)
Why do so many industrial park programs fail? They are popular across the developing world, inspired perhaps by China, where they are widely used as a policy tool and where their products are impressive to the visitor: functional parks with many firms and bustling activity. But horror stories abound, even in China, of empty parks, subsidized land speculation and tax erosion, and often no parks at all. This has not dampened enthusiasm, however. The theory is simply too seductive. By providing high-quality, shared infrastructure to firms in specific areas, industrial parks are meant to create pockets of competitiveness that eventually spill over onto the rest of the economy. For capacity-constrained governments, they have the further appeal of focus.
The Chinese economy has changed dramatically over the last three decades. While its per-capita income was only a third of that of Sub-Saharan Africa in 1978, it has now reached an upper-middle income status, lifting more than half a billion people out of poverty. The numbers are dramatic: per capita income has doubled for more than a billion people in just 12 years. What was once a primarily rural, agricultural economy has been transformed into an increasingly urban and diversified economic structure, with decentralization and market-based relations rising relative to the traditional government driven command-based economy.