Multi-year Expert Meeting on
International Cooperation: South–South Cooperation and Regional Integration
23–25 February 2011
Shifting Wealth and What It Means for Development
Policy
by Mr. Andrew Mold
Senior Economist, OECD
Perspectives Perspectives on Global Development on Global Development
Shifting Wealth and What It Means for Development Policy
UNCTAD, Geneva February 23, 2011
2
An Inclusive Space for Dialogue
Non-OECD Countries2010 – 13 membres
OECD Countries2010 - 26 membres
Morocco
Mauritius
Romania
Viêt-Nam
Colombia
Costa Rica
DominicanRepublic
Egypt
South Africa
India
Thailand
Brazil
Peru
Indonesia
AfDB(Observer)
OECD Development Centre
3
1 Shifting Wealth: Definition
Shifting Wealth: South‐South linkages 3
2 The Macroeconomics of Shifting Wealth
4Shifting Wealth and the Growing Divide within Developing Countries
Outline
5 Shifting Wealth and its Social Dimension
6 Policy Conclusions and Summing Up
4
1 Shifting Wealth: Definition
Shifting Wealth: South‐South linkages 3
2 The Macroeconomics of Shifting Wealth
4Shifting Wealth and the Growing Divide within Developing Countries
Outline
5 Shifting Wealth and its Social Dimension
6 Policy Conclusions and Summing Up
5
Emerging and Developing Countries Driving Global Growth since 2000Contribution to world GDP/PPP growth 1990‐2015
Annual global GDP‐PPP growth rate (based on 3‐yr moving average)
0%
1%
2%
3%
4%
5%
6%
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Contribution of advanced economiesContribution of emerging and developing economies
Source: OECD Development Centre, Perspectives on Global Development 2010 Shifting Wealth based on IMF World Economic Outlook, 2010, AprilNotes: Data for 2010-2015 based on IMF projections
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A New Geography of Growth: The Four-speed World in the 1990s
Source: OECD Development Centre, Perspectives on Global Development 2010 Shifting Wealth
The disappointing reality
10
A New Geography of Growth: The Four-speed World in the 2000s
Source: OECD Development Centre, Perspectives on Global Development 2010 Shifting Wealth
Goodbye Divergence, Hello Convergence?
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1 Shifting Wealth: Definition
Shifting Wealth: South‐South linkages 3
2 The Macroeconomics of Shifting Wealth
4Shifting Wealth and the Growing Divide within Developing Countries
Outline
5 Shifting Wealth and its Social Dimension
6 Policy Conclusions and Summing Up
12
1.1. 800 mln 800 mln ‐‐ 1.5 bln workers1.5 bln workers join globalised labour force since late 1980s →low‐skilled wages
2.2. Raw material demand Raw material demand → ↑ commodity prices
3.3. From net debtor to net creditor From net debtor to net creditor → ↓ interest rates & ↑ liquidity
Shifting Wealth: Impact on Global Wages, Prices and Interest Rates
13
Developing Countries Now Hold Most Foreign Exchange Reserves
Source: IMF International Financial Statistics, Sept 2010
14
Developing Economies no Longer Perceived as High risk/Low return
0%
20%
40%
60%
80%
100%
120%19
9019
9119
9219
9319
9419
9519
9619
9719
9819
9920
0020
0120
0220
0320
0420
0520
0620
0720
0820
0920
1020
1120
1220
1320
1420
15
Advanced economies Emerging and developing economies
Source: OECD Development Centre, Perspectives on Global Development 2010 Shifting Wealth based on IMF World Economic Outlook, 2010, April
Public Debt as % of GDP
16
The Chinese and Indian Middle Class will Drive Global Demand
Source: Kharas (2010) “The Emerging Middle Class in Developing Countries,” OECD Development Centre Working Paper No. 285, Projections based on data from the Wolfensohn Center for Development, Brookings Institution
Share of global middle class consumption
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1 Shifting Wealth: Definition
Shifting Wealth: South‐South linkages 3
2 The Macroeconomics of Shifting Wealth
4Shifting Wealth and the Growing Divide within Developing Countries
Outline
5 Shifting Wealth and its Social Dimension
6 Policy Conclusions and Summing Up
19
Rising Share of South-South Trade on Global Trade
Source: OECD Development Centre, Perspectives on Global Development 2010 Shifting Wealth based on UNCTAD Handbook of Statistics (2010), excluding transition economies
20
Rising Share of South-South Trade on Global Trade
Source: OECD Development Centre, Perspectives on Global Development 2010 Shifting Wealth based on UNCTAD Handbook of Statistics (2010), excluding transition economies
21
Potential Gains from S-S Trade Liberalisation are twice than N-S
Source: OECD Development Centre, Perspectives on Global Development 2010 Shifting Wealth
22
Growth Through Cheaper Imports for Capital Goods?
Source: OECD Development Centre, Perspectives on Global Development 2010 Shifting Wealth based on United Nations (2010)
Chinese exports of capital goods to low and middle-income countries
23
Shifts in Relative Prices for US Imported Goods, 2000-09
Source: OECD Development Centre, Perspectives on Global Development 2010 Shifting Wealth based on US Department of Labour (2010)
% change over the period
24
Rising Outward Foreign Direct Investment from Emerging Economies
Source: OECD Development Centre, Perspectives on Global Development 2010 Shifting Wealth based on UNCTAD Foreign Direct Investment database 2010
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1 Shifting Wealth: Definition
Shifting Wealth: South‐South linkages 3
2 The Macroeconomics of Shifting Wealth
4Shifting Wealth and the Growing Divide within Developing Countries
Outline
5 Shifting Wealth and its Social Dimension
6 Policy Conclusions and Summing Up
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Shifting Wealth and the Growing Divide within Developing Countries
Why convergence?
→ the ability to absorb technologies and generate new ones throughthe ability to absorb technologies and generate new ones through• Human capital upgrading
• R&D
• FDI and trade
But the technological divide is growingtechnological divide is growing
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Growth Accounting and the Four-Speed World, 2000s
Source: OECD Development Centre, Perspectives on Global Development 2010 Shifting Wealth
Contribution to output growth byOutput growth
(average annual growth
rate)
TFP growth
Physical capital growth
Human capital growth
Affluent 3.3% 1.1% 1.6% 0.6%Converging 5.7% 2.8% 1.8% 1.1%Struggling 3.1% 0.5% 1.2% 1.4%
Poor 3.2% 0.6% 1.2% 1.4%
Brazil 3.4% 1.4% 0.7% 1.3%China 9.3% 4.4% 4.4% 0.5%India 7.0% 2.1% 3.7% 1.2%
South Africa 4.2% 1.8% 1.7% 0.7%
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The Technological Divide is Growing Between Developing Countries
Source: World Bank (2009).
Patent applications per 100 000 people
30
A Shift in Tertiary Education towards Asia
Note: Calculations based on number of pupils enrolled in tertiary education worldwide regardless of age.Source: UNESCO (2009).
World share
32
1 Shifting Wealth: Definition
Shifting Wealth: South‐South linkages 3
2 The Macroeconomics of Shifting Wealth
4Shifting Wealth and the Growing Divide within Developing Countries
Outline
5 Shifting Wealth and its Social Dimension
6 Policy Conclusions and Summing Up
33
Poverty Fell Dramatically… but Unevenly (mostly in China)Headcount poverty rates
% of population living under USD 1.25 2005 PPP
Source: OECD Development Centre, Perspectives on Global Development 2010 Shifting Wealth based on Chen and Ravallion (2008).
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Growth is not a Sufficient Condition for Human Development
The case of Under‐5 Mortality Rate
Region 1990 2008 % change over period
Sub‐Saharan Africa 108 86 ‐20%Middle East and North Africa 57 33 ‐42%South Asia 88 57 ‐35%East Asia and Pacific 41 22 ‐46%Latin America and Caribbean 42 19 ‐55%Central and Eastern Europe and the CIS
42 20 ‐52%
Source: UNICEF (2010)
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…But Inequality Within Many High-growth Economies Increased
Note: Gini coefficients for income (Brazil) or per capita expenditure (India, China, South Africa)Source: OECD Development Centre, Perspectives on Global Development 2010 Shifting Wealth, OECD (2010) for China and World Bank (2009a) for
Brazil.
Gini coefficient
37
Shift in Focus from Absolute Poverty to Relative Deprivation
Source: OECD Development Centre, Perspectives on Global Development 2010 Shifting Wealth based on OECD (2008) and World Bank (2009).
•Absolute and relative poverty headcount for selected OECD and non-OECD countries (mid-2000s)
* Indicates income rather than consumption measure
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1 Shifting Wealth: Definition
Shifting Wealth: South‐South linkages 3
2 The Macroeconomics of Shifting Wealth
4Shifting Wealth and the Growing Divide within Developing Countries
Outline
5 Shifting Wealth and its Social Dimension
6 Policy Conclusions and Summing Up
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Harnessing Better the Shift: The Challenges
• Exploit the power of peer‐learning
• Capitalise on trends regarding South‐South linkages – Deepen S‐S liberalisation (regional integration, Sao Paulo Round, etc.)
• Prioritise social policies to address rising intra‐country inequalities. Move towards effective social protection systems
• Putting technology transfer back on the agenda
• Improving inclusiveness of institutions of global governance