Richard Newfarmer, Team Leader, Economic Advisor and GEP co-author, World Bank
Hans Timmer, Manager, Prospects Group, World Bank
Simon Maxwell, Director, ODI
Dr Ian Goldin, Director, James Martin 21st Century School, University of Oxford
1. Dr. Ian Goldin, in the chair, introduced Richard Newfarmer and Hans Timmins from the World Bank.
2. Richard Newfarmer asked what the world will look like after 25 more years of globalization. He offered several projections:
i. Markets will become more integrated.
ii. Developing countries will grow faster than they have in the past and will become major players in the global economy.
iii. Unequal income distribution will inhibit growth in certain countries.
iv. Environmental pressures such as global warming will reach dangerous levels and will require collective action and regulation by the world community.
v. By 2030, 45% of the global market place will constitute developing countries.
vi. China and India will emerge as major players in the global market place, their success fuelled by technological innovation.
3. Newfarmer also focused on the rise of a global middle class by 2030. The emergence of a strong middle class would have the following implications:
i. Per capita income would double to reach US$3,200.
ii. 1.2 East Asians would have been lifted out of poverty.
iii. People living in absolute poverty (on less than a dollar a day) would drop from 20% of global population to about 8%, with most of those people located in Sub-Saharan Africa.
4. Newfarmer then focused his discussion on the negative side effects that would arise from rapid growth. These negative effects could be:
i. Unequal distribution of income, particularly in Latin America and the Middle East.
ii. The regional concentration of wealth.
iii. Global warming and the collapse of natural ecosystems.
5. Newfarmer stressed the importance of governments and international organizations in addressing these potential problems. Their goals should include:
i. Carbon emissions limits and regulations on dirty industries.
ii. Investment in education, particularly for girls and women.
iii. Removing tariffs on goods that the poor can produce.
iv. Providing a support mechanism for workers changing emplyment sectors, eg. from agriculture to the manufacturing or service industries.
6. Hans Timmins began his presentation by stating that the rapid growth that the developing world had enjoyed over the past several years was finally entering a cyclical slowdown, but that it was most likely going to have a soft landing. Timmins justified his theory by stating that:
i. Import tariffs were declining globally.
ii. Hardly any economies in the world are shrinking.
7. Despite the good news, there are still considerable risks and uncertainties. Monetary adjustments will probably need to be made to curb inflation caused by rising prices in commodities. Also, the oil market shows signs of instability, which could have severe repercussions around the world if a serious crisis occurs.
8. Simon Maxwell began his comments by reminding the audience of ODI’s theme for 2006, “What’s Next in International Development?” He stressed the importance of assessing whether current economic policies should remain in place, be amended, or discarded altogether.
He stated that there are many issues in need of exploration. First is globalisation. The wealth ratio between the world’s rich and poor has risen to 10:1 in the last 20 years, and shows no signs of slowing. Policy makers must recognize that inequality can threaten economic stability, and could very easily throw off the projected forecasts. Second, large-scale migration is likely to increase, though it is unclear how this will affect globalisation over the next 25 years. Next, the gradual exhausting of natural resources could lead to economic stagnation, and quite possibly to conflict. Lastly, he touched on urbanization. Over the next 25 years, the world’s population will grow by 1.5 billion people. Of this, 1.3 billion will live in cities. This will have major implications for politics, infrastructure and job markets in developing countries. All these factors need to be carefully considered when considering the economic outlook for 25 years hence.Discussion
Comments and questions raised in the discussion included:
Geopolitical events can have drastic effects on globalization, but are almost impossible to predict.
Urbanization will grow at a substantial rate in the developing world, but its implications are unclear.
The industrialized world has the power to mitigate income inequality by allowing poor countries access to global markets (eg. Kenyan sugar).
Focusing on growth is the most effective anti-poverty policy, and the industrialized world must focus on foreign investment.
At this joint ODI and World Bank event, World Bank Economic Advisor Richard Newfarmer presented the 2007 edition of the World Bank's annual publication, Global Economic Prospects (GEP).
The theme of this year's report is ‘Managing the New Wave of Globalisation.’ Together with an analysis of short-term prospects for the world economy, the report analyses the opportunities - and stresses - which will be created over the next twenty-five years as developing countries move to centre-stage in the world economy, with a particular focus on income inequality, labour markets, and the environment