0.3 Globalization  (Page 5/9)

There are many reasons for the pattern depicted above. One of the most important has been ossified labor markets in France, Italy, Spain, and Greece. In all these countries, it is almost impossible to dismiss anyone when business declines. And it is generally recognized that there is overregulation generally: with overregulation markets cannot be fluid and adaptable.

Meanwhile, Japan’s economic performance in a globalizing world has been uneven to say the very least.

From 1950 to 1990 Japan was viewed internationally an economic powerhouse. In the early fifties, per capita income was only 20 percent of that the U.S. By 1991 per capita GDP in Japan was equal to 80 percent of that of the U.S. Then, the Japanese economy entered a long night. By 2004, Japanese income per capita was only 71 percent of the U.S. From 1991 to 2002, Japan suffered 66 consecutive months of recession versus only 16 in the U.S. However, from 2003 to 2008 Japan enjoyed four consecutive years of positive growth only to decline, along with all industrial nations, because of the 2008-2010 economic meltdown. By 2014 Japan’s very low fertility rate caused a serious aging problem in the labor force, with steadily declining numbers of new workers entering the labor force.

Two waves of globalization brought unforeseen change to the U.S. In the first wave in the 19th century the U.S. was a major debtor nation as a consequence of large flows of foreign investment and foreign loans to the U.S. to finance “internal” improvements such as roads, canals and railroads in 1830-1860. By 1860, the U.S. accounted for the largest stock of foreign investment national and gross foreign liabilities (loans, FDI). But , U.S. also had the largest stock of gross foreign assets (or investments overseas). Nearly a century later, after World War II, the U.S. became the biggest creditor nation.

In the most recent wave of globalization it is probably safe to say that there have been two defining elements:

1. The enormous increase in the volume of international trade . Over the past 25 years, the rate of increase in trade (see Chaper___) has vastly outpaced the rate of growth of world GNP.
2. The increasing mobility of financial and physical capital across national borders. Capital flows from nation to nation are far larger and much freer today than in 1950, as countries, including the U.S., European states, and dozens of developing nations, liberalized their capital accounts especially in the 1980s and 1990s (See Chapter___).

Japan and Taiwan, until recently, were major exceptions: only reluctantly have they liberalized capital inflows and outflows, and not to the same extent as many emerging nations. Liberalization of capital accounts means reduced controls on movement of capital in and out of countries by relaxation of strict foreign exchange controls.

We mentioned earlier in the chapter that much of what has appeared about international capital flows in the popular press about globalization is misleading especially about international capital flows. Much of the increases in capital flows has been between rich countries. Indeed, in 2007 foreign investors increased their acquisition of corporate assets by 90% in one country: the United States. In fact, the developing world’s share in global private capital flows fell from 12% in 1991 to 7.6% in 2000.