Greenspan on Seattle (Jim O'Connor)

christian a. gregory chrisgregory11 at
Thu Jan 27 20:47:34 PST 2000

Jim O'Connor wrote:

>Then Giusanni, in your quote, gets all mushy. "The relatively fast growth
of in world trade share of GWP over > the last 25 years was mainly the result of stagnating GWP, not that of > accelerating international trade. Trade only seems to grow rapidly because > the GWP is exhibiting the lowest rate of growth over the last 150 years, > excluding...1913-1950." His first sentence is a contradiction: on the one > hand, we have "relatively fast growth in world trade share of GWP." On the > other hand, we have "international trade" "not accelerating." In fact, the > latter is wrong, the former is right. Between 1975-1998 world exports grew > at a nearly exponential rate, while world GDP grew at an arithmetic rate > (as he says, lower than the rate between 1950-1975).

Hmm. Actually, that's not what the sentence says. The "not" in the second sentence is part of the predicate that modifies "result." He doesn't say that international trade isn't accelerating, only that it's acceleration relative to GWP doesn't tell you much about "globalization," since international trade is being compared to growth rates that are anemic.

> I can't go into the full theory here, and I'm not clear on some aspects of
> it yet, anyway, but I can give you a crude and somewhat simple-minded
> statement of it. In the first 25 years, domestic investment, consumption,
> and government spending were more important that exports (foreign
spending) > in terms of a growth theory. Then, exports were the passive variable, being > the result of increasing imports as each country's GDP rose. Exactly why > exports expanded 2.8 times faster than world GDP growth would require a lot > of explanation, which I can't do here. In the second period, everything is > changed. The South moves from ISI development to export-led development. > The US increases its exports from about 5 percent of GDP to over 12 percent > by the month the dollar bottomed out, April, 1995, and for a few years was > itself an export-led economy. Every country that has got back to a decent > growth track, after stagnation, or after a deep crisis (1997-98) has done > it by leading with its exports, not domestic investment or consumption. Oh > yes, the Japanese have been pump priming their economy for many years, and > have gotten exactly nowhere because their exports are weak (I include > exports from their sourcing plants all over Asia).

So you would say that U.S. post- 70's and 80's stagnation growth was export-led, when they were a measly 12% of GDP? And with its massive current account deficits, and private debts? You might argue that 12% of American GDP has proportionally greater effects elsewhere-- which is fine. But Korea, for example, has had higher %age of exports than that for a long time, since the 60's (1969: 13%; 1970: 14%; 1971: 15.3%); would that make it export-driven during the import substitution growth phase (i.e phase one) you describe below)?

As for Japan, while it's true that its economy still isn't growing, some argue that it isn't in spite of pump-priming. Only about a third of the money that Japan allocates for countercyclical investment actually is (23 trillion yen, as opposed to 66 trillion yen budgeted.). There was actually a fiscal contraction in 96 and 97. It's true that Japan's exports are weak, but if exports recover without the recovery of domestic demand, there's no reason to think that the economy as a whole will--Japanese economic strength has always been tied to domestic markets (even if it also exported a lot to the U.S. and Asia for example).

> In other words, the ratio of X/GDP, globally, has risen much more during
> 1975-2000, than during 1950-1975, because states, politicians, planners,
> economists, CEOs. etc., grasped the slow growth in the latter period (Asia
> of course excepted) and reorganized world economy as.....dare it name it,
> globalized. Globalized of course means more competition; cost-cutting not
> just in slow years but in all years, permanently; new process and product
> innovation, continually; and lots of other things. States and capitals
> have turned to international trade for answers to slow growth, hence in
> export industries or sectors, competition is fierce because, at the limit,
> you have all the big and strong capitals in the world all competing with
> one another (a limit we haven't reached yet).

> There is much more to this line of argument of course. Hopefully this is
> enough to persuade Rakesh that there is something to the globalization
> thesis.

Do you think that there's a difference between a multinational/international system and a global one? Granted that we have "global" finanical speculation, do you think that patterns of FDI matter for whether the system is "global" or not? (I mean, since 25% of FDI still goes to the U.S.; China for over half of FDI to Asia; Africa for a little over 1% of FDI.) What about trade concentration? It seems much more sensible to talk about the particular patterns of international-regional development than to float the idea that capital has actually *achieved* its dream of global integration.

All best, Christian

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