Unit 2.

Growth, development, and the

global political economy in stages

World Economy
Bachelor’s Degree in Economics, UCM
Professor: Clara García
Unit 2. Growth, development, and the GPE in stages

Contents
1. Inequality and growth in the world economy

2. The global political economy in stages: main norms and actors

1. INEQUALITY AND GROWTH IN THE WORLD ECONOMY
1.1. GDP and economic growth

GDP (more or less) now (cont.)

GDP by regions and countries GDP ($ and world shares), 2019

(Howmuch.net)
1.1. GDP and economic growth

GDP (more or less) now

GDP by countries Map by categories of GDP (billion US$), 2014

(World Bank)
1.1. GDP and economic growth

GDP (more or less) now (cont.)

A brief conclusion

In view of the previous information, there are economic super-powers:

- Amongst developed countries: USA, Western Europe, and Japan

- Amongst non-developed countries: China, India, and to a lesser

degree Russia, Brazil, and South Africa (the BRIC countries)
1.1. GDP and economic growth

Evolution of GDP

In very long term perspective GDP of world powers (shares),

1-2017 (Visualcapitalist.com)
1.1. GDP and economic growth

Evolution of GDP (cont.)

Since World War II GDP (US$, inflation adjusted), 1960-2019

(Gapminder.org)

Link to animation
1.1. GDP and economic growth

Evolution of GDP (cont.)

Since World War II (cont.)

In view of the previous information, and regarding changing shares in

total GDP:

- The US held an outstanding position in the post-war period, only

challenged by a few developed countries (no developing countries held
a prominent position until recently)

- The emergence of China or India as super-powers implies the

recovery of their pre-industrial-revolutions position
1.2. Development in terms of per capita GDP and HDI

Per capita income (more or less) now

Per capita income by regions GDP per capita (international 2011

$), 2016 (Ourworldindata.org)
1.2. Development in terms of per capita GDP and HDI

Per capita income (more or less) now (cont.)

Per capita income by countries Map by categories of per capita

GDP (PPP), 2019 (IMF)
1.2. Development in terms of per capita GDP and HDI

Per capita income (more or less) now (cont.)

Per capita income by countries (cont.) Ranking by per capita

GDP PPP ($), 2017 (World Bank)
1.2. Development in terms of per capita GDP and HDI

Per capita income (more or less) now (cont.)

A brief conclusion

In view of the previous information, there is a huge between-country

inequality:

- Ranking at the top: what we know as developed countries + small

resource-rich countries

- At the bottom, most Subsaharan African countries + several South

Asian countries

- Large heterogeneity between non-developed countries

1.2. Development in terms of per capita GDP and HDI

Evolution of per capita GDP

In long term perspective Per capita GDP (2011 international $),

1870-2016 (Ourworldindata.org)
1.2. Development in terms of per capita GDP and HDI

Evolution of per capita GDP (cont.)

Since World War II – developed GDP pc (2011

international $), 1950-2016 (Ourworldindata.org)
1.2. Development in terms of per capita GDP and HDI

Evolution of per capita GDP (cont.)

Since World War II – non-developed GDP pc (2011

international $), 1952-2016 (Ourworldindata.org)
1.2. Development in terms of per capita GDP and HDI

Evolution of per capita GDP (cont.)

Since World War II – growth rates Annual growth rates in %,

1960-2011 (World Bank WDI)
1960-73 1973-85 1985-07 2007-11
United States 4,4 2,8 3,0 0,2
European Union 4,8 2,1 2,5 -0,1
Japan 8,7 3,8 2,1 -0,8
Europe & Central Asia (all) 4,8 2,2 2,4 0,1
Europe & Central Asia (developing) 2,2
Latin America & Caribbean (developing) 5,7 3,3 3,0 3,3
Brazil 7,6 4,4 2,7 3,7
Middle East & North Africa (developing) 4,6 3,6
East Asia & Pacific (developing) 5,0 6,9 8,5 8,5
China 4,2 8,1 10,0 9,6
South Asia 3,5 4,5 5,9 6,6
India 3,4 4,3 6,3 7,1
Sub-Saharan Africa (developing) 4,8 2,4 3,2 4,1
South Africa 5,4 2,5 2,6 2,0
World 5,3 3,0 3,1 1,5
1.2. Development in terms of per capita GDP and HDI

Evolution of per capita GDP (cont.)

A brief conclusion: stages of growth

The Golden Age (1950-73)  Then, crisis in the 1970s

Growth was higher than ever before or after. Particularly high:
- In Japan among developed countries
- In Latin America and West Asia, among developing countries

Partial recovery, with growth lower than in the Golden Age 

Then, crisis since 2007-08
- Among developed countries, Japan’s crisis since 90s
- Negative growth in transition countries, 80s and 90s
- Among developing countries, East Asia’s growth higher than in the
Golden Age vs the “Lost Decade” (the 80s) and sluggish growth in the
rest of countries
1.2. Development in terms of per capita GDP and HDI

Human development index (more or less) now

Development according to HDI Distribution of population

according to HDI, 2018 (UNDP)
1.2. Development in terms of per capita GDP and HDI

Human development index (more or less) now

Development according to HDI (cont.) Map by categories of

HDI, 2016 (Human Development Report 2017, UNDP)
 1.2. Development in terms of per capita GDP and HDI

Human development index (more or less) now (cont.)

Development according to HDI (cont.) By regions and by HDI

levels, 2018 (Human Development Report 2019, UNDP)

Region HDI value LEB (years) Exp. Years School. Mean Years School GNI PPP (2011 $)
OECD 0.895 80.4 16.3 12.0 40,615
Latin America and the Caribbean 0.759 75.4 14.5 8.6 13,857
Europe and Central Asia 0.779 74.2 14.6 10.2 15,498
East Asia and the Pacific 0.741 75.3 13.4 7.9 14,611
Arab States 0.703 71.9 12.0 7.1 15,721
South Asia 0.642 69.7 11.8 6.5 6,794
Sub-Saharan Africa 0.541 61.2 10.0 5.7 3,443
Low HDI 0.507 61.3 9.3 4.8 2,581
Medium HDI 0.634 69.3 11.7 6.4 6,240
High HDI 0.750 75.1 13.8 8.3 14,403
Very High HDI 0.892 79.5 16.4 12.0 40,112
World 0.731 72.6 12.7 8.4 15,745
1.2. Development in terms of per capita GDP and HDI

Human development index (more or less) now (cont.)

Development according to HDI (cont.) Ranking by HDI, 2018

(Human Development Report 2019, UNDP)
Rank Country HDI value LEB (years) Exp. Years School Mean Years School GNI pc PPP (2011 $)

1 Norway 0.954 82.3 18.1 12.6 68,059

2 Switzerland 0.946 83.6 16.2 13.4 59,375
3 Ireland 0.942 82.1 18.8 12.5 55,66
4 Germany 0.939 81.2 17.1 14.1 46,946
4 Hong Kong, China (SAR) 0.939 84.7 16.5 12.0 60,221
6 Australia 0.938 83.3 22.1 12.7 44,097
6 Iceland 0.938 82.9 19.2 12.5 47,566
8 Sweden 0.937 82.7 18.8 12.4 47,955
9 Singapore 0.935 83.5 16.3 11.5 83,793
10 Netherlands 0.933 82.1 18.0 12.2 50,013
25 Spain 0.893 83.4 17.9 9.8 35,041
180 Mozambique 0.446 60.2 9.7 3.2 1,154
181 Sierra Leone 0.438 54.3 10.2 3.6 1,381
182 Burkina Faso 0.434 61.2 8.9 1.6 1,705
183 Eritrea 0.434 65.9 5.0 3.9 1,708
184 Mali 0.427 58.9 7.6 2.4 1,965
185 Burundi 0.423 61.2 11.3 3.1 660
186 South Sudan 0.423 57.6 5.0 4.8 1,455
187 Chad 0.401 54.0 7.5 2.4 1,716
188 Central African Republic 0.381 52.8 7.6 4.3 777
189 Niger 0.377 62.0 6.5 2.0 912
1.3. Inequalities in gains and environmental damage

Concentrated income and development gains

Global development in long term perspective Several

indicators (Ourworldindata.org)
1.3. Inequalities in gains and environmental damage

Concentrated income and development gains (cont.)

Concentration of poverty cuts Number of poor at 1.90$ a day,

1993-2017 (World Bank)
1.3. Inequalities in gains and environmental damage

Concentrated income and development gains (cont.)

Rising within-country inequality Total cumulative growth

(PPP $), 1980-2016 (WID)
1.3. Inequalities in gains and environmental damage

Concentrated income and development gains (cont.)

Concentration of growth gains Real income gains in percentage

(PPP, 2005 $), 1988-2008 (Branco Milanovic)
1.3. Inequalities in gains and environmental damage

Concentrated income and development gains (cont.)

A brief conclusion

Overall global development has increased both in a long-term view

and during the last globalization phase (since roughly the 1990s)

But gains in income have been unequal, with:

- Growth rates of non-developed countries not being high or stable

enough to bring about between-country convergence (exceptions)

- Rising within-country inequality

- Growth gains concentrating in the bottom-middle- and highest-

classes of the world (Asian middle-classes and the richest)
1.3. Inequalities in gains and environmental damage

Economic growth and environmental damage

Parallel growths Various indicators,1750-2010 (Steffen et al., 2015)

1.3. Inequalities in gains and environmental damage

Economic growth and environmental damage (cont.)

Cumulative emissions CO2 concentration, BC-2018, and

cumulative emisisions by region, 1750-2017 (Ourworldindata.org)
1.3. Inequalities in gains and environmental damage

Economic growth and environmental damage (cont.)

The greatest challenge ever? CO2 emissions, 1870-2017

(Ourworldindata.org)  https://ourworldindata.org/emissions-drivers

The challenge:
zero net CO2
emissions by 2050
1.3. Inequalities in gains and environmental damage

Economic growth and environmental damage (cont.)

The greatest challenge ever? (cont.) Population and GDP per

capita of highest emitters, 1950-2016 (Ourworldindata.org)
1.3. Inequalities in gains and environmental damage

Economic growth and environmental damage (cont.)

The greatest challenge ever? (cont.) Energy intensity and

carbon intensity of highest emitters, 1950-2016 (Ourworldindata.org)
1.3. Inequalities in gains and environmental damage

Economic growth and environmental damage (cont.)

A brief conclusion

Carbon emissions and other environment-damaging activities are

closely linked to modern economic growth

Some details on emissions:

- Cumulative emissions have been caused largely by countries that

have enjoyed modern economic growth

- But current emissions are very much affected also by population size

- Limiting warming to 1.5º imply bringing net CO2 emissions to zero by

2050… So far, advances during economic crisis and too slow
technological improvements
2. THE GLOBAL POLITICAL ECONOMY IN STAGES…
2.1. Main features of norms

Liberalism vs. interventionism

The Golden Age of Growth

Generally speaking, liberalism with interventionism (non laissez-faire)

Capitalism and economic liberalism, but intervention of the nation state:

- At the domestic level, intervention in order to achieve the state’s goals
 political pact between conservative and social-democratic parties
- At the international level, liberalization with restrictions to economic
relations (highest for financial exchanges)

Relevant explanatory events:

- Democratization and new social demands in developed countries
- Decolonization and new developmental needs in developing countries
- Revolutionary tensions everywhere
2.1. Main features of norms

Liberalism vs. interventionism (cont.)

The post-70s crisis era

Towards increasingly liberal rules (laissez-faire)

Capitalism and economic liberalism (no “buts”):

- At the domestic level, liberalization  first, erosion of the political
pact between conservative and social-democratic parties; latter, social-
democratic parties convergence towards liberalism
- At the international level, liberalization with virtually no restrictions to
economic relations

Relevant explanatory events:

- Victory of Reagan and Thatcher in the US and the UK, respectively
- The debt crisis and policies pushed by the IMF and the World Bank
- Dismantling of communist regimes  liberalization
2.1. Main features of norms

Liberalism vs. interventionism (cont.)

The post-08 crisis era

¿Anti-globalist liberalism vs. “open” social-democracies?

Capitalism and economic liberalism, but with questioning from “right”

and “left”:
- At the domestic level, so far polarization of choices  some, toward
liberal-conservative (e.g. Trump); others, toward increased intervention
(e.g. EU, China)  disappearance of political pacts (winner takes all)
- At the international level, a break in liberalization with some
instances of neoprotectonism (more from the “right” than from the “left”)

Relevant explanatory events:

- Victory of Trump and Johnson in the US and the UK, respectively
- The 2008 financial crisis and questioning of strict laissez-faire
2.1. Main features of norms

Multilateralism, regionalism, bilateralism, and sovereignty

The Golden Age of Growth

Generally, multilateralism with preservation of domestic sovereignty

Multilateral cooperation for the determination of rules but with:

- Especial influence of the US on said cooperation
- But new voice to non-hegemonic countries and preservation of
sovereignty of the nation state

Relevant explanatory events:

- Trade wars in the in-between wars period and the 1930s financial
crisis in developed countries
- Decolonization and underdevelopment in developing countries
2.1. Main features of norms

Multilateralism, regionalism… (cont.)

The post-70s crisis era
Generally, multilateralism in coexistence with regionalism and
bilateralism… with loses of domestic sovereignty
Persistence of the power of multilateral institutions:
- Still with a special influence of the US on cooperation
- No preservation of sovereignty of the nation state
Coexistence of multilateralism with a plethora of regional (NAFTA,
ASEAN +3…) and bilateral agreements
Relevant explanatory events:
- End of bipolarity  disinterest by the US in leading multilateral
cooperation and in promoting development  preference for regional
and bilateral dialogues (easier and more effective)
- New economic poles (EU, Japan, China…) imply regionalism
2.1. Main features of norms

Multilateralism, regionalism… (cont.)

The post-08 crisis era

Generally, multilateralism in coexistence with unilateralism… still with

loses of domestic sovereignty (of those with not enough power to
exert unilateral actions)

Still, some power of multilateral institutions, maybe with less of an

influence of the US, in coexistence with now more questioned regional
and bilateral agreements
2.2. Actors with (direct or indirect) regulatory power

Hegemonies

The Golden Age of Growth

Certain countries exert power over others and over international

organizations… In this era, bipolarity of hegemonies:
- USA (superior in terms of pc income, productivity, education and
technology, economic exchanges, military power…)
- USSR leads in Soviet bloc

Developing countries do not hold hegemonic power, but some

countries (in the decolonization context and by virtue of international
cooperation) acquire notable power
2.2. Actors with (direct or indirect) regulatory power

Hegemonies (cont.)

The post-70s crisis era

Bipolarity disappears, leading to a tension between unipolarity and

multipolarity…

End of the Cold War and dismantling of planned systems

 the USA becomes:
- The only military hegemony
- And the only political economy model

But at the same time the US looses economic hegemony (lower

productivity gap, trade deficit…) vis-à-vis:
- Other developed countries: Germany, Japan (70s, 80s)
- Newly industrialized economies: South Korea, Taiwan (70s, 80s)
- Emerging economies, especially China (00s)
2.2. Actors with (direct or indirect) regulatory power

Hegemonies (cont.)

The post-08 crisis era

¿A new bipolarity?
- The USA is still a major military hegemony, but other advantages have
eroded
- China has become a clear hegemony: superior in terms of economic
growth, productivity growth, education and technology, economic
exchanges, increasingly military power…
2.2. Actors with (direct or indirect) regulatory power

International organizations and associations of countries

The Golden Age of Growth

Most importantly, creation of multilateral institutions (the UN):

- Security Council (members with veto powers: USA, Russia, China,
France, and United Kingdom)
- General Assembly and its organizations: UNCTAD, UNDP…
- ECOSOC, which included World Bank, IMF, and GATT

Regional integration became another important way of cooperating;

especially relevant the beginning of European integration

Associations of countries:
- Developed: OECD (OEEC 1948; OECD 1961), G7 (1975; USA, Japan,
Germany, France, Italy, UK, and Canada)
- Non-developed: Non-Aligned Countries, UNCTAD
2.2. Actors with (direct or indirect) regulatory power

International organizations and associations (cont.)

The post-70s crisis era

Tension between less and more power of multilateral institutions…

- Some UN bodies loose effective power: ineffectual Security Council
 unilateralism; weakened agencies within the General Assembly; more
informative than operative
- But there is a reinforced and renewed role of some organizations
within ECOSOC (World Bank, IMF, GATT  WTO)

European integration strengthens, with currency cooperation and

integration; many other integration projects in the 90s
2.2. Actors with (direct or indirect) regulatory power

International organizations and associations (cont.)

The post-08 crisis era

¿Reorganization of “strong” areas within international organizations?

- Certain discredit of some of the organizations that gained strength in
the 90s: IMF, WTO…)
- Strengthened focus on UNFCCC (United Nations Framework
Convention on Climate Change), for instance on its Paris Agreement

Tension between reinforced integration (EU developing new areas of

cooperation and new tools; developing countries…) and neo-
protectionism (Brexit)
2.2. Actors with (direct or indirect) regulatory power

The nation state

The Golden Age of Growth

In spite of the existence of hegemonies, international organizations, and

increasingly powerful TNC, preservation of regulatory power of the
nation state

Goals of states:
- Stability of economic cycles
- Sectoral intervention for strategic and/or developmental purposes
- Directly providing welfare (the Welfare State)

Preservation of power over domestic economies (sovereignty) was due

to will (rules at all levels) and to ability (globalization still not full-fledged)
2.2. Actors with (direct or indirect) regulatory power

The nation state (cont.)

The post-70s crisis era

Less prone to multilateral cooperation hegemonies and mostly

increasingly powerful TNC  erosion of the regulatory power of the
nation state

Goals of states… From the welfare state to the competition state:

- Combating inflation and attracting investment
- Promoting a competitive environment (liberalization and flexibilization)
- Weakening of the welfare state

Loss of power over domestic economies (sovereignty) was due to will

(changing of rules) and to loss of ability to regulate (globalization implies
actual loss of sovereignty)
2.2. Actors with (direct or indirect) regulatory power

The nation state (cont.)

The post-08 crisis era

Towards an increased role of the nation state?

- On the one hand, powerful states with strong leaders (Trump, Putin, Xi
Jinping, Bolsonaro…)
- Even in less relevant countries, a certain trend towards nationalism
and/or increased interventionism

Goals of states… From the competition state to what?:

- Back to an interest in keynesian stabilization (in crisis)
- A renewed interest in new industrial/sectoral policies
- A questioning of the erosion of the welfare state