Rethinking Alternative Growth Paradigms
description
Transcript of Rethinking Alternative Growth Paradigms
![Page 1: Rethinking Alternative Growth Paradigms](https://reader035.fdocuments.in/reader035/viewer/2022062808/568151d7550346895dc0127c/html5/thumbnails/1.jpg)
Rethinking Alternative Growth Paradigms
Mah-Hui LIM
South Centre Conference on The South in the Global Economic Crisis,
Geneva January 31, 2013
1
![Page 2: Rethinking Alternative Growth Paradigms](https://reader035.fdocuments.in/reader035/viewer/2022062808/568151d7550346895dc0127c/html5/thumbnails/2.jpg)
Outline
I – Crisis & Asian Development Models II – Inequality & Declining wage Share Limits of Asian Export Driven
Economies Case of China, Malaysia, S Korea Conclusion
2
![Page 3: Rethinking Alternative Growth Paradigms](https://reader035.fdocuments.in/reader035/viewer/2022062808/568151d7550346895dc0127c/html5/thumbnails/3.jpg)
Crisis and Asian Development
Financial Crisis Exposed structural weaknesses in present growth models for Asia. Asia:
Greater integration to world economy in trade and finance.
Dependence on foreign markets and FDI.
Exposure to international financial instability and unstable capital flows
3
![Page 4: Rethinking Alternative Growth Paradigms](https://reader035.fdocuments.in/reader035/viewer/2022062808/568151d7550346895dc0127c/html5/thumbnails/4.jpg)
Focus on Inequality – one mega trend in 21st century
Mainstream economists see inequality as result of technical issues and inequality of opportunities such as technological change,trade competition, market oriented reforms, lack of access to education, health etc.
4
![Page 5: Rethinking Alternative Growth Paradigms](https://reader035.fdocuments.in/reader035/viewer/2022062808/568151d7550346895dc0127c/html5/thumbnails/5.jpg)
Inequality driven by macro not micro economic forces
Inequality fundamentally related to structure of production & distribution
Important part of Asian dev model has been increasing inequality - part of global trend
Greater competition for foreign investments & external markets- based on wage competitiveness and cost reduction
5
![Page 6: Rethinking Alternative Growth Paradigms](https://reader035.fdocuments.in/reader035/viewer/2022062808/568151d7550346895dc0127c/html5/thumbnails/6.jpg)
Result in bias in higher returns to capital over wages
Evidenced in two trends: Declining wage share of GDP and
increasing share of capital Divergence btw wage and labor
productivity with wages falling behind productivity
6
![Page 7: Rethinking Alternative Growth Paradigms](https://reader035.fdocuments.in/reader035/viewer/2022062808/568151d7550346895dc0127c/html5/thumbnails/7.jpg)
Declining Labor Share of GDP, 3 OECD countries 1960-2007
7
![Page 8: Rethinking Alternative Growth Paradigms](https://reader035.fdocuments.in/reader035/viewer/2022062808/568151d7550346895dc0127c/html5/thumbnails/8.jpg)
Labor Share of GDP, 1970 – 2007, 4 Asian Countries
8
![Page 9: Rethinking Alternative Growth Paradigms](https://reader035.fdocuments.in/reader035/viewer/2022062808/568151d7550346895dc0127c/html5/thumbnails/9.jpg)
Link Btw Declining Wage Share and Wage Falling Behin Prodtvy
Fundamental link btw declining labor share and the divergence btw wage increases and labor productivity increases.
Wage increase lag behind productivity growth
9
![Page 10: Rethinking Alternative Growth Paradigms](https://reader035.fdocuments.in/reader035/viewer/2022062808/568151d7550346895dc0127c/html5/thumbnails/10.jpg)
U.S. - Wages lagged behind productivity
10
![Page 11: Rethinking Alternative Growth Paradigms](https://reader035.fdocuments.in/reader035/viewer/2022062808/568151d7550346895dc0127c/html5/thumbnails/11.jpg)
Real Av Wage Growth/Productivity Growth 2000-2010
11
![Page 12: Rethinking Alternative Growth Paradigms](https://reader035.fdocuments.in/reader035/viewer/2022062808/568151d7550346895dc0127c/html5/thumbnails/12.jpg)
Wages - Not Simply a Cost Factor
Its also a Demand Factor in growth A decline in wage share, esp when
real wages fall (U.S.) or even when real wages are rising (China) leads to under-consumption
Growth is then maintained in 2 ways: increase in debt-financed spending (US) increase in exports (China)
12
![Page 13: Rethinking Alternative Growth Paradigms](https://reader035.fdocuments.in/reader035/viewer/2022062808/568151d7550346895dc0127c/html5/thumbnails/13.jpg)
Debt-Driven and Export Driven Economies
USA model of domestic and debt driven economy
China/German/Japanese model of export driven economy
In export-driven economy, the gap between potential output and domestic demand is taken up by exports
The problem is externalized > global imbalances in trade
13
![Page 14: Rethinking Alternative Growth Paradigms](https://reader035.fdocuments.in/reader035/viewer/2022062808/568151d7550346895dc0127c/html5/thumbnails/14.jpg)
Consequences of a Debt-Driven Economy – U.S.
1960-2007, USD GDP grew 27x but Household Debt rose 64x
Financialization fuelled debt and asset bubble > great financial collapse
14
![Page 15: Rethinking Alternative Growth Paradigms](https://reader035.fdocuments.in/reader035/viewer/2022062808/568151d7550346895dc0127c/html5/thumbnails/15.jpg)
Limits to Export-Led Growth based on wage competitiveness
Case of China Case of Malaysia
15
![Page 16: Rethinking Alternative Growth Paradigms](https://reader035.fdocuments.in/reader035/viewer/2022062808/568151d7550346895dc0127c/html5/thumbnails/16.jpg)
What about China?
Under-consumption due to declining wage share despite rapid growth – wages fall behind productivity growth
Growth driven by exports&investment Problem is externalized resulting in
global imbalance Private consumption depressed-35% Household debt still low abt 30% GDP
as financialization still nascent 16
![Page 17: Rethinking Alternative Growth Paradigms](https://reader035.fdocuments.in/reader035/viewer/2022062808/568151d7550346895dc0127c/html5/thumbnails/17.jpg)
China –productivity grew 180% & wages 92% btw 2000-2007
17
![Page 18: Rethinking Alternative Growth Paradigms](https://reader035.fdocuments.in/reader035/viewer/2022062808/568151d7550346895dc0127c/html5/thumbnails/18.jpg)
China: Consumption, wage share and exports 2000-2010
18
![Page 19: Rethinking Alternative Growth Paradigms](https://reader035.fdocuments.in/reader035/viewer/2022062808/568151d7550346895dc0127c/html5/thumbnails/19.jpg)
What about Malaysia?
Exports growth declined but still at about 100% of GDP.
Exports based on low wages Wage share of GDP declined fr 36% to
30% btw 2000-2008 Consumption supported by HH debt
which rose fr 59% to 64% of GDP (2005-10)
19
![Page 20: Rethinking Alternative Growth Paradigms](https://reader035.fdocuments.in/reader035/viewer/2022062808/568151d7550346895dc0127c/html5/thumbnails/20.jpg)
Malaysia – Productivity and Wages in Manufacturing Sector
20
![Page 21: Rethinking Alternative Growth Paradigms](https://reader035.fdocuments.in/reader035/viewer/2022062808/568151d7550346895dc0127c/html5/thumbnails/21.jpg)
Malaysia: Growth of Income, Consumption, Household Debt
21
![Page 22: Rethinking Alternative Growth Paradigms](https://reader035.fdocuments.in/reader035/viewer/2022062808/568151d7550346895dc0127c/html5/thumbnails/22.jpg)
Korea – also export led
In early stages, growth not based on low wages or FDI
Based on industrial policy, domestic investment, agricultural productivity and selective FDI for technology
State played crucial role Wages trailed closed to productivity
and wage share of GDP rose from 32% to 48% (1975-1990)
22
![Page 23: Rethinking Alternative Growth Paradigms](https://reader035.fdocuments.in/reader035/viewer/2022062808/568151d7550346895dc0127c/html5/thumbnails/23.jpg)
Korea: Wage Share of GDP, 1970-2010
23
![Page 24: Rethinking Alternative Growth Paradigms](https://reader035.fdocuments.in/reader035/viewer/2022062808/568151d7550346895dc0127c/html5/thumbnails/24.jpg)
Korea –Productivity vs Real Wage Growth 1990-2010
24
![Page 25: Rethinking Alternative Growth Paradigms](https://reader035.fdocuments.in/reader035/viewer/2022062808/568151d7550346895dc0127c/html5/thumbnails/25.jpg)
Korea: Wage vs Productivity, 2000-2010
After Asian Financial Crisis, wage share declined & wage growth fell behind productivity growth
Exports continued upward trend Personal consumption rose driven by
rise in household debt that rose to 82% of GDP & 100% of disposable income. Evidenced in credit card bubble
25
![Page 26: Rethinking Alternative Growth Paradigms](https://reader035.fdocuments.in/reader035/viewer/2022062808/568151d7550346895dc0127c/html5/thumbnails/26.jpg)
Major Lessons – Limits to Export-Led Growth
Difference btw export and export-led growth. Exports necessary in initial stages but beyond a certain level – counter productive
Export-led growth based on global wage competition represses domestic wages and demand
26
![Page 27: Rethinking Alternative Growth Paradigms](https://reader035.fdocuments.in/reader035/viewer/2022062808/568151d7550346895dc0127c/html5/thumbnails/27.jpg)
Lessons – Limits of Export Led Growth
Post global financial crisis, Asia cannot depend on rising exports to US and Europe
Need to re-orientate to domestic and intra-regional demand
Mainstream voices call for increasing financial development & integration
27
![Page 28: Rethinking Alternative Growth Paradigms](https://reader035.fdocuments.in/reader035/viewer/2022062808/568151d7550346895dc0127c/html5/thumbnails/28.jpg)
Need Domestic and Wage Driven Growth
Need to avoid debt-driven growth & change income distribution structure
Government –must play role to ensure wages keep up with productivity increases.
Instead of racing to the bottom thru wage competition, countries should coordinate for sensible wage policy
28
![Page 29: Rethinking Alternative Growth Paradigms](https://reader035.fdocuments.in/reader035/viewer/2022062808/568151d7550346895dc0127c/html5/thumbnails/29.jpg)
THANK YOU
29