О Yermoshkina - Global financial flows shifting the balance - страница 1

Страницы:
1  2 

GLOBAL FINANCIAL FLOWS: SHIFTING THE BALANCE

Olena Yermoshkina

On the basis of comparative analysis of the basic groups of national economic indicators, provided by The World Bank, the changes in balance in financial resources distribution are de­fined. The gradual shifting of center of generation of financial resources from North America to Middle, Eastern and South Asia is discovered. The factors that influence on the given processes are shown, and the main future trends of global economy are substantiated.

Introduction

Globalization and integration are the main trends of the nearest past, present and future. These processes, which have involved all countries of the World, has become the cause of different both positive and negative changes in the different fields of human life. The economic and financial crises of 2008-2009 have changed a lot in manner of leading the business and economies: the priori­ties in development and regulation have been shifted from the one hand to careful risk-free conduc­tion and tough regulation, and, from the other hand, to revival of national peculiarities of business, to strengthening the government support of domestic producers. So, the new trend of development of the global economy is the globalization with national priorities.

Modern conditions require the virtuous balancing between national and global interests on each level of economy and in each sector of it. Polarization of positions of different countries [3, 7, 16] has caused the deepening of the differences in guiding lines for development inside them. This leads to development of two practically polar styles of business:

- the first one - business oriented on globalization and integration;

- the second one - business oriented on domestic development.

It should be underlined that the third model (the combination of the basic two ones) should be considered as well - balancing between globalization and domestic interests. Each model reflects in the financial flows and indicators of the national economy, which shows the real (not only politi­cally declared) preferences of development.

Problems connected to the issue of distribution of the financial resources in the world, ac­cumulation of the economic and financial power were considered in the different researches by sci­entists from different countries. The boom of such researches has fallen on the period after the Asian crisis of 1998. On the wave of the interest to the initial causes and main consequences of this crisis the scientists have been divided into several groups. The first group of the scientists has tried to consider the monetary [5, 6, 15] and economic [4, 9] background of the crises, to explain the mis­calculations of national governments and international financial organizations in providing the eco­nomic and financial policy in the country and in the regions [10-12, 14]. The second group has pre­ferred looking for the cause of the crisis in the institutional imperfection of the global economy [1, 8, 13], explaining the crisis as the consequence of imbalance of the interests of different economic groups (households, government, markets, enterprises, financial institutions, etc.). But it should be mentioned that the voice of the second group of scientists was not enough strong to change the point of view of politicians and businessmen. In many respects, the passive position of the politi­cians and traditional economists including top managers of the financial institutions in terms of con­sidering the necessity of institutional improvement of the global economy became the incitement for the global economy to come to financial and economic crisis in 2008-2009.

Never the less, the financial crisis of 2008-2009 has led to shifting the balance in the finan­cial and economic power distribution. Thus, the goal of the presented article is to define the basic changes in global distribution of financial resources, to find out the main causes of these changes, and to substantiate the overall trends which will have an influence on the development of the global economy in future.

1. Distribution of the Economic power: Changing the Leader?

The analysis was conducted for two types of classification of the countries:

- by basic regions of the World; Europe & Central Asia, European Union (including Euro area), North America, Middle East & North Africa, East Asia & Pacific, South Asia, Latin America & Caribbean;

- by level of income: High income, Upper middle income, Middle income, Lower middle income, Low income.

Such classification was accepted in order to compare the changes in the regional distribution with changes in distribution between income levels. In order to define the directions of changes in the global distribution of the economic and financial power the selected indexes were compound by the decomposition tree (fig. 1). The comparison of the indexes has been made between two periods: contribution of country in creation of global financial resources in 2010 was compared with contri­bution in 2000. This approach has been chosen in order to compare the pre-crisis trends in the global economic and financial power distribution with essential changes, which are the conse­quences of the economic crisis of 2008-2009.

As it shown, the economic and financial power of the country can be reflected as a result of creation, distribution and accumulation of the financial resources by the different participants of the global market (fig. 1).

The overall conceptual trends in redistribution of the economic and financial power between groups of countries can be shown by analysis of changes in contribution of the given group into to­tal GDP and GNI (Table 1).

Table 1

Change of role of countries' groups in accumulation of global financial resources

Groups of Countries (by regions of the World)

Changes in contribution of the country into accumulated global financial flow

Changes in productivity of the country in accumulation of na­tional financial flow

Changes in contri­bution in creation of nominal global reserves (minus gold)

 

in nominal GNI

in nominal GDP

real GNI per capita

real GDP per capita

 

Europe & Central Asia

2,1%

2,0%

14,5%

14,2%

-7,3%

European Union

-0,5%

-0,6%

11,2%

10,6%

-11,0%

Euro area

-0,1%

-0,2%

7,1%

6,5%

-9,1%

North America

-7,7%

-7,5%

6,1%

6,5%

-2,6%

Middle East & North Africa

1,3%

1,1%

24,1%

24,3%

4,4%

East Asia & Pacific

0,9%

0,8%

33,4%

33,0%

5,8%

South Asia

1,3%

1,3%

69,1%

67,3%

1,1%

Latin America & Caribbean

1,6%

1,6%

22,3%

22,0%

-1,3%

Source: calculated on the basis of the World Bank data [17]

Analysis of contribution of each group of the countries into the global GDP and GNI has shown that the balance, which was supported for many years, has shifted seriously. Contribution of the world leaders of the economy (North America and European Union) has fallen about on 8% and the accent has moved to Central and South Asia (3.4%), Middle East & North Africa (1.3%), Latin America & Caribbean (1.6%) both in GDP and GNI.

Against this background the productivity of the labor has raised in South Asia on 69.1% in GDP and 67.3% in GNI an only on 6.1% and 6.5% correspondently in North America, 11.2% in EU. Of course, it should be underlined that for the present the North America still obtains one of the leading role in creation of the global GDP (25.3%) and GNI (25.6%). But if in 2000 the leading role totally belonged to the North America (32.9% of GDP and 33.3% of GNI), in 2010 the economic and financial power have been shifted to Europe & Central Asia (former USSR and Yugoslavia countries plus Albania, Bulgaria, Romania and Turkey - 31.7% of GDP and GNI) and proportion­ally distributed between East Asia & Pacific (25.8%), EU (25.6%).в

'З о .

н   С и

^■2 1 о а те

U ^ о

з о и

Ж Щ <о

о а.

т:

І ■а

■а о

я -

8 -s •Е .2

° =

я в

її

І-

о я

о о

Э

с

Ті

І

1

« в

о

її

о

і

5 © І °

о О

Си

О

I Є §1

!1

О и

- Q

.2 З

1 5

Я д

І РІ

§1

я з

ад с

я

PL­'S

І,

в

-

і-

S

З

ІЗ

Basically increase in the share of Europe & Central Asia was obtained due to increase in prices for oil and gas - the basic export goods of Russia, which has provided more than 70% of GDP of the given region. So, the source of the growth is quite unstable and practically totally de­pended on market situation, but it shows the high level of dependence of the global economy from traditional energy resources.

More over, the annual growth of GDP and GNI has testifies that the settled distribution in the economic activity has been changed as well. If in 2000 the average annual growth in GDP was about 4.0% without strong leaders, in 2010 situation has been significantly changed. The undis­puted leader of GDP growth is the South Asia (8.6%), the nearest "competitor" - East Asia & Pa­cific (6.71%), and the North America - 3.03%, EU - 2.2%. The same situation is with GNI - South Asia (8.36%), North America - 4.08%, EU - 2.28%.

Comparing the level of GDP and GNI per capita, attention was paid to real level of produc­tivity: indexes were compared in constant level of USD in 2000. This analysis has testified that the world leaders in productivity are the same: North America (36 167 USD per capita) and EU (19 398 USD per capita). But if in these regions during 10 years GDP per capita has been increased on 6.9 and 10.6 % correspondently, the highest levels of growth are in South Asia (67.3% in GDP and 69.1% in GNI). Of course the level of GDP and GNI per capita in South Asia are almost in 48 times lower than in NA and in 26 times than in EU. But taking into account changes in contribution of the countries into the global GDP such trends gives the opportunity to suppose the gradual change of the global productivity leaders in the future. Such changes can be explained by global trends of moving the capital by international corporations toward cheap labor, capital and resources [16, 18].

Quite interesting trends have been identified during the analysis of GDP and GNI structure by the levels of income (table 2).

Table 2

Change of role of countries groups classified by level of income in creation of accumulated

global financial resources

Groups of Countries (by level of income)

Changes in contribution of the country into accumulated global financial flow

Changes in productivity of the country in accumulation of na­tional financial flow

Changes in contri­bution in creation of nominal global reserves (minus gold)

 

in nominal GNI

in nominal GDP

real GNI per capita

real GDP per capita

 

High income

-17,6%

-17,5%

8,6%

8,8%

-25,1%

Upper middle income

6,9%

7,0%

67,9%

66,5%

13,0%

Middle income

8,8%

8,7%

60,9%

59,3%

12,5%

Lower middle income

1,8%

1,8%

53,4%

51,2%

-0,5%

Low income

0,1%

0,1%

43,5%

36,4%

0,0%

Source: calculated on the basis of data [17]

For the last ten years the contribution of countries with high level of income has fallen on over 17% but they are still the leaders, which provide over 50% of global GDP and GNI. But the competitors are near. The gradual transference of the accents in creation of GDP is leading to shift­ing the accents on the countries with upper middle and middle income, which provided less than 17% of GDP in 2000 and now obtain over 40 % of it providing the over 60% level of annual growth. On this basis changes in contribution in creation of nominal global reserves, which allow to provide the required level of exchange rate and to execute the liabilities of the country, also con­firms the trend of East Asia being the leader: in 2010 more than 58% of total reserves belonged to countries of East Asia & Pacific (comparing to 52.9% in 2000) including 57.9% of them to China (34% of global reserves in 2010 comparing to 8.7% in 2000), and share of North America has been decreased from 4.5% in 2000 to less than 2% in 2010.

Considering the influence of different groups of countries on creation of the accumulated global capital it should be mentioned that the global trends defined previously are deepened (table

3).

Change of role of countries groups in creation of accumulated financial capital

Groups of Countries ((by regions of the World)

Changes in contribution of the group of countries into formation of capital

and savings

 

gross capital formation

gross fixed capital formation

gross domestic savings

gross national expenditure

Europe & Central Asia

-0,9%

-0,3%

-1,0%

2,0%

European Union

-3,7%

-3,1%

-3,8%

-0,6%

Euro area

-2,9%

-2,4%

-3,0%

-0,2%

North America

-12,8%

-12,6%

-12,4%

-7,5%

Middle East & North Africa

2,0%

1,9%

1,9%

1,1%

East Asia & Pacific

6,8%

6,5%

6,2%

0,8%

South Asia

2,7%

2,3%

2,0%

1,5%

Latin America & Caribbean

1,8%

1,9%

1,5%

1,5%

Source: calculated on the basis of data [17]

Accumulated capital is one of the indicators that illuminates the capacity of the country to create new goods and provides services. Changes in gross capital formation (formerly gross domes­tic investment) reflect movement of capital from one region to another and allow testifying the abil­ity of the country to provide the real production and to create new jobs.

So, as it shown in the table 3 for the last ten years North America has lost the leading posi­tions in creating the total and fixed capital by decreasing the share of gross capital formation from 30.2% to 17.4% and has skipped ahead East Asia & Pacific (36.9%). More over, if in 2000 East Asia & Pacific has directed on creation of capital 26.89% of GDP comparing to 20.55% in North America and 21.37% in EU, in 2010 North America directed 15.32% of GDP on creation of the capital, EU - 18.53%, but East Asia & Pacific - 25.47, in South Asia - 32.46%.

Distribution of gross domestic savings, which are the reflection of the gross national income minus total consumption and plus net transfers [17], has been changed as well (table 3) but not sig­nificantly. The top three leaders have remained the same: East Asia & Pacific, Europe & Central Asia and EU. But if in EU and Europe & Central Asia region there is a trend for reducing the share of savings, in East Asia & Pacific the opposite trend (the share in global savings has been increased

on 6.2%).

Movement of the capital from countries with high income to countries with middle income (table 4) proves again the aspiration for optimization of financial and resources flows in the World.

Table 4

Change of role of countries groups in creation of accumulated financial capital_

Groups of Countries (by level of income)

Changes in contribution of the group of countries into formation of capital and

savings

 

gross fixed capital formation

gross capital formation

gross domestic savings

gross national expenditure

High income

-28,9%

-29,4%

-28,7%

-17,7%

Upper middle income

11,9%

11,8%

12,1%

6,8%

Middle income

14,4%

14,6%

14,4%

8,8%

Lower middle income

2,5%

2,8%

2,3%

2,0%

Low income

0,1%

0,1%

0,0%

0,1%

Source: calculated on the basis of data [17]

Moving the enterprises (fixed capital and inventories) from highly developed to less devel­oped regions is the necessity for the owners of the capital to survive in the competition. But deepen­ing of such trend can lead to increasing dependence of the countries with high income on lower ones in the future. More over, such redistribution of capacities gradually leads to shifting the bal­ance in income distribution and changing the participants of different classification groups. That's

mean that in the future the countries with upper middle and middle income will reach the level of high income countries and even may replace them in the given group.

2. contribution of the countries into the global production and investments:

Orientating Toward Asia.

The deeper analysis of economic activity of the enterprises reflected in the value added indi­cator and income has allowed defining the essential background for changes, considered earlier. In order to determine the basic changes in global distribution of production of goods and services and received income, value added was specified by manufacturing, industry, agriculture and services (table 5, 6). In accordance to obtained results the trend of loosing the leading positions by North America still exists. Moreover, in all named sectors the reduction of contribution is present and var­ies from 3.8% in agriculture up to 9.2% in industry. It should be mentioned that countries of East Asia & Pacific and Europe & Central Asia in 2010 have provided over 64% of total value added in global manufacturing, over 60% in industry, 55% in agriculture 56% in services.

Table 5

Change of role of countries groups in creation of value added and income _ by manufacturing sectors of economy__

Groups of Countries (by regions of the World)

Changes in Value added

Changes in Income

 

Manufacturing

Industry

Agriculture

Services

Receipts

Payments

Europe & Central Asia

-1,2%

-0,5%

-5,3%

3,8%

1,3%

2,5%

European Union

-3,1%

-3,4%

-6,2%

1,3%

0,2%

-0,7%

Euro area

-2,0%

-2,3%

-5,3%

1,1%

6,3%

4,4%

North America

-8,4%

-9,2%

-3,8%

-7,0%

-4,0%

-7,5%

Middle East & North Africa

0,7%

2,2%

-0,5%

0,8%

-0,3%

-0,2%

East Asia & Pacific

5,9%

2,9%

5,4%

-0,3%

n/a

n/a

South Asia

1,3%

1,3%

1,6%

1,3%

0,1%

0,2%

Latin America & Caribbean

1,5%

2,4%

1,1%

1,1%

-1,0%

-0,7%

Source: calculated on the basis of data [17]

Comparison of receipts and payments of income shows a little bit different situation - quite significant increase in receipts of income in Euro area comparing to payments. Unfortunately it's hard to assess the changes in income distribution because of lake of data for East Asia & Pacific. Stable trend of significant declining in contribution of income made by countries with high level of income (table 6) and increase in contribution of income made by countries with middle and upper middle income is quite deceptive. Over 82% of total income receipts and 65.5% of total income payments are conducted by countries with high level of income. Thus, the trend of dividing the process of manufacturing with process of managing the financial flows is evident.

Table 6

Change of role of countries groups in creation of value added by economic sectors

Groups of Countries (by level of income)

Changes in Value added

Changes in Income

 

Manufacturing

Industry

Agriculture

Services

Receipts

Payments

High income

-21,6%

-23,3%

-11,8%

-15,1%

-13,9%

-24,5%

Upper middle income

9,1%

9,7%

4,5%

5,9%

6,3%

10,2%

Middle income

10,8%

11,6%

6,1%

7,5%

6,9%

12,3%

Lower middle income

1,6%

1,9%

1,6%

1,6%

0,7%

2,1%

Low income

0,1%

0,1%

-0,4%

0,1%

0,0%

-0,2%

Source: calculated on the basis of data [17]

Besides, calculation of share of all Asian countries (plus former USSR countries) in global production has shown that they provide over 71% of total value added in manufacturing, 70% in industry, 75% in agriculture and 62% in services. This fact confirms the high level of dependence of the EU countries and North America from economic, political and nature conditions in countries with lower level of income (table 6). Besides, such dependence can't be compensated by controlling the financial flows because the background for creation of the biggest part of the financial flows is production of goods and services. Moreover, such misbalance may lead to increasing in degree of social and political tension in the countries with lower level of income that, in its turn, may cause the forced redistribution of the financial flows (nationalization and etc.)

Of course situation is changing. If in 2000 the level of income receipt of the countries with high level of income was 96%, in 2010 it has been declined to 82.1%, moving over 16% of receipts to the countries with upper middle and middle income (in payments 90% in 2000, 65.5% in 2010). But digging deeper, it can be shown that such changes were caused not only by intensive develop­ment of the countries with upper middle and middle income but also due to redistribution of the fi­nancial flows toward the off-shore zones and optimization of taxation by the transnational corpora­tions.

Страницы:
1  2 


Похожие статьи

О Yermoshkina - Ecological safety of the regions achieving the eustandards

О Yermoshkina - Global financial flows shifting the balance