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In the past decade, the combination of high raw material costs and low capital costs has underpinned strong growth performance and rising foreign exchange reserves in most developing countries. But growth was also accompanied by increasing concerns over resource scarcity, increasing inequality and sharply rising food and fuel prices. On both a political and economic level, tensions heightened between Western governments and some of the new emergent powers.
“Shifting Wealth”: Mapping the New Geography of Riches
Since September 2008 there has been a dramatic turnaround. Prices are falling as recession bites. Stock markets worldwide have fallen dramatically and the global credit system is threatening to seize up. The major concern now is deflation rather than inflation. The oil price has slumped, and with it, the price of many other major commodities. Suddenly, the prospects for the developing world look far shakier.
The crisis risks, however, obscuring a fundamental underlying story: In the last two decades we have witnessed a major shift in the world economy’s centre of gravity – from North to South, and from West to East. China and India have been the main drivers of this process, but other regions of the developing world have also been enjoying growth rates well above those of the OECD countries. Multinational corporations, both from OECD countries and the emerging markets, have been extraordinarily active in the developing world, as have the newly constituted sovereign wealth funds. The rising share of emerging markets in global assets has increased their political influence on global governance. We have, in short, been witnessing what has been termed ‘the Rise of the Rest’.
The Global Development Outlook: Promoting Global Dialogue
Apart from documenting the shift in wealth, the Global Development Outlook (GDO) will focus on policy, governance, and management features as they relate to development, poverty reduction and inclusive globalisation. The precise subject matter and structure to be dealt within this broad framework is a matter to be discussed and decided upon by the Advisory Panel members. Some tentative issues to be discussed include:
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Charting the Changing Economic Geography of the Global Economy: The GDO will empirically and analytically try to map the shifts in economic power, with a focus on different kinds of capital flows (aid, FDI, port-folio). It will analyse in detail the changing nature of south-south capital flows (e.g. multinational corporations, sovereign wealth funds, etc.), under varying levels of global liquidity. The GDO will explore what the global credit crisis and changing economic geography mean for the MDGs and inequality.
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Implications for National and Global Governance. Existing governance structures of the global economy have come under intense scrutiny in the aftermath of the outbreak of the credit crisis. The GDO will explore how the current system of international financial institutions can be used and modified to magnify their development impact. New emerging official aid donors have dramatically changed the picture, reducing the influence of older donors and raising questions about best-practice standards, the duplication and competition between donors. Inequalities have risen dramatically. Tensions and conflicts of interest have grown between emerging economies, the industrialised countries and the poorer developing countries. For all these reasons, the future global development architecture will need to be more inclusive, representative and efficient. In a rigorous and lively manner, the GDO will propose innovative and ambitious solutions to these most pressing problems.
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