Memorandum submitted by GLA Economics
Globalisation has been usefully defined in the
economic context as "the integration of economies through
markets across frontiers" and has resulted in unprecedented
levels of interaction and interdependence between economies. It
has generally been associated with global economic growth and
reductions in poverty. The globalisation process itself is not
new, though the most important factor in the recent phase has
been the rise of large emerging economies, particularly India
Globalisation has brought with it a number of
challenges as well as opportunities for London and the UK. The
primary challenge has been increased competitive pressures in
traditional manufacturing sectors, and more recently in more knowledge-intensive
and service-based sectors. In terms of opportunities, globalisation
enables countries like the UK to tap into the growing markets
of the emerging economies, through exports and by attracting inward
This challenge means that innovation and investment
will be important to the continued success of London and the UK
and its ability to exploit comparative advantage. The demand for
unskilled labour is likely to continue to decline. Aside from
these effects, globalisation has brought with it large financial
flows and the potential for more macroeconomic shocks as well
as implications for the environment.
London and the UK are well placed to benefit
from the opportunities produced by globalisation and will do so
as long as policy is aimed in the right direction. For businesses,
this means an increased focus on the "non-cost" factors
that make London and the UK a good place to locate, as well as
providing the physical and social infrastructure, which will enable
the activities where London and the UK have a competitive edge.
This will ensure that jobs lost as a result of trends in globalisation
are replaced with others, although this requires policy to be
aimed at enabling the skills-base of the London/UK workforce to
It is important to ensure that, whilst the benefits
of globalisation can be realised, its effects on resources and
the environment are accounted for. To tackle resource depletion
and climate change effects, policy should be aimed at encouraging
the transfer of energy-efficient and less polluting technology
to emerging economies. Moreover, the UK needs to push for more
widespread expansion of emissions trading and Kyoto protocol directives,
and should also encourage trade in goods that use environment-friendly
and sustainable production methods.
1. The nature of globalisation and its overall
impact on the UK economy
1.1 The meaning of globalisation
Globalisation has been usefully defined in the
economic context as "the integration of economies through
markets across frontiers".
This integration has been characterised by an increasing global
movement of capital, goods, services, and labour, and has resulted
in unprecedented levels of interaction and interdependence between
economies. In general, periods of globalisation have been associated
with periods of strong economic growth.
The driving forces behind globalisation have
advancements in production technology
and in the international organisation of production and business;
the reduction in transport and communications
opening up markets to capital flows and international trade.
The growing importance of capital flows trade
can be seen from Figure 1 below.
THE RISING IMPORTANCE OF TRADE AND CAPITAL
FLOWS. WORLD OUTPUT (GDP), FOREIGN DIRECT INVESTMENT (FDI) AND
EXPORTS, INDEXED 1970=100
The channels through which globalisation occurs
centre around major world cities such as London. World cities
act as "control centres" housing corporate headquarters,
corporate orientated financial services, and supporting business
services. Together this bundle of activities allows business establishments
within world cities to co-ordinate economic activity and flows
of capital across the world. In effect cities are now centres
of "management and co-ordination" of the global economy.
As a result, the nature and impact of globalisation is particularly
important for London.
This is illustrated by the fact that London, along with New York,
is the world's leading financial centre. In 2000, both cities
had close to $2.5 trillion of assets under management.
1.2 The extent to which the recent phase of globalisation
is a new phenomenon for the world economy
The globalisation process itself is not newalthough
in the early 21st century there are some new elements such as
global branding, and both a more global division of production
within companies and a global distribution of plants. In the 19th
and 20th centuries the countries, continents and regions of the
world also went through periods of increasing openness and trade,
as well as periods of greater protectionism and isolation.
However, the current period is one in which
the pace of globalisation has once again picked up and the scale
and scope of change is affecting ever more people and products
across the world. This current phase of globalisation is characterised
especially by the emergence of the major Asian economies onto
the world stage and a resultant shift in the balance of economic
power. The geographic shift in the balance of economic power in
the world is manifest in the rise of countries such as China,
India and Russia, which are predicted to play an increasingly
important part in the world economy over the coming decades.
It is possible that this present phase of globalisation
will also be characterised by a changing approach to fossil fuels.
Previous phases of global growth were fuelled by coal in the 19th
and early 20th centuries, and then oil in the mid 20th. Both environmental
and supply issues mean that further fossil fuel based expansion
is under pressure. However, it is too early to say how severe
this pressure will be. China is buying into Russian-based reserves
and has its own potential supplies. Expansion of coal supplies
is also possible, as is a renewed interest in nuclear power. Limitations
of energy supply is one force which could bring global expansion
to a halt and result in rising prices, competition for scarce
fuels and renewed "beggar my neighbour" policies. The
difficulties in completing the current Doha round of tariff talks
are evidence of these emerging pressures.
1.3 The roles of India and China in the globalisation
Over recent years, China, India and other major
emerging economies have been playing an increasingly important
role in the global economy. Figures from the IMF show that over
the period of 1990-2005, India's share of world output has grown
by 40% while China's share has grown by over 2.5 times. In 2005,
China and India's respective shares of world output reached 15.4%
and 6% in PPP
terms. Over the period 2001-05, China and India accounted for
33% of global economic growth (in PPP terms), compared with a
30% contribution by the G7 countries over the same period.
The rapid growth over the last few decades of
emerging countries such as China and India means that the ranking
of the world's biggest economies could be substantially different
in 10-20 years time compared with today. A study by Goldman Sachs
projects GDP for various countries to 2050, under the key assumption
that these countries maintain and develop policies/institutions
that are supportive of economic growth.
China is projected to become the second biggest economy by around
2020 and will overtake the US to become the world's biggest economy
by 2050. By 2050 India will be the third biggest economy after
China and the US, and Russia and Brazil will be around the same
size as Japan. A study by PwC gives similar results.
Until recently, the primary role of emerging
economies in the globalisation process has been to offer low-cost
locations for multinational businesses in relatively labour-intensive
and low value-added stages of the production process. China and
India, given their rapidly increasing position in the world economy,
have begun to move beyond this role. As noted by HM Treasury,
both China and India have been investing heavily in improving
the skills-base and skills-level of their workforce. In addition,
China has been investing heavily in technology and R&D, while
India continues to increase its presence in the international
outsourcing and business services industries. Brazil and Russia
have been growing slightly less rapidly but are still likely to
prove important for both London and the UK in terms of securing
markets and fuel supplies. All this has resulted in increased
competitive pressure for advanced economies, not only in traditional
areas such as manufacturing but also in the more knowledge-intensive
and service-based industries.
Given the growth forecasts for these emerging
economies, these competitive pressures will almost certainly increase.
This is not the only effect they will have in the globalisation
process. As they grow, they will increasingly become important
markets for other countries to tap into, both in terms of exports
to these emerging economies as well as foreign direct investment
from them. The effect of these developments on the UK economy
is discussed further in section 1.5.
1.4 The impact of globalisation on UK and global
One of the benefits of globalisation has been
that the growth in low-cost production in emerging economies as
well as the spread of innovation has led to a drop in end-user
prices. This trend has until now reduced global inflationary pressures
and eased pressure on monetary authorities worldwide, allowing
interest rates to be lower than they would otherwise be. This
has been coupled in particular with financial ease in Japan as
it has grappled with asset deflation and banking problems.
Financial globalisation has facilitated increased
integration in global capital markets. Two arguments have been
put forward as to how this has increased macroeconomic stability.
Firstly, as international capital flows become more important
for national economic development, assuming they respond negatively
to bad monetary and fiscal policies, governments are encouraged
to conduct macroeconomic policies
providing greater economic stability. However, Tytell and Wei's
(2004) empirical studies suggest that this "discipline-effect"
is not that strong, finding only some modest evidence that financial
globalisation has induced countries to pursue low-inflation monetary
Secondly, financial globalisation has enabled
the US to sustain a large current account deficit ($805 billion/6.4%
of GDP in the US) by attracting capital inflows from economies
with large and rising current account surpluses, whilst at the
same time world long-term real interest rates have been low. This
has been made possible due to the emergence of a so-called "global
saving glut" in emerging economies such as China and other
East Asian economies (who have built up reserves to promote export
led growth policies and to act as buffers against future financial
crises) as well as in oil-exporting countries.
Without globalisation in financial markets, this global private
sector balancing-effect would not be possible; moreover, some
have argued further saying that the same forces that underpin
this balancing effect will enable a "benign" transition
towards lower external imbalances.
As noted by the IMF,
others have argued that, whilst globalisation makes it easier
to finance external imbalances, it does not mean that the imbalances
are sustainable. Instead, a major depreciation of the dollar will
be needed to correct for these imbalances, which could bring with
it significant effects on global output.
It could therefore be argued that globalised financial markets,
by facilitating these financial flows and by allowing these imbalances
to perpetuate, poses a risk to global macroeconomic stability.
However, as mentioned above, it can also be argued that financial
markets have made possible the economic development of previously
unintegrated economies and that financial imbalances are one temporary
consequence that in time can be corrected.
Increased interdependence between countries
also means that UK macroeconomic stability is more exposed to
international shocks. When US interest rates rise, or there is
a cutback in oil production, or there has been a natural disaster
somewhere else across the world the UK economy is affected. These
effects are even more pronounced in London. Given that London
is a financial centre with links across the world, and that the
London economy has a high proportion of financial and business
services, events like these increase exposure and hence have significant
repercussions on the level of economic activity. For example,
the 11 September attacks and the world slowdown that followedthis
helped produce a recession in London in 2002, a feature that did
not occur in the rest of the UK economy.
While the rest of the economy benefited from
the expansion of the public sector, and overall growth was maintained,
this sector is relatively small in London and the private sector
moved more sharply into a downturn.
1.5 The opportunities and challenges which globalisation
presents for the UK Funding
The provision of funding services and managing
the movement of capital are areas of specialisation for the UK
and London economy. Matching the supply and demand for investment
funds across the world and providing the right contractual basis
for such funds, as well as rates that reflect appropriately the
riskiness of ventures, has been a function of the City of London
over several centuries. The range of skills and businesses involved
in such activity should not be underestimated and nor should the
importance of allowing London's continued success in new and emerging
markets in order to maintain and enhance its existing position
as the world's leading financial centresee Figure 2 overleaf.
LONDON'S SHARE OF SELECTED INTERNATIONAL
However, there are two other aspects that are
relevant, which reflect the ability to supply funds for domestic
investment as well as the international supply of funds. At present,
the international flows of funds are dominated by the funding
of the US deficit and the generation of funds as Figure 3 shows.
Disruption of these flows would affect both the cost of funds
and the activities of the global firms that arrange these transfers.
Movements in exchange rates, which also result, can destabilise
markets and margins, leading to financial pressure on banks and
assets. Market stabilisation efforts must be a priority in these
circumstances and should not be neglected.
CURRENT ACCOUNTS BY REGIONS
The supply of funds for domestic investment,
or perhaps the willingness to invest, is also important for the
UK economy to take advantage of new opportunities. It is something
of a puzzle that the economic stability, which has been apparent
over the last 10 years, has not resulted in the investment boom
that was initially expected. In part, this may due to pressure
on companies to support pension fund deficits and the resultant
drain on funds. It may also reflect doubt about the ability to
benefit from such opportunities.
Goods and services
The rise of the service sector and the relative
decline of the manufacturing sector in developed economies over
the last few decades has been a primary feature of the growing
integration of markets regionally and globally. Increased competitive
pressure coming from emerging economies such as India and China
has resulted in manufacturing and associated activities moving
from advanced economies such as the UK to these emerging economies.
In particular in mass-produced manufacturing, where the cost-base
drives profitability, lower cost regions and countries are playing
a growing role.
As mentioned above, emerging economies are also
beginning to compete in more knowledge-based areas of the manufacturing
sectors. Technological advance has led to lower costs in transport
and communications, making trade in services more feasible, enabling
standardised forms of service activities to be competed away from
advanced economies to lower cost regions (commonly referred to
These two growth areas (high-skilled manufacturing and standardised
service sectors) are adding to the competitive pressures that
already exist between advanced economies in these areas.
Therefore a major challenge for the UK brought
about by the globalisation process is the emergence of these competitive
forces. However, whilst its effect is a re-location of industry
to lower-cost alternatives, globalisation enables the UKas
other parts of the worldto focus on areas in which it has
a comparative advantage (see section 2).
The rise of the emerging economies provides
a major growth opportunity for the UK. As these countries grow
and become richer they are also becoming huge markets for goods
and increasingly services. Chinese, Indian and other consumers
will purchase more insurance of various types as their incomes
increase, and as businesses grow they will demand more of the
professional serviceslegal, accountancy, advertising and
consulting. London (and more generally the UK) can continue to
capitalise on this by using its comparative advantage in these
"specialist services", largely based on its knowledge
base and expertise, to satisfy this expanding demand. London has
a particular role to play in this regard. As shown in Figure 4
below, London is much more orientated towards the export of services
rather than goods relative to the UK as a whole. Indeed GLA Economics
estimate that London accounts for around a third of total UK service
EXPORTS OF GOODS AND SERVICES AS A PERCENTAGE
OF GDP UK AND LONDON, 2002
As well as increasing trade, as emerging economies
grow richer, they will also provide valuable investment into the
London and UK economies. Studies by GLA Economics into Foreign
Direct Investment (FDI) from China and India
suggest that London accounted for around 13% of the number of
Chinese FDI projects into Europe in 1997-2004, and the UK as a
whole accounted for around 46%. Indian FDI projects into Europe
also seem strongly concentrated in London, with London accounting
for 46% of projects between 1997 and 2004 and the UK as a whole
accounting for around 59%. Given that the Asian outbound travel
market is growing at a faster rate than any other part of the
business and leisure travel from these countries is also an important
source of inward investment into London and the UK.
Investors from China, India and other parts
of the world are attracted to London by a range of factors. Research
undertaken for Think London, the official inward investment agency
for London, highlighted the following as being the main rationale
for overseas business locating in London
London's status as a global business
city and the access to markets afforded.
Proximity to client base.
Ease of international travel.
Prominence of the English language.
Access to skilled labour.
In addition, London is particularly attractive
for overseas investors due to the diverse communities within it
and the networks they provide, plus a cosmopolitan city culture
that is generally welcoming to people of all nations.
To encourage inward investment and strengthen
economic and other relationships between London and China, the
Mayor has opened representative offices in Beijing and Shanghai.
Programmes of work relating to India and Russia are also being
developed and implemented.
The preceding discussion has inevitable repercussions
on the labour market. The emergence of countries such as China
and India has boosted the global supply of labour. India is one
of a handful of economies forecast to have a growing working-age
population over the next 40 years.
Globalisation has enabled jobs that are relatively low-productivity
and require relatively low levels of training to relocate to lower
cost areas where they can produce as much but more cheaply. Globalisation
also allows emerging economies to compete for the more highly
skilled jobs in manufacturing and services.
This reduced demand for labour in these sectors
is not a problem for the UK if these jobs are replaced with others
and workers and employers are prepared to invest in new opportunities
and skills. A supportive skills investment regime is also required
to help workers adjust to changing industry requirements.
The major effect of globalisation on businesses
is increased competitive pressure. As a result, policy must be
aimed at making the UK an attractive place for business despite
the rise of the low-cost alternatives. As well as cost, the decision
to locate is based on a variety of factors. Rather than just competing
on cost, policies must also be aimed at:
1. Strengthening those "non-cost"
factors that give the UK a competitive edge in the location-choice
for business of all kinds.
2. Maintaining and encouraging innovation
and development in those factors likely to improve the UK's comparative
2.1 "Non-cost" or Qualitative factors
Macroeconomic stabilityA stable macroeconomic
environment minimises distortion in firms' and individuals' decisions,
facilitating more effective long-term planning and ultimately
economic growth. The UK economy has been remarkably stable over
the past decade, with low inflation, low unemployment and sustained
growth. Ensuring that the UK economy remains stable is vital in
an era of increasing exposure to external shocks. This means a
continued commitment to the current monetary framework, and also
a prudent fiscal policy.
However, it may also be necessary to consider
the balance between private sector and public sector stability.
Private sector investment has not responded to stability in the
way envisaged and indeed the private sector has not experienced
stability either, moving into recession in 2001.
Competitive environmentThe UK has long
been committed to open and competitive markets. In the face of
increased competitive pressures, the UK should continue to promote
a liberal trade policy within the EU and counter those tempted
to fall back on protectionist measures. It must remain committed
to creating an open and competitive environment to ensure continued
Innovation, Research and developmentAlthough
the UK has a strong record in R&D investment, it lags behind
major advanced economies
and also needs to be able to compete with emerging economies that
are beginning to invest heavily in more high-value areas. To this
end, the UK needs to encourage private sector investment in R&D
for example, through tax incentives as well as encouraging stronger
links between industry and academia.
Flexible product, capital and labour marketsWith
the fast pace of globalisation, businesses are attracted to locations
where they are able to respond quickly to changing market conditions.
In product and capital markets, despite it being at the forefront
of liberalised and competitive markets, the UK needs to do more
to promote an enterprise society by improving the regulatory environment
for business and helping firms, particularly smaller firms, to
access finance. For discussion on the labour market, see section
Highly skilled workforceThis is crucial
if the UK is to progress in the more high-value end industries,
especially so given the increased supply of high-skilled labour
from countries such as India. Therefore, the UK needs to ensure
that the skills-base of the labour force continues to meet business
needs (see section 3.1). This is a particular issue in London
where there is increasing demand for more highly qualified workers.
Highly Quality InfrastructureModern economies,
particularly complex modern cities such as London require a range
of supporting infrastructure, including transport, social, cultural,
health and education facilities in order to make them attractive
places for both business location and for people to live in. Again
this is a particular priority for London where projects like Crossrail
will be essential to maintaining its success in the key sectors
Good "institutions"This gives
the UK a competitive edge. Therefore, their continued promotion
is needed to ensure the UK remains attractive to business. Such
institutions include a well-developed legal system (supporting
property rights and contract-enforcement), relatively light-handed
regulation and the existence of established markets, financial
infrastructure and government framework.
Effective PromotionIt is important that
the above non-cost or qualitative factors are effectively communicated
to business. This requires effective promotional activities. In
London, such activities are undertaken by Think London, responsible
for attracting inward investment to the capital. Nationally, the
Chancellor of the Exchequer announced in the 2006 Budget that
Government would join forces with the financial services industry
to support a single strategy to strengthen London's position as
the world's number one financial services centre.
2.2 Comparative advantage
The UK has a competitive edge in many expanding
activities. These include financial services, business and computer
services, creative industries, legal, insurance and other professional
services, high-value manufacturing, pharmaceuticals and leisure.
Policy aimed at improving the non-cost factors as outlined above
will help to ensure these remain growing industries in the UK.
One of the natural consequences of this specialisation
is a clustering of industry ("agglomeration"). This
is particularly relevant for London.
Research by GLA Economics and others shows how the extent of agglomeration
in London closely mirrors its strengths and performance of its
sectoral specialisations and is one reason why London is more
productive, when compared to rest of the UK.
In order to continue to capitalise on available
agglomeration economies, and to enable business to respond quickly
to market developments, bottlenecks arising in the transport infrastructure
and in housing need to be tackled. The GLA has outlined a number
of policy measures for London, including pushing forward transport
development projects such as Crossrail and reform of the house-building
3.1 Labour market and employment
As discussed above, globalisation has brought
with it a decline in demand for low-skilled labour in the UK,
both in the service sector and more so in the manufacturing sector.
At the same time, the demand for high-skilled, particularly service-based
labour has increased. For instance, jobs in London's financial
and business services sector doubled as a proportion of all London
jobs between 1971 and 2003, from around 16% to around 32%,
while manufacturing jobs fell from around 27% of jobs to around
Policy must therefore be aimed at aligning the
skills-base of those who have lost their jobs with the requirements
of the growing industries, such as providing re-training facilities,
particularly for those in long-term unemployment. However, the
effectiveness of such policies has been questioned.
A more effective policy could be to provide tax and other incentives
to encourage firms to retrain workers themselves, as well as incentivising
individuals to take such opportunities. In the longer term, a
more holistic approach to skill-formation is requiredfrom
pre-school to university education.
This would mean more investment at all levels of education. The
skills needed to take advantage of new opportunities will themselves
be developing: a positive attitude to change and to learning may
be as important as the acquisition of specific skills. Some more
research into the skills-profile required as globalisation trends
continue may be helpful.
These policies will also ensure a highly skilled
workforce, acting as a pull for those looking for a location to
set up their business, as would ensuring continued flexibility
in the labour market.
Such policies also encourage participation in
the labour market. This is particularly important for London,
where the incidence of worklessness is higher than the UK as a
In addition to the above policies, GLA Economics has outlined
a number of other policies aimed at tackling this discrepancy,
training, improving child-care accessibility and more focus on
less-represented groups such as ethnic minorities.
3.2 Training and the acquisition of skills
3.3 The provision of support for those disadvantaged
Section 3.1 has already discussed policies aimed
at re-aligning the skills-base of low-skilled workers who have
lost jobs as a result of globalisation. In conjunction, policy
must be aimed at boosting income for these disadvantaged groups
and encouraging them back to work. By first identifying these
groups, policy must be aimed at ensuring that:
These groups benefit from current
welfare measures such as the Working Tax Credit.
The National Minimum Wage remains
The forecast growth profile of emerging economies
means increased demand for the world's energy and natural resources.
This is already evident in the oil, gas, base metals and agriculture
product markets where rising global demand, combined with the
inability by the main producer nations to meet this increased
demand, has led to high (in many cases peak) prices in these markets.
The effect of these price rises on advanced
economies has been somewhat muted by globalisation. Globalisation
has enabled the export of manufacturing industries to low cost
destinations. This has had two important consequences for advanced
countries; (a) lower energy consumption per unit of output, (b)
reduced end-user prices.
However, the shift of manufacturing and its
associated activities to low-cost regions has meant that production
has been exported to countries with relatively high energy/resource
intensive and polluting production methods. Environmental regulation
and standards are typically lower in developing countries than
developed countries. This uneven playing field has added to the
already existing problems of resource depletion and climate change
attributed to rising emissions. This phenomenon will not help
to mitigate climate change if certain manufacturing activity and
thus its associated emissions is simply exported elsewhere. However,
this is not true for some sectors such as speciality chemicals
as they have strict universal health and environmental standards.
By taking advantage of the opportunities globalisation
provides, policy can be aimed at:
Encouraging research and transfer
of energy-efficient and less polluting technology to emerging
Encouraging research and take-up
of renewable energy sources and cost effective energy efficiency
measures in all sectors.
Building on current WTO and EU regulations
that encourage trade in those goods whose production methods are
Extending the EU Emissions Trading
Scheme on a global level and removing barriers and transaction
costs associated with the Kyoto mechanisms. London, being a world
financial centre, can play a significant role in the development
of a global emissions-trading market.
Extending the EU ETS to include air
so that prices and consumption decisions reflect better the cost
to society of every aviation trip.
Ben S, 2005, The global saving glut and the US current account
deficit, Sandridge Lecture at Virginia Association of Economics,
10 March 2005.
Corporation of London, 2004, London's linkages
with the rest of the UK, research commissioned from the Oxford
Economic Forecasting, May 2004.
Corporation of London, 2005, The City's importance
to the EU economy 2004, research commissioned from the Centre
for Economics and Business Research, January 2005.
Corporation of London, 2005, Off-shoring
and the City of London, March 2005.
DTI, 2001, Business Clusters in the UKA
First Assessment, research produced by a consortium led by
Trends Business Research, February 2001.
DTI, 2003, Services and Off-shoring: The
Impact of Increasing International Competition in Services,
Fischer, Stanley, 1997, Capital Account Liberalization
and the Role of the IMF, speech made at the IMF Annual meetings
seminar on Asia and the IMF, 19 September 1997.
GLA Economics, 2004, Enter the Dragon,
GLA Economics, 2005, Growing TogetherLondon
and the UK Economy, January 2005.
GLA Economics, 2005, From the Ganges to the
Thames, June 2005.
GLA Economics, 2005, Our London, Our FuturePlanning
for London's growth IImain report, November 2005.
GLA Economics, 2006, Worklessness in London:
Explaining the difference between London and the UK, Working
Paper 15, prepared by Pam Meadows, Synergy Research and Consulting,
GLA Economics, 2006, London's economic outlook:
spring 2006, April 2006.
Goldman Sachs, 2003, Dreaming with BRICs:
The path to 2050, Goldman Sachs Global Economics Paper No
99, October 2003.
Greenspan, Alan, 2005, Globalisation,
Remarks given at the Council of foreign relations, 10 March 2005.
HM Treasury, 2005, Globalisation and the
UK: strength and opportunity to meet the economic challenge,
IMF, 2005, World Economic Outlook, September
IMF, 2006, World Economic Outlook, April 2006.
IMF, 2006, World Economic Outlook Database,
Obstfelt, Maurice and Kenneth Rogoff, 2005,
The unsustainable US current account revisited, revised
version of NBER Working paper 10869, November 2005, available
PwC, 2006, The World in 2050: How big will
the major emerging market economies get and how can the OECD compete?,
John Hawksworth, Head of Macroeconomics, March 2006.
Robinson, Peter, 2000, Active labour market
policies: a case of evidence-based policy-making?, Oxford
Review of Economic Policy, Vol 16, No 1.
Roubini, Nouriel and Brad Sester, 2005, Will
the Bretton Woods 2 regime unravel soon? The risk of hard-landing
in 2005-2006, paper presented at the symposium of the Federal
Reserve Bank of San Francisco and the University of California
Berkeley Revived Bretton Woods system: A new paradigm for Asian
development?, February 2005.
Stiglitz, Joseph, 2000 Capital account liberalization,
economic growth and instability, World Development Vol 28,
No 6, pp 1075-86.
Tytell, Irina and Shang-Jin Wei, 2004, Does
Financial Globalization induce better macroeconomic policies?,
paper presented at the fifth annual IMF research conference, 4
Visit London, China Mission, http://www.visitlondon.com/uploads/13865Chinabriefingforpartners.pdf
Wolf, Martin, 2004, Why globalization worksthe
case for the global market economy, Yale University Press,
New Haven and London.
67 Wolf, "Why globalization works-the case for
the global market economy" (2004) Back
Sassen, "The Global City", (1991) Back
The Greater London Authority has undertaken considerable analysis
of London's global economic role, see London Development Agency,
Sustaining Success: Developing London's Economy, The Economic
Development Strategy (2005), GLA Economics, "Growing Together:
London and the UK Economy" (2005) and GLA Economics, "Our
London, Our Future", (2005) Back
Thomson Financial Investor Relations, Target Cities Report,
PPP stands for purchasing power parity. PPP exchange rates are
calculated to equate the value of a representative basket of goods
and services produced/consumed across countries. They will typically
differ from the actual prevailing market exchange rates. The use
of PPP exchange rates is generally the preferred method for comparing
countries' output or GDP levels Back
IMF World Economic Outlook Database (April 2006) Back
Goldman Sachs, "Dreaming with BRICs: The path to 2050"
PwC, "The World in 2050" (2006) Back
HM Treasury, "Globalisation and the UK: strength and opportunity
to meet the economic challenge" (2005) Back
It is important to note that, even after accounting for the differing
size and growth rates, China has contributed more to the globalisation
process than India. In their World Economic Outlook (September
2005), the IMF notes that India's share of world trade in goods
and services is 2.5%, while that of China and the newly industrialised
Asian economies is 10.5% and 9.3% respectively. The IMF goes on
to identify the factors in India that have restricted integration
despite the rapid pace of economic growth. These include relatively
high tariff levels (despite recent reductions), restrictive labour
laws and high levels of red tape which have hindered manufacturing
growth, a difficult business climate not conducive to FDI, and
a growing inadequacy of its infrastructure. However, India is
clearly moving in the right direction with the authorities taking
steps to strengthen global linkages-assuming this continues, India's
emergence will be as important to the globalisation process as
that of China Back
Fischer, "Capital Account Liberalization and the Role of
the IMF" (1997); Stiglitz, "Capital account liberalization,
economic growth and instability" (2000) Back
Bernanke, "The global saving glut and the US current account
deficit" (2005). Back
Greenspan, "Globalisation" (2005) Back
World Economic Outlook, IMF (September 2005) Back
Obstfelt and Rogoff, "The unsustainable US current account
revisited" (2005); Roubini and Setser, "Will the Bretton
Woods 2 regime unravel soon? The risk of hard-landing in 2005-2006"
DTI, "Services and Off-shoring: The Impact of Increasing
International Competition in Services" (2003); Corporation
of London, "Off-shoring and the City of London" (2005) Back
Since London has already seen a large part of its more standardised
manufacturing industry move to other parts of the country, it
is likely to be less vulnerable to any further weakness in the
manufacturing sector than the UK as a whole. In addition, with
its strength in specialised services including the financial and
business services and creative industries sectors, London can
strengthen its position in those areas where it has a comparative
GLA Economics, "Enter the Dragon" (2004); GLA
Economics, "From the Ganges to the Thames" (2005) Back
Visit London, "China Mission"-The Asian Outbound
travel market is predicted to rise by 6% per year until 2010,
with China leading the way. Chinese outbound visitors are expected
to reach 50 million by 2010 Back
Think London, "One in seven: The Impact of inward investment
on the London economy" (2004). Prepared by DTZ Pieda Consulting Back
World Economic Outlook, IMF (September 2005) Back
See HMT, "Globalisation and the UK: strength and opportunity
to meet the economic challenge" (2005), page 43 Back
Many of London's specialisations (financial and business services,
creative and leisure industries) are co-located in the same parts
of London, usually Central London. This allows companies to take
advantage of what economists have termed agglomeration economies,
leading to increasing returns to scale in the production of goods
and services Back
See GLA Economics, "Growing Together-London and the UK Economy"
(January 2005)-chapter 3; DTI, "Business Clusters in the
UK-A First Assessment" (2001); Corporation of London, "London's
linkages with the rest of the UK" (2004) and "The City's
importance to the EU economy 2004" (2005) Back
See GLA Economics, "Our London, Our Future-Planning for
London's growth II-main report" (November 2005)-chapter 4 Back
From approximately 730,000 to around 1.4 million jobs Back
From approximately 1.3 million to around 270,000 jobs Back
See for instance Robinson, "Active labour market policies:
a case of evidence-based policy-making?" (2000) Back
See GLA Economics, "Our London, Our Future-Planning for
London's growth II-main report" (November 2005)-chapter 4 Back
GLA Economics, "Worklessness in London: Explaining the difference
between London and the UK" (January 2006) Back
Soft skills are those skills that influence how individuals interact
with each other, including such abilities as effective communication,
creativity and analytical thinking Back
GLA Economics, "Our London, Our Future-Planning for London's
growth II-main report" (November 2005)-chapter 4 Back
For a discussion on the oil market see GLA Economics, "London's
economic outlook: spring 2006" (April 2006)-chapter 6 Back
Air emissions have higher global warming potential as they are
emitted at higher altitude Back