The new world order and the failure of globalisation

This is a fuller but earlier prepublication version of an analysis of stagnation and divergence in the world economy which appeared in Pettifor, A (2003) Real World Economic Outlook, pp152-159. Basingstoke: Palgrave MacMillan, pp152-164. It uses data published by the IMF’s World Economic Outlook team to establish that world GDP per head, calculated in constant 1995 dollars at current market exchange, remained static between 1980 and 2002 and declined absolutely between 1988 and 2002. Over the same period – ‘globalisation’, understood as the period of intense financial deregulation and the creation of a world market in capital – this article uses the same figures to prove that the income gap between the North and the South has doubled. Inequality is measured as the ratio between GDP per capita in the IMF’s ‘Advanced countries’ and all remaining countries, in current dollars at market exchange rates. At the beginning of globalisation this ratio was approximately 10 to 1. By 2002 it was nearly 23 to 1. Over this period the real average GDP per capita of the ‘non-advanced countries’ comprising four-fifths of the world’s population, has fallen absolutely, from $1400 to $1100 per year. This economic failure, the article argues, is the underlying cause of the political instability that characterises the current period. The most basic problem of the world economy has not been solved – the imbalance between the declining relative productivity of the USA and its commercial and military dominance. The result is predicted to be a unstable period of history as these contradictions work their way through into the political sphere. Keywords: Divergence; stagnation; World Economy; Kondratieff; Development; Europe; US; value; price; TSSI; temporalism; profit rate; polarisation; inequality; globalisation; deregulation; imperialism; World Systems Theory; unequal exchange; dependency; North-Sout