Briefing Paper

Project: International Economics Department

Donald Hepburn
  • The world’s industrial landscape has changed dramatically in the past 25 years. Industries have emerged, evolved and migrated to new countries. This transformation reflects the emergence of China, South Korea, India, Brazil, Mexico and other developing countries as major economic powers.

  • This transformation has been driven by a combination of economic, political, demographic and environmental trends. Globalization has been a powerful enabler of the transformation, allowing freer trade and capital movement to unlock new sources of competitive advantage.

  • Growing populations and incomes in developing countries will account for most of the rising global consumer spending. Larger workforces will also keep fuelling the developing world’s emergence, while rapid innovation may help the developed world to move up the value chain even as its pre-eminence is being challenged.

  • The long-term impact of the economic crisis is not yet clear. Faster growth in the emerging industrial powers could further tilt the balance in their favour. The failure of laissez-faire policies to prevent the crisis may also encourage them to pursue more active industrial policies.

  • However, the shift of industry to developing countries could be slowed by increased transport costs, changes in exchange rates and a backlash against globalization in developed countries if growth proves elusive and unemployment stays high.