Emilio Ontiveros

Global Turning Points: The rise of the emerging-market multinationals

KEY GLOBAL TURNING POINTS As of 2010 emerging economies and developing countries were home to 25 percent of the largest 500 companies in the world, 29 percent of the total number of multinational firms, and 41 percent of new foreign direct investment flows over the previous five years. Running hand in hand with the extraordinary growth of emerging economies at the turn of the twenty-first century, we come across yet another clear sign that the global economy is changing. New multinational firms from countries such as Brazil, Mexico, China, India, Egypt, or Indonesia are expanding around the world, making acquisitions, and gaining market share not only in traditional industries but also in high-technology sectors. This trend has acquired such magnitude that it is rare the household anywhere around the world that does not consume or own a product branded by an emerging-market multinational (Guillen and Garcia-Canal 2009; Van Agtmael 2007). The figures are tantalizing. While in 1990 about 7.1 percent of all cumulative foreign direct investment in the world was accounted for by the so-called emerging-market multinationals, by the year 2000 the proportion had grown to 11.1 percent, and by 2010 it had more than doubled to 15.3 percent. During the 2006–2010 period emerging and developing economies accounted for 41.4 percent of new foreign direct investment flows. At the turn of the twenty-first century about 20.8 percent of the 64,592 multinational firms in the world were from emerging or developing countries. By 2010 the proportion had climbed to 29.1 percent of the world’s total of 103,786 multinational firms (UNCTAD 2011 ). The economic and financial crisis that began in 2007 actually accelerated this phenomenon. While in 2008 there were 78 emerging-market firms on Fortune magazine’s ranking of the world’s largest 500 firms, in 2010 the figure stood at 117, with most of the increase being attributable to the number of Chinese firms, which grew from 29 to 61. A plausible scenario is that by the year 2030 more than half of cumulative foreign direct investment will be accounted for by emerging-market multinationals, and half of the Fortune Global 500 firms will be emerging-market multinationals (see the Box).

The Internationalization of the Spanish financial system

This chapter looks at how the Spanish financial system has opened up to the outside world in recent years. To that end, it examines the two main components of the system, namely the banking system and the stock market, and it looks at this process in both possible directions. The international integration of Spain’s financial system is hard to disentangle from that of its broader economy, and this process of opening up to the outside world has been an important feature of the evolution of the country’s financial system in recent years; indeed it has been one of the factors driving it.

Global Turning Points: From dictatorship to democracy and failed states

KEY GLOBAL TURNING POINT For the first time since World War II there are more countries in the world affected by state failure than countries ruled by dictators. In general, there is a sharp decline in the legitimacy and capacity of the state in both developed and developing countries. Perhaps the most striking way in which the twenty-first century differs from its predecessor has to do with politics, state fragility, and the nature of violent conflict. The historian Eric Hobsbawm (1994) argued that the twentieth century was a “short” one, stretching only between 1914 and 1991, and was characterized by an epic confrontation between dictatorship and democracy during World War I, the interwar period, World War II, and the Cold War. In the twenty-first century, by contrast, global political dynamics are unlikely to be dominated by the extent to which individual freedoms and political rights are observed. Rather, the problem on everyone’s mind will be failed states, i.e., countries in which central authority has broken down. The rise of international terrorism, the key form of violent conflict in the twenty-first century, is related to this breakdown of state authority. Thus, in many ways the twenty-first century may end up vindicating Francis Fukuyama’s famous “end of history” thesis (1989) in that liberal democracy and free markets won the battle, although the modern state as the dominant form of political organization is not uniformly effective around the world, with major implications for the global economy, global trade, and the nature of conflict. Samuel Huntington’s (1993) premonitory analysis of the “clash of civilizations” seems to have become awfully descriptive of the new politics of identity and conflict in the twenty-first century, in which civil wars are less frequent than during the Cold War period, inter-state wars are even rarer, and the most dangerous and lethal conflict takes the form of terrorism. Democracy, while formally the dominant form of government, does not translate into free popular participation and viable opposition in countries such as Russia, Bolivia, Venezuela, Nigeria, and Pakistan, to name but a few, mostly because of the weakness of political and social institutions (Epstein and Converse 2008). Moreover, in spite of the spread of democracy, two billion people continue to live under authoritarian regimes, especially in Africa, the Middle East, South Asia, and East Asia.