1 Lecture 1 Overview of the World Economy Econ 340 Lecture 1: Overview 2 Lecture 1 Outline Overview of the World Economy • “Globalization” • Elements of the World Economy • Ways that Countries Interact – Trade – Capital Flows – Migration • Policies that Affect Others Lecture 1: Overview 3 Overview of the World Economy • “Globalization” – Means different things to different people • My definitions (see my online Glossary): 1. The increasing world-wide integration of markets for goods, services and capital. 2. Also role of MNCs, IMF, WTO, World Bank. 3. Elsewhere: domination by United States. • Some see good, others bad – Bad: reading by powell – Good: reading by Bhagwati Both make valid points. Read to see what they are. Lecture 1: Overview 4 Overview of the World Economy • International Economics – Is NOT about countries – It IS about interactions among countries Lecture 1: Overview 5 Lecture 1 Outline Overview of the World Economy • “Globalization” • Elements of the World Economy • Ways that Countries Interact – Trade – Capital Flows – Migration • Policies that Affect Others Lecture 1: Overview 6 Overview of the World Economy • World Economy consists of – Countries: a few hundred (CIA lists about 240) (WTO has 159 members) – People: over 7 billion (7.140 b. 1/10/14, compare 319 m. US) – Land: about 15 times the US2 Lecture 1: Overview 7 (Aside, on getting information) An excellent source of information about countries is the CIA World Fact Book (Just Google “fact book”) Lecture 1: Overview 8 Overview of the World Economy • World Economy consists of – GDP (2012 est., per CIA, in US$) • World: Total = $71.62 trillion per capita = $12,500 • US: Total = $16.02 trillion per capita = $51,700 Lecture 1: Overview 9 Overview of the World Economy • Implication – US is very unusual • Very rich – US has less than 5% of world population but more than 20% of world income Lecture 1: Overview 10 Lecture 1 Outline Overview of the World Economy • “Globalization” • Elements of the World Economy • Ways that Countries Interact – Trade – Capital Flows – Migration • Policies that Affect Others Lecture 1: Overview 11 Overview of the World Economy • Ways that countries interact economically – Trade (per CIA, 2012 est.) • World exports: $18.26 trillion (compare world GDP of $72 trillion) • World trade has grown faster than world GDP most years – But not during 2008-9, due to world recession Lecture 1: Overview 123 Lecture 1: Overview 13 Overview of the World Economy • See tables below for – Who trades most? – Who trades with whom? – Share of trade in GDP – US: • What do we export/import? • To/from whom? Lecture 1: Overview 14 Who Trades the Most? ($ b. & % share, 2012) Exporters Importers Value Share Value Share EU-27* 2167 14.7 US 2336 15.6 China 2049 13.9 EU-27* 2301 15.4 US 1278 10.5 China 1818 12.2 Japan 799 5.4 Japan 886 5.9 Korea, S. 548 3.7 Hng Kng 553 3.7 World 14764 100.0 World 14965 100.0 *EU external only Source: WTO, International Trade Statistics, 2013, Table I.8 Lecture 1: Overview 15 Who Trades the Most? • Developed countries are the biggest traders • China is catching up, in trade volume – It was the #3 exporter five years ago when I taught the course; now it’s #2. – Others are gaining as well: Three years ago Canada was #5 exporter. Two years ago that was S Korea. Last year and this, it is Hong Kong. Lecture 1: Overview 16 Who Trades the Most? • “Emerging Markets” in general are catching up to, or surpassing, the developed countries – In GDP, trade, and more – See Economics Focus from The Economist, “Why the Tail Wags the Dog” Lecture 1: Overview 17 Lecture 1: Overview 184 Lecture 1: Overview 19 Who Trades with Whom? ($ b., 2012, Intra- and inter-regional merchandise trade) Source: WTO, International Trade Statistics, 2013, Table I.4 Destination: Origin: North Amer. Latin Amer. Eur. Asia Africa Other North Amer. 1151 217 380 488 38 93 Latin Amer. 187 202 128 172 21 25 Europe 492 124 4383 643 211 454 Asia 975 196 855 3012 177 381 Africa 74 30 240 160 81 19 Other 155 18 578 858 53 292 World 3035 787 6564 5333 580 1264 Lecture 1: Overview 20 • North America, Europe, and Asia trade mostly within their group • Poorer regions – Latin America, Africa – trade mostly with the richer regions • This reflects what is not so clear in the table: – Rich countries trade most with each other – Poor countries trade most with rich countries • But their trade with each other is growing Lecture 1: Overview 21 What Does the World Trade? ($ b. 2012 & annual % growth rates, merchandise exports) Source: WTO, International Trade Statistics, 2013, Table II.1 Value 00-05 05-12 2009 2010 2011 2012 All Products 17,285 Agriculture 1,657 9 10 –12 15 22 0 Fuel & Mining 4,139 16 13 –36 33 35 2 Manufactures 11,490 9 7 –20 19 15 0 Lecture 1: Overview 22 What Does the World Trade? Biggest traded category: manufactures Fastest growing, and then shrinking, then growing: “fuels & mining” Why? Because this is the value of trade, and prices of oil and other raw materials were rising, and then falling. But within Manufactures, Iron & Steel is even more volatile: Lecture 1: Overview 23 What Does the World Trade? ($ b. 2012 & annual % growth rates, merchandise exports) Source: WTO, International Trade Statistics, 2013, Table II.1 Value 00-05 05-12 2009 2010 2011 2012 All Products 17,285 Agriculture 1,657 9 10 –12 15 22 0 Fuel & Mining 4,139 16 13 –36 33 35 2 Manufactures 11,490 9 7 –20 19 15 0 Iron & Steel 486 17 6 –45 30 25 –8 Reason: Very sensitive to investment, thus to expansion and contraction. Lecture 1: Overview 24 What Does the World Trade? ($ b. 2012 & annual % growth rates, merchandise exports) Source: WTO, International Trade Statistics, 2013, Table II.1 Value 00-05 05-12 2009 2010 2011 2012 All Products 17,285 Agriculture 1,657 9 10 –12 15 22 0 Fuel & Mining 4,139
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