THE WORLD 

/GLOBAL ECONOMY
In terms of economic development, the world is divided into 2 parts since the fall of the Berlin
Wall/the Iron Curtain and the end of communism. Before we had the West, the East and the Third
World.

These 2 parts are:

The rich industrialized countries called the developed countries (the West, the Western Countries)
and the developing countries with the less or least developed countries (LDCs=PMA, pays moins
avancés) and the new(ly) industrialized countries (NICs=NPI, nouveaux pays industrialisés). But
people often refer to the North and the South.

How can we make such a division?

This division is made according to their level of economic development, growth, their wealth and
their standard of living.

How can we measure the size of a country’s economy?

The prosperity of a country, the size of its economy is often measured in terms of GDP (Gross
Domestic Product), its economic output that is to say all the goods and services produced there in
a year. But the GDP per capita is a more accurate indicator.
It is sometimes measured in terms of GNP (Gross National Product) or GNI (Gross National
Income=PNB).
But there are also other economic indicators to measure the economic activity of a nation.

What are these economic indicators?

Consumer spending (les dépenses de consommation)

Exchange rate (le taux de change)
Interest rate (le taux d’intérêt)
National debt (la dette nationale)
Rate of inflation (le taux d’inflation)
Unemployment (le chômage)
The trade balance (la balance commerciale)
The balance of payments (la balance des paiements)

What are the balance of trade and the balance of payments?

The trade balance is the difference between payments for imports and payments from exports.
When a country exports more than it imports, it has a trade surplus or a glut when it is the
opposite, it has a trade deficit or trade gap.
The balance of payments is the difference between all the money coming into a country and all
the money going out including investment.

You can have a boom in the economy of a country which means growth but you can also face a
stagnation or a recession (a slump) and when it is really bad we call it a depression.

The richest countries of the world are industrialized countries and their economy is based on free
trade and capitalism (a free market economy). This economic system is based on the law of supply
and demand and on competition and the aim is to increase consumption.
What is the difference between economic growth and economic development?

Economic growth is measured with a quantitative indicator which is GDP whereas economic
development is measured with qualitative indicators such as HDI (Human Development Index)
which includes life expectancy, the literacy rate and GDP per capita. Economic development is
linked to improving living standards.

What is an emerging country?

The term “emerging country” is quite recent. According to the IMF, “Emerging markets are
typically countries with low to middle per capita income that have undertaken economic
development and reform programs and have begun to emerge as significant players in the global
economy.”
These newly industrialised countries have had rapid economic growth and development and
moved very quickly from a primary economy based on agriculture to a secondary one based on
industry.
NIC scan be found on every continent and have large young populations.

A tiger economy is a term used to describe an economy which has grown and become very
successful very quickly. It refers to the four Asian Tigers (Taiwan, Hong Kong, Singapore and South
Korea) which started developing in the 1960s. The main features of tiger economies are high
growth rates, rapid industrialisation, export-driven policies and massive investment (FDI=Foreign
Direct Investment).
BRICS is an acronym which refers to a group of the biggest emerging countries (Brazil, Russia,
India, China and South Africa)
MINT (Mexico, Indonesia, Nigeria, Turkey) is an acronym that refers to a group of countries with
the potential to realize rapid economic growth. The specific countries were selected based on
specific demographic, geographic, and economic factors.

The limits to development

Nations that have made quick progress in economic and industrial growth have become important
players in the global economy, however this has often come at an environmental and social costs.
Exploiting natural resources to satisfy industrial demand has had dramatic environmental effects.

In many emerging countries, millions of farmers and agricultural workers have moved to industrial
areas and to the cities to provide the workforce in factories. Mass urban migration can have a
devastating effect on rural areas which are left with only older and younger generations.

Newly industrialised countries benefit from globalization because they manufacture many goods
for industrialised countries. They are dependent on the world’s biggest economies for their
exports and also for investment in infrastructures.

Many developing countries in Africa, Asia and South America are still heavily reliant on agriculture
and have not managed to transform their primary producing economies into more industrial
economies and have low levels of productivity. There are several reasons why LDCs have not
developed. This can be due to natural conditions such as natural disasters or a lack of natural
resources or to structural economic problems such as a lack of infrastructures, political instability
or a lack of Foreign Direct Investment.