Large Vs Small Economy.

GDP Data

Source: World Bank

World trade depends on large economies: US Dollar , Euro…

“In today’s world around 80% world trade take place in dollars. About 39% of the
world's loans are given in US dollars and 65%-dollar supply is used outside of the
United States. It is surprising to see that most trading countries of the world accept
payment in Dollar. “

Impact of currency fluctuation.

One of the most prominent impacts of currency fluctuations can be seen in international trade.
Generally, a weaker currency stimulates exports and makes imports expensive.

Effect on oil prices:

“When the US dollar strengthens against other currencies, we see a dip in oil prices. To decode why
that happens, it is important to know that major oil-exporting countries like Saudi Arabia have their
currencies pegged to the US dollar. So, when the greenback gets stronger, so does the Saudi Riyal,
making Saudi Arabia’s imports cheaper. Due to this, Saudi Arabia can afford to charge lower prices
for oil. With oil prices affecting the cost of commodities worldwide, consumers can directly feel the
effect of these inter-linked fluctuations.”

Healthcare

Large economies of the world have better healthcare systems in place for their citizens than their
counter parts. They can afford to set aside greater share of their GDP for healthcare and health
infrastructure.

Japan: “Japan has one of the highest life expectancies in the world at 84 years, according to the
World Bank, and the country is widely regarded as having one of the best healthcare systems in the
world. Each Japanese citizen is required to take out health insurance, but this is largely paid for by
the government, with the remaining 10-30% paid for by the individual, depending on means.
Insurance companies are banned from making a profit on medical insurance, resulting in a system
that’s
cheaper and more efficient for citizens. Overall, just 12.8% of medical expenses are paid out-of-
pocket by citizens.”

India: India also increased healthcare spending in the recent budget by 135%. (1.2%- 2.5%)
France: The French government, however, spends 9.3% of its GDP on healthcare which is
higher than many other nations.

*Counter for high cost of healthcare in US:

In the US, healthcare is more business oriented than service for the well-being of its citizens.
Health centres are profit centres. Their Doctors and Nurses are paid more than the doctors in
Switzerland Netherland. Increasing cost of drugs and profit minded Insurance companies make
healthcare costly,

It mainly depends on culture and Japan, where people come before profits, is opposite to US…
and large economy of japan has good health care… most of which is paid for by government.

*Counter for greater impact of COVID on large economies:

US was worst hit by COVID.

Inefficiencies in governance and handling of crisis by leaders of large economies. This may vary from
leader to leader and administrations of different countries. Influence of political leader with laid back
attitude, mismanagement of resources and not following protocols.

Even small economies are affected by the choice their leaders make.

But after Biden got elected as President of USA, vaccines are being deployed swiftly and protocols
have been made strict.

Technology:

Global innovation is crucial. Much of the world is advancing rapidly; however, some countries are
ahead of the pack. These countries help their people enjoy more efficient transportation, the best
healthcare, green initiatives, and more.

Bloomberg Innovation Index ranked Germany as the most technologically advanced country…
followed by South Korea… Germany is pioneer in the field of engineering…the US houses world’s
largest technology companies such as Google, Apple, Facebook…The U.S. has made significant
advances in space technology, pharmaceuticals, and telecommunications. The U.S. also has the
largest and most technologically advanced military in the world…it has massive budget allocated for
R&D.

Higher tech expertise…Japan, US, South Korea, Germany…. affects global eco…leads to marketplace
transformation. Innovation…improved living standards…and more robust int. trade…improved
operations in businesses… lower the cost of business…lower cost of production (India and China)..in
turn leading to prod of better goods and services…increased profitability

Leverage economies of scale…lower cost of production.

*Counter: UN Ranks Finland as the most technologically advanced county.

Technology must get better with each iteration and this is where large economies shine with backing
of their massive R&D budgets which small economies cannot afford…and are heavy rely on foreign
investors from large economies.

Education

Some of the Large economies has advanced education programs and policies backed high
investment in education infrastructure…One such example in Japan…among OECD nations…adults
from Japan displayed highest level of proficiency…and Japanese children lead numeracy and
literacy…

Another large economy with strong education system is South Korea.

Brain drains…people from small economies in a bid to secure higher pay & standard of living migrate
large economies…due to less opportunities.

The 2020 Best Countries for Education are ranked based on a perception-based global survey, which
used a compilation of scores from three equally weighted country attributes: having a well-
developed public education system, whether people would consider attending university there and if
that country provides a top-quality education.

*data inconclusive

If the opposition uses Finland as example…use Japan, which is only second to Fin...South Korea…
Germany (home to many Nobel laureates)

*Counter Finland education system.

Finland's gender gap in reading is twice that of the U.S. While Finnish boys score the average, Finnish
girls score nearly double that, meaning the country's superiority in reading literacy rests solely with
one gender. This is applicable to subject such as math and science where boys lag behind girls by a
huge margin.

Infrastructure

One major factor that contributes to the growth of any type of economy is infrastructure.

Large economies are self-reliant, and they have the means to build and expand their infrastructure…
which includes road transport, railway networks...improvements in these areas increases
connectivity within the nation as well as with other nations and facilitate growth…

India for example is improving its road and rail networks with new upgrades (Bullet train) and
investing to increase its agricultural infrastructure (setting up of cold storage) …which is expected to
bring down cost of produces.

Most infrastructure project in small economies are built in collaboration with large economies
using their expertise… such as ports that facilitate trade…or using borrowed funds from large
economies.

Soon after the efficacy of the COVID vaccination was proved…large economies with increased
production capability… such as India…went on to vaccination for the world.

Natural Resources

Regardless the size of the economy…countries rely on natural resources… Large economies such as
India, China and US not only have large natural resources reserve…not just oil but other important
minerals… they also have the expertise to exploit them to their advantage.

*Counter Small Economy: Natural resources.

Example of Venezuela…blessed with the one of the largest oil reserves…a political crisis led to the fall
of this oil rich country…they do not have the means to exploit the oil resource and were dependent
on foreign investment from large economies…the crisis drove away investors...and with them the
means to extract oil.

*Dependence of small economies on tourism.

Tourism contributes major portion of the GDP of many small nations and some nations are more
dependent on it than others…and these economies are in a very vulnerable position…a small
unforeseen event can topple the economy…one recent example of this…Maldives…whose 56.6
percent GDP is contributed by tourism and…suffered huge losses and…the path to recovery is not an
easy one. (International travel restriction, decreased visits from travelers from large economies
severely affected the country)

They suffer from isolation…geography… countries like …. Seychelles…they are dependent on

tourism…they are 1500 km from other countries…and it’s difficult to import and export goods…
expensive to send local and bring people in.
Others

*Small economy counter economic vulnerability, isolation, high admin cost leads to problems in
education and other domains…. smaller eco are dependent on int. forces on which they have almost
no control.

PPP : there nations have…higher standards of living….

Because of this there are higher interest rates...and it attracts…. investment.

Ability to devote more resources to areas like health care and education - For example-
Health care - China during Covid 19 pandemic
Education - Germany - 16 states abolished tuition fees for undergrad students at all public German
universities - domestic as well as international students can study for free.
 
Large economies can afford to play tighter policies and control carbon footprint which small
economies can do but at the expense of slowing down growth.
Example -
 
Large economies - more diversity, agricultural advancement. Other countries employ people from
large countries/economies as they have a bigger pool of people.
 
Infrastructure...leads to overall growth of economy...they have power to build and expand
connectivity...road transport... railway networks...these facilitate growth.

Concept from class

Catch up effect: In theory it many seem like small economies may catch up to large economies but
there are several other factors at play, and it may not be possible…due to unequitable distribution
of resources.

Money multiplier: effect will be high in large economies… with more opportunities and
transactions happening. So, they have more wealth than smaller economies.