1. World Economies Mahmoud s. Monsef PhD
Chapter 4
World Economies
Mahmoud s. Monsef PhD

2. What’s in It for Me? How are economies classified?
What is the developed world?
What is the developing world?
Which are the emerging markets?

3. Gross Domestic Product
There are some classifications that are commonly used to define a stage of a country’s development.
The GDP is the value of all the goods and services produced by a country in a single year.
The income per person, a better indicator of the strength of the local economy and the market opportunity for a new consumer product, is the nominal per capita GDP—the GDP divided by the population of the country

4. Gross Domestic Product
Finally, to compare production and income across countries, economists adjust this number to reflect the different costs of living in specific countries.

5. Purchasing Power Parity
PPP adjusts the exchange rate between countries to ensure that a good is purchased for the same price in the same currency.
For example, a basic cup of coffee should cost the same in London as in New York.

6. Human Development Index (HDI)
The HDI measures people’s satisfaction in three key areas:
(1) long and healthy life in terms of life expectancy;
(2) access to quality education equally; and
(3) a decent standard of living in the form of income.

7. Human Development Index (HDI)
Health is measured by life expectancy at birth;
knowledge is measured by a combination of the adult literacy rate and the combined primary, secondary, and tertiary gross enrollment ratio;
and standard of living by income as measured by per capita GDP.

8. United Nations Development Program (UNDP)
Standards are constantly evolving to meet changing global scenarios;
for instance, in 1997, the UNDP added the human poverty index (HPI) to factor in the denial of basic opportunities and choices to those who live in poverty.
It’s critical to understand why the changes are occurring, what attitudes and perceptions are shifting, and if they are supported by real, verifiable data.

9. Understanding the Developed World
Understand what the developed world is.
Identify the major developed economies.

10. The Developed World
The developed economies, also known as advanced economies, are characterized as postindustrial countries—typically with a high per capita income, competitive industries, transparent legal and regulatory environments, and well-developed commercial infrastructure.

11. The Developed World
Developed countries also tend to have high human development index (HDI) rankings (i.e., long life expectancies, high-quality health care, equal access to education, and high incomes).
In addition, these countries often have democratically elected governments.

12. The Developed World
The major developed economies include Canada, the United States, Western Europe, Japan, South Korea, Australia, and New Zealand.

13. The United States
The United States is the fourth-largest country in the world—after Russia, China, and Canada.
However, the United States is the world’s largest single-country economy and accounts for nearly 25 percent of the global gross domestic product (GDP).

14. The United States
The strength of the US economy is due in large part to its diversity.
Today, the United States has a service-based economy.
In 2009, industry accounted for 21.9 percent of the GDP; services (including finance, insurance, and real estate) for 76.9 percent; and agriculture for 1.2 percent

15. Germany
Germany, a member of the EU (European Union), has the fifth-largest economy in the world.
The country is a leading exporter of machinery, vehicles, chemicals, and household equipment and benefits from a highly skilled labor force.
It is the largest and strongest economy in Europe.

16. Germany
Services drive the economy, representing 72.3 percent (in 2009) of the total GDP.
Industry accounts for 26.8 percent of the economy, and
agriculture represents 0.9 percent.

17. Japan
Japan’s post–World War II success has been the result of a well-crafted economic policy closely administered by the government in alliance with large businesses. It also benefits from its highly skilled workforce.
Japan has very few mineral and energy resources and relies heavily on imports to bring in almost all of its oil, iron ore, lead, wool, and cotton.

18. Japan
It is the world’s largest importer of numerous raw materials including coal, copper, zinc, and lumber.
As with other developed nations, services lead the economy, representing 76.5 percent of the national GDP, while industry accounts for 21.9 percent of the country’s output.

19. The Developing World
The developing world refers to countries that rank lower on the various classifications from Section 4.1 "Classifying World Economies".
The residents of these economies tend to have lower discretionary income to spend on nonessential goods.
(i.e., goods beyond food, housing, clothing, and other necessities).

20. Third-World countries
The poorest countries of the world are often referred to as the Third World.
However, the Third World is not synonymous with the developing world;
instead it is part of an outdated model of the geopolitical world from the time of the Cold War.

21. Third-World countries
It encompasses three-quarters of the world’s population and
consists of the states that were not aligned with either the democratic-industrial bloc or the eastern, communist-socialist bloc.

22. How Do Developing Countries Become Emerging Markets?
A developing country, in order to evolve into an emerging market, must
(1) seek to implement transparency in its government as well as in its political and economic institutions to help inspire business confidence in its country,

23. How Do Developing Countries Become Emerging Markets?
(2) develop the local commercial infrastructure and reduce trade barriers to attract foreign businesses, and
(3) educate the population equally and create a healthy domestic workforce that’s both skilled and relatively cheap.

24. Emerging Markets
There are some common characteristics of emerging markets in terms of the size of the local population,
the opportunity for growth with changes in the local commercial infrastructure,
the regulatory and trade policies,

25. Emerging Markets improvements in efficiencies, and
an overall investment in the education
and well-being of the local population,
which in turn is expected to increase local incomes and purchasing capabilities.

26. Emerging Markets A current definition of an emerging market is
a country that can be defined as a society
transitioning from a centrally managed economy to a free-market-oriented economy,

27. Emerging Markets
with increasing economic freedom, gradual integration within the global marketplace,
an expanding middle class,
and improving standards of living, social stability,
and tolerance, as well as an increase in cooperation with multilateral institutions