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Windows on the World Economy

Windows on the World Economy. CHAPTER 1. Introduction. Task we take up in this book — discovering the nuances of globalization Will try to explore the world economy and globalization in as balanced a manner as possible Will help us develop informed views and opinions.

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Windows on the World Economy

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  1. Windows on the World Economy CHAPTER 1

  2. Introduction • Task we take up in this book—discovering the nuances of globalization • Will try to explore the world economy and globalization in as balanced a manner as possible • Will help us develop informed views and opinions

  3. International Economics • Typically divided into two parts • International trade • International finance • This book approaches things a bit differently • Will explore four different windows on the modern world economy • International trade • International production • International finance • International development

  4. International Trade • Refers to the exchange of merchandise and services among the countries of the world • Typically imagined as trade in merchandise • Significant portion of world trade is composed of trade in services • Financial services, architectural services, engineering services • Trade in services is about 1/4 the magnitude of trade in merchandise

  5. Figure 1.1 Industrial Production and Exports in the World Economy

  6. International Production • Production of a product in multiple countries • Can take place through • Contracts • International licensing and franchising • Foreign direct investment (FDI) undertaken by multinational enterprises (MNEs) • Involves firms based in one country owning at least a controlling interest in firms producing in another country

  7. MNEs • Account for approximately ¼ of world gross domestic product (GDP) • The sales of foreign affiliates of MNEs now exceed the volume of world trade • Are involved in approximately ¾ of all world trade • Approximately 1/3 of world trade takes place within MNEs • Account for approximately ¾ of worldwide civilian research and development

  8. International Finance • Refers to the exchange of assets among countries • Individuals and firms around the world conduct international transactions in • Currencies • Equities • Government bonds • Corporate bonds (commercial paper) • Real estate • Plays increasingly important role in the world economy

  9. Figure 1.2 Annual Exports and Daily Foreign Exchange Market Turnover

  10. International Development • Hoped that the processes of international trade, production and finance will contribute to improved levels of welfare and standards of living throughout the world • Major issues involved • How we conceptualize levels of welfare or standards of living • How the processes help to determine international development

  11. International Development • Measure of these differences in living standards is the human development index (HDI) • Per capita income • Average life expectancy • Average levels of education

  12. Table 1.1: Measures of Living Standards, 2000

  13. Connecting Windows • Each offers a view, but each has a frame • Each offers some insight into the world economy • An insight that needs to be supplemented by one or more of the other windows

  14. Figure 1.3 Connecting Windows

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