BISC Meeting 3 Notes - Handout

18 Meeting 3 23 Jan 2013 Handout The Global Economy We have looked at the global economy its size and structure - who produces and income and population distribution. The figures we will be using are not the most up to date. But they will do for the purposes of this analysis. Dollar output in 2010 (at current purchasing power parity prices) was around $80tr, of which around $41.77tr (about 52.1%) was generated by G30 countries (the OECD’s 30 odd member states sometimes referred to as the Richman’s Club). G7 (the US, Japan, Germany, Britain France, Italy and Canada) account for the bulk of OECD output - around 40% of the total. The US accounts for 19.5%. Total trade accounts for around $15tr having fallen sharply as the global financial crisis impacted upon economic growth. According to the WTO, trade in 2009 in current dollars declined by around 25%. The IMF’s assessments of economic growth points to growth being sustained by the largest developing economies (China, India and Brazil) though less strong. Recovery elsewhere but notably in the US and the Euro zone remains muted. This has important implications for per capita income growth. Look at the data taken from the OECD and the IMF. Have a look also at the WTO website. Population and per capita incomes Some further key statistics. The OECD which accounts for around 52% of global GDP has a population of around 943 million souls. It has an average per capita, income based on its $41.77tr of collective GDP, of around $44,000. Some of course enjoy higher per capita incomes than others. The US has one of the highest. Portuguese and Greek per capita income, for example, will be markedly lower. Some 440m live in the EU, which is the largest single market. Elsewhere around 5bn live in NIC’s (newly industrialising countries) and other developing and transitional economies. Their collective GDP is $38.3tr or some 47.9% of the total. They enjoy per capita incomes of around $7,600. Some are above the average. Russia with a population of 145 m has a GDP of around $1.7tr and an av erage per capita in come of $12,000. China has a population of 1.4bn with GDP of around $8tr with per capita income of around $5,700. In Africa income per head is as little as $300 per annum - less than the proverbial $ a day! Looking to the future and the role of China But there are fast and radical changes taking place beneath these statistics. Perhaps the most important is that GDP could well more than treble for China over the next decade and a half, which could put Chinese GDP at around $25tr and ahead of US total GDP though not in terms of per capita income. 1 If annualised growth is maintained at around current levels (c 8%pa) it will take China around 9 years to double its growth. If low economic growth of around 2% continues for the US it will take 35 years for the US economy to double. Look also the attached article from a recent Economist article How to get a Date. 1 A way to estimate the number of years it takes for a certain variable to double. The rule of 70 states that in order to estimate the number of years for a variable to double, take the number 70 and divide it by the rate of growth.

BISC Meeting 3 Notes - Handout

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