Points to highlight in global economic classisification What is an economic system?

? The interaction of organizations of participants engaged, according to rules and orders, in the production, distribution, and use of goods and services Resource allocation Forms of ownership Income distribution Role of politics Degree of freedom infrastructure

The Three Worlds

Ignored:

Cold War putting the international attention towards the United States and the Soviet Union. Almost all of them have been part of the colonial control of a European country. Populated by non-European populations.

Exploitation: Despised:

The Three Worlds First World countries

US as the pole Second World countries

Market economies having a high Gross National Product (GDP) per capita. Generally capitalist democracies having the United States, Western Europe and Japan as leaders. Centrally planned economies; from socialism to communism. Average GDP per capita and a well-developed industrial structure. The USSR as the pole:
Satellite nations in Eastern Europe and allies in Asia, Africa and Latin America

The Three Worlds Third World countries

Other nations having diversified political conditions. Low GPD per capita and a weak, and sometimes non-existent, industrial structure. Africa, South America and Asia were the stage of several ideological confrontations between the First and the Second worlds. Several situations of dependency were created between First World and Third World countries. .

The Three Worlds

Capitalist economies lead by the United States

East

North

Socialist economies lead by the USSR

West

South
Area of conflict between the first and the second world (Korea, Vietnam, Africa, etc.) Nonaligned nations

East / West Division, 1982

United States Core USA ally Pro USA URSS Core USSR ally Pro USSR Non aligned

The World Bank Classification of Development A new context

Important political and economic changes from the end of the 1980s. Challenged the conventional economic classification of development as well as the main poles of the world-system. Changes from a bipolar organization (EastWest) to a multipolar organization. Tendency toward some homogenization of political systems The classification now used is based on economic criteria.

The World Bank Classification of Development

Income per capita

Main classification criteria used by the World Bank. The average amount of capital earned by individuals. Straightforward relationship between the per capita income and the economic structure of a nation. The higher it is, the more a population is working in the industrial and services sectors.

Income per Capita, 1993

$695 and less $696-8,625 $8,626 and more Not available

The World Bank Classification of Development Patterns

The GDP per capita underlines the important disparities between countries of the North and of the South. Does not well illustrate the development potential of the market:

China has a per capita income slightly over $300 per year, whereas development opportunities are very high. Mali has a similar income per capita, but conditions of the economy are completely different.

Income by capita doesn't necessarily represent the purchasing power: The higher the purchasing power is, the more an economy is developed.

Classification ( world bank)

1) Low income economies, China and India,& other low-income nations with-GNP per capita income of between US$ 675 or less, 41 nations including Tanzania, Kenya, Zambia and Malawi. ii) Middle income economies, lower middle income, GNP per capita of between US$ 676 and US$ 2,695, 40 nations including Zimbabwe, Mexico and Thailand. iii) Upper middle income, GNP per capita of between US$ 2,676 and US$ 8,355, 17 nations including Brazil, Portugal and Greece. iv) High income economies, OECD members

United Nations Classification of Economic Development Structure

Using several criteria related to income as well as the structure of the economy and exports UN classifies as follows Advanced economies:
High income levels. The classifications proposed by the World Bank and by the United Nations are NEARLY similar. Manufacturing goods represent more than 25% of the GDP and 50% of the exportations. Around 20 countries have experienced a fast and recent industrial growth.

Newly industrialized economies:

United Nations Classification of Economic Development

Petroleum exporting countries:
Drawing a significant portion of their income from the petroleum industry (notably its exportation). Also defined as rent economies having artificially high levels of per capita income. India and China. Low income rural societies are dominant. Economic growth is having huge impacts of the demand a raw materials, goods and services, as well as over urbanization. Very low per capita GDP (less than $700), a low level of industrialization (less than 10% of the GDP) and alphabetization (less than 20% of the population). They mostly include African countries.

Continent sized countries:

Least advanced economies (LAE):

United Nation Classification of Economic Development

Economies
Underdeveloped Developing Newly Industrializing Advanced Oil Export / Rent

Human Development Index Nature

The Human Development Index (HDI) is a composite indicator developed in 1990 by the United Nations Program for Development (UNPD). More complex and representative measure. Level of health:

Definition

The variable used is the life expectancy at birth. A good health system is likely to improve the life expectancy significantly in a nation. The alphabetization level and the average years of attending school are the two variables used.

Level of education:

Global GDP, 2002

3 .2 4 %

3 .3 2 %

U ite Sta s n d te Ja a pn Ge a y rm n O e G7 th r Re of th w st e orld

1 .3 2 % 6 % .1

1 .1 5 %

Distribution of Global Income Groups, 1990

Inequalities
3 6 % % 12 %

6% 3

1% 6

1 quintile 2nd quintile st 3 quintile 4thquintile rd 5 quintile th

The richest 200 people

20% of the worlds population was controlling 85% of the available capital in 1995. This share was 70% in the 1960s. 1% of the population controls 40% of the capital. 50% of the global population live with less than $2 a day. Combined income of 41% of the global population (2.46 billions). Net worth of $1,042

Five stages of world economy

Rostow: Whilst economic in nature, Rostow (1971) produced a five stage model of economic takeoff: Stage 1 traditional society, little increase in productivity, no modern science application systematically, low level of literacy Stage 2 the preconditions of takeoff, modern techniques in agriculture and production, developments in infrastructure and social institutions Stage 3 the takeoff, normal growth patterns, rapid agricultural and industrial modernisation, good social environment. Stage 4 the drive to maturity, modern