Download Windows on the World Economy

Windows on the World
Economy
CHAPTER 1
Reinert/Windows on the World Economy, 2005
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
Reinert/Windows on the World Economy, 2005
2
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
Reinert/Windows on the World Economy, 2005
3
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
Reinert/Windows on the World Economy, 2005
4
Figure 1.1 Industrial Production and
Exports in the World Economy
Reinert/Windows on the World Economy, 2005
5
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
Reinert/Windows on the World Economy, 2005
6
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
Reinert/Windows on the World Economy, 2005
7
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
Reinert/Windows on the World Economy, 2005
8
Figure 1.2 Annual Exports and Daily
Foreign Exchange Market Turnover
Reinert/Windows on the World Economy, 2005
9
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
Reinert/Windows on the World Economy, 2005
10
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
Reinert/Windows on the World Economy, 2005
11
Table 1.1: Measures of Living
Standards, 2000
Reinert/Windows on the World Economy, 2005
12
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
Reinert/Windows on the World Economy, 2005
13
Figure 1.3 Connecting
Windows
Reinert/Windows on the World Economy, 2005
14