FW1 - Mental Imagery
FW2 - Visioning
FW3 - Creativity
FW4 - Micro economy
FW5 - Macro economy
FW6 - Globalization
FW7 - Real world
1. The big pictures
2. The causes
3. Global summary
4. Do it yourself
5. Author
FW8 - Country rating
FW9 - Global trends
FW10 - Sector rating
FW11 - Business idea
FW12 - First sketch
FW13 - Consumer analysis
FW14 - Supplier analysis
FW15 - Marketing mix
FW16 - Operations
FW17 - Organization
FW18 - Accounting
FW19 - Financial statements
FW20 - Financial analysis
FW21 - Cash flow
FW22 - Business name
FW23 - Decision making process
FW24 - Check up point
FW25 - Communication
FW26 - Negotiation
FW27 - Raising money
FW28 - Project management
FW29 - Management
FW30 - Strategy

FreeWorldAcademy ©

FW7-WORLD ECONOMY

YOUR POSITION

Look at the map

MAP

300 days before opening

1. The big pictures 2. The causes 3. Global summary 4. Do it yourself 5. Coaching

INTRODUCTION

In this module, we shall apply the economic concepts you have just learned for describing the world economy.

It means that we shall give you the big pictures of the world economy detailed by regions. it's the real world and the real market.

Duration.

Lesson: 1 hour

External readings: 2hours

Do it yourself: 0

Total: 3 hours

Objectives

This world economy course describes the repartition of wealth between different countries and regions.

The objectives of the course are:

-To give you the big pictures about world and regional GNI, world and regional population and finally to compare the GNI per capita in different regions.

-To explain how these results are connected to the degree of freedom and knowledge in each country.

Warning : About the sources of tables and stats, we invite you to report to : Economic stats-World Bank: www.worldbank.org/data. Population stats: UN: www.un.org/esa/.

The world economy analysis is based on the GDP. The Gross Domestic Product (GDP) is the sum of the entire final production obtained in a given year by a country. GDP measures the economic power of a given country. However, the figures in this survey are based on the GNI (Gross national Income) in accordance with new World bank definition: Go to www.worldbank.org/data

1. The big pictures 2. The causes 3. Global summary 4. Do it yourself 5. Coaching

1-THE BIG PICTURES

11-World GNI

The world GNI attains 39,305 $Billion in 2004.

The world economy relies on three main regions:

USA: 12,150

EUROPEAN UNION ( 25 countries): 12,000

JAPAN:4,750

The USA, the European Union and Japan represent 73,5% of the world GNI (72.5 in 2001). The world economic power is highly concentrated. You may take notice that the above regions only represent 13% of the world population.

Real life example:

You cannot imagine how many top people are blindly ignorant about these figures. Sometimes ago, attending an executive board, I heard people dealing with economic development and what to do to increase it. I just asked " Do you know what is the figure of the world GDP?". It was a profound silence. Surprisingly, none was able to answer this question!

12-Main economic powers

The fifteen main economic powers are the following in 2004:

USA: 12,150; Japan:4,750; Germany: 2,490; China: 2,130; United Kingdom: 2,020; France: 1,860; Italy: 1,500; Canada: 900; Spain: 880; Mexico: 700; India: 680; Korea: 670; Brazil: 550; Australia: 541; Netherlands: 515. These countries represent 82% of the GNI and 55% of the world population.

-China stands far behind the US.

-Because of 70 years of communism, Russia is a small economic power. Russia has 140 million inhabitants, but its GNI is quite equal to that of the Australia with only 20 million inhabitants!

13-Income repartition

The Global GNI pictures the economic power. GNI divided by total population gives GNI per capita. This indicator represents the well being of the population. However, it is an average that does not take into account inequalities of income within a country. Nevertheless, it enables us to make comparisons and to measure the capacity of a society and an economy to satisfy its citizens’ needs

According to the World Bank, the world economy is divided into the following income groups (In % of World population):

1-Low Income= $825 or less:------------------- 37%

2-Lower Middle Income= $826 to $3,255:-------- 38%

3-Upper Middle Income= $3,256 to $10,065:------ 9%

4-High Income= $10,066 or more:----------------16%.

High and Upper Middle income groups represent 25% of the world population. The percentage of poor people (Lower Middle Income en Low income) attains 75% and concentrate in South Asia and in Africa. For example, the situation in Sub Saharan Africa is catastrophic: The GNI per capita only reaches $355 in 2004 (Except South Africa)

Real life example:

Most of the students coming from undeveloped countries do not know the place of their own country regarding this repartition.

Once, I gave these figures to a class formed by young executive coming from the third world. They were astonished : " We have followed many courses in economics both in our universities and in yours" They said " However, it's the first time we discover these figures!"

External readings

In order to check periodically all these big pictures, I recommend you to visit the following sites owned by the international institutions such as the World Bank, the International monetary Fund or the United Nations: www.worldbank.org www.imf.org www.un.org

I also recommend you to read "The Economist", a british newspaper which gives these information's quite on a weekly basis. www.economist.com

1. The big pictures 2. The causes 3. Global summary 4. Do it yourself 5. Coaching

2-THE CAUSES: FREEDOM, KNOWLEDGE

21-False causes

Third world activists often underline different causes such as North South divide, raws materials, and so on. All these explanations do not stand under a close examination:

The North South divide is not valid unless we consider the South American countries as not belonging to the South! 320 million Latin Americans (zone between 4 and 10000$) have an income per head that is higher than that of 320 million Europeans.

Raw materials do not explain the different levels of development either. Japan, the 2^nd most powerful economy in the world, has no raw materials. Africa has a large supply of raw materials, but most African countries are poor. Income per head in countries with abundant petrol supplies in Africa and the Middle East is mostly below 2500 $.

In fact, Freedom and knowledge are the only factors that explain these differences between GNI per capita.

22-Freedom

Out of the 6.5 billion inhabitants that make up the world’s population in the year 2004, 2.3 billion live in free societies, 1.5 in partially free societies and 2.2 in countries ruled by dictators or totalitarian regimes.

We shall show that a constant correlation exists between level of freedom and level of development. 85% of the world wealth is concentrated in free countries.

221-Positive correlation

Whatever the region or the culture, every country with a GNI per capita above $3,250 ( Upper Middle Income ) is a free country ( With the exception of Saudi Arabia ).

These countries are found in:

-North America (USA, Canada) and Western Europe.

-South Asia and the Pacific : Japan, South Korea, Taiwan, Singapore, Hong Kong, Australia and New Zealand.

-Latin America : Mexico, Chile, Argentina and Uruguay.

-Central Europe : Croatia, the Czech Republic, Hungary, Slovenia and Poland.

Among the free countries, the only big one that is far to be developed is India

222-Negative Correlation

With the exception of China, all countries ruled by dictatorships cannot even be included in graphs because their value is too insignificant.

The lowest GNI per capita are found in countries that have suffered or are still suffering from dictatorships.

-African countries in the sphere of influence of the former USSR recorded catastrophic results (GNI per capita 2003 in $: Source Worl Bank Atlas):

-The same applies to South East Asia, where the 3 countries with GNI below $ 500 are communist or former communist countries.(GNI per capita 2003 in $: Source Worl Bank Atlas)

-The same applies to the former USSR countries. Whilst Marxism claimed to improve the people’s happiness, we can see the catastrophic results of 70 years of communism in the table below.(GNI per capita 2003 in $: Source Worl Bank Atlas)

Obviously, economic development and well being are linked to freedom. Why would the degree of freedom explain the levels of development? It is because freedom is closely related to knowledge and therefore also to technical progress, which is the source of economic power. Of course Individuals deprived of freedom cannot create.

The following itinerary results:

Freedom -->Knowledge --> Development

This trilogy is the basic equation for development.

External readings

Go to www. freedomhouse.org . This site provides with an updated overview and regional surveys of freedom in the world.

23-Knowledge

In order to illustrate this golden rule, we shall show that knowledge is both connected to freedom and to the level of development.

We have 5 criteria by which to measure knowledge:

231-Education rate

It is impossible to use this criterion. In fact, authoritarian regimes indoctrinate young people, and schools are often privileged locations for this indoctrination to take place. These countries thus have statistics indicating high education rates, but they have no relation to reality.

Children who spend 10 hours at school every day, listening to teachers belonging to unique political party, receive less education than children who spend only one hour at school per day, but who are taught in a positive way.

232-Number of scientists per 1 000 inhabitants

The second criterion must also be interpreted with caution because the stats about the number of scientists are issued by the States themselves. What is more, scientists who work in dilapidated laboratories are not as effective as those working in pleasant environments.

Bearing this reservation in mind, this criterion gives us the following results for the top 10 countries (In 2001):

These countries include three out of the five principal world powers: the United States, Japan and Germany. We can see that all these countries are free and enjoy high levels of development ( Except Russia)

233-Illiteracy rate

Illiteracy rate generally distinguishes rates for men and women. We have established a single rate without such discrimination (2001):

All these countries are just emerging from dictatorships or remain ruled by dictators. All suffer of very low levels of development

234-Numbers of computers connected to internet for 10000 inhabitants (In 2001)

Once again, these figures show the excellent performance achieved by the Scandinavian countries.

235-Countries that export the most technology (In 2001)

Countries such as the Philippines, Malaysia and Thailand export the most advanced technology. This means that they accept to acquire knowledge through foreign investments in their economy. It also means that these countries are still in the race for progress. As a result, they benefit of high growth rates. All these countries are free or partly free.

1. The big pictures 2. The causes 3. Global summary 4. Do it yourself 5. Coaching

3- GLOBAL SUMMARY

By examining various factors ( GNI per capita, freedom, knowledge) we can form a new classification of countries.

Developed countries:

1. Scandinavian countries
2. North America, Japan
3. Singapore, Oceania (Australia, New Zealand)

Countries heading in the right direction:

1. South Korea, Thailand, the Philippines
2. Chile, Central America ( Mexico )
3. India

1. The big pictures 2. The causes 3. Global summary 4. Do it yourself 5. Coaching

Lesson summary

Analyze carefully all this data in order to clarify your business idea.

When imagining your products, services or markets:

In the short term, think about:

North America — China

Over ten years, think about India

Anyway, Keep focusing on China because of its demographic weight and fast growth.

More precisely, don't invest in a country that is not engaged in a right direction regarding freedom and knowledge.

1. The big pictures 2. The causes 3. Global summary 4. Do it yourself 5. Coaching

DO IT YOURSELF

Once again, use these knowledge's for stimulating your creativity. Begin to deliver short speeches about these topics to your relatives and friends. It should be a good training for increasing your personal visibility.

1. The big pictures 2. The causes 3. Global summary 4. Do it yourself 5. Coaching

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