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Points to highlight in global economic classisification
What is an economic system? The interaction of organizations of
participants engaged, according torules and orders, in the production,distribution, and use of goods andservices
Resource allocation
Forms of ownership Income distribution Role of politics Degree of freedom
infrastructure
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The Three Worlds
Ignored: Cold War putting the international attention towards
the United States and the Soviet Union.
Exploitation: Almost all of them have been part of the colonial
control of a European country.
Despised: Populated by non-European populations.
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The Three Worlds
First World countries Market economies having a high Gross National
Product (GDP) per capita. Generally capitalist democracies having the
United States, Western Europe and Japan asleaders.
US as the pole Second World countries
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
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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 betweenthe First and the Second worlds.
Several situations of dependency were createdbetween First World and Third World countries. .
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The Three Worlds
East West
Capitalist economies lead
by the United States
Socialist economies
lead by the USSRNorth
South
Area of conflict between the first and the
second world (Korea, Vietnam, Africa, etc.)
Nonaligned nations
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East / West Division, 1982
Pro USSR
Core USSR ally
URSS
United States
Core USA ally
Pro USA
Non aligned
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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 themain poles of the world-system.
Changes from a bipolar organization (East-West) to a multipolar organization.
Tendency toward some homogenization ofpolitical systems The classification now used is based on
economic criteria.
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The World Bank Classification of Development
Income per capita Main classification criteria used by the World
Bank.
The average amount of capital earned byindividuals.
Straightforward relationship between the percapita income and the economic structure of a
nation. The higher it is, the more a population isworking in the industrial and services sectors.
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Income per Capita, 1993
Not available
$8,626 and more
$696-8,625
$695 and less
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The World Bank Classification of Development
Patterns The GDP per capita underlines the important
disparities between countries of the Northand of the South.
Does not well illustrate the developmentpotential of the market:
China has a per capita income slightly over $300 peryear, whereas development opportunities are veryhigh.
Mali has a similar income per capita, but conditionsof the economy are completely different.
Income by capita doesn't necessarily representthe purchasing power:
The higher the purchasing power is, the morean economy is developed.
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Classification ( world bank)
1) Low income economies, China and India,&other low-income nations with-GNP percapita income of between US$ 675 or less,41 nations including Tanzania, Kenya,
Zambia and Malawi. ii) Middle incomeeconomies, lower middle income, GNP percapita of between US$ 676 and US$ 2,695,40 nations including Zimbabwe, Mexico andThailand.
iii) Upper middle income, GNP per capita ofbetween US$ 2,676 and US$ 8,355, 17nations including Brazil, Portugal andGreece.
iv) High income economies, OECD members
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United Nations Classification of Economic
Development
Structure Using several criteria related to income as well
as the structure of the economy and exportsUN classifies as follows
Advanced economies: High income levels.The classifications proposed by the World Bank and
by the United Nations are NEARLY similar.
Newly industrialized economies:
Manufacturing goods represent more than 25% ofthe GDP and 50% of the exportations.
Around 20 countries have experienced a fast andrecent industrial growth.
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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.
Continent sized countries: 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. Least advanced economies (LAE):
Very low per capita GDP (less than $700), a low levelof industrialization (less than 10% of the GDP) andalphabetization (less than 20% of the population).
They mostly include African countries.
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United Nation Classification of Economic Development
Newly Industrializing
Developing
Underdeveloped
Advanced
Oil Export / Rent
Economies
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Human Development Index
Nature The Human Development Index (HDI) is a
composite indicator developed in 1990 by theUnited Nations Program for Development
(UNPD). More complex and representative measure.
Definition Level of health:
The variable used is the life expectancy at birth. A good health system is likely to improve the lifeexpectancy significantly in a nation.
Level of education:The alphabetization level and the average years of
attending school are the two variables used.
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Global GDP, 2002
32.3%
12.3%
6.1%15.1%
34.2%
United States
Japan
Germany
Other G7
Rest of the world
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Distribution of Global Income Groups, 1990
Inequalities 20% of the worlds
population wascontrolling 85% of theavailable capital in 1995.
This share was 70% inthe 1960s.
1% of the populationcontrols 40% of thecapital.
50% of the globalpopulation live with lessthan $2 a day.
The richest 200people Combined income of 41%
of the global population
(2.46 billions). Net worth of $1,042
3 6
12
1663
1st quintile 2nd quintil
3rd quintile 4th quintile
5th quintile
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Five stages of world economy
Rostow: Whilst economic in nature, Rostow(1971) produced a five stage model ofeconomic takeoff:
Stage 1 traditional society, little increase in
productivity, no modern science applicationsystematically, low level of literacy Stage 2the preconditions of takeoff, moderntechniques in agriculture and production,developments in infrastructure and socialinstitutions
Stage 3 the takeoff, normal growthpatterns, rapid agricultural and industrialmodernisation, good social environment.
Stage 4 the drive to maturity, modern