Chapter 2
Potential in SSA
"An Africa-wide free-trade pact could bolster the region's income by $450 billion and lift 30 million people out of extreme poverty by 2035, if accompanied by significant policy reforms and trade-facilitation measures, according to a new World Bank report."
Characteristics of Angola - exporter of what - GDP - politics
- Also large oil exporter - 2020 GDP est.: -1.4% - Same party in power since 1979; same president 1979-2017
Explain crisis in Venezuela
- Inflation rate = 4,000% (2019: 10 million %) - Miami Herald: Poll-20% of Venezuelans have left - Huge loss of human capital (Chp. 1)
europeans rate their neighbors - most trustworthy - most arrogant - least arrogant - most compassionate - least compassionate
- most trustworthy: Germany - most arrogant: Germany - least arrogant: themselves - most compassionate: themselves - least compassionate: Germany
US characteristics
- political stability: makes it prime export market - international trade important: ~20% of US GDP - bc of large size: domestic trade in US is more akin to international trade elsewhere -> compare to EU
When was the EU created?
-1951 with European Coal and Steel Community -Maastricht Treaty created the EU -spurts of expansion throughout history EU was created/ expanded: note timeline •Note: 1993 Maastricht Treaty actually created European Union
Characteristics of South Africa - government - GDP growth - Joined what meeting - Exports - current economic situation
-Moved from apartheid to democracy in 1994 (Mandela)* -Modest but steady GDP growth since (3.3% per year avg.) -Joined BRIC summit first time in April 2011 -Exports = 63% of GDP, mostly minerals -Economy now in decline, 2020 -8%
• Lower-Income Nations - income range and countries
-Per cap income $1,035 or less -Afghanistan, DRC, Haiti, N.Korea, Somalia, South Sudan, Syria
• Lower-Middle-Income Nations - income range and countries
-Per cap income $1,036-$4,045 -Ukraine, Bangladesh, Morocco, Nigeria, Nicaragua, Vietnam
• Upper-Middle-Income Nations - income range and countries
-Per cap income $4,046-$12,535 -Belize, Turkey, Russia, Costa R, Gabon, Mexico, Iran, Malaysia
• High-Income Nations - income range and countries
-Per cap income at least $12,536 -OECD, oil-rich countries, island states; in SSA: Seychelles
Who belongs to the EU?
-Some countries who are and some who aren't in Europe
How many Republics declare independence? what were they known as?
15; Newly Independent States
when did the USSR collapse?
1991
When did ___ form ____?
1992, 12 republics formed the Commonwealth of Independent States
What is US's GDP in dollars?
21 trillion dollars
How much GDP per capita in US?
63,600 dollars
What is the upside to India's challenges in the long term?
A lot of poor people but as their economy grows, they will then have a large middle class, leading to a prosperous country
Characteristics of Australia and New Zealand - population - exports - natural resources
Australia - 23 Million ->40% in Sydney and Melbourne - 24% of $1.25 trillion GDP -> Natural resources: gold, iron ore, coal, wool, beef, wheat New Zealand - 4.5 Million >80% on North/South islands - 28% of $189 billion GDP -> Dairy products, meat, wool
In South America, no country made more progress than _________, which lowered its Gini Index on total income inequality by 10 points and in less time than most.
Bolivia
What is China to developing countries/emerging world? Which country is the most in debt to China?
China is basically a bank to developing countries/emerging world. Djibouti
the former communist countries in the EU
Estonia (USSR) Latvia (USSR) Lithuania (USSR) Bulgaria Slovenia (Yugoslavia) Czech Republic Hungary Poland Slovakia Romania
Most influential members in EU
Germany, France, United Kingdom (was)
Explain the difference between Import Substitution and Export Promotion
Import Substitution NTBs- nontariff barriers, to reduce imports and provide money for domestic companies to replace foreign production >> replace foreign production with domestic production for domestic consumption Export Promotion We want to encourage our domestic companies to export abroad and compete with the global market >> give them subsidies/money to lower their production costs
Countries of Southeast Asia
Indonesia, Malaysia, Thailand, Vietnam
What are the four tigers and what does four tigers mean?
South Korea, Taiwan, Singapore, Hong Kong High-Income Asian Markets
Who has the world's largest economy? and the country has what percentage of global GDP?
US, 23%
Arctic Five
US, Russia, Canada, Denmark, Norway
Define subsistence farming
occupation that you use all your energy to provide for yourself but no time to sell to other people and make a profit
Why are the Balkan countries not in the EU?
still recovering from wars and genocide and then when ready, will join the EU
What is the Eurozone?
the group (19 countries) of European Union nations whose national currency is the euro.
What caused the volatility? Who is US's largest trading partner?
trade tensions btw US and China; China
How did Russia transition from communism to free market?
• 1991: Boris Yeltsin, first pres. Privatization enriches oligarchs, not country; govt.-owned businesses still in bad shape; unable to collect taxes, stop financial crises • 1998: Yeltsin devalues ruble, stops payments to foreign creditors • 2000: 2nd pres. Vladimir Putin reforms tax system, deregulates SMEs, allows private farmland • 2003: Putin halts reforms; major co.'s, esp. oil and gas, are renationalized à corruption, graft
Characteristics of Hong Kong - control - exports - industries - one of its purposes
• 1997: Control of Hong Kong reverts to China from British • Is supposed to be (??) autonomous from Chinese control until 2047 • Re-exporter; exports=177% of GDP • Banking, finance, electronics, textiles • Business entryway into China
Vietnam Case Study - GDP growth from 2018->2019 - 2020 - covid situation - average age - labor wage compared to China
• 2018 GDP growth > 7%; 2019 6.6% • 2020 2.7%; 2021 7%-top in reg. • Contained COVID well • Avg. age = 30 • Full of workers and buyers—world's fastest-growing middle class • Wages 50% < than China • Some higher ranks than China in WB Doing Business Report • China has stricter regulations in nine industries • Centrally located to reach region's >600 million consumers • Many SE nations have similar characteristics -Vietnam is an engine of growth in south east Asia -Demographics is average age of 30 which is perfect for a growing country, prime working age people -Fastest growing middle class
Key characteristics of the European Union - members - currency - population - GDP - international trade - market type - government type
• 27 member countries* • 19 use euro** -Belong to Eurozone • Population: 514 million • GDP: ~$23 trillion • International trade = ~50% of GDP • Free-market oriented • Many parliamentary democracies
Middle Income countries NOT in the EU
• Albania, Bosnia-Herzegovina, Macedonia, Kosovo, Montenegro, and Serbia •Development hindered by war and genocide after Yugoslavia's disintegration (1991-1995, 1998-2001)
China's rising global influence
• China's plan to dominate international trade • Includes South China Sea, where >$3 trillion international trade transits every year
South America Overview - history - colonization - number of countries - 1800s - Challenges
• Common political, social, economic history • Spanish/Portuguese colonization -Subjugated native population -Exploited natural resources • 13 countries • 1800s: Independence • Challenges: income inequality, poverty -> political instability
rule 1 in Russia
• Do not defy Putin • "It is primarily a system of ambiguity. Each person in sistema wonders where he stands and monitors the relative positions of friends and rivals."
Key characteristics of Mexico -government style -trade changes -challenges
• Federal government similar to U.S. -Presidential terms of 6 years • Previously anti-free trade, anti-FDI -Has moved to open-market system over last 20 years -NAFTA, 1994 / now USMCA -Free-trade pacts with El Salvador, Honduras, Japan, Uruguay, EU • Challenges -Violence, corruption, lack of rule of law, etc. -NAFTA/USMCA-related uncertainty
China's Economy
• Grew 10.8% 2003 - 2011 - Some economists believe stats exaggerated - ↓ ~ 6% early 2020 (COVID) - 2020 forecast growth of 1.2% - Yet, FDI inflows remain high compared w/ROW • Risks for economy - High corporate indebtedness - Rising trade tensions - COVID resurgence
More Japan's economic challenges
• High yen value ↓ exports • Slow to adjust to e-tail, rise of emerging markets • Protectionist policies • Bad demographics: By 2025 ~30% of pop ≥ 65 years old • Low but ↑ female labor force participation • Persistent economic woes -> deflation again
World Bank divides countries into several groups based on national income, which is usually measured by....
• High-Income Nations • Lower-Middle-Income Nations • Per capita income = GDP/pop • Upper-Middle-Income Nations • Lower-Income Nations
High Income countries NOT in the EU
• Iceland, Norway, Switzerland, Andorra, Monaco, and Liechtenstein, United Kingdom
Expanding Economic Opportunities in Middle East
• Increased economic ties between Israel and UAE • May lead to other countries in the region expanding contact w/Israel as well • First commercial flight between two countries in August • Countries to establish diplomatic presences • Regional economic trends • "Twin shock" to economies
Characteristics of the US dollar
• Invoicing Currency -> Currency in which sale of goods/services is denominated -> For ~½ of all intl. transactions • Flight Capital-> Safe haven for investors from unstable countries • Long-Term FDI -> As of 2014, foreigners have invested $2.9 trillion in U.S. -> U.S. ranks #1 in A.T. Kearney FDI Confidence Index
Positive characteristics of Central America & Caribbean
• Island states thrive on tourism, offshore $ industry (Aruba, Bahamas, Cayman) • Belize, Costa Rica, Dominica, Grenada, Jamaica, Panama, among others, have developed; now considered upper-middle-income nations
What are Japan's economic challenges?
• Long-term economic problems (Date: August 2010—still applicable today) • Key points: -1989 Real estate/stock bubble burst -> "Lost Decade" -Deflationary spiral Co.'s don't recruit due to weak sales -> Prefer temp workers jobless/underemployed ↓ spending -> demand ↓ -> prices ↓ -> business profits ↓ -> fewer jobs • Inconsistent and high taxes dampens growth • COVID: -7.8% (~28% annualized)
Life after oil for the Middle East
• Low oil prices problematic • Diversify economies • Dubai free-trade zone / export entry point • Expanding foreign investments -Sovereign wealth funds* -Saudi A. created $2 trillion fund in 2016 to help transition away from oil
Characteristics of Southeast Asia
• Low-cost labor -> significant FDI inflows • EU, Japan, US use countries as production platforms • Economies boomed due to FDI-generated exports • Manufacturing moving from China b/c cheaper • Middle-income but growing -> labor costs even lower than China
France's role in the EU
• Major role in EU history • Traditionally pushes for more political integration and strong human rights • More protectionist than other members
Rise of China - 1950s-1960s - 1960s-1970s - 1976 - Today
• Mao's policies hurt economy, persecute millions - 1950s-1960s: Great Leap Forward (collectivization) - 1960s-1970s: Cultural Revolution (Communist orthodoxy) • 1976: Mao dies; free-market policies implemented - Privatized agriculture - Legalized small businesses • Today: Unique combo of political control/free-market policies - Human rights violations - High (but slowing) growth (from reported est. >10% à 6%)
Importance of National Income Levels
• Often most important info needed to assess country's potential success as new market • Provides clues about -Purchasing power -Technology level -Infrastructure • Excellent source of national income data -World Bank, International Monetary Fund (IMF)
How is the Arctic an Emerging Market
• One of world's largest emerging markets -Natural resources -Fisheries -Global warming -> trade/transshipment routes •Middle Powers Denmark/Norway have helped negotiate informal arrangements to manage conflict and competition •Sets positive example for other potential conflict zones, like South China Sea • Discovery of large new reserves -> new round of tension
Significant challenges of Central America & Caribbean
• Political instability (Haiti) • Recurring U.S. military intervention (Haiti, Panama) • Poor infrastructure/education/economic policies • High poverty, weak middle class • Import limitations by U.S./EU on sugar, clothing • Reliance on tourism • 2020 projected growth ~ -3%
Characteristics of India - population - independence date - government structure - market reforms and results - 2020 - challenges
• Pop: 1.3 billion, 2nd to China • 1947: Independence from UK • Govt. structure: Strong UK influence • Post-WW2: Used state ownership of key industries to spur growth • 1991: Market reforms/privatization - ↑ FDI inflows, 2019 GDP growth 7% • 2020: India now 3rd-largest economy • Challenges -Infrastructure (2019 annual floods Mumbai, COVID) ->Govt. red tape discourages FDI -Corruption; solution: Cashless society-PM Narendra Modi banned large bills in 2017
History of China - population - important dates
• Pop: 1.4 billion—world's most populous • 2000 BC - early 1900s: emperors rule • 1912: Republic of China established • 1949: Mao Tse-tung/Communists est. People's Republic of China - Nationalists flee to Taiwan, ledby Gen. Chiang Kai-shek
Characteristics of Japan - population - world's economy rank - GDP - Cause of past economic growth - concentrated industrial sector: characteristics
• Pop: 125 million (↓ last 10 years) • World's 4th-largest economy • GDP: $5.5 trillion • Past economic growth b/c of close cooperation between Ministry of International Trade and Industry (MITI) and co.'s • Concentrated industrial sector: Keiretsu, large families of interrelated companies that control Japanese industry - Act as each other's suppliers, financers - System of cross-ownership
Characteristics of Africa - population - colonial influence - commodity boom - agriculture
• Population: 1.2 billion, 55 countries • Colonial Influence remains -European colonization, 1800s-1950s -Political/economic ties -Political problems • Commodity Boom -Oil (Angola, Nigeria Top 10 global oil exporters) -Minerals (Zambia, Botswana, DRC) • Agriculture >40% of GDP in CAR, Sierra Leone, Tanzania, Rwanda -17% overall (compare to 1.6% for OECD countries) -Many on continent employed in subsistence farming
Key characteristics of Canada
• Population: 37 million • World's 2nd-largest land mass • Major exporter: Exports = 32% of GDP • Natural resources: forest products, petroleum, grain • Trade w/U.S.: 2nd largest bilateral trade relationship in world -U.S. receives > 75% of all Canada's exports
Characteristics of South Korea - regional characteristic - exports - what is important to economy
• Post-WW2 divided Korean peninsula into Communist north / democratic south • Exports = 40% of GDP • Govt./chaebol (Top Chaebol include Samsung, Hyundai, Daewoo, LG)* cooperation important to economy
Advantages of Canada
• Proximity to the U.S. • Political/Legal Stability -Québec one possible exception* • Well-developed infrastructure and highly educated population
Russian Politics: Putin at the Center - how did Putin rise to power?
• Putin's rise to power -Cult of personality -Oligarchs -State control of media -Deaths of and attacks on Putin critics
Characteristics of Singapore - when founded, when independent - exports - benefits - industries - regional center for what
• Singapore: Founded as British trading colony in 1819; indep. 1965 •Exports = 174% of GDP •Excellent ports facilitate re-exporting*, oil refining •Communications, financial services •Regional center of high technology
Compare US and Canada with Central America and the Caribbean - population - annual per capita GDPs for 3 countries
• Small population, GDP • Widely varying annual per capita GDPs -Haiti: $755 -Costa Rica: $12,200 -Cayman Islands: $85,500
define kompromat
• The use of compromising materials/blackmail • "routinely used throughout the former Soviet Union to curry favor, improve negotiated outcomes, and sway opinion." • "Intelligence services, businesspeople, and political figures everywhere exploit gossip and damaging information. • Russia sometimes called the "blackmail state"
United Kingdom's role in the EU
• Was counterweight to French influence • London—world's largest financial center • Major trade partner/FDI destination • Gateway to Europe—Brexit could change that
Russian Economy other characteristics
• Weak institutions • Unfavorable demographics • Close connection between government/security services, wealthy businessmen (oligarchs), and Russian mafia • Key concepts in Russian politics and business: sistema and kompromat
US-Canada Trade Ties - How much money worth? Rank in bilateral trade relationship? - Who surpassed Canada as US's largest trading partner and what year?
• World's 2nd-largest bilateral trade relationship: ~$600 billion in 2017 • Canada was largest U.S. trading partner until 2015, when China surpassed it • Trade ties are large, close, and extremely important for both countries
Describe the Russian Economy
• World's 5th-largest economy • 3rd-largest oil producer •2nd-largest oil exporter • Benefited from ↑ oil/raw materials prices • 2003-2014, GDP ↑ at rate of 4.8% per year • 2019: 1.2% / 2020 est.: -6.6% • 2020: Russia has almost $600 billion in currency reserves, 4th largest • Economy has suffered from ↓ oil prices, sanctions, and COVID
Germany's role in the EU
• World's 5th-largest economy, 3rd-largest exporter • Major role in EU history
Characteristics of Taiwan - control - exports - political issue
•1949: Communist victory in mainland China •2 million nationalists flee to Taiwan (aka the Republic of China) •Fast-growing for last 30 years •Exports = 67% of GDP •Political issue: People's Republic of China wants Taiwan Yet, Taiwan-China business strong
What is Abenomics?
•2012: "Abenomics" (PM Shinzo Abe): fiscal stimulus, monetary easing, structural reforms
define sistema
•An informal hierarchy where politicians and businesspeople follow unspoken rules, and through which wealth and power are distributed
Key points of video on how accession process works to join EU
•Croatia: joined in July 2013 •Turkey: European or not? •Macedonia: Northern Greece known as "Greek Macedonia"; Greeks see name as an affront; new deal recently reached •Iceland: Dropped application •Bosnia-Herzegovina, Kosovo: Not yet ready •Ukraine: Unstable and corrupt; war w/Russia à weak economy - Victor Yushchenko, Ukraine's president from 2005-2010, before and after he was poisoned with dioxin. He was possibly poisoned by political enemies, perhaps with the help of Russian authorities. His opponents contend that he faked the poisoning to increase his chances of winning the presidency.
China and the Internet
•Economic importance of Internet •Test which sites allowed/not •Winnie the Pooh banned - China is a digital totalitarian state - China tech firms love censorship
Middle East characteristics - history of what - 2011 - 2016
•History of conflict/political unrest ↑ risk of doing business there •2011: Arab Spring -> uprisings in Egypt, Libya, Syria, Tunisia •2016: Yemen unrest, Syria war
Post-WW2 Economic Policies
•Import Substitution: Use high tariffs and NTBs to ↓ imports and replace w/ domestic production •Export Promotion: Use subsidies to ↑ exports •Benefits firms facing intl. competition •Local markets too small to achieve economies of scale / competitive pricing -> ↑ prices •High-cost govt. subsidies / nationalization to sustain firms -> costs passed on to taxpayers •High budget deficits -> inflation and instability
Challenges for South America today and the causes for the challenges
•Income inequality remains problem •Causes political instability •Caused by -Unequal education access -High birth rates among poor (less $/child) -Ineffective public spending
Central Asian Republics - countries - common heritage
•Kazakhstan •Azerbaijan •Uzbekistan •Tajikistan •Turkmenistan •Kyrgyzstan •Russian Influence •Language and Religion •Scarce Arable Land •Low Per Capita Income •Fossil Fuel Reserves
South America Today - late 1980s and results - 1990s - now GDP - region becoming.. - Venezuela 2019
•Late 1980s Economic Reforms - ↓ trade barriers - Free-trade agreements - Privatization • 1990s: High growth • Now: GDP -9.5% • Region becoming poorer each year relative to ROW • Venezuela 2019 -25%-35% growth / 2020 -15%
Income Inequality in LA - measured by - of world's 20 most unequal countries, ___ are in Latin America - positive outlook
•Measured by Gini coefficient*: ranges from 0 -> 1 -At 0, every person in a country earns same income -At 1, one person earns all income in country -Higher coefficient -> higher income inequality •Of world's 20 most unequal countries, 8 are in Latin America •Yet total income inequality has ↓ significantly in 16/17 LA nations
Economic characteristics of Middle East - largest economy in region - region's highest average income
•Oil-rich nations: Saudi Arabia -largest economy in region -oil = 45% of GDP -oil = 90% of exports •Israel: Region's highest average income
What benefits members have received in the EU:
•Open new export markets 2000-2008 accession ↑ GDPs by avg. 1.75 percentage points - Percentage point is different from percent => read pdf on the canvas CH 2 page
USSR History
•Post-WWI, Bolshevik Rev. coup tsar •Communist-controlled ▪ Outlawed market system ▪ Abolished private property ▪ Collectivized farms ▪ ↓ income inequalities ▪ Living standards fell
Characteristics of Russia
▪ Largest country (land mass) ▪ Ninth largest population ▪ Rich in natural resources (oil, gas, minerals, gold, diamonds)
What is the US's GDP growth?
-5.9%
What is the EU's GDP growth?
-7.1%
• Per capita income = GDP/pop => define GDP
-GDP = total market value of all goods/services produced in nation during time period (e.g., one year)
Who is the world's largest oil producer?
US
SSA Covid Economy
almost 10 years of progress lost
Non-Arctic
China, India want resource/trade route access
Why was the EU created?
EU was created: to prevent war; make unified coal market -Not supposed to be economic, root cause was a political reason- to prevent war -Make the economies so reliant on each other that they couldn't go to war with each other
Africa's Biggest Economies
- Nigeria - South Africa - Angola
What are postage stamp countries?
- they are incredibly geographical tiny, city states - Andorra, Monaco, and Liechtenstein
Characteristics of Nigeria - exporter of what - GDP
- Africa's biggest oil exporter - 2020 GDP est.: -5.4%
What does MENA stand for?
Middle East and North Africa
Trend of India's FDI inflows in US dollars?
Positive growth
what is re-exporting?
Re-exporting is exactly what it sounds like—countries import foreign goods and then export them (re-export them) to other countries.
Growing tensions in the Arctic
•Growing Tensions: security, sovereignty, trade, energy, transit, indigenous people, fisheries, environment