World Economy - Country Income Groups

World Economy – Country Income Groups

What is the world economy?

Well. I want to be a dickhead and provide you the academic version of “ World Economy ”. (I have doubts you will not sleep before finishing to read the post)

But you can do it. Try to do it.

A simply way to manage the “world economy” notion is to start with some definitions.

The world economy can be defined as a worldwide activity between different countries. Being these countries’ economy strictly correlated, their own economy could affect positively or negatively the other countries’ economy.

The world economy is an economy based on economies of all the world countries’ national economy.

The world economy is the economy of global society in opposition to local economy that refers to national economies.

Summarizing, the world economy is the economy of the global society. The world economy should take into consideration the value of the production of all the world. Therefore for evaluating the world economy legal markets but also illegal markets and black market goods should be considered.

How to measure the world economy? There are different ways to measure the economy of nations such as: GDP, consumer spending, stock markets, exchange rates, interest rate, government debt, rate of inflation, unemployment, balance of trade and so on.

In any case the most common way to measure it is GDP. The GDP (Gross Domestic Product) is the market value of all the goods and services produced by labor and property. GDP refers to a country. The world economy is the aggregation of all the countries’ GDP of the world. Moreover in order to compare the world economy variation during years, the national GDP should be adjusted by inflation.

There are two different ways to compute GPD. They are:

  1. the Current Currency exchange rate. The national GDP can be converted into one base currency according to current currency exchange rates in the international exchange market. The most used currency to convert is the American Dollar

  2. the Purchasing Power Parity (PPP) exchange rate. The national GDP can be converted using the Purchasing Power Parity that is a theoretical exchange rate according to which an identical good in different countries, if expressed in the same currency, has the same price. Also in this case the American Dollars is the currency used to convert.

Using GDP as the mean for measuring it, in 2012, the world economy could be estimated in about 101,002 trillionsof American Dollars (GDP (PPP) – according to the World Bank).

Of sure the previous data, 101.002 trillions of American Dollars, is an approximation: changing the Institute it’s possible to obtain different estimates. According to the International Monetary Found the global GDP (using the PPP exchange rate) is about 98,714 trillions of American Dollars. According to the CIA World Fact-book the global GDP (using the PPP exchange rate) is about 100,003 trillions of American Dollars.

Measuring GDP using the Current Currency exchange rate, different results come from.

Moreover, missing information create distortions. Take into consideration illegal economies, black economies and so on. Of sure these economies are not considered in official statistics.

To sum up: it’s really difficult to quantify the world economy.

Well, are you sleeping? Me too. Let’s go on.

DEVELOPED, DEVELOPING AND LEAST DEVELOPED COUNTRIES

In order to better understand the world economy let’s classify the world in the following three categories:

  • developed countries;

  • developing countries;

  • least developed countries.

DEVELOPED COUNTRIES

While there is no one set definition of developed countries, the term refers to countries characterized by highly developed economies. Therefore the most used criterion for classifying developed countries are economic criterion such as GDP, per capita GDP, level of industrialization and standard of living. An interesting way for classifying countries as to be developed countries is looking at the economic sectors. Which is the economic situation of these countries? Developed countries are post-industrial economies where wealth is produced more in the third (the service sector) than the second sector (the industrial sector).

Developed countries are the world’s top economies.

Which countries are developed countries? As already stated, due to the lack of a unique definition, different criterion can be used. According to the criterion there exist several and different lists. Developed countries lists are provided by the United Nations Development Programme, CIA, FTSE Group (a British provider of stock market indices and other data services), OECD, by the International Monetary Fund and by the World Bank.

According to the United Nations Development Programme, developed countries are characterized by high level of human development. Therefore the classification is based on the Human Development Index. It’s an index that takes into consideration income, productivity but also educational opportunities and health conditions. In 2013 the list of developed countries (in the following picture, see “very high human developed countries”) included 47 countries. The list is the following:

World economy – developed countries

Norway, Australia, United States, Netherlands, Germany, New Zealand, Ireland, Sweden, Switzerland, Japan, Canada, South Korea, Hong Kong, Iceland, Denmark, Israel, Belgium, Austria, Singapore, France, Finland, Slovenia, Spain, Liechtenstein, Italy, Luxemburg, United Kingdom, Czech Republic, Greece, Brunei Darussalam, Cyprus, Malta, Andorra, Estonia, Slovakia, Qatar, Hungary, Barbados, Poland, Chile, Lithuania, United Arab Emirates, Portugal, Latvia, Argentina, Seychelles and Croatia.

According to CIA, in 2012, developed countries are “market-oriented economies of the mainly democratic nations in the Organization for Economic Cooperation and Development (OECD) plus Bermuda, Israel, South Africa, and the European mini-states. Generally these countries have a per capita GDP in excess of $15,000 although four OECD countries and South Africa have figures well under $15,000 and eight of the excluded OPEC countries have figures of more than $20,000” (the World Factbook-CIA). Developed countries are 34. They are:

Andorra, Australia, Austria, Belgium, Bermuda, Canada, Denmark, Faroe Islands, Finland, France, Germany, Greece, Holy See, Iceland, Ireland, Israel, Italy, Japan, Liechtenstein, Luxembourg, Malta, Monaco, Netherlands, NZ, Norway, Portugal, San Marino, South Africa, Spain, Sweden, Switzerland, Turkey, UK, US.

The FTSE Group provides a financial market oriented definition of developed countries. Developed countries should have high income economies, detailed requirements with regard to market and regulatory environment, custody and settlement, dealing landscape, derivatives and size of market. In 2012 developed countries were 26:

Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Israel, Italy, Japan, Luxembourg, Netherlands, New Zealand, Norway, Portugal, Singapore, South Korea, Spain, Sweden, Switzerland, United Kingdom, US.

The International Monetary Fund definition of developed countries is based on the following parameters:

  • per capita income level;

  • export diversification;

  • degree of integration in the global financial system.

In 2012, the list included 35 countries:

Imf – World economy . developed countries

Australia, Austria, Belgium, Canada, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hong Kong, Iceland, Israel, Italy, Japan, Luxembourg, Malta, Netherlands, Norway, Portugal, San Marino, Singapore, Slovakia, Slovenia, South Korea, Spain, Sweden, Switzerland, Taiwan, United Kingdom, US.

Only during the 1997-2012 period Hong Kong, Israel, Singapore, South Korea, Taiwan, Cyprus, Slovenia, Malta, Czech Republic, Slovakia, Estonia and San Marino passed to be developed countries.

The World Bank defines developed countries as countries characterized by high income (GNP per capita was $12,616 or more in 2012). There are 75 countries. The list is the following: 

World bank- World economy . developed countries

Andorra, Antigua and Barbuda, Aruba, Australia, Austria, The Bahamas, Bahrain, Barbados, Belgium, Bermuda, Brunei, Canada, Cayman Islands, Channel Islands, Chile, Croatia, Curaçao, Cyprus, Czech Republic, Denmark, Equatorial Guinea, Estonia, Faroe Islands, Finland , France, French Polynesia, Germany, Greece, Greenland, Guam, Hong Kong, Iceland, Ireland, Isle of Man, Israel, Italy, Japan, South Korea, Kuwait, Latvia, Liechtenstein, Lithuania, Luxembourg, Macao, Malta, Monaco, Netherlands, New Caledonia, New Zealand, Northern Mariana Islands, Norway, Oman, Poland, Portugal, Puerto Rico, Qatar, Russia, Saint Kitts and Nevis, San Marino, Saudi Arabia, Singapore, Sint Maartin, Slovakia, Slovenia, Spain, St. Martin, Sweden, Switzerland, Trinidad and Tobago, Turks and Caicos Islands, United Arab Emirates, United Kingdom, United States, Uruguay and U.S. Virgin Islands.

Then there is Taiwan of sure!!!

DEVELOPING COUNTRIES

As for developed countries, also for developing countries there are no one set definition and criterion. What is the economy of these countries? Developing countries are characterized by low income, low degree of industrialization and medium-low standard of living. They locate in the middle with respect to the world economic ranking. In any case among developing countries there are some of the fastest growing economy in the world.

Which countries are developed countries? The United States Development Programme, the International Monetary Fund and the World Bank provide different lists.

According to the United Nations Development Programme (UN) a country’s development is measured according to the following criterion:

  • GDP (gross domestic product);

  • life expectancy (health, nutrition, death age);

  • rate of education/literacy.

In order to capture all the previous variables, the UN uses an indicator: the Human Development Index (HDI). According to the results of the HDI, in 2012, the list of developing countries is composed by 47 high human development countries and by 47 medium human development countries.

World economy . developing countries

High human development countries

Bahrain, Bahamas, Belarus, Uruguay, Montenegro, Palau, Kuwait, Russia, Romania, Bulgaria, Saudi Arabia, Cuba, Panama, Mexico, Costa Rica, Grenada, Libya, Malaysia, Serbia, Antigua and Barbuda, Trinidad and Tobago, Kazakhstan, Albania, Venezuela, Dominica, Georgia, Lebanon, Saint Kitts and Nevis, Iran, Peru, Macedonia, Ukraine, Mauritius, Bosnia and Herzegovina, Azerbaijan, Saint Vincent, Oman, Brazil, Jamaica, Armenia, Saint Lucia, Ecuador, Turkey, Colombia, Sri Lanka, Algeria, Tunisia.

Medium human development countries

Tonga, Belize, Dominican Republic, Fiji, Samoa, Jordan, China, Turkmenistan, Thailand, Maldives, Suriname, Gabon, El Salvador, Bolivia, Mongolia, Palestine, Paraguay, Egypt, Moldova, Philippines, Uzbekistan, Syria, Micronesia, Guyana, Botswana, Honduras, Indonesia, Kiribati, South Africa, Vanuatu, Kyrgyzstan, Tajikistan, Vietnam, Namibia, Nicaragua, Morocco, Iraq, Cape Verde, Guatemala, Timor-Leste, Ghana, Equatorial Guinea, India, Cambodia, Laos, Bhutan, Swaziland.

The International Monetary Fund(IMF)classifies developing countries (as already stated)according to per capita income level, export diversification and degree of integration into the global financial system. As, the IMF classifies countries in only two groups, developed and developing countries, it’s obvious that developing countries are all countries not mentioned in the developed countries list. Therefore, in 2012, the list of developing countries is composed by 154 countries:

IMF – World economy . developing countries – source: Wikimedia commons

Afghanistan, Albania, Algeria, Angola, Antigua and Barbuda, Argentina, Armenia, Azerbaijan, Bahamas, Bahrain, Bangladesh, Barbados, Belarus, Belize, Benin, Bhutan, Bolivia, Bosnia and Herzegovina, Botswana, Brazil, Bulgaria, Burkina Faso, Burma, Burundi, Cambodia, Cameroon, Cape Verde, Central African Republic, Chad, Chile, China, Colombia, Comoros, Democratic Republic of the Congo, Republic of the Congo, Costa Rica, Côte d’Ivoire, Croatia, Djibouti, Dominica, Dominican Republic, Ecuador, Egypt, El Salvador, Equatorial Guinea, Eritrea, Ethiopia, Fiji, Gabon, The Gambia, Georgia, Ghana, Grenada, Guatemala, Guinea, Guinea-Bissau, Guyana, Haiti, Honduras, Hungary, India, Indonesia, Iran, Iraq, Jamaica, Jordan, Kazakhstan, Kenya, Kiribati, Kosovo, Kuwait, Kyrgyzstan, Laos, Latvia, Lebanon, Lesotho, Liberia, Libya, Lithuania, Macedonia, Madagascar, Malawi, Malaysia, Maldives, Mali, Marshall Islands, Mauritania, Mauritius, Mexico, Federated States of Micronesia, Moldova, Mongolia, Montenegro, Morocco, Mozambique, Namibia, Nauru, Nepal, Nicaragua, Niger, Nigeria, Oman, Pakistan, Palau, Panama, Papua New Guinea, Paraguay, Peru, Philippines, Qatar, Romania, Russia, Rwanda, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Samoa, São Tomé and Principe, Saudi Arabia, Senegal, Serbia, Seychelles, Sierra Leone, Solomon Islands, Somalia, South Africa, South Sudan, Sri Lanka, Sudan, Suriname, Swaziland, Syria, Tajikistan, Tanzania, Thailand, Timor-Leste, Togo, Tonga, Trinidad and Tobago, Tunisia, Turkey, Turkmenistan, Tuvalu, Uganda, Ukraine, United Arab Emirates, Uruguay, Uzbekistan, Vanuatu, Venezuela, Vietnam, Yemen, Zambia, Zimbabwe. Cuba and North Korea are not officially classified by the IMF as to be nor developed neither developing countries but they are.

Finally the World Bank considers developing countries, all countries with:

  • upper middle income: in 2012 GNI (Gross National Income) per capita between US$4,086 and US$12,615;

  • lower middle income: in 2012 GNI per capita between US$1,036 and US$4,085.

The list of developing countries is composed by 55 upper middle income countries and by 48 lower middle income countries.

World economy - World bank

Upper middle income countries

Albania, Algeria, American Samoa, Angola, Argentina, Azerbaijan, Belarus, Belize, Bosnia and Herzegovina, Botswana, Brazil, Bulgaria, China, Colombia, Costa Rica, Cuba, Dominica, Dominican Republic, Ecuador, Fiji, Gabon, Grenada, Hungary, Islamic Republic of Iran, Iraq, Jamaica, Jordan, Kazakhstan, Lebanon, Libya, Macedonia, Malaysia, Maldives, Marshall Islands, Mauritius, Mexico, Montenegro, Namibia, Palau, Panama, Peru, Romania, Serbia, Seychelles, South Africa, St. Lucia, St. Vincent and the Grenadines, Suriname, Thailand, Tonga, Tunisia, Turkey, Turkmenistan, Tuvalu and Venezuela.

Lower middle income countries

Armenia, Bhutan, Bolivia, Cameroon, Cape Verde, Republic of Congo, Côte d’Ivoire, Djibouti, Arab Rep. Of Egypt, El Salvador, Georgia, Ghana, Guatemala, Guyana, Honduras, India, Indonesia, Kiribati, Kosovo, Lao, Lesotho, Mauritania, Fed. Sts. of Micronesia, Moldova, Mongolia, Morocco, Nicaragua, Nigeria, Pakistan, Papua New Guinea, Paraguay, Philippines, Samoa, Sao Tomé and Principe, Senegal, Solomon Islands, Sri Lanka, Sudan, Swaziland, Syrian Arab republic, Timor-Leste, Ukraine, Uzbekistan, Vanuatu, Vietnam, West Bank and Gaza, Rep. of Yemen and Zambia.

LEAST DEVELOPING COUNTRIES

Least developed countries are characterized by poverty or extreme poverty. These countries can be classified as the worst economies in the world. Most lest developed countries are located in Africa and in Asia-Oceania plus Haiti (America).

African countries are characterized by extreme poverty, high rate of death (AIDS is widespread in most parts of Africa). From the political point of view, there is lack of political and social stability (civil/ethnic wars), corruption. Very often there are authoritarian governments.

Passing to the Asian-Oceania countries, which is the economic situation of these countries? They are characterized by fist sector economies based on mono-cultures. The most part of governments are quite stable and based on democracy.

According to the United Nations Development Programme (UN), least developed countries are characterized by poverty (tree-year average per capita Gross Domestic Product less than 1.036$ more or less), low levels of health, nutrition and education and economic instability.

The list of least developed countries are composed by 49 countries:

World economy – least developed countries

Angola, Benin, Burkina Faso, Burundi, Central African Republic, Chad, Comoros, Democratic Republic of the Congo, Djibouti, Equatorial Guinea, Eritrea, Ethiopia, The Gambia, Guinea, Guinea-Bissau, Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritania, Mozambique, Niger, Rwanda, São Tomé and Principe, Senegal, Sierra Leone, Somalia, South Sudan, Sudan, Togo, Tanzania, Uganda, Zambia, Afghanistan, Bhutan, Bangladesh, Cambodia, East Timor, Kiribati, Laos, Myanmar, Nepal, Samoa, Solomon Islands, Tuvalu, Vanuatu, Yemen, Haiti.

Afghanistan, Bangladesh, Benin, Burkina Faso, Burundi, Cambodia, Central African Republic, Chad, Comoros, Dem. Rep. of Congo, Eritrea, Ethiopia, The Gambia, Guinea, Guinea-Bissau, Haiti, Kenya, Dem. Rep. of Korea, Kyrgyz Republic, Liberia, Madagascar, Malawi, Mali, Mozambique, Myanmar, Nepal, Niger, Rwanda, Sierra Leone, Somalia, South Sudan, Tajikistan, Tanzania, Togo, Uganda and Zimbabwe.

The World Bank classify as least developed countries those countries with low income (GNI per capita less then US$1,036). Countries (36) are the following:

World economy - World bank - Least Developed Countries

Afghanistan, Bangladesh, Benin, Burkina Faso, Burundi, Cambodia, Central African Republic, Chad, Comoros, Dem. Rep. of Congo, Eritrea, Ethiopia, The Gambia, Guinea, Guinea-Bissau, Haiti, Kenya, Dem. Rep. of Korea, Kyrgyz Republic, Liberia, Madagascar, Malawi, Mali, Mozambique, Myanmar, Nepal, Niger, Rwanda, Sierra Leone, Somalia, South Sudan, Tajikistan, Tanzania, Togo, Uganda and Zimbabwe.

So, here we are. If you have been able to follow the post up to this moment, now it would be a cinch to read the next part.

Matt

13 thoughts on “The World Economy

  1. NY31

    Global economy distribution is quite clear.
    Thank you Matt.
    I’m waiting for your next post.

  2. Melissa H.

    Sure it really seems a professor guide.
    This is a description but I don’t care about numbers and names.
    I care about that these countries are governed for the benefit of the rich people at the expense of the poor ones.
    I think it’s not a problem of richest and poorest countries.
    The point is that we have to pay taxes in order to make the rich people richer.

  3. Gold66

    Interesting.
    Sometimes we get thoroughly confused. Thanks for the very good map of the world economy.

  4. Afua J.

    I was adopted.
    I love my family but I can’t forget my origins.
    I live in the USA and, I can say, in this country are widespreading social diseases.
    Richest countries governors lead to poverty other people.
    They are bad and selfish.
    I don’t know how can we grow up our childrens.
    Your blog title is “how to be rich and wealthy” but after several months I’m still poor.
    I don’t know who you’re Matt O. Dollar but I believe you’re a nice person.
    If you can help me in some way please help me.

    1. Matt Post author

      I think we are all different.
      And I think I’m not the only one who is tired to be manipulated.
      in this blog I share my experience and the way I became rich.
      Well.
      if u do not find anything useful maybe you have only to wait, maybe you have to change blog.
      I can’t give you money if it is what you’re asking.
      I followed well defined steps to become rich.
      And I describe these steps in the blog.
      This is my way.
      If you are like me maybe you’ll obtain the same results.
      p.s. I’ll give you more than financial markets

  5. Bob

    I’m ready for the second part!!

  6. James

    Great article Matt.
    I think this is a first analysis.
    Do you agree with this vision of the world?

    1. Matt Post author

      I partially agree.
      see you soon.

  7. Marcus74

    Wow. Good work.
    But according to me this analysis do not reflect the most important fact.
    Who own the wealth?
    I’m US based and the most part of net worth is held by 1% of population.
    This article is written by William Domhoff.
    http://www2.ucsc.edu/whorulesamerica/power/wealth.html
    This fact is over the state lines.

    1. Matt Post author

      I like your link.
      Now I can avoid to write another post.
      Thanks.

  8. Bill T.

    Hi dude. It has been a really dull day.
    And this article doensn’t help me at all!
    Thank you dude!

  9. mobys

    I couldn’t refrain from commenting. Perfectly written!

  10. OKB

    Having read this I believed it was very informative. I
    appreciate you spending some time and effort to put this short article together.
    I once again find myself spending a significant amount of time both reading and leaving comments.
    But so what, it was still worth it!

Comments are closed.